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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
[X] JOINT ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER: 1-6828 COMMISSION FILE NUMBER: 1-7959
STARWOOD HOTELS & STARWOOD HOTELS &
RESORTS RESORTS WORLDWIDE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS
CHARTER) CHARTER)
MARYLAND MARYLAND
(STATE OR OTHER JURISDICTION (STATE OR OTHER JURISDICTION
OF INCORPORATION OR ORGANIZATION) OF INCORPORATION OR ORGANIZATION)
52-0901263 52-1193298
(I.R.S. EMPLOYER IDENTIFICATION NO.) (I.R.S. EMPLOYER IDENTIFICATION NO.)
2231 E. CAMELBACK ROAD, SUITE 410 2231 E. CAMELBACK ROAD, SUITE 400
PHOENIX, ARIZONA 85016 PHOENIX, ARIZONA 85016
(ADDRESS OF PRINCIPAL EXECUTIVE (ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES, INCLUDING ZIP CODE) OFFICES, INCLUDING ZIP CODE)
(602) 852-3900 (602) 852-3900
(REGISTRANT'S TELEPHONE NUMBER, (REGISTRANT'S TELEPHONE NUMBER,
INCLUDING AREA CODE) INCLUDING AREA CODE)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common shares of beneficial interest, par value New York Stock Exchange
$.01 Pacific Exchange
per share, of Starwood Hotels & Resorts ("Trust
Shares")
paired with shares of Common Stock, par value $.01
per share, of Starwood Hotels & Resorts Worldwide,
Inc.
("Corporation Shares")
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark whether the Registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes [X] No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of each Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ].
As of March 27, 1998, the aggregate market value of the Registrants' voting
and non-voting common equity held by non-affiliates(1) was $9,845,566,727.
As of March 27, 1998, the Trust had 184,196,766 outstanding Trust Shares,
and the Corporation had outstanding 184,196,766 Corporation Shares.
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(1) For purposes of this Joint Annual Report only, includes all shares other
than those held by the Registrants' Trustees, Directors and executive
officers.
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TABLE OF CONTENTS
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ITEM
NUMBER
IN FORM
10-K PAGE
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PART I
1. Business.................................................... 8
2. Properties.................................................. 32
3. Legal Proceedings........................................... 47
4. Submission of Matters to a Vote of Security Holders......... 48
PART II
5. Market for Registrants' Common Equity and Related
Stockholder Matters......................................... 49
6. Selected Financial Data..................................... 51
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 52
8. Financial Statements and Supplementary Data................. 65
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 65
PART III
10. Trustees, Directors and Executive Officers of the
Registrants................................................. 65
11. Executive Compensation...................................... 72
12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 80
13. Certain Relationships and Related Transactions.............. 84
PART IV
14. Exhibits, Financial Statements, Financial Statement
Schedules and Reports on Form 8-K........................... 86
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This Joint Annual Report is filed by Starwood Hotels & Resorts, a Maryland
real estate investment trust (the "Trust"), and Starwood Hotels & Resorts
Worldwide, Inc., a Maryland corporation (the "Corporation"). Unless the context
otherwise requires, (i) all references herein to the Trust include the Trust and
those entities owned or controlled by the Trust, including SLT Realty Limited
Partnership, a Delaware limited partnership (the "Realty Partnership"); (ii) all
references to the Corporation include those entities owned or controlled by the
Corporation, including SLC Operating Limited Partnership, a Delaware limited
partnership (the "Operating Partnership"); and (iii) and all references to
"Starwood Hotels" or the "Company" refer to the Trust, the Corporation and their
respective subsidiaries, collectively. The common shares of beneficial interest,
par value $.01 per share, of the Trust ("Trust Shares") and the shares of common
stock, par value $.01 per share, of the Corporation ("Corporation Shares") are
"paired" and may be held or transferred only in units consisting of one Trust
Share and one Corporation Share (a "Paired Share"). Unless otherwise stated
herein, all information with respect to the Paired Shares has been restated to
give effect to the three-for-two stock split effective January 27, 1997.
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This Joint Annual Report contains statements that constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements appear in a number of places in
this Joint Annual Report, including, without limitation, the sections of Items 1
and 2 captioned "Operating Strategy," "Development Opportunities; Future
Acquisitions; Sales" and "Other Information" Structure and Item 5, Management's
Discussion and Analysis of Financial Condition and Results of Operations. Such
forward-looking statements may include statements regarding the intent, belief
or current expectations of Starwood Hotels, its Trustees or Directors or its
officers with respect to the matters discussed in this Joint Annual Report. All
such forward-looking statements involve risks and uncertainties and that could
cause actual results to differ materially from those in projected in the
forward-looking statements including, without limitation, the risks and
uncertainties set forth below. The Company undertakes no obligation to publicly
update or revise any forward-looking statement to reflect current or future
events or circumstances.
RECENTLY PROPOSED LEGISLATION
On March 26, 1998, the Chairman of the Ways and Means Committee of the
United States House of Representatives and the Chairman of the Finance Committee
of the United States Senate introduced identical bills ("H.R. 3558") that would,
if enacted, limit the ability of the Company to manage or operate real property
that it acquires after March 26, 1998. If enacted, H.R. 3558 would make it
difficult for the Company to acquire and operate hotels after March 26, 1998 in
the same manner as the Company has in the past. As a result, enactment of H.R.
3558 could have a material adverse effect on the results of operations,
financial condition and prospects of the Company. No assurance can be given that
H.R. 3558 will not be enacted in its current form or that other new legislation,
regulations or administrative interpretations with respect to the grandfathering
of the Company will not be adopted. The Company is evaluating its options in the
event that H.R. 3558 (or a similar measure) were to be adopted.
FAILURE TO MANAGE RAPID GROWTH
The full benefits of the Company's acquisition of Westin Hotels & Resorts
Worldwide, Inc. ("Westin Worldwide") and certain of its affiliates
(collectively, "Westin"), of ITT Corporation ("ITT") and of the other hotel
properties acquired during 1997 and thereafter will require the integration of
administrative, finance, sales and marketing organizations; the coordination of
sales efforts; and the implementation of appropriate operations, financial and
management systems and controls in order to realize the efficiencies, revenue
enhancements and cost reductions that are expected from such acquisitions.
Although the Company's management team has experience integrating acquisitions,
none of the prior acquisitions have been of comparable magnitude to, or included
the breadth of operations involved in, the acquisition of Westin or ITT. The
diversion of management attention, as well as any other difficulties which may
be encountered in the transition and integration process, could have an adverse
impact on the revenue and operating results of the Company. There can be no
assurance that the Company will be able to integrate successfully the operations
of the acquired properties with those of the Company or that anticipated
synergies will be realized or, if realized, that such synergies will occur when
anticipated.
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The Company's future success and its ability to manage future growth
depends in large part upon the efforts of its senior management and its ability
to attract and retain key officers and other highly qualified personnel.
Competition for such personnel is intense. Since January 1996, the Company has
experienced significant changes in its senior management, including executive
officers. (See Item 10, Trustees, Directors and Executive Officers of the
Registrants, of this Joint Annual Report.) There can be no assurance that the
Company will continue to be successful in attracting and retaining qualified
personnel. Accordingly, there can be no assurance that the Company's senior
management will be able successfully to execute and implement the Company's
growth and operating strategies.
TAX RISKS
Failure to Qualify as a REIT. The Trust believes that it has operated so
as to qualify as a "real estate investment trust" (a "REIT") under the Internal
Revenue Code of 1986, as amended (the "Code"), commencing with the Trust's
taxable year ended December 31, 1995, and the Trust intends to continue to so
operate. No assurance, however, can be given that the Trust will remain
qualified as a REIT. Qualification as a REIT involves the application of highly
technical and complex Code provisions for which there are only limited judicial
or administrative interpretations. The complexity of these provisions is greater
in the case of a REIT that owns hotels and leases them to a corporation with
which its stock is paired. As a result, the Trust is likely to encounter a
greater number of interpretive issues under the REIT qualification rules, and
more such issues which lack clear guidance, than are other REITs. The
determination of various factual matters and circumstances not entirely within
the Trust's control may affect its ability to qualify as a REIT. In addition, no
assurance can be given that new legislation, new regulations, administrative
interpretations or court decisions will not significantly change the tax laws
with respect to qualification as a REIT or the federal income tax consequences
of such qualification. Furthermore, the qualification of the Trust as a REIT
will depend on the Trust's continuing ability to meet various requirements
concerning, among other things, the ownership of Paired Shares and other equity
securities of the Trust, the nature of the Trust's assets, the sources of its
income and the amounts of its distributions to its shareholders. In connection
with the acquisition of Westin in January 1998 and ITT in February 1998, the
Trust acquired new assets and operations (including the leasing of newly
acquired assets, loans to the Corporation and the ownership of certain
corporations that own hotels or intangible assets). By increasing the complexity
of the Company's operations, these assets and operations may make it more
difficult for the Trust to continue to satisfy the REIT qualification
requirements.
The Trust's ability to qualify as a REIT is also dependent on its continued
exemption from the anti-pairing rules of Section 269B(a)(3) of the Code. Section
269B(a)(3) would ordinarily prevent a company from qualifying as a REIT if its
stock is paired with the stock of another company whose activities are
inconsistent with REIT status, such as the Corporation. The "grandfathering
rules" governing Section 269B(a)(3) generally provide, however, that Section
269B(a)(3) does not apply to a paired REIT if the shares of the REIT and its
paired operating company were paired on or before June 30, 1983 and the REIT was
taxable as a REIT on or before June 30, 1983. There are, however, no judicial or
administrative authorities interpreting the grandfathering rules governing
Section 269B(a)(3).
If in any taxable year the Trust were to fail to qualify as a REIT, the
Trust would not be allowed a deduction for distributions to shareholders in
computing its taxable income and would be subject to federal income tax on its
taxable income at regular corporate rates. Unless entitled to relief under
certain Code provisions, the Trust would also be disqualified from treatment as
a REIT for the four taxable years following the year during which qualification
was lost. The failure of the Trust to qualify as a REIT would reduce its net
earnings available for distribution to shareholders because of the additional
tax liability to the Trust for the year or years involved. In addition,
distributions would no longer be required to be made. To the extent that
distributions to shareholders would have been made in anticipation of the Trust
qualifying as a REIT, the Trust might be required to borrow funds or to
liquidate certain of its investments to pay the applicable tax. The failure to
qualify as a REIT would also constitute a default under certain debt obligations
of the Trust.
Required Distributions to Shareholders. In order to obtain and retain REIT
status, the Trust must distribute to its shareholders at least 95% of its REIT
taxable income (excluding any net capital gain). In
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addition, the Trust will be subject to tax on its undistributed net taxable
income and net capital gain, and a 4% nondeductible excise tax on the amount, if
any, by which certain distributions paid by the Trust with respect to any
calendar year are less than the sum of (i) 85% of the Trust's ordinary income,
(ii) 95% of its capital gain net income for that year and (iii) 100% of its
undistributed income from prior years. The Trust intends to make distributions
to its shareholders to comply with the distribution requirements of the Code and
to avoid federal income taxes and the nondeductible federal excise tax. The
Trust (or the Realty Partnership) could be required to borrow funds on a
short-term basis to meet the REIT distribution requirements, which borrowing may
not otherwise be advisable for the Company.
Distributions by the Trust and Corporation will be determined by the
Trust's Board of Trustees (the "Board of Trustees") or the Corporation's Board
of Directors (the "Board of Directors"), as applicable, and will depend on a
number of factors, including the amount of cash available for distributions, the
Company's financial condition, decisions by either such board to reinvest funds
rather than to distribute such funds, the Company's capital expenditures, the
annual distribution requirements under the REIT provisions of the Code (in the
case of the Trust) and such other factors as either Board deems relevant. For
federal income tax purposes, distributions paid to shareholders may consist of
ordinary income, capital gains (in the case of the Trust), nontaxable return of
capital, or a combination thereof.
DEBT FINANCING
As a result of incurring debt, the Company is subject to the following
risks associated with debt financing: (i) the risk that cash flow from
operations will be insufficient to meet required payments of principal and
interest; (ii) the risk that (to the extent that the Company maintains floating
rate indebtedness) interest rates will fluctuate; and (iii) the agreements
governing the Company's loan and credit facilities contain covenants imposing
certain limitations on the Company's ability to acquire and dispose of assets.
In addition, although the Company anticipates that it will be able to repay or
refinance its existing indebtedness and any other indebtedness when it matures,
there can be no assurance that the Company will be able to do so or that the
terms of such refinancings will be favorable.
In connection with the acquisitions of Westin and ITT, the Company incurred
a substantial amount of additional debt, thereby increasing its exposure to the
risks associated with debt financing. The Company's increased leverage may have
important consequences, including the following: (i) the ability of the Company
to obtain additional financing for acquisitions, working capital, capital
expenditures or other purposes, if necessary, may be impaired or such financing
may not be available on terms favorable to the Company; (ii) a substantial
decrease in operating cash flow or an increase in expenses of the Company could
make it difficult for the Company to meet its debt service requirements and
force it to modify its operations; (iii) the Company's higher level of debt and
resulting interest expense may place it at a competitive disadvantage with
respect to certain competitors with lower amounts of indebtedness and/or higher
credit ratings; and (iv) the Company's greater leverage may make it more
vulnerable to a downturn in its business or in the economy generally.
LIMITS ON CHANGE OF CONTROL AND OWNERSHIP LIMITATION
Ownership Limitation. In order for the Trust to maintain its qualification
as a REIT, not more than 50% in value of its outstanding shares may be owned,
directly or indirectly, by five or fewer individuals (which term is defined in
the Code to include certain entities) at any time during the last half of the
Trust's taxable year. Furthermore, actual or constructive ownership of a
sufficient number of the Paired Shares could cause the Operating Partnership or
the Corporation to become a "related party tenant" of the Trust, which would
result in the loss of the Trust's REIT status. In order to help preserve the
Trust's REIT status, the Declaration of Trust and the Articles of Incorporation
prohibit actual or constructive ownership by any one person or group of related
persons of more than 8.0% of the shares of the Trust or the Corporation, whether
measured by vote, value or number of shares (the "Ownership Limit"). Generally,
the Paired Shares owned by related or affiliated persons will be aggregated and
certain options and warrants will be treated as exercised for purposes of the
Ownership Limit.
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The constructive ownership rules of the Code are extensive and complex and
may cause Paired Shares owned, directly or indirectly, by certain direct or
indirect partners in any partnership, including the direct and indirect owners
of interests in the Realty Partnership and the Operating Partnership, and other
classes of related individuals and/or entities, to be deemed to be
constructively owned by one individual or entity. As a result, the acquisition
of less than 8.0% of the Paired Shares (or the acquisition of an interest in an
entity which owns Paired Shares) by an individual or entity could cause that
individual or entity (or another individual or entity) to own constructively in
excess of 8.0% of the Paired Shares, and thus subject such Paired Shares to the
Ownership Limit. Direct or constructive ownership in excess of the Ownership
Limit would cause the violative transfer or ownership to be void, or cause such
shares to be converted into "Excess Shares," which have limited economic rights,
to the extent necessary to ensure that the purported transfer or other event
does not result in a violation of the Ownership Limit. Notwithstanding the
Ownership Limit, given the breadth of the Code's constructive ownership rules
and that it is not possible for the Trust and the Corporation continuously to
monitor direct and constructive ownership of Paired Shares, it is possible that
an individual or entity could at some time constructively own sufficient Paired
Shares to cause termination of the Trust's REIT status.
Limits on Change of Control. Certain provisions of the Trust's declaration
of trust, as amended (the "Declaration of Trust"), and the Corporation's
articles of incorporation, as amended (the "Articles of Incorporation"),
including, without limitation, those providing for the ability to issue
preferred shares and the maintenance of staggered terms for Trustees and
Directors, may have the effect of discouraging a third party from making an
acquisition proposal for the Trust and the Corporation and may thereby delay,
defer or prevent a change in control under circumstances that could otherwise
give the holders of Paired Shares or other equity securities of the Company the
opportunity to realize a premium over then-prevailing market prices.
INFLUENCE BY STARWOOD CAPITAL
Individuals employed by or otherwise affiliated with Starwood Capital
Group, L.L.C. ("Starwood Capital") hold two positions on the Board of Trustees
and two positions on the Board of Directors. Although the Company has a policy
requiring a majority of its Trustees and Directors to be "independent," Starwood
Capital may have the ability to exercise certain influence over the affairs of
the Company. Barry S. Sternlicht is the President and Chief Executive Officer
of, and controls, Starwood Capital. Mr. Sternlicht also is a Trustee of the
Trust and the Chairman and Chief Executive Officer of the Trust. In addition,
Mr. Sternlicht is Chairman of the Board of Directors of the Corporation. As a
consequence, Mr. Sternlicht has the ability to exercise certain influence over
the affairs of the Company. Starwood Capital and certain of its affiliates own
limited partnership interests in the Realty Partnership and the Operating
Partnership ("Units") that are exchangeable for Paired Shares. As a result, and
due to its different tax situation, prior to the exchange of its Units into
Paired Shares, Starwood Capital's objectives regarding the pricing, structure
and timing of any sale of certain properties or the restructuring or sale of
certain mortgage loans may differ from the objectives of the shareholders of the
Company or current management of the Company.
RISKS RELATING TO HOTEL OPERATIONS
Operating Risks. The properties of the Company are subject to all
operating risks common to the hotel industry. These risks include changes in
general economic conditions (as described below); decreases in the level of
demand for rooms and related services; cyclical over-building in the hotel
industry; restrictive changes in zoning and similar land use laws and
regulations or in health, safety and environmental laws, rules and regulations;
the inability to obtain property and liability insurance fully to protect
against all losses or to obtain such insurance at reasonable rates; and changes
in travel patterns. In addition, the hotel industry is highly competitive. The
properties of the Company compete with other hotel properties in their
geographic markets, and some of the Company's competitors may have substantially
greater marketing and financial resources than the Company.
Acquisition Risks. The Company competes for acquisition opportunities with
other owners of hotel properties, some of which may have substantially greater
financial resources than the Company. These
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competitors may generally be able to accept more risk than the Company can
prudently manage. Competition may generally reduce the number of suitable
investment opportunities offered to the Company and increase the bargaining
power of property owners seeking to sell. Further, management believes that the
Company will face competition for acquisition opportunities from entities
organized for purposes substantially similar to the objectives of the Company.
Seasonality of Hotel Business. The hotel industry is seasonal in nature.
This seasonality may cause quarterly fluctuations in the operating results of
the Company and the market prices of the Paired Shares.
Capital Intensive Business. The Company's properties are capital intensive
and, in order to remain attractive and competitive, must be well maintained as
well as periodically modernized and refurbished. This creates an on-going need
for capital and, to the extent such capital expenditures may not be funded from
cash generated by the Company, financial results may be sensitive to the cost
and availability of funds.
REAL ESTATE INVESTMENT RISKS
General Risks. Real property investments are subject to varying degrees of
risk. The investment returns available from equity investments in real estate
depend in large part on the amount of income earned and capital appreciation
generated by the related properties as well as the expenses incurred.
In addition, income from properties and real estate values are also
affected by a variety of other factors, such as governmental regulations and
applicable laws (including real estate, zoning, tax and eminent domain laws),
interest rate levels and the availability of financing. For example, existing or
new real estate, zoning or tax laws can make it more expensive and/or time
consuming to develop real property or expand, modify or renovate hotels.
Governments can, under eminent domain laws, take real property, sometimes
for less compensation than the owner believes the property is worth. When
prevailing interest rates increase, the expense of acquiring, developing,
expanding or renovating real property increases, and values decrease as it
becomes more difficult to sell property because the number of potential buyers
decreases. Similarly, as financing becomes less available, it becomes more
difficult both to acquire real property and, because of the diminished number of
potential buyers, to sell real property. Any of these factors could have a
material adverse impact on the Company's results of operations or financial
condition, as well as on the Trust's ability to make distributions to its
shareholders.
In addition, equity real estate investments, such as the investments held
by the Company and any additional properties that may be acquired by the
Company, are relatively illiquid. If the properties of the Company do not
generate revenue sufficient to meet operating expenses, including debt service
and capital expenditures, the income of the Company and the Trust's ability to
make distributions to shareholders will be adversely affected.
Hotel Development. The Company intends to develop hotel properties as
suitable opportunities arise and is currently developing several upscale hotels.
New project development is subject to a number of risks, including risks of
construction delays or cost overruns that may increase project costs; receipt of
zoning, occupancy and other required governmental permits and authorization; and
the incurring of development costs that are not pursued to completion. There can
be no assurance that any development project will be completed in a timely
manner or within budget.
Possible Liability Relating to Environmental Matters. Under various
federal, state, local and foreign environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may become
liable for the costs of removal or remediation of hazardous or toxic substances
on, under or in such property. Such laws often impose liability without regard
to whether the owner or operator knew of, or was responsible for, the presence
of such hazardous or toxic substances. The presence of hazardous or toxic
substances, or the failure properly to remediate such substances when present,
may adversely affect the owner's ability to sell or rent such real property or
to borrow using such real property as collateral. Persons who arrange for the
disposal or treatment of hazardous or toxic wastes may be liable for the costs
of removal or remediation of such wastes at the disposal or treatment facility,
regardless of whether such facility is owned or
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operated by such person. Other federal, state, local and foreign laws,
ordinances and regulations require abatement or removal of certain
asbestos-containing materials in the event of demolition or certain renovations
or remodeling and govern emissions of and exposure to asbestos fibers in the
air. The operation and subsequent removal of certain underground storage tanks
also are regulated by federal, state, local and foreign laws.
RISKS RELATING TO GAMING OPERATIONS
Regulation of Gaming Operations. The Company owns and operates a number of
casino gaming facilities, including Caesars Palace and The Desert Inn Resort &
Casino in Las Vegas, Nevada; Caesars Atlantic City in Atlantic City, New Jersey;
and Caesars Tahoe in Stateline, Nevada. Other gaming facilities are located in
Nevada, New Jersey, Delaware, Indiana and Mississippi; in four foreign
countries; and on cruise ships operating in international waters. Each of these
gaming operations is subject to extensive licensing, permitting and regulatory
requirements administered by various governmental entities. Typically, gaming
regulatory authorities have broad powers with respect to the licensing of gaming
operations, and may revoke, suspend, condition or limit the gaming approvals and
licenses of the Company and its gaming subsidiaries, impose substantial fines
and take other actions, any of which could have a material adverse effect on the
business and the value of the Company's hotel/casinos. Directors, officers and
certain key employees of the Company and its gaming subsidiaries are subject to
licensing or suitability determinations by various gaming authorities. If any of
such gaming authorities were to find a person occupying any such position
unsuitable, the Company would be required to sever its relationship with that
person.
Increased Gaming Competition. The Company faces significant domestic and
international competition from both established casinos and newly emerging
gaming operations. Proposals have been made for a significant number of casinos,
both land-based and those involving vessels on navigable waters, in a number of
jurisdictions and large metropolitan areas. Legalization of gaming in additional
jurisdictions may also provide opportunities for expansion by the Company's
competitors that could adversely affect the Company's existing gaming
operations. The Company believes that the adoption of legalized gaming in any
jurisdiction near Nevada (particularly California or other states in the
southwestern United States) or near New Jersey (particularly New York or
Pennsylvania) or the advent of gaming on nearby Native American lands could have
a material adverse effect on the Company's operations in Las Vegas and Atlantic
City.
Risks Associated with High-End Gaming. There are risks associated with the
high end gaming business that currently comprises a portion of the Company's
Caesars Palace and Desert Inn operations. High-end gaming is more volatile than
other forms of gaming, and variances attributable to high-end gaming could,
under certain circumstances, have a positive or negative impact on cash flow,
earnings and other financial measures in a particular quarter. In addition, a
substantial portion of the Company's table gaming revenues from its Caesars
Palace and Desert Inn operations is attributable to the play of a relatively
small number of international customers. The loss of, or a reduction in play of,
the most significant of such customers could have an adverse effect on the
Company's future operating results.
FOREIGN OPERATIONS AND CURRENCY FLUCTUATIONS
The Company has significant international operations, including, as of
March 1, 1998, 31 owned properties in Europe, two properties owned in Africa/the
Middle East, 15 properties owned in Latin America and three properties owned in
Asia/Pacific. International operations generally are subject to various
political and other risks that are not present in U.S. operations, including,
among other things, the risk of war or civil unrest, expropriation and
nationalization. In addition, certain international jurisdictions restrict the
repatriation of non-U.S. earnings. Various international jurisdictions also have
laws limiting the right and ability of non-U.S. entities to pay dividends and
remit earnings to affiliated companies unless specified conditions have been
met. In addition, sales in international jurisdictions typically are made in
local currencies, which subjects the Company to risks associated with currency
fluctuations. Currency devaluations and unfavorable changes in international
monetary and tax policies and other changes in the international regulatory
climate and international economic conditions could materially adversely affect
the Company's profitability and financing
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plans. Other than Italy, where the Company is subject to certain risks due to
currency fluctuations, the Company's properties are geographically diversified
and not concentrated in any particular region.
POSSIBLE LIABILITY OF TRUST SHAREHOLDERS
Both the Maryland statute governing real estate investment trusts formed
under the laws of that state (the "Maryland REIT Law") and the Declaration of
Trust provide that no shareholder of the Trust will be personally liable for any
obligation of the Trust solely as a result of such shareholder's status as a
shareholder of the Trust. The Declaration of Trust further provides that the
Trust shall indemnify each shareholder against any claim or liability to which
the shareholder may become subject by reason of being or having been a
shareholder. In addition, it is the Trust's policy to include a clause in its
contracts which provides that shareholders assume no personal liability for
obligations entered into on behalf of the Trust. However, with respect to tort
claims, contractual claims where shareholder liability is not so negated, claims
for taxes and certain statutory liabilities, the shareholders may, in some
jurisdictions, be personally liable to the extent that such claims are not
satisfied by the Trust. Inasmuch as the Trust does and will carry public
liability insurance which it considers adequate, any risk of personal liability
to shareholders is limited to situations in which the Trust's assets plus its
insurance coverage would be insufficient to satisfy the claims against the Trust
and its shareholders.
RISKS RELATING TO GENERAL ECONOMIC CONDITIONS
The Company's hotel and gaming operations may be adversely affected by
moderate or severe economic downturns, including conditions which may be
isolated to one or more geographic regions. As a result, the Company's ability
to achieve or sustain substantial improvements in funds from operations and
other important financial tests may be adversely affected by general economic
conditions.
Further, an economic downturn in the countries from which the Company's
gaming operations draw high-end international customers could cause a reduction
in the frequency of visits and the revenues generated by such customers.
Similarly, the collectibility of receivables from international gaming customers
could be adversely affected by future business or economic trends, or by
significant events, in the countries in which such customers reside.
RISKS RELATING TO ACTS OF GOD AND WAR
The Company's financial and operating performance may be adversely affected
by acts of God, such as natural disasters, in both the locations in which the
Company owns and/or operates significant properties and areas of the world from
which the Company draws a large number of customers. Similarly, wars, political
unrest and other forms of civil strife may cause the Company's results to differ
materially from predicted results.
PART I
ITEM 1. BUSINESS.
Starwood Hotels & Resorts Worldwide, Inc. and Starwood Hotels & Resorts
are, together with their subsidiaries, one of world's leading hotel operating
companies and the largest real estate investment trust in the United States,
respectively. The Corporation conducts its hotel business both directly and
through its subsidiaries ITT Sheraton Corporation ("Sheraton") and Ciga, S.P.A.
("Ciga"), and engages in the gaming business principally through its subsidiary
Caesars World, Inc. ("Caesars"). Through the Sheraton, Westin, The Luxury
Collection, St. Regis, Ciga, Four Points Hotels and Caesars brand names,
Starwood Hotels is represented in most major markets of the world. At December
31, 1997, the Trust owned fee, ground leasehold and mortgage loan interests in
hotel properties located throughout the United States and in Mexico and
Scotland. At December 31, 1997, the Corporation leased properties from the Trust
and operated them directly or through third-party management companies. As of
March 30, 1998, Starwood Hotels owned equity interests in approximately 220
hotel properties, held mortgage interests in eight hotel properties, operated
8
<PAGE> 10
approximately 180 hotel properties on behalf of third-party owners and earned
franchise fees by licensing one of its brand names to approximately 240 hotel
properties. Gaming operations generally are marketed under either the Caesars or
Sheraton brand name and service mark and are currently represented in, among
other areas, Las Vegas, Atlantic City and Tunica County, Mississippi, in five
foreign countries and on two cruise ships that operate in international waters.
At December 31, 1997, Starwood Hotels owned fee or ground leasehold
interests in 102 hotel properties and mortgage interests in another eight hotel
properties. Of the 102 hotels in which Starwood Hotels owned an equity interest,
12 hotels were being managed by third-party operators, including four hotels
leased to third parties. In addition, the Corporation managed nine hotels for
third-party owners. In furtherance of the Company's strategy to enhance, expand
and diversify its hotel portfolio and to develop or acquire global brands, on
January 2, 1998, the Company acquired Westin and on February 23, 1998, the
Company acquired ITT.
ITT
Prior to its acquisition by the Company, ITT was one of the world's largest
hotel and gaming companies. ITT conducts its hotel and gaming business through
its subsidiaries Sheraton, Ciga and Caesars. Through the Sheraton, The Luxury
Collection, Ciga, Four Points Hotels and Caesars brand names, ITT is represented
in most major markets of the world. In 1997, ITT hosted over 4.5 million
customer nights at ITT's properties in 63 countries. Gaming operations are
marketed under either the Caesars or Sheraton brand name and service mark, and
are currently represented in Las Vegas (Nevada), Atlantic City (New Jersey),
Halifax and Sydney (Nova Scotia), Lake Tahoe (Nevada), Tunica County
(Mississippi), Lima (Peru), Cairo (Egypt), Windsor (Ontario) and Townsville
(Australia).
BUSINESS SEGMENTS
Business segment information for ITT is as follows:
<TABLE>
<CAPTION>
REVENUES NET INCOME
-------------------------- -----------------------
1997 1996 1995 1997 1996 1995
------ ------ ------ ----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Hotels................................ $4,687 $4,433 $4,164 $ 400 $ 371 $ 197
Gaming................................ 1,123 1,159 1,045 151 219 191
------ ------ ------ ----- ----- -----
Ongoing Segments.................... 5,810 5,592 5,209 551 590 388
Dispositions.......................... 89 126 187 (47) (8) 11
------ ------ ------ ----- ----- -----
Total Segments...................... 5,899 5,718 5,396 504 582 399
Other................................. (739) (83) (5)
----- ----- -----
(235) 499 394
Interest expense, net................. (94) (96) (152)
Miscellaneous income (expense), net... 227 3 5
Income tax expense.................... (159) (173) (87)
Minority equity....................... (9) (7) 1
----- ----- -----
Income (loss) from continuing
operations.......................... (270) 226 161
Discontinued operations (after tax)... 25 23 (14)
Extraordinary item.................... (42) -- --
Cumulative effect of accounting
change.............................. (11) -- --
------ ------ ------ ----- ----- -----
$5,899 $5,718 $5,396 $(298) $ 249 $ 147
====== ====== ====== ===== ===== =====
</TABLE>
9
<PAGE> 11
HOTEL OPERATIONS
ITT's revenues from hotel operations are derived worldwide from Sheraton's
owned, leased and managed hotels and ITT's 70.3% ownership interest in Ciga, a
group of luxury hotels in Europe. ITT also earns franchise fees by licensing the
"Sheraton" and "Four Points Hotels" brands to owners of independent hotels.
Revenues in the hotel business (excluding franchised hotels) are essentially a
function of number of rooms, average daily rate charged for rooms and number of
rooms occupied.
ITT's gaming operations in hotels in the Sheraton network and the gaming
operations of Caesars are discussed below under "Gaming Operations." The tables
contained in this "Hotel Operations" section of Item 1 of this Joint Annual
Report do not include information relating to hotel/casinos owned by Sheraton or
Caesars.
The following table illustrates the sources of revenues of ITT's hotel
operations for the years ended December 31, 1997 and December 31, 1996,
respectively.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Owned and Leased Hotels..................................... 33% 33%
Managed and Joint Venture Hotels(1)......................... 64% 64%
Franchised Hotels(2)........................................ 1% 1%
Other(3).................................................... 2% 2%
---- ----
100% 100%
==== ====
</TABLE>
- ---------------
(1) Includes 100% of the revenues of managed and joint venture hotels.
(2) Includes franchise fees paid to Sheraton, not revenues of franchised hotels.
(3) Other revenues primarily include revenues from reservation services and
Sheraton Club International operations.
Sheraton's hotel operations are conducted worldwide. As of December 31,
1997, Sheraton owned or leased 17 properties in North America. Generally,
outside of North America, Sheraton manages hotels and, to a limited extent,
invests equity in hotels. As of December 31, 1997, Sheraton had an equity
interest of 50% or less in eight properties in Europe, five properties in the
Asia/Pacific region, one property in Latin America and one property in the
Africa/Middle East region.
10
<PAGE> 12
Owned and Leased Hotels
The following table illustrates, for owned and leased properties classified
by geographic region and hotel type, the average number of years since purchase
or major renovation, total revenue (in millions), average daily occupancy rate,
average daily rate and revenue per available room ("REVPAR") for the years ended
December 31, 1997 and 1996 and the number of rooms and the number of properties
at December 31, 1997 and 1996. The amounts shown in the table reflect the U.S.
dollar equivalent of all local currencies; in some cases, currency fluctuations
may have an adverse effect on the comparison of any region or individual
property for the periods presented.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
NORTH AMERICA -- LUXURY
Average number of years since purchase or major
renovation................................................ 9 8
Total revenues.............................................. $216.3 $ 193.3
Average daily occupancy rate(1)............................. 78% 75%
Average daily rate(2)....................................... $ 335 $ 309
REVPAR(3)................................................... $ 258 $ 231
Number of rooms............................................. 1,152 1,145
Number of properties........................................ 3 3
NORTH AMERICA -- UPSCALE:
Average number of years since purchase or major
renovation................................................ 6 4
Total revenues.............................................. $521.5 $ 520.7
Average daily occupancy rate(1)............................. 75% 72%
Average daily rate(2)....................................... $ 155 $ 137
REVPAR(3)................................................... $ 115 $ 99
Number of rooms............................................. 7,668 9,797
Number of properties........................................ 14 18
NORTH AMERICA -- TOTAL:
Average number of years since purchase or major
renovation................................................ 8 5
Total revenues.............................................. $737.8 $ 714.0
Average daily occupancy rate(1)............................. 75% 72%
Average daily rate(2)....................................... $ 177 $ 155
REVPAR(3)................................................... $ 131 $ 112
Number of rooms............................................. 8,820 10,942
Number of properties........................................ 17 21
EUROPE/CIGA -- LUXURY:
Average number of years since purchase or major
renovation................................................ 3 2
Total revenues.............................................. $253.6 $ 263.3
Average daily occupancy rate(1)............................. 72% 66%
Average daily rate(2)....................................... $ 228 $ 225
REVPAR(3)................................................... $ 161 $ 149
Number of rooms............................................. 3,350 3,188
Number of properties........................................ 18 17
</TABLE>
11
<PAGE> 13
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
EUROPE/CIGA -- UPSCALE:
Average number of years since purchase or major
renovation................................................ 5 4
Total revenues.............................................. $248.0 $ 218.5
Average daily occupancy rate(1)............................. 74% 72%
Average daily rate(2)....................................... $ 125 $ 129
REVPAR(3)................................................... $ 92 $ 93
Number of rooms............................................. 3,829 3,537
Number of properties........................................ 15 15
EUROPE/CIGA -- TOTAL
Average number of years since purchase or major
renovation................................................ 4 3
Total revenues.............................................. $501.6 $ 481.8
Average daily occupancy rate(1)............................. 73% 69%
Average daily rate(2)....................................... $ 168 $ 171
REVPAR(3)................................................... $ 122 $ 119
Number of rooms............................................. 7,179 7,622
Number of properties........................................ 33 32
AFRICA/MIDDLE EAST -- UPSCALE AND TOTAL:
Average number of years since purchase or major
renovation................................................ N/A(4) 16
Total revenues.............................................. $ 2.5
Average daily occupancy rate(1)............................. 67%
Average daily rate(2)....................................... $ 11
REVPAR(3)................................................... $ 7
Number of rooms............................................. 164
Number of properties........................................ 2
LATIN AMERICA -- LUXURY:
Average number of years since purchase or major
renovation................................................ 4 6
Total revenues.............................................. $ 36.3 $ 25.9
Average daily occupancy rate(1)............................. 65% 63%
Average daily rate(2)....................................... $ 258 $ 238
REVPAR(3)................................................... $ 162 $ 150
Number of rooms............................................. 470 425
Number of properties........................................ 3 2
LATIN AMERICA -- UPSCALE:
Average number of years since purchase or major
renovation................................................ 12 14
Total revenues.............................................. $191.5 $ 172.3
Average daily occupancy rate(1)............................. 74% 69%
Average daily rate(2)....................................... $ 105 $ 98
REVPAR(3)................................................... $ 77 $ 67
Number of rooms............................................. 4,256 4,008
Number of properties........................................ 9 8
</TABLE>
12
<PAGE> 14
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
LATIN AMERICA -- TOTAL
Average number of years since purchase or major
renovation................................................ 10 13
Total revenues.............................................. $227.8 $ 198.2
Average daily occupancy rate(1)............................. 73% 68%
Average daily rate(2)....................................... $ 118 $ 106
REVPAR(3)................................................... $ 85 $ 73
Number of rooms............................................. 4,726 4,433
Number of properties........................................ 12 10
ASIA/PACIFIC -- LUXURY:
Average number of years since purchase or major
renovation................................................ 2 1
Total revenues.............................................. $ 50.9 $ 14.5
Average daily occupancy rate(1)............................. 83% 84%
Average daily rate(2)....................................... $ 167 $ 173
REVPAR(3)................................................... $ 135 $ 145
Number of rooms............................................. 559 559
Number of properties........................................ 1 1
ASIA/PACIFIC -- UPSCALE:
Average number of years since purchase or major
renovation................................................ 2 2
Total revenues.............................................. $ 32.8 $ 16.1
Average daily occupancy rate(1)............................. 72% 76%
Average daily rate(2)....................................... $ 144 $ 142
REVPAR(3)................................................... $ 99 $ 108
Number of rooms............................................. 563 567
Number of properties........................................ 2 2
ASIA/PACIFIC -- TOTAL:
Average number of years since purchase or major
renovation................................................ 2 1
Total revenues.............................................. $ 83.7 $ 30.6
Average daily occupancy rate(1)............................. 77% 79%
Average daily rate(2)....................................... $ 156 $ 154
REVPAR(3)................................................... $ 117 $ 122
Number of rooms............................................. 1,112 1,112
Number properties........................................... 3 3
</TABLE>
- ---------------
(1) Occupied rooms in the period divided by rooms available for sale in the same
period.
(2) Room revenues for the period divided by rooms occupied for the same period.
(3) REVPAR was computed as room revenue divided by rooms available for sale.
(4) There were no properties in this geographic region for the period presented.
During 1996, subsidiaries of Sheraton leased two properties; these leases
were terminated in 1997 and Sheraton entered into new management agreements
for these properties.
The hotel properties that are owned and leased by Sheraton are, in many
cases, subject to mortgage and lease indebtedness. As of December 31, 1997, the
aggregate mortgage and lease indebtedness relating to these hotels was
approximately $252 million. For ITT's leased properties, a subsidiary of
Sheraton generally leases the land upon which the hotel has been built and the
hotel building. At the end of the lease, the buildings and other leasehold
improvements revert to the landlord. Usually, a Sheraton subsidiary is
responsible for repairs,
13
<PAGE> 15
maintenance, operating expenses and lease rentals and retains managerial
discretion over operations. Generally, Sheraton pays a percentage rental based
on total revenues or gross operating profit for the facility, but sometimes with
a minimum fixed annual rent or a preferential rent. During 1997 and 1996,
Sheraton paid aggregate rentals, including rentals attributable to the leased
properties, of $28 million and $22 million, respectively.
In June 1997, Sheraton sold to FelCor Suite Hotels, Inc. five hotel
properties (the Park Central (Dallas), the O'Hare Gateway (Chicago), the
Crescent (Phoenix), the Atlanta Galleria and the Atlanta Gateway) for $200
million in cash and retained a 20-year contract to manage these hotels.
Managed and Joint Venture Hotels
Through its subsidiaries, ITT manages, usually under a long-term agreement
with the owner, a number of hotels throughout the world. The following table
illustrates, for managed and joint venture properties, classified by geographic
region, total revenue (in millions), average daily occupancy rate, average daily
rate, REVPAR for the years ended December 31, 1997 and 1996 and the number of
rooms and number of properties at December 31, 1997 and 1996. The amounts shown
in the table reflect the U.S. dollar equivalent of all local currencies; in some
cases, currency fluctuations may have an adverse effect on the comparison of any
region or individual property for the periods presented.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
NORTH AMERICA:
Total revenues.............................................. $1,375.2 $1,231.0
Average daily occupancy rate(1)............................. 75% 72%
Average daily rate(2)....................................... $ 148 $ 139
REVPAR(3)................................................... $ 109 $ 101
Number of rooms............................................. 25,987 22,091
Number of properties........................................ 49 37
EUROPE/CIGA:
Total revenues.............................................. $ 464.8 $ 444.9
Average daily occupancy rate(1)............................. 69% 69%
Average daily rate(2)....................................... $ 141 $ 140
REVPAR(3)................................................... $ 96 $ 97
Number of rooms............................................. 8,743 7,339
Number of properties........................................ 31 26
AFRICA/MIDDLE EAST:
Total revenues.............................................. $ 415.8 $ 382.8
Average daily occupancy rate(1)............................. 65% 61%
Average daily rate(2)....................................... $ 90 $ 91
REVPAR(3)................................................... $ 57 $ 55
Number of rooms............................................. 9,933 9,244
Number of properties........................................ 37 34
</TABLE>
14
<PAGE> 16
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
LATIN AMERICA:
Total revenues.............................................. $ 35.1 $ 21.0
Average daily occupancy rate(1)............................. 54% 59%
Average daily rate(2)....................................... $ 91 $ 66
REVPAR(3)................................................... $ 48 $ 39
Number of rooms............................................. 1,464 1,084
Number of properties........................................ 6 4
ASIA/PACIFIC:
Total revenues.............................................. $ 713.4 $ 790.9
Average daily occupancy rate(1)............................. 69% 68%
Average daily rate(2)....................................... $ 133 $ 138
REVPAR(3)................................................... $ 89 $ 93
Number of rooms............................................. 12,658 11,790
Number of properties........................................ 39 34
</TABLE>
- ---------------
(1) Occupied rooms in the period divided by rooms available for sale in the same
period.
(2) Room revenues for the period divided by rooms occupied for the same period.
(3) REVPAR was computed as room revenue divided by rooms available for sale.
Under its standard management agreement, Sheraton operates lodging
facilities under long-term arrangements with property owners. Sheraton's
responsibilities include hiring, training and supervising the managers and
employees required to operate these facilities. For additional fees, Sheraton
provides reservation services. Sheraton also coordinates national advertising
and certain marketing and promotional services. Sheraton prepares and implements
annual budgets for lodging facilities under its management and is responsible
for allocating property-owner funds for periodic maintenance and repair of
buildings and furnishings. Sheraton's management fee is generally based on a
percentage of the hotel's total revenues plus, in certain instances, an
incentive fee based on the hotel's operating performance.
During 1997, Sheraton invested approximately $18 million, in hotel joint
ventures, including investments in Key West-Florida, Schiphol Airport-Amsterdam,
The Netherlands and Beijing International Club-Beijing, China. In each of these
projects, Sheraton owns an equity interest and is, or will be, the manager of
the hotel.
During 1997, Sheraton signed agreements to manage 45 additional hotels, of
which 14 had opened as of December 31, 1997. Sheraton did not invest in the
ownership of any of these hotels. Of these 45 hotels, seven are in North
America, 16 in Asia/Pacific, four in Europe, 10 in Africa or the Middle East and
eight in Latin America.
Franchised Hotels
Sheraton franchises properties located primarily in North America. Of
Sheraton's over 200 franchised hotels and inns, as of December 31, 1997, only 23
were located outside of North America.
For Sheraton's franchise business (which includes properties operated under
the "Four Points Hotels" name), the following table illustrates the number of
properties, number of room nights available, average daily
15
<PAGE> 17
occupancy rate and average daily rate for the years ended December 31, 1997 and
December 31, 1996, respectively.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Number of properties........................................ 216 208
Number of room nights available............................. 19,180,437 18,867,329
Average daily occupancy rate(1)............................. 68% 67%
Average daily rate(2)....................................... $87 $81
</TABLE>
- ---------------
(1) Occupied rooms in the period divided by rooms available for sale in the same
period.
(2) Room revenues for the period divided by rooms occupied for the same period.
Hotels that are franchised by Sheraton are permitted to operate under the
"Sheraton" trade name and to use the stylized "S" and wreath service mark.
Sheraton franchised hotels are generally smaller than the hotels owned, leased
or managed by Sheraton. Sheraton approves certain plans for, and the location
of, franchised hotels and reviews their design.
In general, each franchisee pays Sheraton an initial minimum fee plus an
additional fee for every room over 100. There is a continuing monthly license
fee based on a percentage of the facility's room revenues. Although Sheraton
does not directly participate in the day-to-day management or operation of its
franchised hotels, Sheraton or an agent of Sheraton periodically inspects the
hotels to ensure that Sheraton's standards are maintained.
In 1995, Sheraton began offering its franchised hotel owners the
opportunity to convert inns that are franchised by Sheraton to the "Four Points
Hotels" name, a new mid-priced hotel brand. As of December 31, 1997, Sheraton
had 68 franchised properties operating under the Four Points Hotels brand name.
Of these properties, 37 were properties converted from Sheraton franchises, 28
properties were converted from competing brands and three were newly
constructed. Sheraton expects that each Four Points Hotel will be operated and
marketed by its owners with a view toward providing hospitality services to the
business-oriented traveler.
During 1997, Sheraton executed 37 new franchise agreements, of which 10 had
been opened as of December 31, 1997. Of these, 15 are or will be operated under
the Sheraton name and 22 are or will be operated under the Four Points Hotels
name. At December 31, 1997, there were 216 franchised hotels in operation under
the Sheraton and Four Points Hotels names.
GAMING OPERATIONS
Currently, ITT's gaming operations consist of 15 casinos or other gaming
facilities, including Caesars Palace in Las Vegas, Nevada; Caesars Atlantic City
in Atlantic City, New Jersey; Caesars Tahoe in Stateline, Nevada; The Desert Inn
Resort & Casino in Las Vegas, Nevada; The Sheraton Casino & Hotel in Tunica
County, Mississippi; and various other casino/hotel operations under Sheraton
and Caesars outside the United States. In April 1997, ITT announced its
intention to sell The Desert Inn Resort & Casino.
Beginning in June 1996, ITT undertook a capital expenditure program to
upgrade and expand ITT's existing gaming operations. Upon completion of this
program, approximately $500 million will have been invested at Caesars Palace,
approximately $272 million will have been invested at Caesars Atlantic City, and
approximately $193 million has been invested at The Desert Inn Resort & Casino,
excluding in each case capitalized interest and pre-opening expenses. ITT is
also in the process of constructing a riverboat casino and a hotel in Harrison
County, Indiana.
16
<PAGE> 18
Caesars World
Caesars operates three destination gaming resorts: Caesars Palace in Las
Vegas, Nevada; Caesars Tahoe in Stateline, Nevada; and Caesars Atlantic City in
Atlantic City, New Jersey. Caesars also owns one-half of a management company
that operates Casino Windsor, a casino in Windsor, Canada that is owned by the
Government of the Province of Ontario. Caesars subsidiaries also operate small
casinos on two cruise ships and operate a 1,000 machine slot operation at Dover
Downs in Dover, Delaware.
Caesars Palace. Caesars Palace, which opened in 1966 as the first themed
casino on the "Strip" in Las Vegas, Nevada, is a casino/hotel complex located on
approximately 80 acres. At December 31, 1997, Caesars Palace had approximately
2,469 hotel rooms and suites in service, 10 restaurants, a 1,126-seat showroom,
a convention complex with approximately 171,000 square feet of meeting and
banquet space, numerous bars and lounges, The Forum Shops (a retail shopping
arcade), health spas and an "Omnimax" theater. Currently, the Caesars Palace
casino is approximately 125,000 square feet, and offers wagering limits that are
among the highest in Nevada.
As part of its capital expenditure program, Caesars has invested
approximately $406 million at Caesars Palace during the two years ended February
28, 1998. The project is intended to create a more attractive, exciting gaming
environment, while satisfying previously unmet room demand. The project has
resulted in the addition of approximately 1,130 rooms, which have increased the
total number of rooms at Caesars Palace to approximately 2,470. Construction of
the room tower was completed during the fourth quarter of 1997. Enhancements to
the casino include the addition of gaming space for slot machines and table
games. Other improvements include the development of the second phase of The
Forum Shops (which was developed by a third party and opened in the third
quarter of 1997) with 250,000 square feet of retail space, and the addition of
112,000 square feet of meeting and convention facilities. Construction of a new
health club and spa is underway and the facility is expected to open in April
1998.
The average occupancy rate at Caesars Palace was 93% and 92.3% for 1997 and
1996, including occupancy of 43% and 42%, respectively, of the occupied rooms
and suites by guests receiving complimentary rooms.
Caesars Atlantic City. Caesars Atlantic City is a casino/hotel on the
Boardwalk in Atlantic City, New Jersey. At December 31, 1997, Caesars Atlantic
City had approximately 1,144 rooms in service, a 78,000-square foot casino,
including table games and slots, and approximately 6,000 square feet of gaming
space for keno, poker and race simulcasting. It also had 13 restaurants and
bars, 40,000 square feet of meeting and banquet space, a 1,100-seat showroom, a
shopping arcade, a Roman-themed transportation center that accommodates 2,500
cars and 11 buses, a health club and two tennis courts. The property on which
Caesars Atlantic City stands consists of approximately 8.1 acres, including
contiguous parcels totaling approximately 5.4 acres bounded on three sides by
Missouri, Arkansas and Pacific Avenues, with an entire block of Boardwalk
frontage.
Improvements at Caesars Atlantic City are expected to cost approximately
$272 million during the 1997-1998 period. These improvements will bring the
total number of rooms to approximately 1,125 and will increase casino space by
approximately 30,000 square feet. As part of this project, Caesars Atlantic City
is constructing a new entrance and central four-story atrium, a grand
multi-function ballroom and expanded dining facilities. The design incorporates
an elaborate Roman theme with Corinthian columns, large statues and extensive
fountains. These improvements are expected to enable Caesars Atlantic City to
increase its convention business and to satisfy substantial unmet room demand.
The exterior renovations are designed to further enhance Caesar's visibility on
the center of the Boardwalk to attract more "walk-in" patrons.
Caesars also owns the Ocean One retail mall. The Ocean One mall is
constructed on a pier that extends out 900 feet over the Atlantic Ocean and is
located directly in front of the Boardwalk entrance to Caesars Atlantic City.
Ocean One contains approximately 400,000 square feet of restaurant and retail
space on three floors. Under current applicable local and state laws, and
subject to certain restrictions, Ocean One may be used for gaming or lodging
activities. The average occupancy rate at Caesars Atlantic City was 93.5% and
17
<PAGE> 19
95.6% for 1997 and 1996, including occupancy of 88.5% and 88.7%, respectively,
of the available rooms and suites by guests receiving complimentary rooms.
Caesars Tahoe. Caesars Tahoe casino/hotel opened in 1979 and is located in
Stateline, Nevada, adjacent to Lake Tahoe. At that time, Caesars entered into a
long-term lease of the 24-acre property on which the casino/hotel stands. At
December 31, 1997, Caesars Tahoe had 440 rooms and suites in service, five
restaurants, a 1,500-seat showroom, 16,000 square feet of convention space, a
Roman-themed nightclub, a 40,000-square foot casino including a race and sports
book, bars, shops, four outdoor tennis courts and an indoor health spa
containing a swimming pool and a racquetball court. The average occupancy rate
at Caesars Tahoe was 80.5% and 82.7% for 1997 and 1996, including occupancy of
22.1% and 24.8%, respectively, of the available rooms and suites by guests
receiving complimentary rooms.
Casino Windsor. Caesars owns a one-half interest in Windsor Casino Limited
("Windsor"). Windsor is the operator of Casino Windsor, a 50,000-square foot
interim casino in Windsor, Ontario, which is owned by the Ontario provincial
government. Caesars anticipates that the interim casino will be replaced by a
permanent facility in the second quarter of 1998, which is expected to include a
hotel of approximately 400 rooms, a 100,000-square foot casino and entertainment
and meeting facilities.
Harrison County Riverboat Development. In May 1996, Caesars was granted a
certificate of suitability by the Indiana Gaming Commission to construct and
operate a riverboat casino. The land-based and marine facilities will be located
on the Indiana side of the Ohio River across the river from Louisville,
Kentucky. Construction of the riverboat casino and related improvements is
subject to receipt of various consents, permits and approvals, all of which have
been secured.
The Desert Inn Resort & Casino
The Desert Inn Resort & Casino, which ITT purchased in November 1993, is a
casino/hotel complex located on approximately 200 acres on the "Strip" in Las
Vegas, Nevada. The Desert Inn underwent extensive renovations in 1996 and 1997
at a total cost of approximately $193 million. At December 31, 1997, The Desert
Inn had 715 rooms and suites, six restaurants, a 636-seat showroom, a convention
complex with approximately 27,000 square feet of meeting and banquet space,
numerous bars and lounges, swimming pools, tennis facilities, an 18-hole
championship golf course, a spa and other facilities. Its casino is
approximately 30,000 square feet. The average occupancy rate at The Desert Inn
was 70.2% and 75.4% for 1997 and 1996, including occupancy of 22.3% and 22.7%,
respectively, of the available rooms and suites by guests receiving
complimentary rooms.
The Sheraton Casino & Hotel
The Sheraton Casino opened in Tunica County, Mississippi, in August 1994;
in November 1997, the hotel opened a 150-room tower and was renamed "Sheraton
Casino & Hotel." The Sheraton Casino & Hotel has three restaurants, three bars
and lounges and other facilities. Its casino has approximately 31,000 square
feet of gaming space.
Other Sheraton Gaming Operations
Sheraton also operates casinos in Lima, Peru at the Sheraton Lima Hotel &
Casino, which has 438 rooms and suites; in Halifax, Nova Scotia at the Sheraton
Halifax Hotel & Casino, which has 351 rooms and suites; in Sydney, Cape Breton,
Nova Scotia at the Sheraton Casino Sydney, which is a stand-alone casino; in
Townsville, Australia at the Sheraton Breakwater, which has 192 rooms and 16
suites; and in Cairo, Egypt at the Cairo Sheraton and the El Gezirah Sheraton,
which have 433 rooms and 86 suites and 477 rooms and 68 suites, respectively.
Termination of Planet Hollywood Development
In June 1996, ITT entered into an agreement in principle to form a joint
venture with Planet Hollywood International, Inc. ("Planet Hollywood") to
develop, own and operate "Planet Hollywood" themed hotel/
18
<PAGE> 20
casinos. The Company does not expect that the definitive agreement with Planet
Hollywood will be executed or that the Company will develop "Planet Hollywood"
themed hotel/casinos.
OTHER ASSETS AND OPERATIONS; CERTAIN RECENT DEVELOPMENTS
Potential Disposition of ITT Educational
In addition to its hotel and gaming businesses, ITT owns 83.3% of the
outstanding shares of ITT Educational Services, Inc. ("ITT Educational"). The
shares of common stock of ITT Educational are traded on the New York Stock
Exchange under the symbol "ESI". The term "ITT Technical Institutes" (in
singular or plural form) refers to educational institutions owned and operated
by ITT Educational.
Starwood Hotels is currently exploring a range of disposition strategies
for ITT's equity interest in ITT Educational. As part of this disposition
strategy, on February 13, 1998, ITT Educational filed a registration statement
with the Securities and Exchange Commission for the sale by ITT in an
underwritten public offering of up to 12,650,000 shares (assuming the
underwriters' overallotment option is exercised in full) of ITT Educational
common stock.
ITT Educational is a leading proprietary provider of technology-oriented
post-secondary degree programs in the United States. ITT Educational offers
associate, bachelor and master degree programs and non-degree diploma programs
to over 24,000 students through a system of 63 ITT Technical Institutes located
in 27 states. The education programs are designed, after consultation with
employers, to help graduates prepare for careers in a variety of fields
involving technology. As of December 31, 1997, approximately 97% were enrolled
in a degree program, with approximately 74% of ITT Technical Institute students
enrolled in programs related to electronics engineering technology and
approximately 23% enrolled in programs related to computer-aided drafting
technology. While most graduates of ITT Technical Institutes are initially
employed by numerous small, technology-oriented companies, employers have also
included well recognized corporations, such as AT&T, Boeing, Intel, NCI,
Microsoft, Motorola, IBM and General Electric. Additionally, the institutes'
graduates have been hired by some federal and local government agencies,
including the Federal Bureau of Investigation and the Central Intelligence
Agency.
ITT Educational has experienced significant growth, acquiring three and
establishing 50 new technical institutes since 1981. Of the 63 institutes
currently operating, 20 have been established since January 1, 1993. The number
of students attending ITT Technical Institutes has increased 32.1% from 18,539
students at December 31, 1992 to 24,498 at December 31, 1997. Total revenues
from ITT Technical Institutes have increased 74% from $150.4 million (excluding
discontinued operations) in 1992 to $261.7 million in 1997. ITT Educational
opened three new institutes in 1997. ITT Educational intends to continue
expanding by opening new institutes (including six new institutes in 1998) and
offering a broader range of programs at its institutes.
Madison Square Garden
In August 1994, Madison Square Garden, L.P. ("MSG"), a partnership among
subsidiaries of ITT and Cablevision Systems Corporation ("Cablevision"), was
formed to acquire the business previously operated by Madison Square Garden
Corporation. MSG is the owner of the New York Knickerbockers basketball
franchise (the "Knicks"), and New York Rangers hockey franchise (the "Rangers"),
the Madison Square Garden Arena and the MSG cable television network.
At the time MSG was formed, MSG Eden Corporation ("MSGE") was the general
partner and owner of a 1% general partnership interest in MSG, and was owned by
ITT Eden Corporation ("ITTE") and Rainbow Garden Corp. ("RGC"), a subsidiary of
Cablevision; ITT MSG Inc. ("ITT MSG") and Garden L.P. Holding Corp. ("GHC"),
another subsidiary of Cablevision, each owned a 49.5% limited partnership
interest in MSG.
On April 15, 1997, ITT, ITTE and ITT MSG entered into a Partnership
Interest Transfer Agreement (the "Transfer Agreement") with MSG and Cablevision
that provides for the sale of ITT MSG's interest in MSG to Cablevision for $650
million plus the assumption of approximately $115 million of indebtedness.
19
<PAGE> 21
Pursuant to the Transfer Agreement, on July 17, 1997, MSG redeemed, for $493.5
million, a portion of ITT MSG's limited partnership interest in MSG, MSGE
redeemed all of ITTE's ownership interest in MSGE for $6.5 million and
Cablevision caused Sports Channel Associates to be contributed to MSG. After
such redemptions and contribution, ITT (through ITT MSG) owned a 10.2% limited
partnership interest in MSG.
In March 1998, ITT MSG was notified that, as permitted by MSG's partnership
agreement, affiliates of Cablevision had contributed approximately $450 million
of additional capital to MSG, thereby reducing ITT MSG's limited partnership
interest in MSG to approximately 7.81%.
The Transfer Agreement provides that ITT MSG (i) had an initial "put"
option to require Cablevision to purchase (or cause MSG to redeem) one half of
ITT's continuing interest in MSG for $94 million on June 17, 1998 and (ii) has a
second "put" option to require Cablevision to purchase (or cause MSG to redeem)
ITT MSG's then remaining interest on June 17, 1999 for $94 million. In addition,
on June 17, 2000, Cablevision has the right to purchase (or cause MSG to redeem)
ITT MSG's then remaining interest in MSG at a price determined by an investment
banking firm to be the fair market value, subject to a "floor" price equal to
the proportionate "put" price. ITT MSG exercised the initial "put" option in
March 1998.
Pursuant to an Aircraft Contribution Agreement dated as of April 15, 1997,
among GHC, MSGE, ITT MSG, ITT Flight Operations, Inc. ("ITTF") and MSG, on
December 31, 1997, ITTF contributed to MSG an ITT-owned aircraft that MSG had
used for the Knicks and the Rangers, which was valued at $38 million. In the
event the remaining put and call rights are not exercised, ITT's percentage
interest in MSG will be increased to reflect the contribution to MSG of the
aircraft described above.
WBIS+
In July 1996, ITT purchased, in partnership with Dow Jones & Co. ("Dow
Jones"), television station WNYC-TV, Channel 31 in New York City, from The City
of New York. The purchase price of $207 million was paid one-half by ITT and
one-half by Dow Jones, and the partnership is managed on a 50/50 basis. The
station was renamed WBIS+ and, in January 1997, introduced a new format of
business and sports programming.
In March 1998, ITT and Dow Jones sold WBIS+ to Paxson Communications
Corporation for a cash purchase price of approximately $257.5 million. ITT's
proceeds from the sale of approximately $128.8 million were used to pay down
existing indebtedness of the Corporation .
Disposition of ITT World Directories
In February 1998, ITT disposed of ITT World Directories, Inc., the
subsidiary through which ITT conducted its telephone directories publishing
business, to VNU International B.V., a leading international publishing and
information company based in The Netherlands, for a total gross consideration
valued at $2.1 billion. Proceeds from the disposition were used, in part, to
acquire certain outstanding debt of Starwood Hotels.
WESTIN
As of December 31, 1997, Westin owned, managed, franchised or represented
97 luxury or upscale hotel and resort properties worldwide, excluding 15 Westin
hotels owned by the Company. Westin's primary strategy is to provide, for its
own hotels and to the other owners of Westin's hotel and resort properties,
focused, responsive, high quality marketing, reservations, management and, as
appropriate, franchise services that are designed to increase the operating
revenues and profitability of the properties and to increase hotel and resort
customer satisfaction.
Westin Hotel Company, originally founded as Western Hotels in 1930, became
Western International Hotels in 1963 and adopted the Westin name and logo in the
late 1970s. It grew from its initial 17 hotels located in the Pacific Northwest
to 82 properties when it was acquired by W&S Hotel L.L.C. in May 1995, and grew
to its 97 luxury or upscale hotel and resort properties (excluding 15 Westin
hotels owned by the
20
<PAGE> 22
Company) throughout the world at December 31, 1997 through a combination of
Westin's own development efforts and management, franchise and representation
agreements with other hotel owners. Westin hotel and resort properties are
located throughout the United States and in Argentina, Brazil, Canada, China,
England, France, Germany, Guatemala, Indonesia, Japan, Korea, Malaysia, Mexico,
the Netherlands, Panama, the Philippines, Portugal, Singapore, Switzerland and
Thailand.
As of December 31, 1997, the Westin portfolio (excluding 15 Westin hotels
owned by the Company) consisted of 12 owned hotels with approximately 5,900
rooms, five joint ventures with approximately 3,200 rooms, 37 managed hotels
with approximately 20,500 rooms, 28 franchised hotels with approximately 8,400
rooms and 15 represented hotels with approximately 5,300 rooms.
Owned Hotels
The following table illustrates, for each hotel owned by Westin at December
31, 1997, the total number of guest rooms at that date, the year the hotel was
first operated, and for 1997, the average daily occupancy rate, average daily
room rate and REVPAR:
<TABLE>
<CAPTION>
1997
-------------------------------
AVERAGE AVERAGE
FIRST DAILY DAILY
YEAR ROOM RATE OCCUPANCY REVPAR
HOTEL(1) LOCATION ROOMS OPERATED ($) RATE (%) ($)
- -------- -------- ----- -------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Westin South Coast Plaza.... Costa Mesa, CA 390 1975 113.31 75.4 85.44
Westin San Francisco
Airport................... Millbrae, CA 391 1987 128.52 83.3 107.06
Cherry Creek Inn............ Denver, CO 320 1979 61.16 85.5 52.29
Westin Tabor Center......... Denver, CO 420 1985 141.82 77.1 109.34
Westin Fort Lauderdale...... Fort Lauderdale, FL 293 1986 68.50 78.6 53.84
Westin Peachtree Plaza...... Atlanta, GA 1,068 1976 120.64 69.9 84.33
Westin Indianapolis......... Indianapolis, IN 573 1989 103.84 73.1 75.91
Westin Cincinnati........... Cincinnati, OH 448 1981 111.85 69.1 77.29
Westin Galleria Houston..... Houston, TX 485 1977 109.35 75.3 82.34
Westin Oaks................. Houston, TX 406 1971 109.35 75.3 82.34
Westin Resort............... St. John, US Virgin Islands 285 1997(2) N/A N/A N/A
Westin Seattle.............. Seattle, WA 865 (3) 133.43 75.0 100.07
-----
5,994
</TABLE>
- ---------------
(1) The Trust (or, as to the properties in Atlanta, Georgia and St. John, US
Virgin Islands, the Operating Partnership) acquired a 100% equity interest
in each of these hotels on January 2, 1998. See "Structure -- Acquisition of
Westin" below.
(2) Substantially destroyed by a hurricane in September 1995 and reopened in
December 1997 following significant renovations and reconstruction.
(3) South Tower, 1969; North Tower, 1982.
21
<PAGE> 23
Joint Venture Hotels
At December 31, 1997, Westin also had an equity interest in five joint
ventures that owned the following hotels:
<TABLE>
<CAPTION>
HOTEL LOCATION ROOMS WESTIN'S EQUITY INTEREST(%)(1)
- ----- ----------------- ----- ------------------------------
<S> <C> <C> <C>
Westin London, Ontario................. London, Canada 322 10.0
Westin O'Hare.......................... Chicago, IL 525 48.6
Westin Michigan Avenue................. Chicago, IL 740 8.3
Westin Galleria Dallas................. Dallas, TX 431 20.0
Westin St. Francis..................... San Francisco, CA 1,200 8.3
-----
3,218
</TABLE>
- ---------------
(1) Acquired by the Corporation on January 2, 1998. See
"Structure -- Acquisition of Westin" below.
Managed, Franchised and Represented Hotels
The following table lists the hotels managed, franchised or represented by
Westin at December 31, 1997, and the number of guest rooms per property at that
date. Each of these hotels is now managed, franchised or represented by the
Corporation; see "Structure -- Acquisition of Westin" below.
<TABLE>
<CAPTION>
HOTEL LOCATION ROOMS
- ----- ---------------------------- ------
<S> <C> <C>
MANAGED:
Westin Calgary................................... Calgary, Canada 525
Westin Edmonton.................................. Edmonton, Canada 413
Westin Ottawa.................................... Ottawa, Canada 478
Westin Harbour Castle............................ Toronto, Canada 980
Westin Bayshore.................................. Vancouver, Canada 517
Le Hameau du Trianon, a Westin Hotel............. Versailles, France 190
Westin Grand, Berlin............................. Berlin, Germany 358
Westin Bellevue, Dresden......................... Dresden, Germany 339
Westin Resort.................................... Tumon Bay, Guam 420
Westin Surabaya.................................. Surabaya, Indonesia 418
Westin Tokyo..................................... Tokyo, Japan 445
Westin Resort.................................... Coloane Ihla, Macau 208
Westin Dragonara Resort.......................... St. Julians, Malta 311
Las Brisas....................................... Acapulco, Mexico 265
Westin Brisas Resort............................. Ixtapa, Mexico 428
Westin Galleria Plaza............................ Mexico City, Mexico 439
Westin Philippine Plaza.......................... Manila, Philippines 609
Westin Plaza..................................... Singapore 796
Westin Stamford.................................. Singapore 1,253
Westin Chosun Beach.............................. Pusan, South Korea 290
Westin Chosun.................................... Seoul, South Korea 479
Westin Banyan Tree............................... Bangkok, Thailand 216
Westin Chiangmai................................. Chiang Mai, Thailand 528
Westin Copley Place.............................. Boston, MA 800
Westin Charlotte................................. Charlotte, NC 410
Westin River North............................... Chicago, IL 422
Westin Innisbrook Resort......................... Tarpon Springs, FL 850
Westin Renaissance Center........................ Detroit, MI 1,392
Westin Resort.................................... Hilton Head Island, SC 412
</TABLE>
22
<PAGE> 24
<TABLE>
<CAPTION>
HOTEL LOCATION ROOMS
- ----- ---------------------------- ------
<S> <C> <C>
Westin Maui...................................... Kaanapali Beach, HI 742
Westin Crown Center.............................. Kansas City, MO 725
Westin Century Plaza Hotel and Tower............. Los Angeles, CA 1,072
Westin Canal Place............................... New Orleans, LA 438
Westin Santa Clara............................... Santa Clara, CA 500
Walt Disney World Swan........................... Orlando, FL 758
Westin William Penn.............................. Pittsburgh, PA 595
Westin La Paloma................................. Tucson, AZ 487
------
20,508
------
FRANCHISED:
Westin Nova Scotian.............................. Halifax, Canada 307
Le Westin Mont-Royal............................. Montreal, Canada 300
Westin Prince Toronto............................ Toronto, Canada 381
Westin Shanghai.................................. Shanghai, China 495
Westin Demeure Hotels (Astor).................... Paris, France 125
Westin Demeure Hotels (Baltimore)................ Paris, France 105
Westin Demeure Hotels (Castille)................. Paris, France 111
Westin Demeure Hotels (Le Parc).................. Paris, France 120
Westin Demeure Hotels (Marignan-Elysees)......... Paris, France 73
Westin Casuarina Resort.......................... Grand Cayman Islands 343
Westin Osaka..................................... Osaka, Japan 304
Westin San Luis Potosi........................... San Luis Potosi, Mexico 123
Westin Demeure Hotels (The Grand)................ Amsterdam, Netherlands 182
Westin Rio Mar Beach Resort & Casino............. Rio Mar Beach, Puerto Rico 600
Westin Demeure Hotels (Hotel D'Angleterre)....... Geneva, Switzerland 45
Westin Demeure Hotels (47 Park Street)........... London, England 52
Westin Carambola Beach Resort.................... St. Croix, US Virgin Islands 150
Westin Alyeska Prince............................ Girdwood, AK 307
Westin Atlanta Airport........................... Atlanta, GA 496
Westin Columbus.................................. Columbus, OH 196
Westin Beach Resort.............................. Key Largo, FL 200
Hapuna Beach Prince Hotel........................ Kohala Coast, HI 350
Mauna Kea Beach Hotel............................ Kohala Coast, HI 310
Westin Bonaventure Hotel and Suites.............. Los Angeles, CA 1,369
Biltmore Hotel................................... Coral Gables, FL 275
Westin Resort.................................... Miami Beach, FL 423
Westin Providence................................ Providence, RI 350
Westin Washington DC, City Center................ Washington, DC 400
------
8,492
------
REPRESENTED:(*)
Caesar Park Buenos Aires......................... Buenos Aires, Argentina 173
Caesar Park Hotel................................ Fortaleza, Brazil 230
Caesar Park Hotel Ipanema........................ Rio de Janeiro, Brazil 221
Caesar Park Sao Paulo............................ Sao Paulo, Brazil 177
Camino Real Tikal................................ El Remate, Peten, Guatemala 72
Camino Real...................................... Guatemala City, Guatemala 404
Westin Kyoto Takara-ga-ike Prince Hotel.......... Kyoto, Japan 322
</TABLE>
23
<PAGE> 25
<TABLE>
<CAPTION>
HOTEL LOCATION ROOMS
- ----- ---------------------------- ------
<S> <C> <C>
Hotel Grand Palace............................... Tokyo, Japan 464
Palace Hotel..................................... Tokyo, Japan 391
Caesar Park Cancun Beach & Golf Resort........... Cancun, Mexico 426
Caesar Park Hotel................................ Panama City, Panama 491
Caesar Park Penha Longa Golf Resort.............. Sintra, Portugal 176
Hawaii Prince Hotel Waikiki...................... Honolulu, HI 521
Maui Prince Hotel................................ Makena, HI 310
New York Palace.................................. New York, NY 985
------
5,363
------
43,525
======
</TABLE>
- ---------------
* Westin provides reservation and marketing services for these hotels, but does
not allow hotels to use the Westin name.
24
<PAGE> 26
OTHER ACQUISITIONS
1997 Acquisitions
During the year ended December 31, 1997, Starwood Hotels acquired equity
interests in the following 44 hotels (the "1997 Properties"):
<TABLE>
<CAPTION>
PURCHASE NUMBER OF
DATE OF PRICE GUEST
HOTEL(1) LOCATION PURCHASE (000'S) ROOMS
- -------- ---------------------- -------- ------------ ---------
<S> <C> <C> <C> <C>
Deerfield Beach Hilton............. Deerfield Beach, FL 01/08/97 $ 11,500 220
Radisson Denver South.............. Denver, CO 01/20/97 21,750 263
The HEI Owned Hotels, consisting
of:
Sheraton Hotel................... Long Beach, CA 02/14/97 460
Omni Waterside Hotel............. Norfolk, VA 02/14/97 446
BWI Airport Marriott............. Baltimore, MD 02/14/97 310
Crowne Plaza Edison.............. Edison, NJ 02/14/97 274
Courtyard by Marriott Crystal
City.......................... Arlington, VA 02/14/97 272
Charleston Hilton................ Charleston, SC 02/14/97 296
Park Ridge Hotel................. King of Prussia, PA 02/14/97 265
Sonoma County Hilton............. Santa Rosa, CA 02/14/97 245
Novi Hilton...................... Novi, MI 02/14/97 239
Embassy Suites................... Atlanta, GA 02/14/97 233
---------- ------
312,000 3,040
Days Inn Lake Shore Drive.......... Chicago, IL 02/21/97 48,000 578
Westin Hermitage................... Nashville, TN 03/11/97 15,800 120
Hotel De La Poste.................. New Orleans, LA 03/12/97 16,000 100
San Diego Marriott Suites.......... San Diego, CA 04/03/97 32,500 264
Tremont Hotel...................... Chicago, IL 04/04/97 14,400 130
Raphael Hotel...................... Chicago, IL 05/07/97 17,750 172
Sheraton Stamford.................. Stamford, CT 06/12/97 14,600 480
Westin Southfield -- Detroit....... Southfield, MI 07/10/97 40,000 385
Westin Regina Portfolio, consisting
of:
Westin Regina Resort............. Cabo San Lucas, Mexico 08/21/97 229
Westin Regina Resort............. Cancun, Mexico 08/21/97 385
Puerto Vallarta,
Westin Regina Resort............. Mexico 08/21/97 280
---------- ------
133,000 894
The Flatley Portfolio, consisting
of:
Wayfarer Inn..................... Bedford, NH 09/11/97 194
Sheraton Tara Hotel.............. Braintree, MA 09/11/97 376
Tara's Ferncroft Conference
Resort........................ Danvers, MA 09/11/97 367
Sheraton Tara Hotel.............. Framingham, MA 09/11/97 375
Tara's Cape Codder Hotel......... Hyannis, MA 09/11/97 261
Tara Hyannis Hotel & Resort...... Hyannis, MA 09/11/97 224
Sheraton Tara Lexington Inn...... Lexington, MA 09/11/97 119
Colonial Hilton and Resort....... Lynnfield, MA 09/11/97 280
Merrimack Hotel & Conference
Center........................ Merrimack, NH 09/11/97 200
Sheraton Tara Hotel.............. Nashua, NH 09/11/97 337
Sheraton Tara Hotel(3)........... Newton, MA 09/11/97 272
Sheraton Tara Hotel.............. Parsippany, NJ 09/11/97 383
</TABLE>
25
<PAGE> 27
<TABLE>
<CAPTION>
PURCHASE NUMBER OF
DATE OF PRICE GUEST
HOTEL(1) LOCATION PURCHASE (000'S) ROOMS
- -------- ---------------------- -------- ------------ ---------
<S> <C> <C> <C> <C>
Sheraton Tara Hotel.............. South Portland, ME 09/11/97 220
Tara Stamford Hotel.............. Stamford, CT 09/11/97 328
Sheraton Tara Airport Hotel...... Warwick, RI 09/11/97 207
---------- ------
469,970 4,143
Crowne Plaza....................... New Orleans, LA 09/23/97 58,750 439
One Washington Circle.............. Washington, DC 09/30/97 19,000 151
Radisson Plaza & Suite Hotel....... Indianapolis, IN 10/30/97 54,000 552
Westin Aquila...................... Omaha, NE 12/08/97 14,000 145
Westin Mission Hills Resort........ Rancho Mirage, CA 12/15/97 118,000(2) 512
Turnberry Hotel and Golf Resort.... Ayreshire, Scotland 12/23/97 51,500 132
---------- ------
$1,462,520 12,720
========== ======
</TABLE>
- ---------------
(1) Starwood Hotels acquired a 100% fee or ground leasehold interest in each of
these hotel properties except for the Westin Mission Hills Resort and the
Sheraton Tara Hotel in Newton, Massachusetts. See footnotes (2) and (3)
below.
(2) Amount shown represents a 100% interest; Starwood Hotels acquired a 95%
interest in a joint venture that acquired the property.
(3) Starwood Hotels acquired an operating leasehold in this property.
Of the 44 hotel properties acquired in 1997, all but four were acquired by
the Realty Partnership. The Turnberry Hotel and Golf Resort and the Westin
Regina Portfolio are owned by the Operating Partnership.
HEI Acquisition
On February 14, 1997, in addition to the 10 hotels referred to above as the
HEI Owned Hotels that were acquired from Prudential Property Investment Separate
Account II, an institutional real estate investment fund ("PRISA II") managed by
Prudential Real Estate Investors, and HEI Hotels LLC ("HEI"), a Westport,
Connecticut based hotel operating company, the Company also acquired HEI and
contracts to manage the following nine hotels (the "HEI Managed Hotels"):
<TABLE>
<CAPTION>
HOTEL LOCATION ROOMS
----- ------------------ -----
<S> <C> <C>
Sheraton Gateway Houston Airport.................... Houston, TX 418
Ontario Airport Hilton.............................. Ontario, CA 309
Grand Junction Hilton............................... Grand Junction, CO 264
Danbury Hilton & Towers............................. Danbury, CT 242
Residence Inn By Marriott........................... Princeton, NJ 208
Long Island Sheraton Hotel.......................... Smithtown, NY 211
Wilmington Hilton Hotel............................. Wilmington, DE 193
Ramada Hotel Bethesda............................... Bethesda, MD 160
The Pavilion Towers Hotel........................... Virginia Beach, VA 292
-----
2,297
</TABLE>
As consideration for the HEI Owned Hotels, HEI and the nine management
contracts (collectively the "HEI Portfolio"), the Company paid an aggregate of
$112 million in cash and notes and issued Units exchangeable for a total of
6,548,000 Paired Shares (which Units were valued for purposes of the transaction
at approximately $215 million).
26
<PAGE> 28
Al-Anwa Portfolio
On January 15, 1998, Starwood Hotels acquired the following four hotels
(the "Al-Anwa Portfolio") for a combination of approximately $150 million in
cash and approximately 3.7 million Paired Shares (which shares were valued for
purposes of the acquisition at approximately $184 million):
<TABLE>
<CAPTION>
1997
----------------------------------
YEAR AVERAGE OCCUPANCY
HOTEL LOCATION ROOMS OPENED DAILY RATE RATE REVPAR
----- -------------- ----- ------ ---------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
The Al-Anwa Portfolio:
ITT Sheraton Luxury
Collection Hotel
Aspen(1).............. Aspen, CO 257 1992 $255.12 67.6% $172.35
ITT Sheraton Luxury
Collection Hotel
Houston............... Houston, TX 232 1981 153.29 70.7% 108.32
ITT Sheraton Luxury
Collection Hotel
Washington, DC........ Washington, DC 213 1929 199.03 55.7% 110.77
ITT Sheraton Luxury
Collection Hotel New
York(2)............... New York, NY 214 1929 312.09 71.5% 223.24
---
916
</TABLE>
- ---------------
(1) Re-flagged as a St. Regis following the acquisition.
(2) Re-flagged as a Westin following the acquisition.
DEVELOPMENT OPPORTUNITIES; FUTURE ACQUISITIONS; SALES
Development Opportunities
Starwood Hotels also intends to develop, on a limited basis, new hotels,
either through new construction or conversion of office buildings, in certain
under-served markets. In this respect, in November 1996, the Trust paid
approximately $7.0 million to acquire a site in downtown Seattle, Washington,
which has full entitlements for construction of a 426-room hotel. The Trust
began construction on this hotel in August 1997. This hotel is estimated to cost
approximately $73 million and is expected to open in early 1999.
In May 1997, Starwood Hotels paid $11.9 million to acquire the site and
development rights to construct, and began to build, a 30-story, 423-room hotel
in downtown San Francisco, California. The hotel is estimated to cost
approximately $73 million and is expected to open in May 1999.
In October 1997, Starwood Hotels formed a joint venture to convert a
474,000-square-foot, 31-story office building located in downtown Denver into a
540-room, four-star hotel that is expected to open in 1999. Conversion of the
building is expected to begin in early 1998. The Company paid approximately $9
million to acquire a 50% interest in the leasehold of the office building. The
estimated cost of the project is $68.6 million.
Future Acquisitions
Starwood Hotels intends to continue to expand and diversify its hotel
portfolio through the acquisition of primarily upscale hotels in major
metropolitan areas. Starwood Hotels believes that hotels in this segment can be
purchased at prices below replacement cost and offer better potential for cash
flow growth than hotels in other market segments. Starwood Hotels generally
seeks investments in hotels where management believes that profits can be
increased by the introduction of more professional and efficient management
techniques, a change of franchise affiliation or the injection of capital for
renovating, repositioning or expanding a property. Properties are targeted
throughout the world, but Starwood Hotels generally focuses on properties with
favorable demographic trends, significant barriers to entry or with major room
demand generators such as
27
<PAGE> 29
office or retail complexes, airports, tourist attractions or universities. The
Company intends to finance future acquisitions of hotel properties through cash
flow from operations, through borrowings under new or existing credit facilities
and, when market conditions warrant, through the issuance of debt or equity
securities.
Sales
As part of its continuous evaluation of its portfolio and efforts to
redeploy capital in high growth assets, the Company has identified certain
properties for sale. These properties include hotels primarily in market
segments that the Company believes have limited growth potential. In 1997, the
Company sold the Radisson Marque in Winston-Salem, North Carolina for
approximately $7.6 million and three Best Western hotels in Savannah, Georgia;
El Paso, Texas; and Las Cruces, New Mexico for approximately $12 million,
recognizing losses of approximately $614,000 and $314,000, respectively. The
Corporation has entered into an agreement to sell the personal property relating
to the King 8 Hotel & Casino in Las Vegas, Nevada (the "King 8") for $3 million
and expects the closing to occur in June 1998 following receipt by the purchaser
of required gaming approvals. The Trust sold the real property of the King 8 in
1996 for approximately $18.8 million, recognizing a gain of approximately $5.6
million. The Company is currently engaged in efforts to sell the Milwaukee
Sheraton in Brookfield, Wisconsin; the Tyee Hotel in Olympia, Washington; and
the Bay Valley Hotel & Resort in Bay City, Michigan. In February 1998, the
Company sold three Vagabond hotels in Rosemead, California; Woodland Hills,
California; and Sacramento, California, respectively, for approximately $7.7
million, recognizing a loss of approximately $105,000.
STRUCTURE AND OPERATING STRATEGY
Current Structure
As of the date of this Joint Annual Report, the structure of Starwood
Hotels is as follows:
[PAIRED SHARES CHART]
The limited partnership interests of the Realty Partnership and the
Operating Partnership held by the limited partners are (subject to the ownership
limitation provisions of the Trust and the Corporation)
28
<PAGE> 30
exchangeable for, at the option of the Trust and the Corporation, either cash,
Paired Shares representing up to 5.9% of the Paired Shares after such exchange
(based on the number of Paired Shares outstanding on March 30, 1998), or a
combination of cash and such Paired Shares. The ownership limitation provisions
of the Declaration of Trust are designed to preserve the status of the Trust as
a REIT for tax purposes by providing in general that no shareholder may own,
directly or indirectly, more than 8% of the outstanding Paired Shares. The Trust
controls the Realty Partnership as its sole general partner; the Corporation
controls the Operating Partnership as its sole general partner.
As of December 31, 1997, the Realty Partnership held fee interests, ground
leaseholds and mortgage loan interests in 120 hotel properties containing over
32,800 rooms located in 34 states throughout the United States and the District
of Columbia, and in Mexico and Scotland. The Operating Partnership leased from
the Realty Partnership all but four of the 96 hotel properties owned in fee or
held pursuant to long-term leases by the Realty Partnership. In addition, the
Operating Partnership owned, as of December 31, 1997, the Milwaukee Sheraton,
the Midland Hotel in Chicago, Illinois, the Westin Regina Portfolio and the
Turnberry Hotel and Golf Resort, all subject to mortgages to the Trust, and
managed nine hotels for third-party owners.
Tax Status of the Trust
The Trust elected to be taxed as a REIT, commencing with its taxable year
ended December 31, 1995. The Trust expects to also make this election for the
year ended December 31, 1997, when it files its tax return for such period,
which is due no later than September 15, 1998. The Trust was taxed as a REIT
beginning in 1969 through and including its taxable year ended December 31,
1990. During 1994, the Trust discovered that it may not have qualified as a REIT
in 1991 through 1994, due to its failure to comply with certain procedural
requirements of the Code. The Trust requested and received a letter from the
Internal Revenue Service providing that the Trust's election to be taxed as a
REIT terminated beginning with the Trust's taxable year ended December 31, 1991,
and permitting the Trust to re-elect to be taxed as a REIT commencing with its
taxable year ended December 31, 1995. Because the Trust had net losses for tax
purposes for its 1991 through 1994 taxable years, the Trust does not owe any
Federal income tax for such years.
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 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"),
W&S Hotel L.L.C. ("W&S LLC" and, together with Westin, the "Westin Companies"),
the Trust, the Realty Partnership, the Corporation and the Operating
Partnership, the Company acquired Westin.
Pursuant to the terms of the Westin Transaction Agreement:
(i) Westin Worldwide merged into the Trust (the "Westin Merger"). In
connection with the Westin Merger, all of the issued and outstanding shares
of capital stock of Westin Worldwide (other than shares held by Westin and
its subsidiaries or by the Company) were converted into an aggregate of
6,285,783 Class A Exchangeable Preferred Shares, par value $.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 $177.9 million
in cash;
(ii) The stockholders of Lauderdale, Seattle and Denver contributed
all of 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,
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<PAGE> 31
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 of 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 contributions of shares of stock of each of Seattle, Lauderdale,
Denver, Atlanta and St. John (collectively, the "Westin Subsidiaries") are
referred to in this Joint Annual Report as the "Subsidiary Contributions." The
aggregate principal amount of debt assumed 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-to-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-to-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 holders with the right, from and after the fifth
anniversary of the closing date of the Westin acquisition, to require the Trust
to redeem such shares at a price of $38.50.
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., a newly formed Nevada corporation and
a subsidiary of the Company ("Merger Sub"), the Trust and ITT, the Company
acquired ITT.
Pursuant to the terms of the ITT Merger Agreement, Merger Sub 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. Upon 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,
35,195,664 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 $.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).
The aggregate value of the ITT acquisition in cash, Paired Shares and assumed
debt was approximately $14.6 billion.
Reorganization
Effective January 1, 1995 (the "Reorganization Date"), the Trust and the
Corporation consummated a reorganization (the "Reorganization") with Starwood
Capital and certain affiliates of Starwood Capital (collectively, the "Starwood
Partners").
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<PAGE> 32
The Reorganization involved a number of related transactions that occurred
simultaneously on the Reorganization Date. Such transactions included (i) the
formation of the Realty Partnership, and the contribution by the Trust to the
Realty Partnership of substantially all of the properties and assets of the
Trust, subject to substantially all of the liabilities of the Trust, in exchange
for an approximately 28.3% interest as a general partner in the Realty
Partnership; (ii) the contribution by the Starwood Partners to the Realty
Partnership of approximately $12.6 million in cash and certain hotel properties
and first mortgage notes, in exchange for Units representing the remaining
approximately 71.7% interest in the Realty Partnership; (iii) the formation of
the Operating Partnership, and the contribution by the Corporation and its
subsidiaries to the Operating Partnership of substantially all of their
properties and operating assets (except for their gaming assets), subject to
substantially all of their liabilities, in exchange for an approximately 28.3%
interest as a general partner in the Operating Partnership; and (iv) the
contribution by the Starwood Partners to the Operating Partnership of
approximately $1.4 million in cash and fixtures, furnishings and equipment of
certain hotel properties, in exchange for Units representing the remaining
approximately 71.7% interest in the Operating Partnership. On March 24, 1995, a
Starwood Partner exchanged $12 million of debt of the Realty Partnership for
additional Units, resulting in the Starwood Partners owning approximately 74.6%
of each of the Partnerships on such date.
Operating Strategy
The Trust and the Corporation intend that the Corporation lease and operate
hotels owned or acquired by the Trust or the Realty Partnership, thereby
retaining for shareholders the economic benefits otherwise captured by
third-party operators. During 1997, the Corporation assumed management of 48
hotels, including 38 hotels acquired by the Company.
The Corporation intends to continue to reposition hotels in order to
increase cash flows and asset values by changing or initiating franchise
affiliations to one of the brands acquired in 1998 and implementing renovations,
expansions and upgrades of hotel facilities. In 1997, the Corporation entered
into new franchise affiliations with respect to three hotels, of which two were
acquired and converted to the Westin brand in 1997. The other was acquired in
1996 and converted to the Westin brand in 1997.
The Corporation also intends to manage hotels on behalf of third-party
owners, thereby capitalizing on the enhanced operational management
infrastructure of the Corporation. The Company believes that third-party
management contracts could provide the Company with an additional source of
earnings as well as a source of potential acquisitions, including minority
equity investments in hotel properties.
Additionally, the Company intends to continue to acquire debt interests in
hotels at discounts to their face amounts with the intention of acquiring the
hotel.
OTHER INFORMATION
Seasonality and Competition
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 than in the second, third or fourth quarters, the acquisitions of Westin
and ITT are expected to affect, and future acquisitions may further affect,
seasonal fluctuations in revenues and cash flows.
Competition in the hotel and gaming industries is vigorous and is generally
based on quality and consistency of room, restaurant, casino, entertainment and
convention facilities and services, attractiveness of locations, availability of
a global distribution system, price and other factors. Management believes that
the Company competes favorably in these areas. The properties of the Company
compete with other hotel and casino properties in their geographic markets. The
principal competitors of the Company include other hotel REITs, hotel operating
and gaming companies and national hotel brands. Some of the Company's
competitors may have greater marketing and financial resources than the Company.
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<PAGE> 33
The Company may compete for acquisition opportunities with entities which
have greater financial resources than the Company or which may accept more risk
than the Company. Competition may generally reduce the number of suitable
investment opportunities and increase the bargaining power of property owners
seeking to sell. Further, management of the Company believes that it will face
competition for acquisition opportunities from entities organized for purposes
substantially similar to the objectives of the Trust or the Company.
Environmental Matters
The Company is subject to certain requirements and potential liabilities
under various federal, state and local environmental laws, ordinances and
regulations ("Environmental Laws"). For example, a current or previous owner or
operator of real property may become liable for the costs of removal or
remediation of hazardous or toxic substances on, under or in such property. Such
laws often impose liability without regard to whether the owner or operator knew
of, or was responsible for, the presence of such hazardous or toxic substances.
The presence of hazardous or toxic substances may adversely affect the owner's
ability to sell or rent such real property or to borrow using such real property
as collateral. Persons who arrange for the disposal or treatment of hazardous or
toxic wastes may be liable for the costs of removal or remediation of such
wastes at the treatment, storage or disposal facility, regardless of whether
such facility is owned or operated by such person. The Company uses certain
substances and generates certain wastes that may be deemed hazardous or toxic
under applicable Environmental Laws, and the Company from time to time has
incurred, and in the future may incur, costs related to cleaning up
contamination resulting from historic uses of certain of the Company's current
or former properties or the Company's treatment, storage or disposal of wastes
at facilities owned by others. Other Environmental Laws require abatement or
removal of certain asbestos-containing materials ("ACMs") (limited quantities of
which are present in various building materials such as spray-on insulation,
floor coverings, ceiling coverings, tiles, decorative treatments and piping
located at certain of the Company's hotels) in the event of damage or
demolition, or certain renovations or remodeling. These laws also govern
emissions of and exposure to asbestos fibers in the air. Environmental Laws also
regulate polychlorinated biphenyls ("PCBs"), which may be present in electrical
equipment. A number of the Company's hotels have underground storage tanks
("USTs") and equipment containing chlorofluorocarbons ("CFCs"); the operation
and subsequent removal or upgrading of certain USTs and the use of equipment
containing CFCs also are regulated by Environmental Laws. In connection with the
Company's ownership, operation and management of its properties, the Company
could be held liable for the costs of remedial or other action with respect to
PCBs, USTs or CFCs.
Environmental Laws are not the only source of environmental liability.
Under the common law, owners and operators of real property may face liability
for personal injury or property damage because of various environmental
conditions such as alleged exposure to hazardous or toxic substances (including,
but not limited to, ACMs, PCBs and CFCs), poor indoor air quality, radon and
poor drinking water quality.
Although the Company has incurred and expects to incur remediation and
other environmental costs during the ordinary course of operations, management
anticipates that such costs will not have a material adverse effect on the
operations or financial condition of the Company.
Regulation and Licensing
The ownership and operation of the casino gaming facilities of the Company
are subject to extensive licensing, permitting and regulatory requirements
administered by various governmental entities. See "Regulation and Licensing"
included in Item 2 of this Joint Annual Report.
Employees
As of December 31, 1997, the Trust had four employees and the Corporation
had approximately 15,000 employees. As a result of the acquisitions of ITT and
Westin, the Corporation has, as of March 1, 1998, approximately 100,000
employees.
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Executive Offices
The Trust's executive offices are located at 2231 East Camelback Road,
Suite 410, Phoenix, Arizona 85016 (telephone (602) 852-3900) and the
Corporation's executive offices are located at 2231 East Camelback Road, Suite
400, Phoenix, Arizona 85016 (telephone (602) 852-3900).
Industry Segments
Financial information with respect to the two segments of the hospitality
industry (hotels and gaming) and the domestic and foreign segments in which the
Corporation operated during the year ended December 31, 1997 is included in Note
22 of the Notes to Financial Statements included in Item 8 of this Joint Annual
Report.
ITEM 2. PROPERTIES.
For information with respect to the properties owned, managed, franchised
or represented by ITT and Westin, see Item 1 of this Joint Annual Report.
At December 31, 1997, the Company owned, operated and managed a
geographically diversified portfolio of hotel assets, including fee, ground
lease and first mortgage interests in 120 hotel properties containing
approximately 32,800 guest rooms located in 34 states and the District of
Columbia, Mexico and Scotland. At that time, 92 of such hotels were operated
under licensing, membership, franchise or management agreements or leases with
national hotel organizations, including Ritz Carlton(R), Westin(R), Marriott(R),
Hilton(R), Sheraton(R), Omni(R), Doubletree(R), Embassy Suites(R), Crowne
Plaza(R), Courtyard By Marriott(R), Wyndham(R), Ramada(R), Radisson(R),
Clarion(R), Holiday Inn(R), Residence Inn(R), Days Inn(R), Best Western(R) and
Vagabond Inn(R).
EQUITY INVESTMENTS
As of December 31, 1997, the Company had equity investments in 102
properties containing a total of over 27,500 guest rooms. All but six of the
properties are owned by the Trust. Those six properties -- the Milwaukee
Sheraton, the Midland Hotel, the Turnberry Hotel and Golf Resort and the Westin
Regina Resorts in Cancun, Cabo San Lucas and Puerto Vallarta, Mexico -- are
owned by the Operating Partnership; all are subject to mortgages held by the
Trust. Of the 96 hotels owned by the Trust at December 31, 1997, all but four
are leased to the Corporation or its subsidiaries pursuant to leases between the
Trust and the Corporation (the "Intercompany Leases").
Each of the Intercompany Leases provides for the lessee's payment of annual
minimum rent in a specified amount plus additional rent based on a percentage of
the gross revenues (or items thereof) of the leased property. The Intercompany
Leases have an average remaining term of three years. The Intercompany Leases
are "triple-net" -- i.e., the lessee is generally responsible for paying all
operating expenses of the hotel property, including maintenance and repair
costs, insurance premiums and real estate and personal property taxes, and for
making all rental and other payments required pursuant to any underlying ground
leases. As lessee, the Operating Partnership retains all of the profits, net of
rents and other expenses, and bears all risk of losses, generated by the hotel
property's operations.
Of the four Trust hotels not subject to Intercompany Leases, the three
Vagabond Inns (the "Vagabond Inns") as of December 31, 1997 were leased by the
Trust to a third party pursuant to ground leases that expire in 2001, 2007 and
2008, respectively. In February 1998, the Trust sold its leasehold interests in
the Vagabond Inns for approximately $7.7 million. The remaining property, the
Doral Inn, is leased by the Trust to a third party; such lease expires in 2005.
The Trust owns the land underlying the Doral Inn and holds a leasehold mortgage
on the building and personal property; the Operating Partnership operates the
hotel pursuant to a sublease. Lastly, the Marriott Forrestal Village is leased
by the Trust to the Corporation, which, in turn, leases the property to a third
party. Both such leases expire in 2007.
The following table sets forth the average occupancy rate, average daily
rate ("ADR"), REVPAR and certain other information concerning the Company's
non-gaming hotels (excluding the Vagabond Inns) for the year ended December 31,
1997. Each hotel in the following table is owned by the Trust and leased to the
Corporation, except as noted.
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<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
YEAR YEAR -----------------------------
HOTEL LOCATION ROOMS OPENED ACQUIRED(1) ADR($) OCCUP(%) REVPAR($)
----- ------------------- ----- ------ ----------- ------ -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Embassy Suites Phoenix Airport....... Phoenix, AZ 227 1981 1983 101.54 71.9 72.99
Tempe Embassy Suites................. Tempe, AZ 224 1984 1995 115.55 78.3 90.43
Hotel Park Tucson.................... Tucson, AZ 215 1986 1996 78.32 67.8 53.08
Plaza Hotel & Conference
Center(15)......................... Tucson, AZ 149 1971 1983 58.21 60.2 35.05
Sheraton Hotel....................... Long Beach, CA 460 1988 1997 87.12 70.4 61.33
Westin Los Angeles Airport(19)....... Los Angeles, CA 723 1986 1996 68.75 72.3 49.68
Clarion at San Francisco Airport..... Millbrae, CA 442 1962 1996 94.29 74.4 70.17
Palm Desert Embassy Suites........... Palm Desert, CA 198 1985 1996 112.54 72.7 81.86
Doubletree Club Hotel Rancho
Bernardo........................... Rancho Bernardo, CA 209 1988 1995 81.07 70.3 56.96
Westin Mission Hills Resort(13)...... Rancho Mirage, CA 512 1987 1997 155.00 68.5 106.19
San Diego Marriott Suites............ San Diego, CA 264 1989 1997 125.09 72.8 91.10
Westin Horton Plaza San Diego........ San Diego, CA 450 1987 1996 125.46 73.4 92.10
Sonoma County Hilton................. Santa Rosa, CA 245 1984 1997 82.13 67.2 55.18
Westwood Marquis Hotel & Gardens(7).. Westwood, CA 257 1969 1996 185.51 59.1 109.58
Radisson Denver South................ Englewood, CO 263 1986 1997 90.33 68.5 61.84
Sheraton Stamford(9)................. Stamford, CT 480 1985 1997 101.92 60.6 61.74
Tara Stamford Hotel.................. Stamford, CT 445 1984 1997 103.25 57.6 59.45
Capitol Hill Suites.................. Washington, DC 152 1955 1995 104.55 70.0 73.17
One Washington Circle................ Washington, DC 151 1964 1997 113.35 82.5 93.56
Westin Washington, DC................ Washington, DC 263 1984 1995 133.59 65.2 87.06
Wyndham Hotel at Ft. Lauderdale
Airport............................ Dania, FL 251 1986 1996 82.61 79.4 65.58
Deerfield Beach Hilton............... Deerfield Beach, FL 220 1985 1997 82.16 74.2 61.00
Doubletree Guest Suites Cypress
Creek.............................. Fort Lauderdale, FL 254 1985 1996 85.19 76.5 65.18
Gainesville Radisson Hotel........... Gainesville, FL 195 1974 1986 69.13 52.7 36.40
Westin Tampa Airport................. Tampa, FL 260 1987 1996 93.71 64.5 60.48
Holiday Inn -- Albany................ Albany, GA 151 1989 1989 64.43 60.5 38.98
Lenox Inn............................ Atlanta, GA 180 1965 1995 79.62 65.8 52.37
Marque of Atlanta.................... Atlanta, GA 275 1980 1996 95.89 63.1 60.49
Sheraton Colony Square............... Atlanta, GA 462 1973 1995 111.49 66.6 74.26
Terrace Garden Hotel................. Atlanta, GA 364 1975 1995 93.82 63.8 59.86
Westin Atlanta North at Perimeter.... Atlanta, GA 370 1986 1996 111.10 65.7 72.99
Embassy Suites Hotel................. College Park, GA 233 1989 1997 102.12 68.9 70.31
Arlington Park Hilton................ Arlington Heights, 422 1968 1996 92.54 73.5 68.06
IL
Days Inn Lake Shore Drive............ Chicago, IL 578 1965 1997 104.07 70.2 73.04
Midland Hotel(2)..................... Chicago, IL 257 1934 1996 139.87 73.4 102.66
Raphael Hotel........................ Chicago, IL 172 1978 1997 135.59 67.5 91.50
Tremont Hotel........................ Chicago, IL 129 1974 1997 157.35 62.0 97.61
Radisson Plaza & Suite Hotel(18)..... Indianapolis, IN 552 1983 1997 92.29 75.0 69.19
Harvey Hotel......................... Wichita, KS 259 1974 1995 58.71 59.8 35.10
Doubletree Guest Suites.............. Lexington, KY 155 1989 1995 91.89 70.3 64.62
Crowne Plaza(10)..................... New Orleans, LA 439 1984 1997 116.23 72.4 84.17
Hotel De La Poste.................... New Orleans, LA 100 1973 1997 124.31 72.7 90.39
Park Plaza Hotel(5).................. Boston, MA 960 1927 1996 131.61 77.1 101.45
Sheraton Tara Hotel.................. Braintree, MA 376 1971 1997 114.86 76.1 87.36
Tara's Ferncroft Conference Resort... Danvers, MA 367 1978 1997 101.03 55.7 56.25
Sheraton Tara Hotel.................. Framingham, MA 375 1973 1997 105.52 64.0 67.55
Tara Hyannis Hotel & Resort.......... Hyannis, MA 224 1967 1997 105.79 56.4 59.66
Tara's Cape Codder Hotel............. Hyannis, MA 261 1975 1997 87.85 48.1 42.26
Sheraton Tara Lexington Inn.......... Lexington, MA 119 1958 1997 114.34 76.1 87.02
Colonial Hilton and Resort........... Lynnfield, MA 280 1966 1997 107.71 63.3 68.21
Sheraton Needham..................... Needham, MA 247 1986 1996 112.80 76.7 86.46
Sheraton Tara Hotel(20).............. Newton, MA 272 1968 1997 114.29 72.8 83.21
Westin Waltham Hotel................. Waltham, MA 347 1990 1996 126.88 73.3 93.03
BWI Airport Marriott................. Baltimore, MD 310 1988 1997 112.12 75.6 84.71
Holiday Inn -- Calverton............. Beltsville, MD 206 1987 1995 73.15 63.7 46.62
</TABLE>
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<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
YEAR YEAR -----------------------------
HOTEL LOCATION ROOMS OPENED ACQUIRED(1) ADR($) OCCUP(%) REVPAR($)
----- ------------------- ----- ------ ----------- ------ -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Sheraton Tara Hotel.................. South Portland, ME 220 1973 1997 90.51 66.2 59.93
Bay Valley Hotel & Resort(4)......... Bay City, MI 151 1973 1984 65.26 51.9 33.90
Novi Hilton.......................... Novi, MI 239 1985 1997 94.68 70.4 66.63
Westin Southfield -- Detroit......... Southfield, MI 385 1987 1997 102.43 66.0 67.57
Doubletree Hotel Minneapolis Airport
at the Mall........................ Bloomington, MN 321 1975 1996 98.63 74.7 73.72
Sheraton Metrodome................... Minneapolis, MN 254 1980 1996 83.65 72.3 60.45
Ritz Carlton -- Kansas City.......... Kansas City, MO 373 1973 1996 138.66 78.4 108.65
St. Louis Embassy Suites............. St. Louis, MO 297 1985 1996 101.24 68.5 69.38
Omni Hotel........................... Chapel Hill, NC 168 1981 1995 93.27 71.2 66.37
Westin Aquila........................ Omaha, NE 145 1995 1997 102.94 63.8 65.70
Wayfarer Inn......................... Bedford, NH 194 1966 1997 77.07 63.5 48.98
Merrimack Hotel & Conference
Center............................. Merrimack, NH 200 1979 1997 60.51 37.9 22.91
Sheraton Tara Hotel.................. Nashua, NH 337 1980 1997 80.51 59.0 47.46
Crowne Plaza Edison.................. Edison, NJ 274 1987 1997 85.58 72.4 61.99
Sheraton Tara Hotel.................. Parsippany, NJ 389 1987 1997 115.60 73.6 85.07
Marriott Forrestal Village
Hotel(3)........................... Princeton, NJ 294 1987 1996 117.38 84.4 99.07
Best Western Airport Inn (16)........ Albuquerque, NM 123 1980 1984 59.40 68.0 40.39
Doral Court(6)(14)................... New York, NY 199 1927 1996 165.28 75.5 124.78
Doral Inn(8)......................... New York, NY 652 1927 1996 126.60 63.0 79.82
Doral Tuscany(6)(14)................. New York, NY 121 1935 1996 188.98 73.6 139.02
Days Inn City Center................. Portland, OR 173 1962 1984 77.55 68.3 52.96
Riverside Inn........................ Portland, OR 137 1964 1984 96.27 65.9 63.47
Allentown Hilton..................... Allentown, PA 224 1981 1996 70.94 69.6 49.37
Park Ridge Hotel..................... King of Prussia, PA 265 1973 1997 100.38 76.1 76.40
Days Inn Airport(12)................. Philadelphia, PA 177 1984 1996 70.14 74.6 52.34
Ritz Carlton -- Philadelphia......... Philadelphia, PA 290 1990 1996 166.53 82.5 137.31
Westin Philadelphia International
Airport(12)........................ Philadelphia, PA 251 1985 1996 101.58 64.2 65.17
Sheraton Tara Airport Hotel.......... Warwick, RI 207 1979 1997 87.48 71.1 62.18
Charleston Hilton North.............. Charleston, SC 296 1983 1997 78.01 70.5 55.00
Westin Hermitage..................... Nashville, TN 120 1910 1997 129.18 65.7 84.92
Radisson Dallas Park Central......... Dallas, TX 438 1972 1972 78.55 45.9 36.04
Doubletree Guest Suites DFW
Airport............................ Irving, TX 308 1985 1996 107.70 73.7 79.40
Courtyard by Marriott Crystal City... Arlington, VA 272 1990 1997 106.40 68.8 73.22
Omni Waterside Hotel................. Norfolk, VA 446 1976 1997 90.16 60.4 54.44
Residence Inn Tyson's Corner......... Vienna, VA 96 1984 1984 119.47 83.0 99.14
Tyee Hotel(4)........................ Olympia, WA 145 1961 1987 65.27 49.3 32.20
Days Inn -- Town Center(17).......... Seattle, WA 90 1957 1984 78.28 71.4 55.86
Edmond Meany Hotel................... Seattle, WA 155 1932 1984 95.06 57.8 54.93
Sixth Avenue Inn(17)................. Seattle, WA 166 1959 1984 91.00 65.2 59.34
Milwaukee Sheraton(2)(4)............. Brookfield, WI 393 1972 1990 81.67 72.8 59.45
Turnberry Hotel and Golf Resort(2)... Ayreshire, Scotland 132 1905 1997 156.12 49.5 77.31
Westin Regina Resort(2)(11).......... Cancun, Mexico 385 1991 1997 111.25 72.0 80.10
Westin Regina Resort(2)(11).......... Puerto Vallarta, 280 1992 1997 98.99 67.5 66.82
Mexico
Westin Regina Resort(2) (11)......... Cabo San Lucas, 229 1994 1997 204.36 74.7 152.75
Mexico
TOTAL OWNED (99 HOTELS)..............
109.41 68.6 75.08
MANAGED:
Ontario Airport Hilton............... Ontario, CA 309 1997 78.85 71.6 56.47
Grand Junction Hilton................ Grand Junction, CO 264 1997 69.57 68.7 47.81
Danbury Hilton & Towers.............. Danbury, CT 242 1997 93.49 80.3 75.09
Wilmington Hilton Hotel.............. Wilmington , DE 193 1997 83.73 68.8 57.42
Atlanta Hilton Northeast............. Atlanta, GA 272 1997 93.40 63.0 58.86
Ramada Hotel......................... Bethesda, MD 160 1997 84.35 70.8 59.70
</TABLE>
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<PAGE> 37
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
YEAR YEAR -----------------------------
HOTEL LOCATION ROOMS OPENED ACQUIRED(1) ADR($) OCCUP(%) REVPAR($)
----- ------------------- ----- ------ ----------- ------ -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Long Island Sheraton Hotel........... Smithtown, NY 211 1997 93.05 80.7 75.06
Sheraton Gateway Houston Airport..... Houston, TX 418 1997 72.06 65.8 47.40
Pavillion Towers Hotel............... Virginia Beach, VA 292 1997 65.55 38.4 25.17
TOTAL MANAGED (9 HOTELS).............
82.07 66.6 54.64
</TABLE>
- ---------------
(1) "Year acquired" represents the calendar year in which the Trust or
Corporation (or a predecessor) made its initial investment in the property.
(2) Property is owned by the Corporation subject to a first mortgage to the
Trust.
(3) Property is subject to a ground lease expiring in December 2055, which is
terminable by the ground lessor after September 1999 and prior to that
time, upon six months' notice under certain circumstances.
(4) Property is an asset held for sale at December 31, 1997.
(5) The Trust owns a 58.2% general partnership interest in the partnership that
owns this hotel. The property is subject to the BPP Mortgage (as defined in
"Liquidity and Capital Resources -- Cash Flows from Investing and Financing
Activities -- Credit Facilities and Recent Stock Sales" included in Item 7
of this Joint Annual Report).
(6) Property is subject to a mortgage under the Doral Mortgage(as defined in
"Liquidity and Capital Resources -- Cash Flows from Investing and Financing
Activities -- Loan and Credit Facilities" included in Item 7 of this Joint
Annual Report).
(7) The Trust owns a 93.5% general partnership interest in the partnership that
owns this hotel.
(8) The Trust owns the land and holds a leasehold mortgage on the hotel
building and personal property; the Operating Partnership operates the
hotel pursuant to a sublease.
(9) Property is subject to a mortgage under the Stamford Note (as defined in
"Liquidity and Capital Resources -- Cash Flows from Investing and Financing
Activities -- Loan and Credit Facilities" included in Item 7 of this Joint
Annual Report).
(10) Property is subject to the Crowne Plaza Mortgage (as defined in "Liquidity
and Capital Resources -- Cash Flows from Investing and Financing
Activities -- Loans and Credit Facilities" included in Item 7 of this Joint
Annual Report).
(11) Property is subject to a mortgage under the Bancomer Note (as defined
in"Liquidity and Capital Resources -- Cash Flows from Investing and
Financing Activities -- Loans and Credit Facilities" included in Item 7 of
this Joint Annual Report).
(12) Property is subject to a mortgage under the Tax Exempt Bonds (as defined in
"Liquidity and Capital Resources -- Cash Flows from Investing and Financing
Activities -- Loans and Credit Facilities" included in Item 7 of this Joint
Annual Report).
(13) The Trust owns a 95% interest in this property.
(14) The Trust owns a 49% interest in this property.
(15) Property is subject to ground leases that expire between 1999 to 2007,
depending on the parcel.
(16) Property is subject to a ground lease expiring in 2029.
(17) Property is subject to a ground lease expiring in 1999.
(18) Property is subject to a ground lease expiring in 2067.
(19) Property is subject to a ground lease expiring in 2054.
(20) Property is subject to a ground lease expiring in 2010.
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<PAGE> 38
FRANCHISE AGREEMENTS
Seventy-three of the 102 hotel properties in which Starwood Hotels had an
equity interest at December 31, 1997 were operated at such time pursuant to
franchise or license agreements ("Franchise Agreements"), including 14 Franchise
Agreements with Westin and 13 Franchise Agreements with Sheraton. The Franchise
Agreements generally require the payment of a monthly royalty fee based on gross
room revenue and various other fees associated with certain marketing or
advertising and centralized reservation services, which fees also are generally
based on gross room revenues.
The Franchise Agreements have various durations but generally may be
terminated upon not more than three years' prior notice or upon payment of
certain specified fees.
The Franchise Agreements generally contain specific standards for, and
restrictions and limitations on, the operation and maintenance of the hotels,
which standards are established by the franchisors to maintain uniformity in the
system created by each such franchisor. Such standards generally regulate the
appearance of the hotel, the quality and type of goods and services offered,
signage and usage of trade and service marks.
The Franchise Agreements also typically contain financial reporting
requirements relating to the calculation of royalty and other fees and insurance
requirements with respect to coverage for specified liabilities, approved
coverage limits and minimum insurance company ratings.
The Franchise Agreements generally require the consent of the franchisor to
a transfer of an interest in the applicable franchise, and both the consent of
the franchisor and the execution of a new franchise agreement in the event of a
transfer of all or a controlling portion of the franchisee under the relevant
Franchise Agreement. In addition, some Franchise Agreements may require payment
of an initial fee upon establishment of a franchise relationship.
The Company intends to convert many of its hotels to a Westin or Sheraton
brand.
MANAGEMENT AGREEMENTS
As of December 31, 1997, nine of the Company-owned hotels were managed by
third-party operators. The Marriott Forrestal Village is operated by Marriott
International, Inc. ("Marriott") pursuant to a lease expiring in 2007, and the
Ritz Carlton Hotels in Philadelphia, Pennsylvania, and Kansas City, Missouri are
operated by an affiliate of Marriott pursuant to operating agreements that
terminate in 1999 but are subject to earlier termination if certain annual
financial performance standards are not met. The Westin Regina Resorts in Cabo
San Lucas, Cancun and Puerto Vallarta, Mexico, the Westin Mission Hills Resort
in Rancho Mirage, California; the Westin Aquila in Omaha, Nebraska; and the
Turnberry Hotel and Golf Resort in Ayreshire, Scotland have been operated by
Westin Worldwide since their respective acquisition dates by the Company.
Each of the management agreements described above provides that the
operator has the exclusive right to direct the operations of the hotel subject
to that agreement. The operator is responsible for maintaining and making all
necessary repairs to the managed hotel, hiring, training and supervising all
hotel employees, and performing all hotel bookkeeping and other administrative
duties. Each operator is required to submit to the Company for its approval an
annual budget that includes proposed capital expenditures, and the operator
makes only those capital expenditures that are approved by the Company. The
Company is required to make available to each operator sufficient working
capital to operate the hotel.
For their services in managing the hotels, each operator receives a fee
equal to a specified percentage (generally 2%-4%) of the gross revenues of the
managed hotel, plus additional incentive fees based upon the hotel's operating
profits.
As of December 31 1997, the Company managed nine hotels owned by third
parties. Certain of these management agreements are currently month-to-month;
others have expiration dates ranging from 1999 to 2016. Management fees ranging
from 2.5% of hotel revenues to 4% of hotel revenues.
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<PAGE> 39
MORTGAGE AND OTHER NOTES RECEIVABLES
At December 31, 1997, the Trust held nine promissory notes issued by the
Operating Partnership. Three of those notes ($31.8 million in aggregate
principal amount at December 31, 1997) are secured by the Sheraton Hotel in
Milwaukee, Wisconsin; one note ($40.3 million in principal amount at December
31, 1997) is secured by the Doral Inn in New York, New York; one note ($20.0
million in principal amount at December 31, 1997) is secured by the Midland
Hotel in Chicago, Illinois; one note ($42.3 million in principal amount at
December 31, 1997) is secured by the Westin Regina in Cancun, Mexico; one note
($54.7 million in principal amount at December 31, 1997) is secured by the
Westin Regina in Cabo San Lucas, Mexico; one note ($25.3 million in principal
amount at December 31, 1997) is secured by the Westin Regina in Puerto Vallarta,
Mexico; and one note ($27.0 million in principal amount at December 31, 1997) is
secured by the Turnberry Hotel and Golf Resort in Ayreshire, Scotland.
At December 31, 1997, the Trust held 11 promissory notes that were either
contributed by the Starwood Partners to the Realty Partnership as part of the
Reorganization, executed by third-party purchasers of the Trust's hotels, or
purchased by the Trust, all of which are secured by mortgages (including deeds
of trust) on eight hotels in the aggregate. Of these 11 promissory notes, eight
notes ($63.0 million in aggregate principal amount at December 31, 1997) are
secured by first mortgages and three notes ($0.2 million in aggregate principal
amount as of December 31, 1997) are secured by second mortgages. Seven of these
11 notes have fixed interest rates that currently range from 8% to 10% per
annum; one note has a variable interest rate that was the three-month London
Interbank Offered Rate ("LIBOR") plus 1.25% per annum at December 31, 1997; one
note also provides for contingent interest based on a percentage of the gross
revenue of the property securing such note and three notes are non-interest
bearing. The maturity dates of the 11 notes range from current to December 2006.
For additional information with respect to the mortgage notes receivable
held by the Trust, see Notes 14 and 15 and Schedule IV of Notes to Financial
Statements included in Item 8 of this Joint Annual Report.
In December 1987, in connection with the acquisition by the Company of an
interest in two Atlanta, Georgia area hotels (which have been subsequently
sold), a former officer of the Trust assumed certain obligations of the seller,
which obligations are evidenced by an unsecured promissory note to the Trust in
the principal amount of $800,000. Interest on the outstanding principal amount
of this note accrues interest at an annual rate of 10% and is payable annually;
the entire principal amount of the note is due in December 1999. During 1995,
the Trust loaned another former officer of the Trust, on an unsecured basis,
$250,000, of which $100,000 was outstanding as of December 31, 1997. The
remaining principal amount is due in July 2005 and bears interest at an annual
rate equal to the lowest applicable rate prescribed by Section 1274(d) of the
Code.
During 1996, the Corporation made a $150,000 non-interest bearing bridge
loan to a former officer of the Corporation, Eric A. Danziger, which loan was
repaid in February 1998; and a $250,000 non-interest bearing loan to Theodore W.
Darnall, an officer of the Corporation, of which $150,000 remained outstanding
as of December 31, 1997. This loan is secured by a second mortgage on Mr.
Darnall's residence in Phoenix, Arizona, and will mature as to $150,000 upon
termination of Mr. Darnall's employment with the Corporation. (See Note 21 of
Notes to Financial Statements included in Item 8 of this Joint Annual Report and
"Employment and Compensation Agreements with Executive Officers" included in
Item 11 hereof.)
REGULATION AND LICENSING
Casino Gaming Regulation -- General. As a result of the ITT Merger,
Starwood Hotels' gaming operations include Caesars Palace and the Desert Inn
Resort & Casino ("Desert Inn"), both in Las Vegas, Nevada; Caesars Atlantic City
in Atlantic City, New Jersey; Caesars Tahoe in Stateline, Nevada; the Sheraton
Casino in Tunica County, Mississippi; the Sheraton Lima Hotel and Casino in
Lima, Peru; the Sheraton Halifax Hotel and Casino in Halifax, Nova Scotia; the
Sheraton Casino Sydney in Sydney, Cape Breton, Nova Scotia. Caesars also owns
one-half of a management company that operates Casino Windsor, a casino in
Windsor, Canada, which is owned by Government of the Province of Ontario. A
Caesars subsidiary operates small casinos on two cruise ships as well. Sheraton
also operates casinos in Australia and Egypt. In
38
<PAGE> 40
May 1996, Caesars was granted a certificate of suitability by the Indiana Gaming
Commission to construct and operate a riverboat casino on the Ohio River in
Harrison County, Indiana, across the river from Louisville, Kentucky.
Construction of the facility is subject to receipt of various consents, permits
and approvals. Another subsidiary of the Corporation, Hotel Investors
Corporation of Nevada ("HICN"), leases and operates the King 8 Hotel in Las
Vegas, Nevada. The Trust sold the King 8 in 1996 pursuant to an arrangement in
which HICN agreed to continue to operate the hotel and casino to the earlier of
when the purchaser or his designee obtains required gaming licenses and
approvals or June 30, 1998.
The Desert Inn is owned and operated by Sheraton Desert Inn Corporation
("SDI"), which is a wholly owned subsidiary of Sheraton Gaming Corporation
("SGC"), which is a wholly owned subsidiary of Sheraton (Sheraton, SGC and SDI
are collectively referred to as the "Sheraton Desert Inn Companies"). The
Sheraton Casino in Tunica County, Mississippi, is owned and operated by Sheraton
Tunica Corporation ("STC"), which is a wholly owned subsidiary of SDI.
Caesars' casino gaming operations in Las Vegas, Nevada and Stateline,
Nevada are conducted by Desert Palace, Inc. ("DPI"), which is a wholly owned
subsidiary of Caesars Palace Corporation ("CPC"), which is a wholly owned
subsidiary of Caesars (Caesars, CPC and DPI are hereinafter collectively
referred to as the "Caesars Nevada Companies"). Caesars is a wholly owned
subsidiary of Sheraton. Caesars' casino gaming operations in Atlantic City are
conducted by Boardwalk Regency Corporation ("BRC"), which is a wholly owned
subsidiary of Caesars New Jersey, Inc. ("CNJ"), which is a wholly owned
subsidiary of Caesars (as required by the context, Caesars, CNJ and BRC are
collectively referred to as the "Caesars New Jersey Companies"). In addition,
DPI owns all of the issued and outstanding capital stock of Tele/Info, Inc.
("Tele/Info"), which is a Nevada licensed disseminator of horse race simulcasts
for the purpose of receiving and disseminating live telecasts of horse racing
information.
The ownership and/or operation of casino gaming facilities in the United
States are subject to extensive Federal, state and local regulations. Under
Federal Law, Starwood Hotels' casino gaming operations are specifically subject
to the compliance with the Gambling Devices Act of 1962, as amended, and the
Bank Secrecy Act, as amended. These statutes govern the ownership, possession,
manufacture, distribution and transportation in interstate commerce of gaming
devices, and the recording and reporting of currency transactions, respectively.
Starwood Hotels' Nevada casino gaming operations are subject to the Nevada
Gaming Control Act and the regulations promulgated thereunder (the "Nevada
Act"), and the licensing and regulatory control of the Nevada Gaming Commission
(the "Nevada Commission") and the Nevada State Gaming Control Board (the "Nevada
Board"), as well as, certain county government agencies (collectively referred
to as the "Nevada Gaming Authorities"). Due to the development of a riverboat
gaming facility located on the Ohio River in Harrison County, Indiana, Starwood
Hotels' casino gaming operations in Indiana are subject to the Indiana Gaming
Control Act (the "Indiana Act"), and the licensing and regulatory control of the
Indiana Gaming Commission, as well as various local, county and state regulatory
agencies. Starwood Hotels' New Jersey casino gaming operations are subject to
the New Jersey Casino Control Act (the "New Jersey Act"), and the licensing and
regulatory control of the New Jersey Casino Control Commission (the "New Jersey
Commission"), and the New Jersey Department of Law & Public Safety, Divisions of
Gaming Enforcement (the "New Jersey DGE"), as well as various local, county and
state regulatory agencies (collectively referred to as the "New Jersey Gaming
Authorities"). Starwood Hotels' Mississippi casino gaming operations are subject
to the Mississippi Gaming Control Act (the "Mississippi Act"), and the licensing
and regulatory control of the Mississippi Gaming Commission (the "Mississippi
Commission"), as well as various local, county and state regulatory agencies
(collectively referred to as the "Mississippi Gaming Authorities"). Starwood
Hotels' Ontario casino gaming operations are subject to the Ontario Gaming
Control Act (the "Ontario Act"), and the licensing and regulatory control of the
Ontario Gaming Control Commission (the "Ontario Commission"), as well as various
local, provincial and federal regulatory agencies (collectively referred to as
the "Ontario Gaming Authorities"). Starwood Hotels' Nova Scotia casino gaming
operations are subject to the Nova Scotia Gaming Control Act (the "Nova Scotia
Act"), and the licensing and regulatory control of the Nova Scotia Gaming
Control Commission (the "Nova Scotia Commission"), as well as various local,
provincial and federal regulatory agencies (collectively referred to as the
"Nova Scotia Gaming Authorities").
39
<PAGE> 41
The casino gaming laws, regulations and supervisory procedures of Nevada,
New Jersey, Indiana, Mississippi, Ontario and Nova Scotia are extensive and
reflect certain public policy considerations as to (i) the integrity of casino
gaming operations and their participants; (ii) the need for strict governmental
and regulatory control of casino gaming operations; (iii) the creation of
economic development, taxes and employment; and, (iv) the maintenance and
development of public confidence and trust in casino gaming regulation and
control. Changes to these laws, regulations and supervisory procedures could
have an adverse effect on Starwood Hotels' casino gaming operations.
Nevada Gaming Regulation. The gaming laws, regulations and supervisory
procedures of Nevada seek to (i) prevent unsavory or unsuitable persons from
having any direct or indirect involvement with gaming at any time or in any
capacity; (ii) establish and maintain responsible accounting practices and
procedures; (iii) maintain effective control over the financial practices of
licensees, including establishing minimum procedures for internal fiscal affairs
and the safeguarding of assets and revenues, providing reliable record-keeping,
and making periodic reports to the applicable casino gaming authority; (iv)
prevent cheating and fraudulent practices; and, (v) provide a source of state
and local revenues through taxation and licensing fees.
Starwood Hotels, ITT and Caesars are registered with the Nevada Commission
as publicly traded corporations and Starwood Hotels has been found suitable by
the Nevada Gaming Authorities to own all of the outstanding capital stock of ITT
and HICN. The Nevada Gaming Authorities have found suitable ITT as the sole
shareholder of Sheraton. Sheraton is registered with the Nevada Commission as an
intermediary company and been found suitable by the Nevada Gaming Authorities to
own all the outstanding capital stock of Caesars and SGC. Similarly, SGC is
registered with the Nevada Commission as an intermediary company and been found
suitable by the Nevada Gaming Authorities to own all the outstanding capital
stock of SDI.
SDI operates the Desert Inn, DPI operates both Caesars Palace and Caesars
Tahoe, and HICN operates the King 8 pursuant to licenses granted by the Nevada
Gaming Authorities. These casino gaming licenses are not transferrable and must
be renewed periodically by the payment of various gaming license fees and taxes.
No person may become a stockholder of, or receive any percentage of profits from
SDI, DPI or HICN without first obtaining certain required licenses and approvals
from the Nevada Gaming Authorities.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, a corporation which is
involved in gaming activities. Officers, directors and key employees of each of
SDI, DPI and HICN must be individually licensed by, and changes in corporate
positions must be reported to the Nevada Gaming Authorities, which changes may
be disapproved by the Nevada Gaming Authorities. Certain of Starwood Hotels'
officers, directors and key employees and those of Starwood Hotels' subsidiaries
who are actively and directly involved in Starwood Hotels' gaming activities
have been, and others may be, required to be licensed or found suitable by the
Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application
for licensing for any cause which they deem reasonable. A finding of suitability
is comparable to licensing, and both require submission of detailed personal and
financial information followed by a thorough investigation.
If the Nevada Gaming Authorities find an officer, director or key employee
unsuitable for licensing or unsuitable to continue having a relationship with
Starwood Hotels, ITT, the Sheraton Desert Inn Companies, the Caesars Nevada
Companies or HICN, the companies involved would be required to sever all
relationships with such person. In addition, the Nevada Gaming Authorities may
require a registered company or licensee to terminate the employment of any
person who refuses to file appropriate applications or disclosures.
Starwood Hotels, ITT, the Sheraton Desert Inn Companies, the Caesars Nevada
Companies and HICN are required to submit detailed financial and operating
reports to the Nevada Commission. Substantially all loans, leases, sales of
securities and similar financing transactions by either SDI, DPI or HICN must be
reported to or approved by the Nevada Commission. Nevada law prohibits a
corporation registered by the Nevada Commission from making a public offering of
its securities without the prior approval of the Nevada Commission if any part
of the proceeds of the offering of the securities is, or the securities
themselves are, to be used either to (i) finance the construction, acquisition
or operation of gaming facilities in Nevada; or (ii) retire or extend
obligations incurred for one or more such purposes.
40
<PAGE> 42
If it were determined that the Nevada Act was violated by SDI, DPI or HICN,
the gaming license each holds could be limited, conditioned, suspended or
revoked. In addition, at the discretion of the Nevada Commission, Starwood
Hotels, ITT, the Sheraton Desert Inn Companies and the persons involved could be
subject to substantial fines for each separate violation of the Nevada Act by
the Desert Inn. Similarly, and also at the discretion of the Nevada Commission,
Starwood Hotels, ITT, the Caesars Nevada Companies and the persons involved
could be subject to substantial fines for each separate violation of the Nevada
Act by either Caesars Palace or Caesars Tahoe. Likewise, the Nevada Commission
may exercise its discretion to impose substantial fines on Starwood Hotels, HICN
and the persons involved for each separate violation of the Nevada Act by the
King 8. Furthermore, a supervisor could be appointed by the Nevada Commission to
operate the gaming property of SDI, DPI or HICN and, under certain
circumstances, earnings generated during the supervisor's appointment (except
for the reasonable rental value of the affected gaming property) could be
forfeited to the State of Nevada. Any suspension or revocation of the licenses
or approvals, or the appointment of a supervisor, would have a material adverse
effect on SDI, DPI or HICN, as the case may be.
The Nevada Gaming Authorities may investigate and require a finding of
suitability of any holder of any class of Starwood Hotels' voting securities at
any time. Nevada law requires any person who acquires more than 5% of any class
of Starwood Hotels' voting securities to report the acquisition to the Nevada
Commission and such person may be investigated and found suitable or not
suitable. Any person who becomes a beneficial owner of more than 10% of any
class of Starwood Hotels' voting securities must apply for a finding of
suitability by the Nevada Commission within 30 days after the Nevada Board
Chairman mails a written notice requiring such filing, and must pay the costs
and fees incurred by the Nevada Board in connection with the investigation.
Under certain circumstances, an "institutional investor," as defined by the
Nevada Act, that acquires more than 10% but not more than 15% of Starwood
Hotels' voting securities may apply to the Nevada Commission for a waiver of
such finding of suitability requirements if such institutional investor holds
the voting securities for investment purposes only. An institutional investor
will not be deemed to hold voting securities for investment purposes unless the
voting securities were acquired and are held in the ordinary course of business
as an institutional investor and not for the purpose of causing, directly or
indirectly, the election of a majority of the members of either the Board of
Directors or the Board of Trustees, any change in Starwood Hotels' corporate
charter, bylaws, management, policies or operations or any of Starwood Hotels'
casino gaming operations, or any other action which the Nevada Commission finds
to be inconsistent with holding Starwood Hotels' voting securities for
investment purposes only. Activities which are not deemed to be inconsistent
with holding voting securities for investment purposes only include (i) voting
on all matters voted on by stockholders; (ii) making financial and other
inquiries of management of the type normally made by securities analysts for
informational purposes and not to cause a change in its management, policies or
operations; and, (iii) such other activities as the Nevada Commission may
determine to be consistent with such investment intent. If the stockholder who
must be found suitable is a corporation, partnership or trust, it must submit
detailed business and financial information, including a list of beneficial
holders of its ownership interests.
Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Nevada Commission or
by the Chairman of the Nevada Board may be found unsuitable. Any person found
unsuitable who holds, directly or indirectly, any beneficial ownership of
Starwood Hotels' debt or equity voting securities beyond such period or periods
of time as may be prescribed by the Nevada Commission may be guilty of a gross
misdemeanor. Starwood Hotels, ITT, the Desert Inn Companies or the Caesars
Nevada Companies could be subject to disciplinary action if, without the prior
approval of the Nevada Commission and after receipt of notice that a person is
unsuitable to be an equity or debt security holder or to have any other
relationship with Starwood Hotels, ITT, the Sheraton Desert Inn Companies or the
Caesars Nevada Companies, any of such entities either (i) pays to the unsuitable
person any dividend, interest or any distribution whatsoever; (ii) recognizes
any voting right by such unsuitable person in connection with such securities;
(iii) pays the unsuitable person remuneration in any form; (iv) makes any
payment to the unsuitable person by way of principal, redemption, conversion,
exchange, liquidation or similar transaction; or, (v) fails to pursue all lawful
efforts to require such unsuitable person to relinquish his securities
including, if necessary, the immediate purchase of such securities for cash at
fair market value.
41
<PAGE> 43
Regulations of the Nevada Commission provide that control of a registered
publicly traded corporation cannot be changed through merger, consolidation,
acquisition of assets, management or consulting agreements, or any form of
takeover without the prior approval of the Nevada Commission. Persons seeking
approval to control a registered publicly traded corporation must satisfy the
Nevada Commission as to a variety of stringent standards prior to assuming
control of such corporation. The failure of a person to obtain such approval
prior to assuming control over the registered publicly traded corporation may
constitute grounds for finding such person unsuitable.
Regulations of the Nevada Commission also prohibit certain repurchases of
securities by registered publicly traded corporations without the prior approval
of the Nevada Commission. Transactions covered by these regulations are
generally aimed at discouraging repurchases of securities at a premium over
market price from certain holders of more that 3% of the outstanding securities
of the registered publicly traded corporation. The regulations of the Nevada
Commission also require prior approval for a "plan of recapitalization."
Generally, a plan of recapitalization is a plan proposed by the management of a
registered publicly traded corporation that contains recommended action in
response to a proposed corporate acquisition opposed by management of the
corporation if such acquisition would require the prior approval of the Nevada
Commission.
Any person who is licensed, required to be licensed, registered, required
to be registered, or is under common control with such persons (collectively
"Licensees"), and who proposes to become involved in a gaming operation outside
the State of Nevada is required to deposit with the Nevada Control Board, and
thereafter maintain, a revolving fund in the amount of $10,000 to pay the
expenses of investigation by the Nevada Board of the Licensees' participation in
such foreign gaming; the revolving fund is subject to increase or decrease in
the discretion of the Nevada Commission. Once such revolving fund is
established, the Licensees may engage in gaming activities outside the State of
Nevada without seeking the approval of the Nevada Commission provided (i) such
activities are lawful in the jurisdiction where they are to be conducted; and,
(ii) the Licensees comply with certain reporting requirements imposed by the
Nevada Act. Licensees are subject to disciplinary action by the Nevada
Commission if they (i) knowingly violate any laws of the foreign jurisdiction
pertaining to the foreign gaming operation; (ii) fail to conduct the foreign
gaming operation in accordance with the standards of honesty and integrity
required of Nevada gaming operations; (iii) engage in activities that are
harmful to the State of Nevada or its ability to collect gaming taxes and fees;
or, (iv) employ a person in the foreign operation who has been denied a license
or finding of suitability in Nevada on the ground of personal unsuitability.
New Jersey Gaming Regulation. The New Jersey gaming laws and regulations
primarily concern (a) the financial stability and character of casino operators,
their employees, their security holders and others financially interested in
casino operations; and, (b) the operating methods and the financial and
accounting procedures used in connection with casino operations. The New Jersey
gaming laws and regulations include, among other requirements, detailed
provisions concerning (i) the type, manner and number of applications and
licenses required to conduct casino gaming and ancillary activities; (ii) the
licensing, regulation and curricula of gaming schools; (iii) the establishment
of minimum standards of accounting and internal control, including the issuance
and enforceability of casino credit; (iv) the manufacture, sale, distribution
and possession of gaming equipment; (v) the rules of the games; (vi) the
exclusion of undesirable persons; (vii) the use, regulation and reporting of
junket activities; (viii) the possession, sale and distribution of alcoholic
beverages; (ix) the regulation and licensing of suppliers to licensed casino
operators; (x) the conduct of entertainment within licensed casino facilities;
(xi) equal employment opportunity for employees of licensed casino operators,
contractors for casino facilities and other entities; (xii) the payment of gross
revenue taxes and similar fees and expenses; (xiii) the conduct of casino
simulcasting; and, (xiv) the imposition and discharge of casino reinvestment
development obligations. A number of these regulations require practices which
are different from those in many casinos elsewhere and some of them result in
casino operating costs greater than those in comparable facilities elsewhere. As
a prerequisite to being licensed, a New Jersey hotel/ casino facility must meet
certain facilities requirements concerning, among other things, the size and
number of guest rooms.
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<PAGE> 44
BRC is licensed to operate Caesars Atlantic City by the New Jersey
Commission, which has broad discretion with regard to the issuance, renewal,
revocation or suspension of licenses. A New Jersey casino license is not
transferable and must be renewed at designated periods of up to four years.
Renewal is not automatic and involves an extensive review by the New Jersey DGE,
a report by the New Jersey DGE to the New Jersey Commission, an independent
review by the New Jersey Commission, and the affirmative vote of at least four
of the five sitting Commissioners of the New Jersey Commission. The casino
license to operate Caesars Atlantic City was renewed on November 30, 1996, and
expires on November 30, 2000. As a prerequisite to BRC holding a license, ITT,
Caesars and CNJ have been and are approved by the New Jersey Commission due to
their corporate relationship to BRC. Starwood Hotels also is required to be
approved by the New Jersey Commission, and has received interim casino
authorization.
Except for certain banking and lending institutions exempted under the New
Jersey Act, all financial backers, investors, mortgagees, debt holders,
landlords under leases relating to Starwood Hotels' New Jersey hotel/casino
facilities, all lenders to BRC, all officers and directors of BRC and all
employees who work at Caesars Atlantic City have to be qualified, licensed,
approved or registered by or with the New Jersey Commission. In addition, all
contracts and leases entered into by BRC are subject to approval by the New
Jersey Commission.
Any holder of the debt or equity securities of Starwood Hotels, Caesars or
CNJ must be found qualified; the qualification requirement may be waived based
on an express finding by the New Jersey Commission, with the consent of the
Director of the New Jersey DGE, that the security holder either (a)(i) is not
significantly involved in the activities of BRC; (ii) does not have the ability
to control Starwood Hotels, ITT, Caesars, CNJ or BRC; and (iii) does not have
the ability to elect one or more members of the Board of Directors, the Board of
Trustees, or the respective boards of directors of ITT, Caesars, CNJ or BRC; or
(b) is an "institutional investor." The New Jersey Act presumes that any
security holder that is not an "institutional investor" who owns or beneficially
holds 5% or more of Starwood Hotels' equity securities has the ability to
control Starwood Hotels, ITT, Caesars, CNJ or BRC, unless such presumption is
rebutted by clear and convincing evidence.
The New Jersey Act and regulations define an "institutional investor" as
(i) any retirement fund administered by a public agency for the exclusive
benefit of Federal, state or local public employees; (ii) an investment company
registered under the Investment Company Act of 1940; (iii) a collective
investment trust organized by banks under Part Nine of the Rules of the
Comptroller of the Currency; (iv) a closed end investment trust; (v) a chartered
or licensed life insurance company or property and casualty insurance company;
(vi) banking or other licensed or chartered lending institutions; (vii) an
investment advisor registered under the Investment Advisors Act of 1940; or,
(viii) such other persons as the New Jersey Commission may determine for reasons
consistent with the policies of the New Jersey Act. In the absence of a prima
facie showing by the Director of the DGE that there is any cause to believe that
such institutional investor may be found unqualified, upon application and for
good cause shown, an institutional investor holding either (a) less than 10% of
Starwood Hotels' equity securities; or, (b) debt securities constituting less
than 20% of Starwood Hotels' outstanding debt and less than 50% of the issue
involved may be granted a waiver of qualification as to such holdings if (i)
such securities are those of a publicly traded corporation; (ii) the
institutional investor's holdings of such securities were purchased for
investment purposes only; and, (iii) upon request by the New Jersey Commission,
the institutional investor files with the New Jersey Commission a certified
statement to the effect that the institutional investor has no intention of
influencing or affecting the affairs of Starwood Hotels, ITT, Caesars, CNJ or
BRC; notwithstanding the foregoing, the institutional investor is permitted to
vote on matters put to the vote of the outstanding security holders of Starwood
Hotels.
If an institutional investor who has been granted a waiver subsequently
determines to influence or affect Starwood Hotels' affairs, the institutional
investor must provide to the New Jersey Commission not less than 30 days' prior
notice of such intent and the institutional investor must file with the New
Jersey Commission an application for qualification before taking any action that
may influence or affect Starwood Hotels' affairs; notwithstanding the foregoing,
the institutional investor is permitted to vote on matters put to the vote of
Starwood Hotels' outstanding security holders. If an institutional investor
changes its investment intent, or if
43
<PAGE> 45
the New Jersey Commission finds reasonable cause to believe that the
institutional investor may be found unqualified, no action other than
divestiture shall be taken by that institutional investor until there has been
compliance with the interim casino authorization provisions of the New Jersey
Act, including the execution of a trust agreement. Starwood Hotels, ITT,
Caesars, CNJ and BRC are required to immediately notify the New Jersey
Commission and the New Jersey DGE of any information about, or action of an
institutional investor holding Starwood Hotels' equity or debt securities where
such information or action may impact on the eligibility of such institutional
investor for a waiver. If the New Jersey Commission finds an institutional
investor unqualified or if the New Jersey Commission finds that, by reason of
the extent or nature of its holdings, an institutional investor is in the
position to exercise a substantial impact on the controlling interests of BRC so
that qualification of the institutional investor is necessary to protect the
public interest, the New Jersey Act vests in the New Jersey Commission the power
to take all necessary action to protect the public interest, including the power
to require that the institutional investor submit to qualification and become
qualified under the New Jersey Act.
Any holder of Starwood Hotels' debt or equity securities, including an
institutional investor, who is required to be found qualified by the New Jersey
Commission must submit an application for qualification within 30 days after
being ordered to do so or divest all security holdings within 120 days after the
New Jersey Commission determines such qualification is required. The application
for qualification must include a trust agreement by which the security holder
places its interest in Starwood Hotels' securities in trust with a trustee
qualified by the New Jersey Commission. If the security holder is ultimately
found qualified, the trust agreement is terminated. In connection with the ITT
Merger, Starwood Hotels petitioned for and, on January 28, 1998 received,
interim casino authorization under the provisions of the New Jersey Act,
including the execution of a trust agreement. Starwood Hotels has filed an
application for plenary qualification, which, pursuant to the New Jersey Act,
the New Jersey Commission will act upon within nine months from the date interim
casino authorization was granted.
If the security holder is not found qualified or withdraws its application
for qualification, the trustee will be empowered with all rights of ownership
pertaining to such security holder's securities, including all voting rights and
the power to sell the securities; in any event, the unqualified security holder
will not be entitled to receive in exchange for its securities an amount in
excess of the lower of (i) the actual cost the security holder incurred in
acquiring the securities; or, (ii) the value of such securities, calculated as
if the investment had been made on the date the trust became operative. If the
security holder is not found qualified, it is unlawful for the security holder
to (i) receive any dividends or interest on such securities; (ii) exercise,
directly or through any trustee or nominee, any right conferred by such
securities; or, (iii) receive any remuneration in any form from Starwood Hotels,
ITT, Caesars, CNJ or BRC for services rendered or otherwise.
Each officer, director, lender and certain other persons of Starwood
Hotels, ITT, Caesars and CNJ must be found qualified unless the New Jersey
Commission, with the consent of the Director of the New Jersey Commission, with
the consent of the Director of the New Jersey DGE, finds that such officer,
director, lender or other person is not significantly involved in the affairs of
BRC and is thus waived from qualification. New Jersey law requires that an
officer or director of Starwood Hotels, ITT, Caesars or CNJ must apply for
temporary qualification at least 30 days before assuming any duties.
The New Jersey Act requires that each of Starwood Hotels, ITT, Caesars, CNJ
and BRC maintain financial stability and capability. For purposes of these
requirements, the New Jersey Commission has adopted regulations defining
"financial stability" and has set forth certain standards for determining
compliance with the financial stability regulations. Under the regulations of
the New Jersey Commission, "financial stability" has been defined as (i) the
ability to assure the financial integrity of casino operations by the
maintenance of a casino bankroll or equivalent provisions adequate to pay
winning wagers to casino patrons when due; (ii) the ability to meet ongoing
operating expenses which are essential to the maintenance of continuous and
stable casino operations; (iii) the ability to pay, as and when due, all local,
state and Federal taxes and any and all fees imposed by the New Jersey Act; (iv)
the ability to make necessary capital and maintenance expenditures in a timely
manner which are adequate to insure maintenance of a superior first class
facility of exceptional quality as required by the New Jersey Act; and, (v) the
ability to pay, exchange, refinance or extend debts, including long-term and
short-term principal and interest and capital lease obligations, which will
mature or
44
<PAGE> 46
otherwise come due and payable during either the license term or within 12
months after the end of the license term or to otherwise manage such debts and
any default with respect to the debts. The New Jersey Commission regulations
provide that the financial stability standards concerning casino bankroll,
operating expenses and capital and maintenance expenditures are met if the
following is shown by clear and convincing evidence: (i) casino bankroll -- the
maintenance, on a daily basis, of a casino bankroll at least equal to the
average daily casino bankroll, calculated on a monthly basis, for the
corresponding month in the previous year; (ii) operating expenses -- the
demonstration of the ability to achieve positive gross operating profit measured
on an annual basis; and, (iii) capital and maintenance expenditures -- the
demonstration that its capital and maintenance expenditures over the five-year
period, which includes the previous 36 calendar months and the upcoming license
period, average at least 5% of net revenue per annum. Starwood Hotels believes
that, at current operating levels, BRC will have no difficulty in complying with
these requirements. The New Jersey Commission has the authority to restrict or
prohibit the transfer of cash or the assumption of liabilities by BRC if such
action will adversely impact the financial stability of BRC and the prior
approval of the New Jersey Commission is required to incur indebtedness and
guarantees of affiliated indebtedness by BRC involving amounts greater than $25
million.
If it were determined that New Jersey gaming laws were violated by BRC, BRC
could be subject to fines or its casino license could be limited, conditioned,
suspended or revoked. In addition, if a security holder of Starwood Hotels, ITT,
Caesars, CNJ or BRC is found disqualified but does not dispose of the
securities, the New Jersey Commission is authorized to take any necessary action
to protect the public interest, including the suspension or revocation of the
casino license. The New Jersey Commission, however, will not take any action
against Starwood Hotels, ITT, Caesars, CNJ or BRC in connection with a
disqualified holder if the New Jersey Commission finds that (i) Starwood Hotels
has provided in its corporate and trust charters that Starwood Hotels'
securities are held subject to the condition that, if a holder is found to be
disqualified by the New Jersey Commission pursuant to the provisions of the New
Jersey Act, such holder shall dispose of its interest in Starwood Hotels; (ii)
Starwood Hotels has made a good faith effort, including the prosecution of all
legal remedies, to comply with any order of the New Jersey Commission requiring
the divestiture of the interest held by the disqualified holder; and, (iii) such
disqualified holder does not have the ability to control Starwood Hotels, ITT,
Caesars, CNJ or BRC or to elect one or more members of the Board of Directors,
the Board of Trustees or the respective boards of directors of ITT, Caesars, CNJ
or BRC. If BRC's license is revoked, not renewed or suspended for a period in
excess of 120 days, the New Jersey Commission is empowered to appoint a
conservator to operate, and to dispose of, BRC's casino/hotel facilities. If a
conservator operates the casino/hotel facilities, payments to shareholders would
be limited to a "fair return" on their investment, with any excess going to the
State of New Jersey. If a conservator is appointed, the conservator's charges
and expenses become a lien against the property which has priority over all
prior and subsequent liens. Any suspension or revocation of the licenses or
approvals, or the appointment of a conservator would have a material adverse
effect on BRC.
Mississippi Gaming Regulation. Gaming in Mississippi can be legally
conducted only on vessels of a certain minimum size either in navigable waters
of counties bordering the Mississippi River or in the waters of the State of
Mississippi which lie adjacent to the coastline of the three counties bordering
the Gulf of Mexico. STC possesses a license for the ownership and operation of
The Sheraton Casino & Hotel in Robinsonville, Tunica County, Mississippi issued
by the Mississippi Commission pursuant to the Mississippi Act. The Mississippi
Act does not restrict the amount or percentage of space on a vessel that may be
utilized for casino gaming; the Mississippi Act also does not limit the number
of licenses that the Mississippi Commission can grant for a particular area.
Starwood Hotels, ITT and STC are required to submit detailed financial,
operating and other reports to the Mississippi Commission. Substantially all
loans, leases, sales of securities and similar financing transactions entered
into by Starwood Hotels, ITT or by STC must be reported to or approved by the
Mississippi Commission. Starwood Hotels, ITT and STC are also required
periodically to submit detailed financial and operating reports to the
Mississippi Commission and to furnish any other information which the
Mississippi Commission may require.
45
<PAGE> 47
Each of the directors, officers and certain key employees of Starwood
Hotels, ITT and STC who are actively and directly engaged in the administration
or supervision of casino gaming in Mississippi, or who have any other
significant involvement with the activities of STC, must be found suitable
therefor and may be required to be licensed by the Mississippi Commission. A
finding of suitability is comparable to licensing, and both require the
submission of detailed personal and financial information followed by a thorough
investigation. An application for licensing may be denied for any cause deemed
reasonable by the Mississippi Commission. Changes in licensed positions must be
reported to the Mississippi Commission. In addition to its authority to deny an
application for a license, the Mississippi Commission has the authority to
disapprove a change in corporate position. If the Mississippi Commission finds a
director, officer or key employee of Starwood Hotels, ITT or STC unsuitable for
licensing or unsuitable to continue having a relationship with Starwood Hotels,
ITT or STC, such entity is required to suspend, dismiss and sever all
relationships with such person. Starwood Hotels, ITT and STC have similar
obligations with regard to any person who fails or refuses to file appropriate
applications. Each gaming employee must obtain a work permit; the Mississippi
Commission may refuse to issue a work permit to a gaming employee (i) if the
employee has committed larceny, embezzlement or any other crime of moral
turpitude or knowingly violated the Mississippi Act or the regulations of the
Mississippi Commission; or (ii) for any other reasonable cause.
Mississippi gaming licenses are not transferable and must be renewed
periodically. The Mississippi Commission is empowered to deny, limit, condition,
revoke and/or suspend any license, finding of suitability or registration, and
to fine any person as it deems reasonable and in the public interest, subject to
the due process considerations of notice and an opportunity for a hearing. The
Mississippi Commission may fine any licensee or other person that is subject to
the Mississippi Act up to $100,000 for each violation of the Mississippi Act
that is the subject of an initial complaint and up to $250,000 for each
violation of the Mississippi Act that is the subject of any subsequent
complaint.
License fees and taxes, computed in various ways depending on the type of
casino gaming involved, are payable to the State of Mississippi and to the
counties and cities in which gaming operations are located. Generally, these
fees and taxes are based on a percentage of the gross gaming revenues received
by the casino operation, the number of slot machines operated by such casino, or
the number of table games operated by such casino. Moreover, several local
governments have been authorized to impose either additional gross fees on
adjusted gross gaming revenues or, alternatively, per person boarding fees and
annual license fees based on the number of gaming devices aboard the vessel.
License fees paid to the State of Mississippi are allowed as a credit against
Mississippi state income taxes.
In all other material respects, casino gaming regulation in Mississippi is
similar to the regulation of casino gaming in Nevada and New Jersey.
Ontario Gaming Regulation. Windsor Casino Limited ("WCL"), which is
half-owned by Caesars and which operates the casino in Windsor, Ontario, Canada,
is required to comply with licensing requirements similar to Nevada and New
Jersey and is also subject to operational regulation by the Province of Ontario.
Pursuant to the Ontario Act, the Registrar of the Ontario Commission must
approve any change in the directors or officers of WCL. The Ontario Act also
provides that the Ontario Commission may require the submission of certain
disclosures and informational material from any person who has an interest in
WCL. Starwood Hotels will submit in a timely manner to the Registrar the
required disclosures and informational material.
Under the Ontario Act, no person may provide goods or services for a casino
or other business operated by, on behalf of or under contract with the Ontario
Casino Corporation unless, among other things, that person is registered as a
supplier under the Ontario Act. The Registrar has the power, subject to the
Ontario Act, to grant, renew, suspend or revoke registrations. The Registrar is
entitled to make such inquiries and conduct such investigations as are necessary
to determine that applicants for registration meet the requirements of the
Ontario Act and to require information or material from any person who has an
interest in an applicant for registration as a registrant. The criteria to be
considered in connection with registration under the Ontario Act include
financial responsibility, integrity, honesty and the public interest. The
Registrar may, at any time,
46
<PAGE> 48
subject to the provisions of the Ontario Act, revoke, suspend or refuse to renew
WCL's registration under the Ontario Act.
Nova Scotia Gaming Regulation. Sheraton Casino Nova Scotia ("SCNS"), the
subsidiary of ITT that owns and operates the casino in the City of Halifax, Nova
Scotia, and operates the casino in the City of Sydney, Nova Scotia, is required
to comply with licensing requirements similar to the Province of Ontario and is
also subject to operational regulation by the Province of Nova Scotia.
Under the Nova Scotia Act, the Director of Registration of the Nova Scotia
Commission must be notified, within 15 days, of any change in the officers or
directors of SCNS. SCNS is also required to file a disclosure form with the
Director of Registration within 15 days of (i) a person acquiring a beneficial
interest in the business of SCNS; (ii) a person exercising control, either
directly or indirectly, over the business of SCNS; or (iii) a person providing
financing, either directly or indirectly, to the business of SCNS. The Nova
Scotia Act also provides that the Director of Registration may require
information or material from SCNS or any person who has an interest in SCNS.
Starwood Hotels has or will submit on a timely basis all required disclosure
forms and informational materials as applicable.
Indiana Gaming Regulation. As a result of Caesars' planned riverboat
casino development in Harrison County, Indiana, Starwood Hotels and ITT are
subject to the gaming regulations in force in that state. Indiana currently
imposes regulations on gaming companies similar to, and in Starwood Hotels'
opinion, no more restrictive than, the gaming regulations in force in Nevada and
New Jersey.
The riverboat also must comply with U.S. Coast Guard requirements as to
boat design, on-board facilities, equipment, personnel and safety and must hold
a Certificate of Seaworthiness or must be approved by the American Bureau of
Shipping for stabilization and flotation. The U.S. Coast Guard requirements
establish design standards, set limits on the operation of the vessel and
require individual licensing of all personnel involved with the operation of the
vessel. Loss of the vessel's Certificate of Seaworthiness or the American Bureau
of Shipping approval would preclude its use as a floating casino. The land-based
facilities developed and used in connection with the riverboat are subject to
local zoning and building codes.
Under the Indiana Act and regulations prior approval of the ITT Merger was
not required and Starwood Hotels must file for approval of the ITT Merger within
45 days of the closing of the ITT Merger. Starwood Hotels will file all required
applications in a timely manner.
Provisions of the Corporation's Articles of Incorporation Related to Casino
Gaming. The Articles of Incorporation provide that (i) all Starwood Hotels'
securities are subject to redemption to the extent necessary to prevent the
loss, or to secure the reinstatement, of any casino gaming license held by any
of Starwood Hotels' subsidiaries in any jurisdiction within or without the
United States; (ii) all Starwood Hotels' securities are held subject to the
condition that if a holder is found by a gaming authority in any jurisdiction to
be disqualified or unsuitable pursuant to any gaming law, such holder will be
required to dispose of all such securities; failing such disposition, the
Corporation may redeem the securities at the lesser of their market price or the
disqualified holder's original purchase price; and (iii) it is unlawful for any
such disqualified person to (a) receive payments of interest or dividends on any
such securities; (b) exercise, directly or indirectly, any rights conferred by
any such securities; or (c) receive any remuneration in any form, for services
rendered or otherwise, from the subsidiary that holds the gaming license in the
applicable jurisdiction.
ITEM 3. LEGAL PROCEEDINGS.
There are various legal actions pending against the Company, some of which
involve claims for substantial amounts. Although there can be no assurance as to
the ultimate outcome of any litigation involving the Company, managements of the
Trust and the Corporation do not believe that any pending legal proceeding will
have, after taking into account the Company's existing insurance coverage,
indemnification rights and provisions for such liabilities, a material adverse
effect on the consolidated financial condition of the Company.
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<PAGE> 49
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
THE TRUST
On December 12, 1997, the Trust held its 1997 annual meeting of
shareholders (the "Trust Meeting"). At the Trust Meeting, the shareholders of
the Trust (i) approved the Company's acquisition of Westin by the Company
pursuant to the Westin Transaction Agreement; (ii) approved an amendment to the
Declaration of Trust changing the name of the Trust and increasing the number of
authorized shares of beneficial ownership of the Trust; (iii) elected to the
Board of Trustees Jean-Marc Chapus, Bruce W. Duncan and Barry S. Sternlicht,
each to serve for a three-year term; and (iv) approved the amendment and
restatement of the Starwood Hotels & Resorts 1995 Long-Term Incentive Plan (the
"Trust's LTIP"). Messrs. Stuart M. Rothenberg, Barry S. Sternlicht, Steven R.
Goldman, Roger S. Pratt, Stephen R. Quazzo, Madison F. Grose, and George J.
Mitchell continued to serve as Trustees following the Trust Meeting.
The following table sets forth, with respect to each matter voted upon at
the Trust Meeting, the number of votes cast for, the number of votes cast
against, and the number of votes abstaining (or, with respect to the election of
Trustees, the number of votes withheld) with respect to such matter:
<TABLE>
<CAPTION>
VOTES VOTES VOTES
FOR AGAINST ABSTENTIONS WITHHELD
---------- --------- ----------- --------
<S> <C> <C> <C> <C>
Acquisition of Westin......................... 40,620,168 31,988 42,251
Amendment of the Declaration of Trust......... 40,610,170 36,130 48,083
Election of Trustees:
Jean-Marc Chapus............................ 44,832,723 51,063
Bruce W. Duncan............................. 44,840,223 43,563
Barry S. Sternlicht......................... 44,830,743 53,043
Amendment and Restatement of the Starwood
Hotels & Resorts 1995 Long-Term Incentive
Plan........................................ 36,442,273 4,171,142 80,991
</TABLE>
THE CORPORATION
On December 12, 1997, the Corporation held its 1997 annual meeting of
stockholders (the "Corporation Meeting"). At the Corporation Meeting, the
stockholders of the Corporation (i) approved the Company's acquisition of Westin
pursuant to the Westin Transaction Agreement; (ii) approved an amendment to the
Articles of Incorporation changing the name of the Corporation and increasing
the number of authorized Corporation Shares; (iii) elected as Directors Jonathan
D. Eilian and Barry S. Sternlicht, each to serve for a three-year term; and (iv)
approved the amendment and restatement of the Starwood Hotels & Resorts
Worldwide, Inc. 1995 Long-Term Incentive Plan (the "Corporation's LTIP").
Messrs. Juergen Bartels, Barry S. Volpert, Michael A. Leven, Daniel H. Stern,
Bruce M. Ford, Graeme W. Henderson, Earle F. Jones and Daniel W. Yih continued
to serve as Directors following the Corporation Meeting.
The following table sets forth, with respect to each matter voted upon at
the Corporation Meeting, the number of votes cast for, the number of votes cast
against, and the number of votes abstaining (or, with respect to the election of
Directors, the number of votes withheld) with respect to such matter:
<TABLE>
<CAPTION>
VOTES VOTES VOTES
FOR AGAINST ABSTENTIONS WITHHELD
---------- --------- ----------- --------
<S> <C> <C> <C> <C>
Acquisition of Westin......................... 40,613,653 30,271 51,000
Amendment of the Articles of Incorporation.... 40,600,579 37,075 57,269
Election of Directors:
Jonathan D. Eilian.......................... 44,839,367 44,419
Barry S. Sternlicht......................... 44,827,160 56,626
Amendment and Restatement of the Starwood
Hotels & Resorts Worldwide, Inc. 1995 Long-
Term Incentive Plan......................... 35,110,792 5,487,347 83,478
</TABLE>
48
<PAGE> 50
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET INFORMATION
The Paired Shares are traded principally on the New York Stock Exchange
(the "NYSE") under the symbol "HOT."
The following table sets forth, for the fiscal periods indicated, the high
and low sales prices per Paired Share on the NYSE Composite Tape.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1997
Fourth quarter............................................. $60.38 $52.13
Third quarter.............................................. $57.44 $41.56
Second quarter............................................. $42.81 $34.25
First quarter.............................................. $45.88 $34.50
1996
Fourth quarter............................................. $36.75 $27.42
Third quarter.............................................. $27.92 $22.08
Second quarter............................................. $25.75 $21.17
First quarter.............................................. $23.25 $19.67
</TABLE>
HOLDERS
As of March 27, 1998, there were approximately 47,936 holders of record of
Paired Shares, including approximately 25,883 holders of record of ITT Shares
converted into Paired Shares in connection with the ITT Merger who have not yet
surrendered their certificates.
49
<PAGE> 51
DISTRIBUTIONS MADE/DECLARED
The following table sets forth certain information with respect to
distributions made by the Trust during the years ended December 31, 1997 and
1996:
<TABLE>
<CAPTION>
DISTRIBUTIONS RETURN OF CAPITAL
MADE GAAP Basis (a)
------------- -----------------
<S> <C> <C>
1997
Fourth quarter.............................................. $0.48(b) $0.23
Third quarter............................................... $0.48 $0.48
Second quarter.............................................. $0.39 $0.01
First quarter............................................... $0.39 $0.21
1996
Fourth quarter.............................................. $0.39(c)(d) $0.22
Third quarter............................................... $0.33 $0.14
Second quarter.............................................. $0.33 --
First quarter............................................... $0.31 $0.11
</TABLE>
- ---------------
(a) Represents distributions per Paired Share in excess of net income per Paired
Share on a generally accepted accounting principles ("GAAP") basis, and is
not the same as return of capital on a tax basis.
(b) The Trust declared a distribution for the fourth quarter of 1997 to
shareholders of record on December 31, 1997. The distribution was paid in
January 1998.
(c) The Trust declared a distribution for the fourth quarter of 1996 to
shareholders of record on December 30, 1996. The distribution was paid in
January 1997.
(d) During the fourth quarter of 1996, the Trust and the Corporation each
declared a three-for-two stock split in the form of a 50% stock dividend
payable to shareholders of record on December 30, 1996. The stock dividend
was paid in January 1997.
The Corporation has not paid any cash dividends since its organization and
does not anticipate that it will make any such distributions in the foreseeable
future. Under the terms of the Company's current credit facilities, the Trust is
generally permitted to distribute to its shareholders on an annual basis cash in
an amount equal to the greater of (i) 55% of adjusted funds from operations (as
defined) for any four consecutive calendar quarters and (ii) the minimum amount
necessary to maintain the Trust's tax status as a REIT.
50
<PAGE> 52
ITEM 6. SELECTED FINANCIAL DATA.
The following data sets forth certain financial information for each of the
Trust and the Corporation, and the Trust and the Corporation on a combined
basis. This information is based on and should be read in conjunction with the
financial statements and the notes thereto appearing elsewhere in this Joint
Annual Report.
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Revenue:
Trust................................. $270,768 $115,059 $ 44,023 $ 21,671 $ 20,342
Corporation........................... 913,688 410,156 149,184 110,962 114,828
Combined(1)........................... 933,583 428,538 161,716 113,997 117,155
Income (Loss) before Extraordinary
Items:
Trust(2).............................. $ 50,747 $ 33,589 $ 12,864 $ (3,465) $ (3,889)
Corporation(2)........................ (9,223) (7,715) (1,739) (1,198) (3,143)
-------- -------- -------- -------- --------
Combined.............................. $ 41,524 $ 25,874 $ 11,125 $ (4,663) $ (7,032)
Income (Loss) from Continuing
Operations:
Trust(2).............................. $ 47,295 $ 33,589 $ 10,709 $ (3,465) $ (3,889)
Corporation(2)........................ (9,223) (6,638) (1,739) (1,198) (3,143)
-------- -------- -------- -------- --------
Combined.............................. $ 38,072 $ 26,951 $ 8,970 $ (4,663) $ (7,032)
Income (Loss) before Extraordinary Items
Per Share/Paired Share(3):
Trust................................. $ 1.10 $ 1.15 $ 1.10 $ (1.14) $ (1.28)
Corporation(4)........................ (0.20) (0.26) (0.15) (0.39) (1.04)
Combined(4)........................... 0.90 0.88 0.95 (1.53) (2.32)
Income (Loss) from Continuing Operations
Per Share/Paired Share(3):
Trust................................. $ 1.03 $ 1.14 $ 0.92 $ (1.14) $ (1.28)
Corporation(4)........................ (0.20) (0.22) (0.15) (0.39) (1.04)
Combined(4)........................... 0.83 0.92 0.77 (1.53) (2.32)
Income (Loss) from Continuing Operations
Per Share/Paired Share Assuming
Dilution(3):
Trust................................. $ 0.97 $ 1.12 $ 0.92 $ (1.14) $ (1.28)
Corporation(4)........................ (0.20) (0.22) (0.15) (0.39) (1.04)
Combined(4)........................... 0.78 0.90 0.77 (1.53) (2.32)
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total Assets:
Trust.............................. $2,772,423 $1,233,366 $425,737 $162,245 $232,845
Corporation........................ 558,651 185,192 120,721 48,626 49,993
Combined(1)........................ 3,009,464 1,312,740 459,994 183,955 195,352
Total Debt:
Trust.............................. $1,439,294 $ 477,603 $119,200 $146,734 $156,526
Corporation........................ 448,330 107,781 90,749 40,664 101,846
Combined(1)........................ 1,566,014 479,566 123,485 160,482 170,886
Shareholders' Equity (Deficit):
Trust.............................. $ 982,626 $ 569,300 $204,728 $ 10,450 $ 72,205
Corporation........................ 38,997 23,361 10,740 (1,742) (58,879)
---------- ---------- -------- -------- --------
Combined........................... 1,021,623 592,661 215,468 8,708 13,326
Paired Shares outstanding at end of
period(3).......................... 51,346 40,078 20,697 3,033 3,033
</TABLE>
51
<PAGE> 53
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1997 1996 1995 1994 1993
----------- --------- --------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
CASH FLOW AND DIVIDEND DATA
Net cash provided by (used in)
operating activities:
Trust.............................. $ 176,671 $ 61,589 $ 11,267 $ 4,455 $ 3,136
Corporation........................ (19,738) 12,578 5,144 4,438 2,396
Combined........................... 156,933 74,167 16,411 8,893 5,532
Net cash provided by (used in)
investing activities:
Trust.............................. $(1,217,133) $(726,427) $(175,506) $ 8,239 $ 2,474
Corporation........................ (93,230) (33,774) (44,003) 215 (4,426)
Combined(1)........................ (1,220,138) (746,800) (181,995) 4,489 (3,645)
Net cash provided by (used in)
financing activities:
Trust.............................. $ 1,046,470 $ 667,938 $ 164,694 $(13,357) $(7,307)
Corporation........................ 104,996 34,190 42,671 (4,577) (1,138)
Combined(1)........................ 1,061,241 688,727 169,851 (13,969) (6,752)
Cash distributions to shareholders --
Trust.............................. $ 98,554 $ 46,218 $ 9,265 -- --
Corporation........................ 1,054 -- -- -- --
Cash distributions per share --
Trust(3)........................... $ 1.74 $ 1.36 $ 0.62 -- --
Corporation........................ -- -- -- -- --
</TABLE>
- ---------------
(1) The individual amounts with respect to the Trust and Corporation do not add
to Combined amounts due to accounting elimination entries.
(2) For the Trust, includes gains (losses) on sales in the amount of $3,171,000,
$4,290,000, ($125,000), $432,000 and ($53,000) for the years ended December
31, 1997, 1996, 1995, 1994 and 1993, respectively; a charge for the
settlement of Treasury locks of $25,000,000 for the year ended December 31,
1997; and provisions for investment losses of $759,000 and $2,369,000 in the
years ended December 31, 1994 and 1993, respectively. For the Corporation,
includes gains on sales of $3,864,000, $24,000 and $74,000 for the years
ended December 31, 1997, 1994 and 1993, respectively.
(3) As adjusted for a one-for-six reverse stock split in June 1995 and a
three-for-two stock split in January 1997.
(4) Options to purchase approximately 2.3 million Paired Shares and 557,000
Paired Shares and restricted stock grants of approximately 329,000 Paired
Shares and 85,000 Paired Shares were outstanding during 1997 and 1996,
respectively,but were not included in the computation of earnings per share
assuming dilution for the Corporation because the effect would have been
antidilutive. Accordingly, the individual amounts with respect to the Trust
and Corporation may not add to the Combined amounts for 1997 and 1996.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
HISTORICAL RESULTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
THE TRUST
Rents from the Corporation, which are based largely on hotel revenues,
increased $146.9 million for the year ended December 31, 1997, as compared to
the corresponding period of 1996. The increase was primarily
52
<PAGE> 54
the result of rents earned by the Trust on the 40 hotels acquired by the Trust
during 1997. (See "Other Acquisitions -- 1997 Acquisitions" included in Item 1
of this Joint Annual Report.) The increase was also the result of earning a full
year of rents by the Trust on hotels acquired by the Trust during 1996 (the
"1996 Acquired Hotels"). The investment in the 1997 Acquired Hotels and the 1996
Acquired Hotels accounted for increased rents for the year ended December 31,
1997 of $87.4 million and $61.0 million, respectively, as compared to the
corresponding period in 1996. In addition, rents earned by the Trust from
continuously owned properties leased to the Corporation decreased by $1.5
million for the year ended December 31, 1997, as compared to the corresponding
period in 1996, due to 1997 and 1996 sales of hotel assets.
Interest from the Corporation increased by $7.3 million for the year ended
December 31, 1997, as compared to the corresponding period of 1996. The increase
in interest income was primarily a result of interest relating to first
mortgages on the Westin Regina Portfolio, which was acquired by the Corporation
in August 1997 and interest on the first mortgage on the Midland Hotel, which
hotel was acquired by the Corporation in March 1996.
Interest from mortgage and other notes amounted to $13.7 million for the
year ended December 31, 1997, as compared to $11.3 million for the corresponding
period in 1996. The increase resulted from the purchase during 1996 of debt, a
portion of which was secured by the 305-room Holiday Inn in Milpitas, California
and which was repaid in December 1997, and a first mortgage note secured by the
King 8 which was received as partial consideration for the sale of the Trust's
interest in the King 8 in the fourth quarter of 1996. The increase was offset in
part by principal amortization.
Other income for the year ended December 31, 1997 includes a $1.2 million
gain (net of related expenses) realized in conjunction with the sale of
securities.
Interest expense increased by $41.8 million for the year ended December 31,
1997, as compared to the corresponding period of 1996. The increase was due to
borrowings under the Doral Mortgage Note, the BPP Mortgage, the Tax Exempt
Bonds, the Stamford Note, and the Crowne Plaza Note used to acquire the 1996
Acquired Hotels and the 1997 Acquired Hotels. The increase was offset by the net
proceeds from the offerings of Paired Shares made in 1997 used to partially fund
the acquisition of the above-mentioned properties.
Depreciation and amortization expense increased by $57.6 million during the
year ended December 31, 1997, as compared to the corresponding period of 1996,
principally due to the acquisition of the 1997 Acquired Hotels and a full year
of depreciation expense relating to the 1996 Acquired Hotels.
Administrative and general expenses for the year ended December 31, 1997,
increased by $8.1 million to $12.2 million, as compared to $4.1 million for the
corresponding period of 1996. The increase resulted predominantly from expenses
related to the Trust's LTIP and the increase in payroll costs commensurate with
the Company's growth.
Net income for the year ended December 31, 1997 includes a $25 million
charge relating to an accrual for a settlement of three interest rate protection
agreements which expired on January 30, 1998 and were settled in January 1998.
The Company did not issue the debt anticipated by such agreements due to various
factors including its financing of the ITT Merger. Net income also includes an
extraordinary loss of $4.4 million before minority interest resulting from early
extinguishment of debt. The extraordinary loss represents financing costs
associated with the Company's existing indebtedness which was retired upon
entering into the $1.2 Billion Facility (as defined below).
Minority interest represents primarily the interest of the Starwood
Partners and other limited partners in the Realty Partnership for the year ended
December 31, 1997, $2.7 million relating to the 41.8% minority interest of a
third party in the joint venture that owns the Boston Park Plaza hotel and $1.4
million relating to the minority interest of a third party in the joint venture
that owns the Doral Court and Doral Tuscany hotels.
THE CORPORATION
Hotel revenues increased by $503.8 million for the year ended December 31,
1997, as compared to the corresponding period of 1996. The assumption of
management of the 1997 Acquired Hotels and the addition
53
<PAGE> 55
of the Westin Regina Portfolio and the Turnberry Hotel and Golf Resort resulted
in an increase in hotel revenues of $270.3 million for the year ended December
31, 1997. The remaining increase of $233.5 million for the year ended December
31, 1997, is attributable to the full year impact of revenues from the 1996
Acquired Hotels and other continuously owned properties.
Hotel gross margin for the year ended December 31, 1997, was $274.8
million, or 30.9% of hotel revenues, as compared to $110.1 million, or 28.6% of
hotel revenues, for the same period of 1996.
Gaming revenues for the year ended December 31, 1997 as compared to the
corresponding period of 1996 decreased by $8.6 million to $15.0 million. Gaming
gross margin for the year ended December 31, 1997 was a loss of $1.5 million, as
compared to a profit of $1.8 million for the corresponding period in 1996. The
decrease in gaming revenues and the decline in gaming gross margin predominately
resulted from operations at Bourbon Street, which was sold on September 12,
1996. The real property of the King 8 was also sold in 1996 for approximately
$18.8 million. The sale of the personal property of the King 8, for $3 million,
is scheduled to close following the receipt by the purchaser or his designee of
required gaming approval. HICN, a subsidiary of the Corporation, leases the real
property from the purchaser and has agreed to continue to operate the hotel and
casino while the purchaser obtains required gaming licenses and approvals.
Management fees and other income for the year ended December 31, 1997,
includes $1.1 million of management fee income from the joint venture that owns
the Boston Park Plaza hotel and $2.5 million of management fee income from the
HEI Managed Hotels.
Administrative and general expenses for the year ended December 31, 1997,
increased to $15.0 million or 1.6% of revenues as compared to $12.4 million or
3.0% of revenues for the corresponding period of 1996. The increase was
primarily a result of increases in payroll costs commensurate with the Company's
growth, the assumption of management of hotels and expenses incurred as a result
of the Corporation's LTIP. Administrative and general expenses for the year
ended December 31, 1996, included a $1.9 million charge for costs relating to
the relocation of the corporate office from Los Angeles, California to Phoenix,
Arizona.
Depreciation and amortization expense increased by $12.1 million for the
year ended December 31, 1997, as compared to the corresponding period of 1996.
The increase was primarily a result of depreciation relating to hotels acquired
by the Corporation.
Minority interest represents primarily the interest of the Starwood
Partners and other limited partners in the Operating Partnership and
approximately $2.9 million related to the 41.8% minority interest of a third
party in the joint venture that owns the Boston Park Plaza hotel.
For more information with respect to rent and interest paid to the Trust
during the years ended December 31, 1997 and 1996, see "The Trust" immediately
above.
EXTERNAL GROWTH
During the year ended December 31, 1997, the Company acquired equity
interests in 44 hotels containing more than 12,800 rooms at a combined cost
exceeding $1.4 billion. For a list of the hotels acquired during 1997, see
"Other Acquisitions -- 1997 Acquisitions" included in Item 1 of this Joint
Annual Report.
INTERNAL GROWTH
On a same-store-sales basis, including the results of all hotels acquired
prior to December 31, 1997 except the Doral Inn in New York City, New York,
which underwent a substantial renovation during 1997, and three hotels held for
sale (the Milwaukee Sheraton in Milwaukee, Wisconsin; the Bay Valley Hotel &
Resort in Bay City, Michigan; and the Tyee Hotel in Olympia, Washington), for
the period from their respective dates of acquisition (if acquired in 1997) as
compared to the same period in 1996, REVPAR for the year ended December 31,
1997, increased 8.0% from $67.33 to $72.69 over the same period in 1996. The
increase in REVPAR resulted from an increase in ADR of 8.6%, from $96.16 to
$104.41, while the occupancy rate decreased slightly to 69.6% from 70.0%.
Excluding the Doral Inn and the three hotels held for sale as well as
54
<PAGE> 56
six hotels in Atlanta, Georgia whose results are not comparable to 1996 due to
the nonrecurrence of the Olympic games, REVPAR increased 9.4% to $73.31 from
$67.00 in the corresponding period in 1996.
The overall increase in REVPAR for the year ended December 31, 1997, was
largely attributable to the strong increase in REVPAR at the Company's upscale
hotels. These hotels experienced an increase in REVPAR of 8.5% for the year
ended December 31, 1997, as compared to the corresponding period of 1996. ADR
for the Company's upscale hotels increased 8.1% for the year ended December 31,
1997, as compared to the corresponding period in 1996.
The following tables summarize average occupancy, ADR and REVPAR for the
Company's 99 owned and operated (including owned but third-party managed hotels
and including the Acquired Properties and properties acquired by the Corporation
for the period beginning with their respective dates of acquisition and ending
at the end of each period; and excluding the Doral Inn and the three hotels held
for sale), non-gaming hotels for the years ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1997 1996
------- ------
<S> <C> <C>
95 NON-GAMING HOTELS:
Occupancy rate.............................................. 69.6% 70.0%
ADR......................................................... $104.41 $96.16
REVPAR...................................................... $ 72.69 $67.33
REVPAR % change............................................. 8.0%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1997 1996
------- ------
<S> <C> <C>
78 UPSCALE/LUXURY HOTELS:
Occupancy rate.............................................. 69.5% 69.3%
ADR......................................................... $108.07 $99.99
REVPAR...................................................... $ 75.14 $69.26
REVPAR % change............................................. 8.5%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1997 1996
------ ------
<S> <C> <C>
17 MIDSCALE/ECONOMY HOTELS:
Occupancy rate.............................................. 70.1% 73.9%
ADR......................................................... $85.62 $77.63
REVPAR...................................................... $60.03 $57.39
REVPAR % change............................................. 4.6%
</TABLE>
Management believes that increases in REVPAR resulted primarily from
increases in demand due to continued favorable economic conditions which have
resulted in increased business and leisure travel throughout the United States,
while the supply of hotel rooms has not increased as rapidly, particularly in
major urban locations. Revenue increases for the year were greatest at the
recently renovated Radisson Park Central in Dallas, Texas; the recently acquired
properties in the Southern California and New England regions; and the three
resort properties in Mexico. REVPAR declined significantly at the Doral Inn in
New York, New York, which was partially closed for renovation during the year.
Management believes that there are several important factors that have
contributed to the improved profitability of hotel properties, including
increased ADR and effective cost management. Because a substantial portion of
the hotels' operating costs and expenses are generally fixed, the Company
derives substantial operating leverage from increases in revenue. However, the
Company's continued investment in full-service properties has led to a larger
component of food and beverage revenue when compared to the same period last
year. Despite the larger food and beverage component, the Company's continued
focus on
55
<PAGE> 57
increasing gross margins through cost containment and cost reductions resulted
in increases in gross margins of 340 basis points from 33.6% to 37.0% for the
year ended December 31, 1997.
During the year ended December 31, 1997, consistent with its business
objective to capture the economic benefits otherwise retained by a third-party
operator, the Company assumed management of a total of 48 hotels including 38
hotels acquired during the period. Management believes that the assumption of
direct control over the operations of these hotels will allow the Company to
effectively use the experience of management to improve operations.
During the year ended December 31, 1997, the Company completed an
approximately $12.0 million renovation of the Radisson Park Central hotel in
Dallas, Texas; an approximately $6.0 million renovation of the Westin in
Washington, DC; an approximately $5.0 million renovation of the Edmond Meany
Tower hotel in Seattle, Washington; an approximately $4.0 million renovation of
the Westin Tampa Airport in Tampa, Florida; an approximately $7.0 million
renovation of the Sheraton Colony Square hotel in Atlanta, Georgia; and an
approximately $5.7 million renovation of the Westin Guest Suites at the
Philadelphia International Airport in Philadelphia, Pennsylvania. Renovations
have also been scheduled and should be completed in 1998 and 1999 for the
Terrace Garden in Atlanta, Georgia (approximately $8.5 million); the Atlanta
Marque in Atlanta, Georgia (approximately $6.8 million); the Days Inn at the
Philadelphia Airport (approximately $3.4 million); the Midland Hotel in Chicago,
Illinois (approximately $13.0 million); and the Park Plaza hotel in Boston,
Massachusetts (approximately $49.2 million).
56
<PAGE> 58
RESULTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
THE TRUST
Rents from the Corporation, which are based largely on hotel revenues,
increased $60.9 million for the year ended December 31, 1996, as compared to the
corresponding period of 1995. The increase was primarily the result of rents
earned by the Trust on the 1996 Acquired Hotels. The investment in the 1996
Acquired Hotels accounted for increased rents of $59.7 million for the year
ended December 31, 1996, as compared to the corresponding period in 1995. In
addition, rents earned by the Trust from continuously owned properties leased to
the Corporation increased by $1.2 million for the year ended December 31, 1996,
as compared to the corresponding period in 1995.
Interest from the Corporation increased by $4.3 million for the year ended
December 31, 1996, as compared to the corresponding period of 1995. The increase
in interest income was primarily a result of interest on the mortgage interests
relating to the Milwaukee Sheraton Hotel, which mortgage interests were
purchased by the Trust in July 1995, and interest on the first mortgage of the
Midland Hotel, which hotel was acquired by the Corporation in March 1996.
Interest from mortgage and other notes amounted to $11.2 million for the
year ended December 31, 1996, as compared to $10.8 million for the corresponding
period in 1995. The increase resulted from the purchase during the year of debt,
a portion of which is secured by the 305-room Holiday Inn in Milpitas,
California, offset in part by principal amortization.
Other income for the year ended December 31, 1996 included a $290,000 gain
(net of related expenses) realized in conjunction with the sale of securities
which were purchased in contemplation of acquiring a portfolio of hotel
properties and a $750,000 gain (net of related expenses) realized in connection
with the sale of other securities. Also included in other income is $314,500
recorded as a result of a litigation settlement.
Interest expense increased by $10.7 million for the year ended December 31,
1996, as compared to the corresponding period of 1995. The increase was due to
borrowings under loan and credit facilities, the Doral Mortgage and the BPP
Mortgage, used to acquire the above mentioned properties offset by the net
proceeds from offerings of Paired Shares made in 1996 used to partially fund the
acquisition of the above mentioned properties.
Depreciation and amortization expense increased by $33.5 million during the
year ended December 31, 1996, as compared to the corresponding period of 1995,
principally due to the acquisition of the 1996 Acquired Hotels.
Administrative and general expenses for the year ended December 31, 1996
increased by $1.7 million to $4.1 million, as compared to $2.4 million for the
corresponding period of 1995. The increase resulted predominantly from expenses
related to the Trust's LTIP as well as costs incurred relating to the
investigation of hotels which ultimately were not acquired. Administrative and
general expenses includes payments of approximately $242,000 to a former officer
of the Trust pursuant to his separation agreement with the Trust.
Minority interest represents primarily the interest of the Starwood
Partners in the Realty Partnership for the year ended December 31, 1996, and the
41.8% minority interest of a third party in the joint venture that owns the
Boston Park Plaza hotel.
THE CORPORATION
Hotel revenues increased by $263.9 million for the year ended December 31,
1996, as compared to the corresponding period of 1995. The assumption of
management of the 1996 Acquired Hotels and the addition of the 652-room Doral
Inn in New York, New York; the 293-room Radisson Marque hotel in Winston-Salem,
North Carolina and the 257-room Midland Hotel in Chicago, Illinois resulted in
increases in hotel revenues of $249.1 million for the year ended December 31,
1996. The remaining increase of $14.8 million for the year ended December 31,
1996 is attributable to other continuously owned properties.
57
<PAGE> 59
Hotel gross margin for the year ended December 31, 1996 was $110.1 million,
or 28.6% of hotel revenues, as compared to $36.2 million, or 29.9% of hotel
revenues, for the same period of 1995. The decrease in gross margin was
primarily due to the increase in the food and beverage revenue component of
total hotel revenue resulting from the Company's continued investment in
full-service hotels offset, in part, by increases in REVPAR and the termination
of third-party management agreements.
Gaming revenues for the year ended December 31, 1996 as compared to the
corresponding period of 1995 decreased by $3.3 million to $23.6 million. Gaming
gross margin for the year ended December 31, 1996 was $1.8 million or 8% of
gaming revenues, as compared to $2.7 million or 10% of gaming revenues, for the
corresponding period in 1995. The decrease in gaming revenues and the decline in
gaming gross margin predominately resulted from the sale of the Bourbon Street
hotel/casino and the real property of the other gaming asset, the King 8 in
1996.
Management fees and other income for the year ended December 31, 1996
includes a $314,500 litigation settlement and $953,500 of management fee income
from the joint venture that owns the Boston Park Plaza hotel.
Administrative and general expenses for the year ended December 31, 1996
increased to $12.4 million or 3.0% of revenues as compared to $3.3 million or
2.2% of revenues for the corresponding period of 1995. The increase was
primarily a result of increases in payroll costs commensurate with the Company's
growth, the assumption of management of hotels previously operated by third
parties, and expenses related to the Corporation's LTIP. Administrative and
general expenses for the year ended December 31, 1996 included a $1.9 million
charge relating to costs incurred in relocating the corporate office from Los
Angeles, California to Phoenix, Arizona.
Depreciation and amortization expense increased by $6.7 million for the
year ended December 31, 1996, as compared to the corresponding period of 1995.
The increase was primarily a result of depreciation relating to hotels acquired
by the Corporation.
Minority interest represents primarily the interest of the Starwood
Partners in the Operating Partnership and the 41.8% minority interest of a third
party in the joint venture that owns the Boston Park Plaza hotel.
Net income for the year ended December 31, 1996, includes an extraordinary
gain of $1.5 million before minority interest resulting from early
extinguishment of debt. The extraordinary gain resulted from the early payoff,
at a discount, of a note secured by the Milwaukee Sheraton. In addition, the
Corporation purchased the remaining equity interest for $240,000 and became the
100% owner of the hotel.
For more information with respect to rent and interest paid to the Trust
during the years ended December 31, 1996 and 1995, see "The Trust" immediately
above.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW PROVIDED BY OPERATING ACTIVITIES
The principal source of cash to be used to fund the Company's operating
expenses, interest expense, recurring capital expenditures and distribution
payments by the Trust will be cash flow provided by operating activities. The
Company anticipates that cash flow provided by operating activities will provide
the necessary funds on a short and long-term basis to meet operating cash
requirements including all distributions to shareholders by the Trust. During
the first quarter of 1997, the Trust paid a distribution of $0.39 per share for
the fourth quarter of 1996. During the second quarter of 1997, the Trust paid a
distribution of $0.39 per share for the quarter ending March 31, 1997. During
the third quarter of 1997, the Trust paid a distribution of $0.39 per share for
the quarter ended June 30, 1997. During the fourth quarter of 1997, the Trust
paid a distribution of $0.48 per share for the quarter ended September 30, 1997
and declared a distribution of $0.48 per share for the quarter ended December
31, 1997. This distribution was paid on January 26, 1998.
58
<PAGE> 60
CASH FLOWS FROM INVESTING AND FINANCING ACTIVITIES
The Company intends to finance the acquisition of additional hotel
properties, hotel renovations and capital improvements and provide for general
corporate purposes through its credit facilities described below, through
additional lines of credit, and when market conditions warrant, to issue
additional equity or debt securities.
Loans and Credit Facilities. In March 1996, the Realty Partnership entered
into a $24 million, one-year, non-recourse secured term loan (the "Term Loan")
to fund the acquisition of the 257-room Midland Hotel in Chicago, Illinois; in
April 1996, the amount of the Term Loan was increased to $94 million. The Term
Loan was secured by nine properties of the Company, but was non-recourse to the
Realty Partnership. The Term Loan accrued interest at a rate equal to one-, two-
or three-month LIBOR, at the Company's option, plus (a) 1.95% for the first $24
million of borrowings and (b) 1.75% for the balance of amounts borrowed under
the Term Loan. The maturity date of the Term Loan was extended to October 1997
with a right to further extend at the Company's option to April 1998. In
September 1997, the Company retired the Term Loan with a portion of the proceeds
from the $1.2 Billion Facility (defined below).
In March 1996, the joint venture that owns the Boston Park Plaza ( in which
the Company holds a 58.2% interest) refinanced a mortgage secured by the Boston
Park Plaza with a new non-recourse mortgage due July 2003 (the "BPP Mortgage")
in the amount of $25 million with the Life Insurance Company of Georgia. The BPP
Mortgage bears interests at an annual interest rate of 8.4%; as of December 31,
1997, the balance outstanding under the BPP Mortgage was $24.8 million.
In July 1996, the maturity date of the Company's mortgage loan funding
facility with Lehman Brothers, Inc. ("Lehman Brothers" and such facility the
"Mortgage Facility"), which was secured by six notes receivable, was extended
from January 25, 1997 to July 25, 1997 and, in July 1997, was further extended
to October 1997. In September 1997, the Company retired the Mortgage Facility
with a portion of the proceeds from the $1.2 Billion Facility.
In August 1996, the Company entered into a facility with an affiliate of
Goldman, Sachs & Co. ("Goldman, Sachs" and such facility the "Goldman Facility")
for a one-year (extendible to 18 months) loan of up to $300 million to fund a
portion of the acquisition cost of a portfolio of nine hotels acquired from
Hotels of Distinction Ventures, Inc. (the "HOD Portfolio") and for general
corporate purposes. The Goldman Facility bore interest at one-month LIBOR plus
1.75% (2.75% during the six-month extension period), and was secured by a
portfolio of eight hotels acquired from a financial institution and the HOD
Portfolio. In September 1997, the Company retired the Goldman Facility with a
portion of the proceeds from the $1.2 Billion Facility.
In September 1996, upon the acquisition of the Doral Court and Doral
Tuscany in New York, the Company assumed liability under and amended the terms
of a mortgage note with The Sumitomo Trust and Banking Co., Ltd. (the "Doral
Mortgage Note"). As amended, the Doral Mortgage Note is recourse to the Realty
Partnership, bears interest at an annual rate of 7.64% and is due September
2001. As of December 31, 1997, the balance outstanding under the Doral Mortgage
Note was $27.4 million.
In February 1997, the Corporation issued (and the Trust guaranteed)
tax-exempt bonds (the "Tax Exempt Bonds") due October 2013 in the aggregate
principal amount of $39.5 million. The Tax Exempt Bonds, which bear interest at
a rate of 6.5%, were issued at a discount to yield 6.7% per year and are secured
by two hotels of the Company located at the Philadelphia International Airport.
Net proceeds from the Tax Exempt Bonds of approximately $37.6 million were used
to partially fund the acquisition of the 578-room Days Inn in Chicago, Illinois.
As of December 31, 1997, the balance outstanding under the Tax Exempt Bonds was
$39.5 million.
In February 1997, in connection with the acquisition of the HEI Portfolio,
the Company obtained a short-term loan from the Prudential Insurance Company of
America on behalf of Prudential Property Investment Separate Account II in the
principal amount of $97.5 million (the "Prudential Loan"). The Prudential Loan
bore interest at a rate of 7.0% per annum and was originally due May 30, 1997.
During the second quarter of 1997, the Company extended the maturity date of the
Prudential Loan to July 14, 1997. In July 1997, the
59
<PAGE> 61
Company refinanced the Prudential Loan with a portion of the proceeds from the
$200 Million Facility (as defined below).
On June 12, 1997, the Company acquired ownership and operational control of
the 480-room Stamford Sheraton Hotel in Stamford, Connecticut. In connection
with this transaction, the Company executed a $10.25 million mortgage note (the
"Stamford Note") in favor of Lehman Brothers and certain of its affiliates. The
Stamford Note is secured by the Stamford Sheraton Hotel, bears interest at LIBOR
plus 225 basis points and matures on January 31, 2000. As of December 31, 1997,
the balance outstanding under the Stamford Note was $10.25 million.
In July 1997, the Company entered into a $200 million three-year unsecured
term loan facility arranged by Bankers Trust Company (the "$200 Million
Facility"). Proceeds from the $200 Million Facility, which bore interest at
one-, two- or three-month LIBOR plus 1.75% per annum, were used to repay the
Prudential Loan and for other acquisitions. In September 1997, the Company
retired the $200 Million Facility with a portion of the proceeds from the $1.2
Billion Facility.
On August 5, 1997, in connection with the acquisition of the Westin Regina
Portfolio, the Company obtained a $118.75 million loan from Bancomer, SA (the
"Bancomer Loan"). The Bancomer Loan is secured by mortgages on the Westin Regina
Portfolio, bears interest at one-month LIBOR plus 169 basis points and matures
on May 14, 1998. As of December 31, 1997, the balance outstanding under the
Bancomer Loan was $118.75 million.
On September 10, 1997, the Company obtained a $1.2 billion three-year
unsecured revolving credit and term loan facility (the "$1.2 Billion Facility").
The $1.2 Billion Facility was arranged and structured by Bankers Trust Company
and co-arranged by affiliates of Lehman Brothers with Bank Boston and Bank of
Montreal. The $1.2 Billion Facility was structured as a $600 million unsecured
revolving credit facility and a $600 million term loan. At closing, the Company
used proceeds from the $1.2 Billion Facility to retire approximately $650
million of its existing indebtedness and to fund the acquisition of the Flatley
Portfolio for approximately $470 million. As of December 31, 1997, the balance
outstanding under the $1.2 Billion Facility was $1.183 billion.
On September 24, 1997, in connection with the acquisition of the 439-room
Crowne Plaza Hotel in New Orleans, Louisiana, the Company entered into a $29.0
million mortgage loan agreement with Hibernia National Bank (the "Crowne Plaza
Mortgage"). The Crowne Plaza Mortgage is secured by the Crowne Plaza Hotel in
New Orleans, bears interest at one-month LIBOR plus 200 basis points and matures
on September 1, 2002. As of December 31, 1997, the balance outstanding under the
Crowne Plaza Mortgage was $29.0 million.
On December 31, 1997, in connection with the Westin Merger, certain assets
of the Westin Companies were transferred to the Corporation. As consideration
for such asset transfers, the Corporation has executed and delivered to the
Westin Companies certain promissory notes in an aggregate principal amount of
approximately $125.7 million. The notes bear interest at 6% per annum, were
acquired by the Trust as part of the Westin Merger on January 2, 1998 and are
currently payable on demand.
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 the $1.2
Billion Facility.
On February 23, 1998, the Company 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 consideration,
to refinance a portion of the Company's existing indebtedness (including
indebtedness outstanding under the $2.2 Billion Facility) 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 increasing rates 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, a five year term loan, and a $1.1 billion, five-year
revolving credit facility. The Corporation, the Trust and certain of their
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<PAGE> 62
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 is one-, two- or three-month LIBOR, at the
Company's option, plus 187.5 basis points for the four months ending June 24,
1998, one-, two-or three-month LIBOR plus 162.5 basis points for the two months
ending August 24, 1998, and thereafter 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, forth and fifth year, 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 subsidiaries, 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.
Recent Stock Sales. On March 26, 1997, the Company sold 3,000,000 Paired
Shares at a net price to the Company of approximately $43.35 per share in a
public offering. The net proceeds of approximately $130.0 million were used, in
part, to fund the acquisitions of the 264-suite Marriott Suites Hotel in San
Diego, California, the 172-room Raphael Hotel in Chicago, Illinois and the
130-room Tremont Hotel in Chicago, Illinois, and for general corporate purposes.
On October 2, 1997, the Company completed the sale of approximately 2.5
million Paired Shares at the net price of $53.00 per Paired Share to a group of
institutional buyers in a direct placement. Net proceeds from this sale of
approximately $131.6 million were used to repay existing indebtedness.
On October 15, 1997, the Company sold to Union Bank of Switzerland ("UBS")
2,185,000 Paired Common Shares (the "UBS Shares"), in a private placement, at a
net price of $57.25 per share. Net proceeds of this offering (after payment of a
customary placement fee to UBS) were used to repay existing indebtedness.
Separately, the Company entered into a Forward Stock Agreement with UBS
(the "UBS Price Adjustment Agreement"). The UBS Price Adjustment Agreement
provides for a settlement payment to be made, in the form of Paired Shares, by
the Company to UBS, or by UBS to the Company, based on the market price of the
UBS 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 declared on the UBS Shares, in each case during
the term of the UBS Price Adjustment Agreement).
The Company has the right at any time during a preliminary term of one year
to elect to deliver or receive Paired Shares in settlement of the UBS Price
Adjustment Agreement. The Company has the further right, but not the obligation,
to settle by repurchasing for cash all of the UBS Shares at the Forward Price.
The Company has the obligation to settle the UBS Price Adjustment Agreement at
the end of one year unless UBS agrees to extend its term. UBS has the right to
cause an earlier settlement upon the occurrence of certain events of default or
a substantial decline in the market price of the Paired Shares. The Company has
the right under the UBS Price Adjustment Agreement to settle the Company's
obligation (if any) by making a cash payment, but cannot compel UBS to settle
UBS's obligation through the payment of cash to the Company.
In the event that at various quarterly dates during the term of the UBS
Price Adjustment Agreement the Forward Price is higher than the then current
market price of the Paired Common Stock, the Company is obligated to deliver
additional Paired Shares (or at the Company's election, cash) to UBS to be held
as
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<PAGE> 63
security for the Company's settlement obligation. In February 1998 the Company
paid $7,835,000 to UBS as such security. The Company may, prior to April 15,
1998, deliver Paired Shares to UBS and receive the return of the Company's cash
deposit. Any and all Paired Shares delivered as security will be issued and
outstanding when delivered and will adjust the Forward Price in accordance with
the formula contained in the UBS Price Adjustment Agreement.
Upon final settlement of the UBS Price Adjustment Agreement, the Company is
obligated to pay a placement fee based on the amount of the net stock
settlement, if any, as well as an unwind accretion fee equal to one-half of the
settlement amount multiplied by an interest factor calculated for the number of
actual days the UBS Price Adjustment Agreement was in effect prior to final
settlement.
The Company is required to cause to be registered under the Securities Act
of 1933, for resale by UBS, the Paired Shares sold to UBS on October 15, 1997
and the Paired Shares issued or issuable to UBS under the UBS Price Adjustment
Agreement.
On February 24, 1998, the Company sold an aggregate of 4,641,000 Paired
Shares to Merrill Lynch International, NMS Services, Inc. and Lehman Brothers
Inc. (collectively, the "February Purchasers"), in a private placement, for
$245.0 million. The Company paid the February Purchasers a customary placement
fee.
Separately, the Company entered into agreements (the "February Price
Adjustment Agreements") with the February Purchasers (and with Merrill Lynch,
Pierce, Fenner & Smith Incorporated, NationsBanc Montgomery Securities LLC and
Lehman Brothers Finance S.A., each of which is an affiliate of a February
Purchaser) with terms that are essentially the same as the terms of the UBS
Price Adjustment Agreement, except that (i) under the February Price Adjustment
Agreements, the Company does not have any right to deliver cash in settlement of
its obligation to deliver Paired Shares or any right to repurchase the shares
sold to the February Purchasers, and (ii) the Forward Price under the February
Price Adjustment Agreements is based on a price of $53.875 per share.
The Company is required to cause to be registered under the Securities Act
of 1933, for resale by the February Purchasers, the Paired Shares sold to the
February Purchasers on February 24, 1998 and the Paired Shares issued or
issuable to the February Purchasers under the February Price Adjustment
Agreements.
Treasury Locks. The Company from time to time has entered into interest
rate protection agreements ("Treasury Locks") as a means of managing interest
rate exposure on anticipated transactions. The Treasury Locks have the effect of
fixing the base rate of interest for long-term debt that the Company intends to
issue. The Treasury Locks provide that, on their settlement date, the Company
will receive or pay an amount that will depend upon whether the interest rate
for ten-year Treasury Notes in effect on that date (the "Treasury Rate") has
increased or declined since the dates the Company entered into the Treasury
Locks. If by the settlement date the related debt has been issued by the
Company, these amounts will be capitalized and amortized over the term of such
debt as an increase or decrease in interest expense. To the extent that the
Company has not issued the related debt by the settlement date, the Company will
be required to recognize the amount so paid or received as, respectively, gain
or loss from continuing operations. In addition, if any time prior to the
settlement date the Company changes its intention with respect to the issuance
of the related debt, the Company will be required to recognize gain or loss as
if the settlement had occurred at that time. The amount of such unrecognized
gain or loss fluctuates with the Treasury Rate.
In order for the amount paid or received to be deferred under such
agreements, and therefore treated as a hedge, the Company must determine that it
is probable that the future issuance of debt anticipated by the contract will
occur. In order to assess whether this criterion has been met, the Company
reviews current projections to determine if the issuance of such debt is still
in line with the Company's plans and whether the Company has the ability to
issue such debt.
On May 27, 1997, the Company entered into an interest rate protection
agreement which had the effect of fixing the base rate of interest at 6.773% for
debt with an aggregate notional principal amount of $100 million and a term to
maturity of five years. On October 10, 1997, the Company extended the settlement
date to January 30, 1998, which had the effect of fixing the base rate of
interest at 6.9105% for debt that the Company intended to issue in the first
quarter of 1998.
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On July 29, 1997, the Company extended the settlement date of a previously
transacted interest rate protection agreement to January 30, 1998, which had the
effect of fixing the base rate of interest at 6.09725% for debt that the Company
intended to issue in the first quarter of 1998 with an aggregate notional
principal amount of $100 million and a term to maturity of seven years.
On July 29, 1997, the Company extended the settlement date of a previously
transacted interest rate protection agreement to January 30, 1998, which had the
effect of fixing the base rate of interest at 6.95% for debt that the Company
intended to issue in the first quarter of 1998 with an aggregate notional
principal amount of $150 million and a term to maturity of 10 years.
During the fourth quarter of 1997, the Company determined that, due to
various factors including its financing plans related to the ITT Merger, the
Company no longer intended to issue the debt anticipated by the interest rate
hedging agreements described above. Accordingly, the Company recorded a charge
in the amount of $25 million for the year ended December 31, 1997 and in January
1998 settled the three Treasury Locks for approximately $22.4 million.
CAPITAL IMPROVEMENTS
As previously discussed, during the year ended December 31, 1997, the
Company completed an approximately $16 million renovation of the Radisson Park
Central hotel in Dallas, Texas; an approximately $7 million renovation of the
Westin in Washington, DC; an approximately $6 million renovation of the Edmond
Meany Tower hotel in Seattle, Washington; an approximately $4 million renovation
of the Westin Tampa Airport in Tampa, Florida; an approximately $8 million
renovation of the Sheraton Colony Square hotel in Atlanta, Georgia; and an
approximately $6 million renovation of the Westin Guest Suites at the
Philadelphia International Airport in Philadelphia, Pennsylvania. Renovations
have also been scheduled and should be completed in 1998 and 1999 for the
Terrace Garden in Atlanta, Georgia (approximately $9 million); the Atlanta
Marque in Atlanta, Georgia (approximately $7 million); the Days Inn at the
Philadelphia Airport (approximately $4 million); the Midland Hotel in Chicago,
Illinois (approximately $13.0 million); and the Park Plaza Hotel in Boston,
Massachusetts (approximately $49.2 million). Major and minor renovations,
expansions and upgrades of other hotels are also being contemplated. In
addition, the Company intends to develop new hotels on a selective basis.
Sources of capital for major renovations, expansions and upgrades of hotels as
well as new construction are expected to be: (i) excess funds from operations,
(ii) additional debt financing, and (iii) additional equity raised in the public
and private markets.
Between January 1, 1995 and December 31, 1997, the Company invested over
$2.5 billion in hotel assets (including approximately $157 million in capital
expenditures for the year ended December 31, 1997); an additional $16.4 billion
was invested in connection with the acquisitions of Westin and ITT. As part of
its investment strategy, the Company plans to acquire additional hotels. Future
acquisitions are expected to be funded through further draws under the Company's
current credit facilities, draws under new lines of credit, issuance of
long-term debt on either a secured or unsecured basis, issuance of limited
partnership interests in the Realty Partnership and the Operating Partnership
exchangeable for Paired Shares and the issuance of additional equity or debt
securities. The Company intends to incur additional indebtedness in a manner
consistent with its policy of maintaining a Debt-to-Total Market Capitalization
Ratio (defined as total debt outstanding divided by the sum of total debt
outstanding and the fair market value of the Paired Shares on a fully diluted
basis, after giving effect to the conversion of outstanding Units) of not more
than 50%.
As of December 31, 1997, the Company had approximately $1.57 billion
aggregate principal amount of debt outstanding and approximately 10% of the
Company's owned hotels were encumbered by debt. Substantially all of this debt
is subject to cross-default provisions (subject to certain limitations). As of
March 30, 1998, the Company had approximately $8.1 billion aggregate principal
amount of debt outstanding; see "Cash Flows from Investing and Financing
Activities" immediately above. Although the Company's governing documents do not
provide any limitations on the incurring of indebtedness, as discussed above,
management currently plans to maintain a Debt-to-Total Market Capitalization
Ratio of no more than 50%. During the year ended December 31, 1997, the
Company's Debt-to-Total Market Capitalization Ratio did not exceed 50%.
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Management believes that the Company will have access to capital resources
sufficient to satisfy the cash requirements of each of the Trust and the
Corporation and to expand and develop their business in accordance with their
strategy for future growth.
FUNDS FROM OPERATIONS
Management believes that funds from operations ("FFO") is one measure of
financial performance of an equity REIT such as the Trust. Combined FFO (as
defined by the National Association of Real Estate Investment Trusts)(1) for the
year ended December 31, 1997, grew by 130% to $190.1 million, compared to
combined FFO of $82.7 million for the corresponding period in 1996. The
following table shows the calculation of historical combined FFO for the
indicated periods:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996
---------- ---------
(IN THOUSANDS)
<S> <C> <C>
Income before extraordinary item and minority interest...... $ 60,208 $36,112
Depreciation and amortization............................... 125,446 55,745
Amortization of financing costs............................. (4,079) (4,548)
Minority interest -- consolidated joint ventures............ (9,483) (2,121)
Gain on sales of hotel assets............................... (7,035) (4,290)
Corporate relocation costs.................................. -- 1,850
Treasury lock settlement.................................... 25,000 --
-------- -------
Funds From Operations....................................... $190,057 $82,748
======== =======
</TABLE>
FFO includes $5.5 million and $3.1 million of interest income recognized in
excess of the interest received on mortgage notes receivable (as a result of the
notes having been purchased at a discount) for the years ended December 31, 1997
and 1996, respectively.
YEAR 2000
Many computer systems were originally designed to recognize calendar years
by their last two digits. Calculations performed using these shortened fields
may not work properly with dates from the year 2000 and beyond. The Company is
undertaking a review and an evaluation of its existing computerized systems as
part of a program to bring all such systems into Year 2000 compliance. As a part
of this evaluation, the Company expects that its central reservation system will
be Year 2000 compliant by the end of the third quarter of 1998. The Company is
also communicating with vendors of the Company's third-party software to obtain
Year 2000 compliance certification. The Company expects, to the extent
necessary, to either modify or upgrade third-party software to ensure Year 2000
compliance.
The Company has not yet determined the total cost of modifications to its
computerized systems; however, based upon the review and evaluations conducted
to date, the Company believes the costs associated with this process will not
have a material adverse effect on the Company's results of operations or
liquidity.
- ---------------
(1) Management and industry analysts generally consider funds from operations to
be one measure of the financial performance of an equity REIT that provides
a relevant basis for comparison among REITs and FFO is presented to assist
investors in analyzing the performance of the Company. FFO is defined as
income before minority interest (computed in accordance with generally
accepted accounting principles), excluding gains (losses) from debt
restructuring and sales of property, and real estate related depreciation
and amortization (excluding amortization of financing costs). FFO does not
represent cash generated from operating activities in accordance with
generally accepted accounting principles and is not necessarily indicative
of cash available to fund cash needs. FFO should not be considered an
alternative to net income as an indication of the Company's financial
performance or as an alternative to cash flows from operating activities as
a measure of liquidity.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and supplementary data required by this Item are
included in Item 14 of this Joint Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. TRUSTEES, DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS.
TRUSTEES AND EXECUTIVE OFFICERS OF THE TRUST
The Board of Trustees currently has nine members, each of whom serves a
three-year term. The following table sets forth, for each of the members of the
Board of Trustees as of the date of this Joint Annual Report, the class of
Trustees to which such Trustee has been elected and certain other information
regarding the Trustees and executive officers of the Trust.
TRUSTEES WHOSE TERMS EXPIRE AT THE 2000 ANNUAL MEETING
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE TRUSTEE SINCE
------------ -------------------------------------------- --------------
<S> <C> <C>
Jean-Marc Chapus (38)......... Managing Director and Portfolio Manager of November 1997
Trust Company of the West and President of
TCW/Crescent Mezzanine L.L.C., a private
investment fund, since March 1995. Prior to
that time, Mr. Chapus was a Managing
Director and Principal of Crescent Capital
Corporation with primary responsibility for
the firm's private lending and private
placement activities. Mr. Chapus was a
Director of the Corporation from August 1995
to November 1997, and is currently a member
of the Board of Directors of Home Asset
Management Company and Firstamerica
Automotive, Inc.
Bruce W. Duncan (46).......... President and Chief Executive Officer of The August 1995
Cadillac Fairview Corporation Limited since
December 1995. From October 1994 to December
1995, President of Blakely Capital, Inc., a
private firm focusing on investments in real
estate and telecommunications. From 1992 to
April 1994, Mr. Duncan was President and
Co-Chief Executive Officer of JMB
Institutional Realty Corporation and from
1984 to 1991 Executive Vice President of JMB
Realty Corporation. Mr. Duncan is a member
of the Board of Directors of the Canadian
Institute of Public Real Estate Companies,
the Urban Land Institute and the Board of
Trustees of Kenyon College.
</TABLE>
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<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE TRUSTEE SINCE
------------ -------------------------------------------- --------------
<S> <C> <C>
Stuart M. Rothenberg (34)..... Managing Director in the Real Estate January 1998
Principal Investment Area of Goldman, Sachs
and the head of acquisitions for that
company's Whitehall Real Estate Funds. Over
the past 10 years, Mr. Rothenberg has held
various management and other positions with
Goldman, Sachs. Mr. Rothenberg is a director
of The Archon Group, Gestion d'Actifs
Haussmann and The Wellsford Whitehall,
L.L.C.
Pursuant to the Westin Transaction
Agreement, the Trust has agreed to include
Mr. Rothenberg (and such successors to Mr.
Rothenberg as shall be designated by The
Goldman Sachs Group, L.P. ("GS Group") or an
affiliate thereof designated by GS Group) on
each management slate of nominees to the
Board of Trustees. This right to designate a
Trustee will expire if affiliates of the GS
Group sell (to unaffiliated persons) more
than 75% of the securities of the Company
received by affiliates of the GS Group in
the transactions provided for in the Westin
Transaction Agreement (or securities of the
Company issued in exchange for such
securities).
Barry S. Sternlicht (37)...... Chairman and Chief Executive Officer of the December 1994
Trust. Mr. Sternlicht is the founder and
General Manager of Starwood Capital Group,
L.L.C., and was a co-founder in 1991 of its
predecessor Starwood Capital Group, L.P. Mr.
Sternlicht also has been the President and
Chief Executive Officer of Starwood Capital
Group, L.P. since its formation. Mr.
Sternlicht is currently the Chairman of the
Board of Directors of the Corporation, a
Trustee of each of Equity Residential
Properties Trust (a multi-family REIT) and
Starwood Financial Trust (a REIT), and a
Director of each of U.S. Franchise Systems
and ITT Educational. Mr. Sternlicht is on
the Board of Governors of National
Association of Real Estate Investment Trusts
("NAREIT") and is a member of the Urban Land
Institute and of the National Multi-Family
Housing Council. Mr. Sternlicht is a member
of the Board of Directors of the Council for
Christian and Jewish Understanding, is a
member of the Young Presidents Organization
and is on the Board of Directors of Junior
Achievement for Fairfield County,
Connecticut.
</TABLE>
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<TABLE>
<CAPTION>
TRUSTEES WHOSE TERMS EXPIRE AT THE 1999 ANNUAL MEETING
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE TRUSTEE SINCE
------------ -------------------------------------------- --------------
<S> <C> <C>
Steven R. Goldman (36)........ Executive Vice President of Acquisition and September 1996
Development of the Trust since March 1998.
Mr. Goldman was Senior Vice President of the
Trust from September 1996 through March 1998
and Senior Vice President of the Corporation
from March 1995 to September 1996. Mr.
Goldman was a Vice President of Starwood
Capital Group, L.P. specializing in hotel
acquisitions and hotel asset management from
August 1993 to February 1995. From 1990 to
1993, he was Senior Development Manager of
Disney Development Company, the real estate
investment development and management
division of The Walt Disney Company.
Roger S. Pratt (45)........... Managing Director and Senior Portfolio February 1997
Manager of Prudential Real Estate Investors.
Since January 1992, Mr. Pratt has been the
portfolio manager for Prudential Property
Investment Separate Account II, a real
estate fund managed by Prudential Real
Estate Investors for pension fund clients.
Mr. Pratt has been with The Prudential
Insurance Company of America ("Prudential")
for more than 15 years, serving in a variety
of roles in development, asset management,
hotel management and administration. Mr.
Pratt is a member of the American Institute
of Certified Planners and serves on the
Multi-Family Council of the Urban Land
Institute. He is also a trustee of the
George Street Playhouse. Mr. Pratt is the
designee of Prudential on the Board of
Trustees pursuant to a Contribution
Agreement dated as of January 15, 1997,
which entitles Prudential to be represented
on the Board of Trustees for so long as
Prudential meets certain share ownership
criteria.
Stephen R. Quazzo (38)........ Managing Director, Chief Executive Officer August 1995
and co-founder of Transwestern Investment
Company, L.L.C., a real estate principal
investment firm, since March 1996. From
April 1991 to March 1996, Mr. Quazzo was
President of Equity Institutional Investors,
Inc., a subsidiary of Equity Group
Investments, Inc., a Chicago-based holding
company controlled by Samuel Zell. Mr.
Quazzo is an advisory board member of City
Year Chicago.
TRUSTEES WHOSE TERMS EXPIRE AT THE 1998 ANNUAL MEETING
Madison F. Grose (44)......... Managing Director and General Counsel of December 1994
Starwood Capital Group, L.L.C. (and its
predecessor entities) since July 1992. From
November 1983 through June 1992, he was a
Partner in the law firm of Pircher, Nichols
& Meeks. Mr. Grose is currently a Trustee of
Starwood Financial Trust.
</TABLE>
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<TABLE>
<CAPTION>
TRUSTEES WHOSE TERMS EXPIRE
AT THE 1999 ANNUAL MEETING
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE TRUSTEE SINCE
--------------------------- -------------------------------------------- --------------
<S> <C> <C>
George J. Mitchell (64)....... Special Counsel to the law firm of Verner, November 1997
Liipfert, Bernhard, McPherson and Hand since
January 1995. Senator Mitchell served as a
United States Senator from January 1980 to
January 1995. While in the Senate, Senator
Mitchell served on the Finance, Veterans
Affairs and Environment and Public Works
Committees, and was the Majority Leader from
1989 to 1995. Senator Mitchell serves as a
director of The Walt Disney Company, Federal
Express Corporation, Xerox Corporation and
UNUM Corporation. In addition, Senator
Mitchell serves as Chairman of the
International Crisis Group, a non-profit
organization dedicated to the prevention of
crises in international affairs. From 1995
to 1997, Senator Mitchell served as the
Special Advisor to the President of the
United States on economic initiatives in
Ireland. At the request of the British and
Irish Governments, he served as Chairman of
the International Commission on Disarmament
in Northern Ireland, and now serves as
Chairman of the peace negotiations in
Northern Ireland. Senator Mitchell serves as
Chairman of the Ethics Committee of the U.S.
Olympic Committee and as Chairman of the
National Health Care Commission created by
the Pew Charitable Foundation.
</TABLE>
The executive officers of the Trust serve at the pleasure of the Board of
Trustees. There is no family relationship among any of the Trustees or executive
officers of the Trust.
DIRECTORS AND EXECUTIVE OFFICERS OF THE CORPORATION
The Board of Directors of the Corporation consists of 10 members, each of
whom serves for a three-year term. The following table sets forth, for each of
the members of the Corporation's Board of Directors as of the date of this Joint
Annual Report, the class of Directors to which such Director has been elected
and certain other information regarding such Director.
DIRECTORS WHOSE TERMS EXPIRE AT THE 2000 ANNUAL MEETING
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE DIRECTOR SINCE
------------ -------------------------------------------- --------------
<S> <C> <C>
Juergen Bartels (57).......... Chief Executive of the Company's Hotel Group January 1998
since March 1998. From May 1995 to March
1998, Chairman and Chief Executive Officer
of Westin Hotels & Resorts. Prior to joining
Westin, Mr. Bartels was the President and
Chief Executive Officer of Carlson
Hospitality Group, Inc. ("Carlson"), which
controls Radisson Hotels International,
T.G.I. Friday's restaurants and Country Inns
and Suites. Prior to joining Carlson in
1983, Mr. Bartels was the President of
Ramada's worldwide holding company and
founder of Ramada Renaissance Hotels.
</TABLE>
68
<PAGE> 70
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE DIRECTOR SINCE
------------ -------------------------------------------- --------------
<S> <C> <C>
Jonathan D. Eilian (30)....... Managing Director of Starwood Capital Group, August 1995
L.L.C. (and a senior executive of its
predecessor entities) since its formation in
September 1991. Prior to being a founding
member of Starwood Capital, Mr. Eilian
served as an Associate for JMB Realty
Corporation, a real estate investment firm,
and for The Palmer Group, L.P., a private
investment firm specializing in corporate
acquisitions. Mr. Eilian is currently a
Trustee of Starwood Financial Trust.
Barry S. Sternlicht (37)...... Chairman and Chief Executive Officer of the December 1994
Trust. Mr. Sternlicht is the founder and
General Manager of Starwood Capital Group,
L.L.C., and was a co-founder in 1991 of its
predecessor Starwood Capital Group, L.P. Mr.
Sternlicht also has been the President and
Chief Executive Officer of Starwood Capital
Group, L.P. since its formation. Mr.
Sternlicht is currently the Chairman of the
Board of Directors of the Corporation, a
Trustee of each of ITT Educational Services,
Inc., Equity Residential Properties Trust
and Starwood Financial Trust, and a director
of U.S. Franchise Systems. Mr. Sternlicht is
on the Board of Governors of NAREIT and is a
member of the Urban Land Institute and of
the National Multi-Family Housing Council.
Mr. Sternlicht is a member of the Board of
Directors of the Council for Christian and
Jewish Understanding, is a member of the
Young Presidents Organization and is on the
Board of Directors of Junior Achievement for
Fairfield County, Connecticut.
Barry S. Volpert (38)......... Managing Director in the Principal January 1998
Investment Area of Goldman, Sachs. Over the
past 11 years, Mr. Volpert has held various
other management positions with that
company. Mr. Volpert is a director of Elifin
S.A. (Luxembourg), Insilco Corp. and
Rockefeller Center Properties, Inc.
DIRECTORS WHOSE TERMS EXPIRE AT THE 1999 ANNUAL MEETING
Michael A. Leven (60)......... Chairman of the Board, President and Chief August 1995
Executive Officer of U.S. Franchise Systems,
a hotel franchising and development company,
since September 1995. From October 1990 to
September 1995, Mr. Leven was President and
Chief Operating Officer of Holiday Inn
Worldwide. Mr. Leven is a director of U.S.
Franchise Systems and Servico, Inc. Mr.
Leven is also a member of the Board of
Governors, the Chairman of the BioMedical
Services Board and a member of the Executive
Committee, of the American Red Cross.
Daniel H. Stern (37).......... President of Reservoir Capital Group, November 1997
L.L.C., a New York based investment
management firm, since July 1997. Mr. Stern
was a Trustee of the Trust from August 1995
to November 1997. From December 1992 to July
1997, Mr. Stern was President of Ziff
Brothers Investments, L.L.C., a diversified
investment management firm.
</TABLE>
69
<PAGE> 71
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE DIRECTOR SINCE
------------ -------------------------------------------- --------------
<S> <C> <C>
DIRECTORS WHOSE TERMS EXPIRE AT THE 1998 ANNUAL MEETING
Bruce M. Ford (58)............ President of F.K.B. Management Corporation, September 1983
a hotel and restaurant management company,
since 1988. Member of Gibson 25 Associates,
LLC, a hotel developer, since March 1995.
President of Ford Management Corporation, a
hotel/motel management and development
company, since June 1988. President of FST
and Associates from 1988 until August 1997.
Prior to that time, Mr. Ford was Senior Vice
President of Operations of Ramada Inns.
Graeme W. Henderson (64)...... Chairman of the Trust from July 1989 to September 1986
December 1994 and Trustee of the Trust from
September 1986 to December 1994. He has been
a private investor since January 1990. Prior
to January 1990, Mr. Henderson was President
of Henderson Consulting, Inc., a private
financial consulting firm. Mr. Henderson has
been President of Capstan, Inc. (formerly
Seymour, Inc.), a manufacturer of machine
tool controls, since 1982. Mr. Henderson is
currently a director of Capital Southwest
Corporation.
Earle F. Jones (71)........... Mr. Jones was the Chairman of the Board of September 1985
Directors of the Corporation from February
1989 to September 1997. He has been
Co-Chairman since 1988 of MMI Hotel Group, a
hotel company. From 1967 to 1968, Mr. Jones
was President of the International
Association of Holiday Inns and served two
terms as a director. Mr. Jones is a Trustee
and Chairman of Communications Improvement
Trust, whose beneficiaries are public
broadcasting and Tougaloo College Trust, a
member of the Board of Trustees for each of
Millsap College and the Catholic Foundation
and Co-Chairman of the Mississippi Olympic
Committee. Mr. Jones is a general partner of
Orlando Plaza Suite Hotel, Ltd-A, which
filed a petition under Chapter 11 of the
U.S. Bankruptcy Code in May 1996. An order
confirming the debtor's plan of
reorganization was issued by the court on
January 27, 1997.
Daniel W. Yih (39)............ A general partner of Chilmark Partners, L.P. August 1995
since June 1995. Mr. Yih served as interim
Chief Financial Officer of Midway Airlines
(from September 1995 to December 1995),
President of Merco-Savory, Inc., a
manufacturer of food preparation equipment
(from March 1995 to June 1995) and as a
senior executive of Welbilt Corporation
(from September 1993 to March 1995).
</TABLE>
Pursuant to the Westin Transaction Agreement, the Corporation has agreed to
include Barry S. Volpert (and such successors to Mr. Volpert as shall be
designated by the GS Group or an affiliate thereof) and Juergen Bartels (to the
extent he continues as Chief Executive Officer) on each management slate of
nominees to the Board of Directors. This right to designate Directors of the
Corporation will expire if affiliates of the GS Group sell (to unaffiliated
persons) more than 50% of the securities of the Company received by affiliates
of the GS Group in the transactions provided for in the Westin Transaction
Agreement (or securities of the Company issued in exchange therefor).
70
<PAGE> 72
The following table includes certain information with respect to each of
the Corporation's current executive officers other than Mr. Bartels:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH THE CORPORATION
---- --- --------------------------------
<S> <C> <C>
Susan R. Bolger...................... 44 Executive Vice President of Human Resources
Ronald C. Brown...................... 43 Executive Vice President and Chief Financial
Officer
Theodore W. Darnall.................. 40 Executive Vice President, Hotel Operations,
North America
</TABLE>
Susan R. Bolger. Ms. Bolger has been Executive Vice President of Human
Resources of the Corporation since March 1998 and was Senior Vice President of
Human Resources of the Corporation from September 1996 to March 1998. From
November 1994 to September 1996, she was Corporate Vice President of Human
Resources for Wyndham Hotels and Resorts; prior to that time, she was Vice
President for Human Resources for Arrow Industries, a division of Conagra.
Ronald C. Brown. Mr. Brown has been Executive Vice President and Chief
Financial Officer of the Corporation since March 1998 and was Senior Vice
President and Chief Financial Officer of the Trust from July 1995 through March
1998. Prior to joining the Trust, Mr. Brown was President of Sonoran Hotel
Advisors, L.L.C., a hotel REIT advisory firm, from August 1994 to July 1995.
From December 1993 to August 1994, Mr. Brown was President of Doubletree
Corporation, a public hotel operating company. From December 1990 to December
1993, Mr. Brown was Executive Vice President and Chief Financial Officer, and
from April 1992, Chairman and Chief Executive Officer, of Doubletree Hotels
Corporation. From March 1988 to April 1992, Mr. Brown was Vice
President -- Finance & Accounting and Chief Financial Officer, and then
Executive Vice President and Chief Financial Officer, for Canadian Pacific
Hotels Corporation, a hotel operating company. Mr. Brown is also the Vice
Chairman and a Director of Phoenix Children's Hospital.
Theodore W. Darnall. Mr. Darnall was named the Corporation's Executive
Vice President, Hotel Operations, North America in March 1998. From April 1996
to March 1998 he served as the Executive Vice President and Chief Operating
Officer of the Corporation. Prior to joining the Corporation, Mr. Darnall served
as the Senior Vice President -- Operations of Interstate Hotel Company from
August 1995 to April 1996. Prior to that time, he served as the Regional Vice
President -- Operations of Interstate Hotel Company.
The executive officers of the Corporation serve at the pleasure of the
Board of Directors. There is no family relationship among any of the Directors
or executive officers of the Corporation.
71
<PAGE> 73
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
THE TRUST
The following table provides certain summary information concerning the
compensation paid for the fiscal years ended December 31, 1997, 1996 and 1995 to
the Trust's Chief Executive Officer and each person serving as an executive
officer of the Trust during the year ended December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------
RESTRICTED
STOCK
ANNUAL COMPENSATION AWARD(S) SECURITIES
--------------------- ---------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) OPTIONS(#)(2) COMPENSATION($)
--------------------------- ---- --------- --------- ---------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Barry S. Sternlicht........... 1997 307,500 2,650,00 400,000
Chairman and Chief 1996 181,252 250,000 956,250(3) 1,554,000
Executive Officer 1995 91,667 150,000 625,500
Gary M. Mendell(4)............ 1997 319,368 300,000
President
Ronald C. Brown(5)............ 1997 200,000 250,000 40,000
Senior Vice President and 1996 175,000 100,000 540,000(6) 85,500 163,963(7)
Chief Financial Officer 1995 66,666 65,000 82,500
Steven R. Goldman(8).......... 1997 200,000 250,000 50,000
Senior Vice President 1996 43,750 75,000 900,000(9) 90,000 44,112(7)
</TABLE>
- ---------------
(1) Value is calculated by multiplying the number of shares by the closing
market price of the Paired Shares on the date of grant.
(2) For additional information with respect to these options, see "Option
Exercises and Holdings" below.
(3) In February 1996, Mr. Sternlicht received restricted stock awards in the
form of two warrants to purchase an aggregate of 45,000 Paired Shares at an
exercise price of $0.67 per Paired Share. One warrant was exercisable in
full on the grant date; the second warrant became exercisable in full in
January 1997; and the exercisability of both warrants generally was
conditioned upon Mr. Sternlicht's continued employment by the Trust. Mr.
Sternlicht exercised both of these warrants in full in 1997, and the
restricted stock issued upon these exercises has fully vested. Dividends
were paid to Mr. Sternlicht with respect to this restricted stock award. The
value of such Paired Shares at December 31, 1997 was $2,604,375, based on
the closing price of the Paired Shares on the NYSE on such date ($57.875).
(4) Mr. Mendell became an officer of the Trust in January 1997 and resigned such
position in March 1998.
(5) Mr. Brown became an officer of the Trust in July 1995; in March 1998 he
resigned this position to become an executive officer of the Corporation.
(6) Mr. Brown was granted a restricted stock award of 22,500 Paired Shares in
August 1996. Such restricted stock award was originally scheduled to vest in
annual installments during the three years ended August 12, 1999. In
accordance with the change of control provisions of the Trust's LTIP, upon
the consummation of the ITT Merger, such restricted stock award vested in
full. Dividends were paid to Mr. Brown with respect to such restricted stock
award. As of December 31, 1997, the value of such 22,500 Shares was
$1,302,188, based on the closing price of the Paired Shares on the NYSE on
such date ($57.875).
(7) Amount shown reflects taxable reimbursement of relocation expenses.
(8) Mr. Goldman became an executive officer of the Trust in September 1996.
Prior to September 1996, Mr. Goldman was an officer of the Corporation. For
services rendered during 1996, the Corporation paid Mr. Goldman $131,250 in
salary and a bonus of $25,000.
72
<PAGE> 74
(9) Mr. Goldman was granted a restricted stock award of 37,500 Paired Shares in
August 1996. Such restricted stock award was originally scheduled to vest in
annual installments during the three years ended August 12, 1999. In
accordance with the change of control provisions of the Trust's LTIP, upon
the consummation of the ITT Merger, such restricted stock award vested in
full. Dividends were paid to Mr. Goldman with respect to such restricted
stock award. As of December 31, 1997, the value of such 37,500 Paired Shares
was $2,170,313 based on the closing price of the Paired Shares on the NYSE
on such date ($57.875).
THE CORPORATION
The following table provides certain summary information concerning the
compensation paid for the fiscal years ended December 31, 1997, 1996 and 1995 to
the Corporation's Chief Executive Officer and each person serving as an
executive officer of the Corporation during the year ended December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------
RESTRICTED
STOCK
ANNUAL COMPENSATION AWARD(S) SECURITIES
-------------------- ---------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) OPTIONS(#)(2) COMPENSATION($)
--------------------------- ---- --------- -------- ---------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Eric A. Danziger(3)............ 1997 365,000 375,000
President and Chief 1996 175,711 150,000 2,455,451(4) 300,000 201,312(5)
Executive Officer
Theodore W. Darnall(6)......... 1997 269,000 250,000 40,000
Executive Vice-President 1996 191,790 137,500 1,000,011(7) 150,000 41,758(5)
and Chief Operating Officer
Steven R. Goldman(8)........... 1996 131,250 25,000
Senior Vice President 1995 114,583 75,000 69,000 19,800(9)
Alan M. Schnaid................ 1997 110,000 120,000 25,000
Vice President and Corporate 1996 85,228 22,500 9,750 69,918(10)
Controller 1995 55,000 8,500 6,750
</TABLE>
- ---------------
(1) Value is calculated by multiplying the number of shares by the closing
market price of the Paired Shares on the date of grant.
(2) For information with respect to these options, see "Options Exercises and
Holdings" below.
(3) Mr. Danziger became an officer of the Corporation in July 1996 and resigned
in February 1998.
(4) Mr. Danziger was granted a restricted stock award of 100,222 Paired Shares
in August 1996. Such restricted stock award was originally scheduled to
vest in annual installments over the three years ended June 27, 1999. In
accordance with the provisions of Mr. Danziger's employment contract, upon
the termination of Mr. Danziger's employment with the Corporation, such
restricted stock award vested in full. Dividends were paid to Mr. Danziger
with respect to such restricted stock award. As of December 31, 1997, the
value of such 101,222 Paired Shares was $5,800,348.25, based on the closing
price of the Paired Shares on the NYSE on such date ($57.875).
(5) Amount shown reflects taxable reimbursement of relocation expenses.
(6) Mr. Darnall became an officer of the Corporation in April 1996.
(7) Mr. Darnall was granted a restricted stock award of 45,283 Paired Shares in
August 1996. Such restricted stock award was originally scheduled to vest
in annual installments over the three years ended April 26, 1999. In
accordance with the change of control provisions of the Corporation's LTIP,
upon the consummation of the ITT Merger, such restricted stock award vested
in full. Dividends were paid to Mr. Darnall with respect to such restricted
stock award. As of December 31, 1997, the value of such 45,283 Paired
Shares was $2,620,753.63, based on the closing price of the Paired Shares
on the NYSE on such date ($57.875).
73
<PAGE> 75
(8) Mr. Goldman resigned as an officer of the Corporation in September 1996, at
which time he became an executive officer of the Trust. During 1996, the
Trust paid Mr. Goldman $43,750 in salary and a bonus of $75,000, and
reimbursed Mr. Goldman on a taxable basis for $44,112 of relocation
expenses.
(9) Amount shown reflects cash paid by the Corporation for housing allowance.
(10) Amount shown reflects $46,635 for relocation allowance and $23,303 for
taxable reimbursement of relocation expenses.
OPTION GRANTS
The following table shows, as to each executive officer of the Trust and
each executive officer of the Corporation named in the Summary Compensation
Tables above, certain information concerning the options granted to that officer
during the year ended December 31, 1997.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE
SECURITIES OPTIONS/ AT ASSUMED ANNUAL RATES OF
UNDERLYING SARS GRANTED STOCK PRICE APPRECIATION
OPTIONS/ TO EMPLOYEES EXERCISE FOR OPTION TERM*
SARS IN LAST PRICE ---------------------------
NAME GRANTED FISCAL YEAR ($/SH.) EXPIRATION DATE 5%($) 10%($)
---- ---------- ------------ -------- ------------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Barry S. Sternlicht.... 400,000 23.15 53.00 September 25, 2007 13,332,566 33,787,340
Ronald C. Brown........ 40,000 2.32 53.00 September 25, 2007 1,333,257 3,378,734
Steven R. Goldman...... 50,000 2.89 53.00 September 25, 2007 1,666,571 4,223,418
Theodore W. Darnall.... 40,000 2.32 53.00 September 25, 2007 1,333,257 3,378,734
Alan M. Schnaid........ 10,000 0.58 38.50 March 3, 2007 242,124 613,591
15,000 0.87 53.00 September 25, 2007 499,971 1,267,025
Gary M. Mendell........ 300,000 17.36 37.417 February 14, 2007 7,059,405 17,889,918
</TABLE>
- ---------------
* The dollar gains under these columns result from calculations assuming 5% and
10% growth rates as set by the Securities and Exchange Commission and are not
intended to forecast future price appreciation of the Paired Shares. The gains
reflect a future value based upon growth at these prescribed rates. The
Company did not use an alternative formula for a grant date valuation, an
approach that would state gains at present, and therefore lower, value. The
Company is not aware of any formula that will determine with reasonable
accuracy a present value based on future unknown or volatile factors.
It is important to note that options have value to recipients, including the
listed executives, only if the price of the Paired Shares advances beyond the
grant date price shown in the table during the effective option period.
The per Paired Share exercise price of each option listed in the table
above is equal to the fair market value of a Paired Share on the day that option
was granted. Each of the options listed in the table above (other than the
option granted to Mr. Mendell) originally was to become exercisable in three
equal annual installments commencing on the first anniversary of the option
grant date. In accordance with the change of control provisions of the LTIPs,
upon consummation of the ITT Merger, all of these options became immediately
exercisable for the full amount of Paired Shares subject thereto. The option
granted to Mr. Mendell originally became exercisable as to one-fifth of the
shares subject thereto on each of the second, third and fourth anniversaries of
the option grant date, and as to the balance of these shares on the fifth
anniversary of the grant date. Upon the termination of Mr. Mendell's employment
with the Corporation, the option became exercisable in full.
74
<PAGE> 76
OPTION EXERCISES AND HOLDINGS
The following table provides certain information with respect to the
options held as of December 31, 1997 by the executive officers of the Trust and
the executive officers of the Corporation named in the Summary Compensation
Tables above.
AGGREGATED OPTION/SAR EXERCISES IN 1997
AND DECEMBER 31, 1997 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FISCAL OPTIONS/SARS
VALUE YEAR-END(#) AT FISCAL YEAR-END($)(*)
SHARES ACQUIRED REALIZED --------------------------- ---------------------------
NAME ON EXERCISE(#)(1) ($)(*) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Barry S. Sternlicht..... 794,001 1,785,499 30,613,742 50,853,584
Gary M. Mendell......... 0 300,000 0 6,126,900
Ronald C. Brown......... 6,153 139,981 64,847 137,000 2,604,987 3,756,318
Steven R. Goldman....... 66,500 142,500 2,710,028 3,618,647
Eric A. Danziger........ 62,500 237,500 2,083,750 7,983,838
Theodore W. Darnall..... 25,000 165,000 893,918 4,525,660
Alan M. Schnaid......... 5,500 33,750 212,121 594,601
</TABLE>
- ---------------
(*) Value is calculated by subtracting the exercise price from the assumed fair
market value of the Paired Shares underlying the option at December 31, 1997
and multiplying the result by the number of shares for which the option is
"in the money." Fair market value was calculated based upon the average of
the high and low sales prices of the Paired Shares as reported by the NYSE
at December 31, 1997 ($57.84). There is no assurance that if and when any
such option is exercised, the option will have this value.
COMPENSATION OF TRUSTEES AND DIRECTORS
On the last day of March, July, September and December of each calendar
year, each Trustee and each Director then in office who is not an employee of
the Trust or the Corporation is awarded, under the Trust's LTIP or the
Corporation's LTIP, as applicable, and on a current or deferred basis at the
election of such Trustee or Director, that number of Paired Shares (rounded to
the nearest whole share) equal to one-quarter of the "Annual Fee" (as defined
below) divided by the fair market value of a Paired Share on the immediately
preceding December 31 (a "Fee Award"); provided, however, that the number of
Paired Shares issued in payment of such Annual Fee may be reduced, at the option
of the recipient, by up to one-half to the extent that such Trustee or Director
indicates in advance his or her election to receive cash (a "Cash Election") in
such amount in lieu of Paired Shares prior to such immediately preceding
December 31 or, with respect to any person who becomes a non-employee Trustee or
Director subsequent to that date, within 10 days of becoming such a Trustee or
Director. In addition, on or before each December 31 (or in the case of a person
who first becomes a Trustee or Director subsequent to December 31, within 10
days of becoming a Trustee or Director), a Trustee or Director may, by written
notice to the Trust or Corporation, elect to defer receipt of any or all of the
Paired Shares to be received as a Fee Award or the cash to be received pursuant
to a Cash Election. Effective January 1, 1998, the Annual Fee was increased from
$25,000 to $50,000; to the extent that any award to be made to a Trustee or
Director exceeds the maximum amount constituting a Fee Award under the
applicable LTIP, such award will take the form of a discretionary grant.
On June 30, 1997, each non-employee Trustee and Director received options
to purchase 4,500 Paired Shares at an exercise price of $42.8125 per Paired
Share, the fair market value of a Paired Share on that date. On June 30, 1998
and on June 30 of each subsequent year, each non-employee Trustee or Director
will also receive options to purchase 4,500 Paired Shares at an exercise price
per share equal to the fair market value of a Paired Share on the first business
day prior to the date of grant.
75
<PAGE> 77
In addition to the compensation described above, each non-employee Trustee
or Director receives a fee of $750 (or, in the case of telephonic meetings,
$500) for each meeting in which he participates and a fee of $500 ($1,000 per
meeting for committee chairmen) for each committee meeting in which he
participates. Mr. Jones also received an additional fee of $2,500 per year
(prorated) for his services as Chairman of the Board of Directors. All Trustees
and Directors are reimbursed for out-of-pocket expenses incurred in attending
meetings of the Board of Trustees or the Board of Directors.
EMPLOYMENT AND COMPENSATION AGREEMENTS WITH EXECUTIVE OFFICERS
The Trust
In February 1998, Barry S. Sternlicht and the Trust entered into an amended
and restated employment agreement pursuant to which Mr. Sternlicht has agreed to
continue to serve as the Chairman and Chief Executive Officer of the Trust until
at least December 31, 1999. The amended and restated employment agreement
provides that Mr. Sternlicht will receive a minimum annual base salary of
$1,000,000 and a guaranteed minimum bonus for 1998 of $1,325,000. In addition,
the Trust will purchase for Mr. Sternlicht a $10,000,000 life insurance policy
on his life, and will pay to Mr. Sternlicht cash in an amount equal to the
amount of any excise tax imposed on him as a result of the accelerated vesting
of certain outstanding stock options. Mr. Sternlicht also will receive a cash
payment in respect of taxes payable by Mr. Sternlicht as a result of the vesting
of the restricted stock award granted in August 1996 to Starwood Capital under
the Trust's LTIP. In connection with such modifications, Mr. Sternlicht waived
the accelerated vesting (as a result of the ITT Merger or the Westin Merger) of
all awards to him under the Trust's LTIP that otherwise would have vested in
1998; such awards accordingly will vest in accordance with their terms, as
modified.
Mr. Sternlicht's employment is terminable by the Trust with or without
cause. In the event Mr. Sternlicht's employment by the Trust is terminated by
the Trust other than for "cause" or by Mr. Sternlicht for "good reason" (each as
defined), the Trust has agreed to pay to Mr. Sternlicht as a severance benefit
an amount equal to two times the sum of his annual base salary then in effect
plus the average of his bonus for the preceding two years. In addition, all then
unvested awards made to Mr. Sternlicht under the Trust's LTIP will vest in full,
subject to certain exceptions.
In connection with the execution and delivery of the amended and restated
employment agreement, the Trust granted to Mr. Sternlicht an option under the
Trust's LTIP to purchase 2,500,000 Paired Shares, exercisable at $54.69 per
Paired Share (the market value of a Paired Share on the date of grant); this
option vests in three equal annual installments, subject generally to Mr.
Sternlicht's continued employment by the Trust. Until June 30, 1998, and subject
to certain limitations, Mr. Sternlicht may transfer the right to purchase an
aggregate of up to 500,000 of the Paired Shares subject to this option.
In connection with the HEI Acquisition, Gary M. Mendell and the Trust
entered into an employment agreement dated as of January 15, 1997, pursuant to
which Mr. Mendell was employed as the President of the Trust and elected as a
member of the Board of Trustees. Pursuant to the employment agreement, Mr.
Mendell received a minimum base salary of $365,000 and annual incentive
compensation; in addition, he was granted (i) an option to purchase 300,000
Paired Shares exercisable at $37.417 per Paired Share (the market value of a
Paired Share on the date of grant), which option vests in five equal annual
increments beginning on the second anniversary of the grant date, and (ii) a
performance award under the Trust's LTIP entitling him to receive all
distributions paid on the Paired Shares if certain performance criteria are
satisfied over the five-year period ended December 5, 2001. Mr. Mendell's
employment by the Trust was terminable by either party with or without cause,
and was terminated by Mr. Mendell in March 1998. As a result of such
termination, Mr. Mendell is entitled to a payment equal to the sum of his most
recent annual base salary plus $255,500 and the immediate vesting of the option
and the related performance award.
As of March 25, 1998, Steven R. Goldman and the Trust entered into a new
employment agreement in connection with Mr. Goldman's assuming the new position
of Executive Vice President, Acquisitions and Development, for the Trust. Under
the new agreement, Mr. Goldman's annual salary will be $325,000, with a bonus to
be determined in accordance with a new plan that is expected to be considered by
the Board of Trustees, and an additional retention bonus of one year's salary
(at the current base salary level) conditioned upon Mr. Goldman's staying with
the Trust at least one year after the closing of the ITT Merger.
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<PAGE> 78
Mr. Goldman will also receive, conditioned upon Mr. Goldman's staying with the
Trust for the same one-year period, a cash payment in respect of taxes payable
by Mr. Goldman as a result of the vesting of the restricted stock award granted
to Mr. Goldman in August 1996. The Trust also undertakes to recommend to the
Option Committee of the Board of Trustees that Mr. Goldman be granted an option
under the Trust's LTIP at an exercise price equal to the fair market value of
Paired Shares on the date of grant; the option will be for such number of Paired
Shares as is determined by the Option Committee and will vest over a three-year
period. In addition, the new agreement calls for the Trust to pay (i) Mr.
Goldman's reasonable out-of-pocket expenses in connection with his relocation to
the Fairfield/Westchester county area, (ii) relocation costs relating to a
third-party purchase of Mr. Goldman's home in Phoenix to facilitate an expedient
relocation and (iii) mortgage duplication expenses for a period not to exceed
six months. The Trust also has agreed to make a five-year, non-interest-bearing
loan to Mr. Goldman in the amount of $400,000, to be secured by a second
mortgage on Mr. Goldman's new home in the Fairfield/Westchester county area. Mr.
Goldman's employment is terminable by the Trust or Mr. Goldman with or without
cause. In the event his employment is terminated by the Trust without cause or
by Mr. Goldman due to breach by the Trust, Mr. Goldman will be entitled to
severance benefits of one year's base salary and the accelerated vesting of all
outstanding options.
The Corporation
As of March 19, 1998, Juergen Bartels and the Corporation entered into an
employment agreement in connection with Mr. Bartels's assuming the new position
of Chief Executive Officer of the Hotel Group for the Corporation. Under the
agreement, Mr. Bartels's annual salary will be $525,000, with a bonus to be
determined in accordance with a new bonus plan expected to be considered by the
Board of Directors. The Corporation also undertakes to recommend to the Option
Committee of the Board of Directors that Mr. Bartels be granted an option under
the Corporation's LTIP at an exercise price equal to the fair market value of a
Paired Share on the date of grant; the option will be for such number of Paired
Shares as is determined by the Option Committee and will vest over a three-year
period. In addition, the employment agreement calls for the Corporation to pay
(i) Mr. Bartels's reasonable out-of-pocket expenses in connection with his
relocation to the Fairfield/Westchester county area and (ii) relocation costs
relating to a third-party purchase of Mr. Bartels's home in Seattle to
facilitate an expedient relocation. Mr. Bartels's employment is terminable by
the Corporation or Mr. Bartels with or without cause. In the event his
employment is terminated by the Corporation without cause or by Mr. Bartels due
to breach by the Corporation, Mr. Bartels will be entitled to severance benefits
of one year's base salary and the accelerated vesting of all outstanding
options.
Eric A. Danziger and the Corporation entered into an employment agreement
dated as of June 27, 1996, pursuant to which Mr. Danziger was employed as
President and Chief Executive Officer of the Corporation at an annual salary of
$365,000 and was guaranteed a minimum bonus of $150,000 for 1996. Mr. Danziger
also received an option to purchase up to 187,500 Paired Shares at a price of
$24.50 per Paired Share (the fair market value of the Paired Shares on the date
of grant) and a restricted stock award of 100,222 Paired Shares. (See "The
Corporation -- Summary Compensation Table" above.) The Corporation also
reimbursed Mr. Danziger for expenses incurred in connection with moving his
residence from Dallas, Texas to Phoenix, Arizona, and provided Mr. Danziger with
a one-year non-interest bearing loan for $150,000 secured by a second mortgage
on his new residence in Phoenix. This loan was paid in full by Mr. Danziger in
February 1998. As a result of the termination of Mr. Danziger's employment in
February 1998, Mr. Danziger is entitled to severance benefits of one year's base
salary and the immediate vesting of all outstanding options and restricted stock
awards.
As of March 25, 1998, Theodore W. Darnall and the Corporation entered into
a new employment agreement in connection with Mr. Darnall's assuming the new
position of Executive Vice President of Hotel Operations for the Corporation.
Under the new agreement, Mr. Darnall's annual salary will be $350,000, with a
bonus to be determined in accordance with the anticipated new bonus plan, and an
additional retention bonus of one year's salary (at the current base salary
level) conditioned upon Mr. Darnall's staying with the Corporation at least one
year after the closing of the ITT Merger. Mr. Darnall will also receive,
conditioned upon Mr. Darnall's staying with the Corporation for the same
one-year period, a cash payment in respect of taxes payable by Mr. Darnall as a
result of the vesting of the restricted stock award originally granted to
77
<PAGE> 79
Mr. Darnall in August 1996. The Corporation also undertakes to recommend to the
Option Committee of the Board of Directors that Mr. Darnall be granted an option
under the Corporation's LTIP at an exercise price equal to the fair market value
of a Paired Share on the date of grant; the option will be for such number of
Paired Shares as is determined by the Option Committee and will vest over a
three-year period. In addition, the new agreement calls for the Corporation to
pay (i) Mr. Darnall's reasonable out-of-pocket expenses in connection with his
relocation to the Fairfield/Westchester county area and (ii) relocation costs in
connection with a third-party purchase of Mr. Darnall's home in Phoenix to
facilitate an expedient relocation. The Corporation also has agreed to make a
five-year, non-interest-bearing loan to Mr. Darnall in the amount of $600,000,
to be secured by a second mortgage on Mr. Darnall's new home in the
Fairfield/Westchester county area. Mr. Darnall's employment is terminable by the
Corporation or Mr. Darnall with or without cause. In the event his employment is
terminated by the Corporation without cause or by Mr. Darnall due to breach by
the Corporation, Mr. Darnall will be entitled to severance benefits of one
year's base salary and the accelerated vesting of all outstanding options.
In March 1998, Ronald C. Brown resigned as an officer of the Trust and
became an executive officer of the Corporation; see "Directors and Executive
Officers of the Corporation" included in Item 10 of this Joint Annual Report. As
of March 10, 1998, Ronald C. Brown and the Corporation entered into a new
employment agreement in connection with Mr. Brown's assuming the new position of
Executive Vice President and Chief Financial Officer for the Corporation. Under
the new agreement, Mr. Brown's annual salary will be $325,000, with a bonus to
be determined in accordance with the anticipated new bonus plan. Mr. Brown also
will receive, conditioned upon Mr. Brown's staying with the Corporation at least
one year after the closing of the ITT Merger, a cash payment in respect of taxes
payable by Mr. Brown as a result of the vesting of the restricted stock award
originally granted to Mr. Brown in August 1996. The Corporation also undertakes
to recommend to the Options Committee of the Board of Directors that Mr. Brown
be granted an option under the Corporation's LTIP at an exercise price equal to
the fair market value of a Paired Share on the date of grant; the option will be
for such number of Paired Shares as is determined by the Option Committee and
will vest over a three-year period. Mr. Brown's employment is terminable by the
Corporation or Mr. Brown with or without cause. In the event his employment is
terminated by the Corporation without cause or by Mr. Brown due to breach by the
Corporation, Mr. Brown will be entitled to severance benefits of one year's base
salary and the accelerated vesting of all outstanding options.
As of March 2, 1998, Susan R. Bolger and the Corporation entered into a new
employment agreement in connection with Ms. Bolger's assuming the new position
of Executive Vice President of Human Resources for the Corporation. Under the
new agreement, Ms. Bolger's annual salary will be $300,000, with a bonus to be
determined in accordance with the anticipated new bonus plan. For 1998 Ms.
Bolger is guaranteed a minimum bonus equal to 50% of her base salary prorated
for the calendar year, an additional bonus of $75,000 in respect of calendar
year 1997, and an additional retention bonus of one year's salary (at the
current base salary level) conditioned upon Ms. Bolger's staying with the
Corporation at least one year after the closing of the ITT Merger. Ms. Bolger
will also receive, conditioned upon Ms. Bolger's staying with the Corporation
for the same one-year period, a cash payment in respect of taxes payable by Ms.
Bolger as a result of the vesting of the restricted stock award granted to Ms.
Bolger in August 1996. The Corporation also undertakes to recommend to the
Option Committee of the Board of Directors that Ms. Bolger be granted an option
under the Corporation's LTIP at an exercise price equal to the fair market value
of a Paired Share on the date of grant; the option will be for such number of
Paired Shares as is determined by the Option Committee and will vest over a
three-year period. In addition, the new agreement calls for the Corporation to
pay (i) Ms. Bolger's reasonable out-of-pocket expenses in connection with his
relocation to the Fairfield/Westchester county area, (ii) relocation costs in
connection with a third-party purchase of Ms. Bolger's home in Phoenix to
facilitate an expedient relocation and (iii) mortgage duplication expenses for a
period not to exceed six months. The Corporation also has agreed to make a
five-year, non-interest-bearing loan to Ms. Bolger in the amount of $400,000, to
be secured by a second mortgage on Ms. Bolger's new home in the
Fairfield/Westchester county area. Ms. Bolger's employment is terminable by the
Corporation or Ms. Bolger with or without cause. In the event her employment is
terminated by the Corporation without cause or by Ms. Bolger due to breach by
the Corporation, Ms. Bolger will be entitled to severance benefits of one year's
base salary and the accelerated vesting of all outstanding options.
78
<PAGE> 80
COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
During early 1997, the Compensation Committee of the Board of Trustees (the
"Trust Compensation Committee") was comprised of Messrs. Sternlicht, Grose and
William E. Simms. Mr. Simms resigned from the Board of Trustees in June 1997.
Based on informal discussions, the Trust Compensation Committee made
recommendations to the Board of Trustees regarding the compensation of the
Trust's executive officers other than Mr. Sternlicht. The Option Committee of
the Board of Trustees (whose members during 1997 were Messrs. Duncan, Quazzo and
(from November 1997) Chapus) made recommendations during 1997 to such Board
regarding Mr. Sternlicht's compensation. Based in part on the recommendations of
the Trust Compensation Committee and, as to Mr. Sternlicht, the Trust Option
Committee, the Board of Trustees made decisions with respect to the compensation
of the Trust's executive officers. Messrs. Sternlicht and Goldman, who are
executive officers of the Trust and members of the Board of Trustees, did not
participate at meeting of the Trustees in discussions or votes with respect to
their own compensation.
During most of 1997, the Compensation Committee of the Board of Directors
(the "Corporation Compensation Committee") was made up of Messrs. Sternlicht,
Jones and Chapus. Mr. Chapus resigned from the Board of Directors and became a
Trustee of the Trust in November 1997. The Corporation Compensation Committee
met informally during 1997 to discuss the compensation of the Corporation's
executive officers. Based in part on the recommendations of the Corporation
Compensation Committee, the Board of Directors made decisions with respect to
the compensation of the Corporation's executive officers. Mr. Danziger did not
participate at meetings of the Directors in discussions or votes with respect to
his own compensation.
Mr. Sternlicht, the Chairman and Chief Executive Officer and a Trustee of
the Trust and the Chairman of the Board of Directors of the Corporation, serves
as a director of U.S. Franchise Systems, Inc. Michael A. Leven, a Director of
the Corporation, serves as Chairman of the Board and Chief Executive Officer of
U.S. Franchise Systems, Inc.
Mr. Sternlicht controls and has been the President and Chief Executive
Officer of Starwood Capital since its formation. Mr. Stern is an affiliate of a
limited partner of Starwood Capital. For information with respect to certain
transactions involving the Company and Starwood Capital, see "Starwood Capital"
included in Item 13 of this Joint Annual Report, which information is
incorporated in this item by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
CERTAIN BENEFICIAL OWNERS
To the knowledge of the Trust and the Corporation, as of March 27, 1998, no
person owned beneficially 5% or more of the Paired Shares, except as follows:
<TABLE>
<CAPTION>
AMOUNT PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS(1)
------------------------------------ ------------------ ----------
<S> <C> <C>
Starwood Capital Group, L.L.C.,
its affiliated entities and Barry S. Sternlicht........... 10,223,750(2) 5.3%(2)
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
FMR Corp.................................................... 6,589,082(3) 3.6%(3)
82 Devonshire Street
Boston, MA 02109
</TABLE>
- ---------------
(1) Based on the number of Paired Shares outstanding on March 27, 1998.
(2) Based on information in Amendment No. 2 to Schedule 13D dated December 31,
1996 filed by Starwood Capital Group, L.L.C., Barry S. Sternlicht, BSS
Capital Partners, L.P., Sternlicht Holdings II, Inc., Harveywood Hotel
Investors, L.P., Starwood Hotel Investors II-L.P., Starwood Opportunity Fund
II, L.P. and Firebird Consolidated Partners, L.P. (collectively, the
"Starwood Partners"), and additional information provided to the Company,
Mr. Sternlicht may be deemed to beneficially own, directly or
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<PAGE> 81
through entities controlled by him, 467,069 Paired Shares and may be deemed
to have either sole or shared power to vote and dispose of such Paired
Shares. Mr. Sternlicht may also be deemed to beneficially own 1,763,167
Paired Shares subject to presently exercisable options. Mr. Sternlicht
holds, directly or through trusts created by him for the benefit of members
of his family, Units that are exchangeable for an aggregate of 508,120
Paired Shares. Starwood Partners may be deemed to hold shares of Class A EPS
and shares of Class B EPS that are exchangeable for an aggregate of
4,014,809 Paired Shares, and Units that are exchangeable for an aggregate of
3,470,585 Paired Shares. The amount beneficially owned and the percent of
class calculated assumes that Starwood Capital Group, its affiliated
entities and Mr. Sternlicht exchange Units for Paired Shares to the maximum
extent permitted within the Ownership Limit Provision.
(3) Based on information contained in Amendment No. 2 to Schedule 13G dated
February 14, 1998, filed by FMR Corp. and certain affiliates, 5,962,833
Paired Shares are held by Fidelity Management & Research Company, a wholly
owned subsidiary of FMR Corp. ("FMRC") and 626,249 Paired Shares are held by
Fidelity Management Trust Company, a wholly owned subsidiary of FMR Corp.
("FMTC"). FMR Corp. has sole voting power with respect to 626,249 Paired
Shares and dispositive power with respect to 6,589,082 Paired Shares.
The amount beneficially owned and the percent of class shown do not include
11,159,400 ITT Shares held by FMRC and 363,622 ITT Shares held by FMTC (as
reported in Amendment No. 3 to Schedule 13G dated February 14, 1998, filed
with respect to ITT Corporation), constituting approximately 9.8% of the ITT
Shares outstanding on February 23, 1998. Such Amendment No. 3 also reported
that FMR Corp. had sole voting power with respect to 287,922 ITT Shares and
dispositive power with respect to 11,523,022 ITT Shares. The Company
believes, based upon the foregoing report, that not less than 10,673,476
Paired Shares were issued to FMR Corp. in connection with the ITT Merger.
Based on additional information provided to the Company, all Paired Shares
reported as held by, or believed by the Company to have been issued to, FMR
and its affiliates are held by various separate entities no one of which,
directly or by attribution, holds in excess of 8.0% of the outstanding
Paired Shares.
TRUSTEES AND EXECUTIVE OFFICERS OF THE TRUST
The following table sets forth the beneficial ownership of Paired Shares as
of March 27, 1998, by each Trustee and each executive officer of the Trust named
in the Summary Compensation Table included in Item 11 hereof who owns Paired
Shares and by all Trustees and executive officers of the Trust as a group.
Except as otherwise provided below, each beneficial owner has sole voting and
investment power with respect to all Paired Shares beneficially owned.
<TABLE>
<CAPTION>
AMOUNT PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS(1)
------------------------ ------------------ ----------
<S> <C> <C>
Ronald C. Brown............................................. 121,806(2) (3)
Jean-Marc Chapus............................................ 24,680(4) (3)
Bruce W. Duncan............................................. 37,999(5) (3)
Steven R. Goldman........................................... 222,116(6) (3)
Madison F. Grose............................................ 214,174(7) (3)
Gary M. Mendell............................................. 935,612(8) (3)
George J. Mitchell.......................................... 2,910(9) (3)
Roger S. Pratt.............................................. 4,534,187(10) 2.4%
Stephen R. Quazzo........................................... 29,627(11) (3)
Stuart M. Rothenberg........................................ 4,394,371(12) 2.3%
Barry S. Sternlicht......................................... 10,223,750(13) 5.3%
All Trustees and officers as a group........................ 20,741,232(14) 10.3%
</TABLE>
- ---------------
(1) Based on the number of Paired Shares outstanding on March 27, 1998,
including any exercise of options to purchase Paired Shares or any exchange
of Units for Paired Shares.
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<PAGE> 82
(2) Includes 85,500 Paired Shares subject to presently exercisable options.
(3) Less than 1%.
(4) Includes 22,500 Paired Shares subject to presently exercisable options.
(5) Includes 22,500 Paired Shares subject to presently exercisable options.
(6) Includes 159,000 Paired Shares subject to presently exercisable options and
Units that are exchangeable for 22,616 Paired Shares.
(7) Includes 120,000 Paired Shares subject to presently exercisable options,
EPS that are exchangeable for an aggregate of 3,223 Paired Shares, and
Units that are exchangeable for an aggregate of 43,299 Paired Shares. Also
includes shares of EPS that are exchangeable for an aggregate of 25,990
Paired Shares and Units that are exchangeable for an aggregate of 2,382
Paired Shares, all owned by Mr. Grose's wife.
(8) Includes 300,000 Paired Shares subject to presently exercisable options and
Units that are exchangeable for an aggregate of 599,112 Paired Shares. Also
includes Units owned by a limited partnership of which Mr. Mendell is
general partner and exchangeable for 36,500 Paired Shares.
(9) Includes 2,910 Paired Shares subject to presently exercisable options.
(10) Includes 4,500 Paired Shares subject to presently exercisable options. Also
includes 2,775,680 Paired Shares and Units that are exchangeable for an
aggregate of 1,754,007 Paired Shares, all of which are owned by Prudential
on behalf of Prudential Property Investment Separate Account II ("PRISA
II"); by virtue of his investment control over PRISA II, Mr. Pratt may be
deemed to have an indirect pecuniary interest in these Units and Paired
Shares. Does not include 508,720 Paired Shares held by Prudential on behalf
of other accounts.
(11) Includes 22,500 Paired Shares subject to presently exercisable options,
6,430 Paired Shares owned by a trust of which Mr. Quazzo is settlor and
over which he shares investment control, and 397 Paired Shares owned by a
trust of which Mr. Quazzo's wife is settlor and over which she exercises
some investment control.
(12) Includes 2,219 Paired Shares subject to presently exercisable options. Also
includes shares of EPS that are exchangeable for an aggregate of 4,188,035
Paired Shares and Units that are exchangeable for an aggregate of 194,861
Paired Shares, all of which may be deemed to be owned by Goldman, Sachs and
The Goldman Sachs Group, L.P. through certain investment partnerships; Mr.
Rothenberg is a managing director of Goldman, Sachs & Co. and may be deemed
to have an indirect pecuniary interest in such securities. Mr. Rothenberg
has disclaimed beneficial ownership of these securities except to the
extent of his pecuniary interest therein.
(13) See Note (2) under "Certain Beneficial Owners" above. Includes (i) 467,069
Paired Shares that may be deemed to be beneficially owned by Mr.
Sternlicht, either directly or through entities controlled by him; (ii)
1,763,167 Paired Shares subject to presently exercisable options; (iii)
shares of EPS that may be deemed to be beneficially owned by Mr.
Sternlicht, either directly or through entities controlled by him, that are
exchangeable for an aggregate of 4,014,809 Paired Shares; and (iv) Units
that may be deemed to be beneficially owned by Mr. Sternlicht, either
directly or through entities controlled by him, that are exchangeable for
an aggregate of 3,978,705 Paired Shares. Mr. Sternlicht has disclaimed
beneficial ownership of all such Paired Shares, shares of EPS and Units
except to the extent of his actual pecuniary interest therein. By virtue of
his service as both a Trustee of the Trust and a Director of the
Corporation, Mr. Sternlicht's options, Paired Shares, shares of EPS and
Units are listed and totaled both here and in the chart below.
(14) Includes 2,529,796 Paired Shares that may be acquired upon the exercise of
presently exercisable options, 8,232,057 Paired Shares issuable upon the
exchange of shares of EPS and 6,631,482 Paired Shares issuable upon the
exchange of Units.
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<PAGE> 83
DIRECTORS AND EXECUTIVE OFFICERS OF THE CORPORATION
The following table sets forth the beneficial ownership of Paired Shares as
of March 27, 1998, by each Director and each executive officer of the
Corporation named in the Summary Compensation Table included in Item 11 hereof
who owns Paired Shares and by all Directors and executive officers of the
Corporation as a group. Except as otherwise provided below, each beneficial
owner has sole voting and investment power with respect to all Paired Shares
beneficially owned.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS(1)
------------------------ ------------------ ----------
<S> <C> <C>
Juergen Bartels............................................. 815,269(2) (3)
Eric A. Danziger............................................ 400,222(4) (3)
Theodore W. Darnall......................................... 196,783(5) (3)
Jonathan D. Eilian.......................................... 123,680(6) (3)
Bruce M. Ford............................................... 24,332(7) (3)
Graeme W. Henderson......................................... 25,072(8) (3)
Earle F. Jones.............................................. 32,178(9) (3)
Michael A. Leven............................................ 23,180(10) (3)
Alan M. Schnaid............................................. 24,250(11) (3)
Daniel H. Stern............................................. 23,180(12) (3)
Barry S. Sternlicht......................................... 10,223,750(13) 5.3%
Barry S. Volpert............................................ 4,394,371(14) 2.3%
Daniel W. Yih............................................... 25,611(15) (3)
All Directors and officers as a group....................... 15,931,656(16) 8.0%
</TABLE>
- ---------------
(1) Based on the number of Paired Shares outstanding on March 27, 1998,
including any exercise of options to purchase Paired Shares or any exchange
of Units for Paired Shares.
(2) Includes shares of EPS that are exchangeable for an aggregate of 815,269
Paired Shares.
(3) Less than 1%.
(4) Includes 300,000 Paired Shares subject to presently exercisable options.
(5) Includes 150,000 Paired Shares subject to presently exercisable options.
(6) Includes 120,000 Paired Shares subject to presently exercisable options.
(7) Includes 22,500 Paired Shares subject to presently exercisable options and
85 Paired Shares owned by Mr. Ford's wife.
(8) Includes 22,500 Paired Shares subject to presently exercisable options.
(9) Includes 13,500 Paired Shares subject to presently exercisable options.
(10) Includes 22,500 Paired Shares subject to presently exercisable options.
(11) Includes 24,250 Paired Shares subject to presently exercisable options.
(12) Includes 22,500 Paired Shares subject to presently exercisable options.
(13) See Note (2) under "Certain Beneficial Owners" above. Includes (i) 467,069
Paired Shares that may be deemed to be beneficially owned by Mr.
Sternlicht, either directly or through entities controlled by him; (ii)
1,763,167 Paired Shares subject to presently exercisable options; (iii)
shares of EPS that may be deemed to be beneficially owned by Mr.
Sternlicht, either directly or through entities controlled by him, that are
exchangeable for an aggregate of 4,014,809 Paired Shares; and (iv) Units
that may be deemed to be beneficially owned by Mr. Sternlicht, either
directly or through entities controlled by him, that are exchangeable for
an aggregate of 3,978,705 Paired Shares. Mr. Sternlicht has disclaimed
beneficial ownership of all such Paired Shares, shares of EPS and Units
except to the extent of his actual pecuniary interest therein. By virtue of
his service as both a Director of the Corporation and a Trustee of the
Trust, Mr. Sternlicht's options, Paired Shares, shares of EPS and Units are
listed and totaled both here and above.
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<PAGE> 84
(14) Includes 2,219 Paired Shares subject to presently exercisable options. Also
includes shares of EPS that are exchangeable for an aggregate of 4,188,035
Paired Shares and Units that are exchangeable for an aggregate of 194,861
Paired Shares, all of which may be deemed to be owned by Goldman, Sachs &
Co. and The Goldman Sachs Group, L.P. through certain investment
partnerships; Mr. Volpert is a managing director of Goldman, Sachs & Co.
and may be deemed to have an indirect pecuniary interest in such
securities. Mr. Volpert has disclaimed beneficial ownership of these
securities except to the extent of his pecuniary interest therein.
(15) Includes 22,500 Paired Shares subject to presently exercisable options.
(16) Includes 2,185,636 Paired Shares that may be acquired upon the exercise of
presently exercisable options, 9,018,113 Paired Shares issuable upon the
exchange of shares of EPS and 4,173,566 Paired Shares issuable upon the
exchange of Units.
COMPLIANCE WITH THE REPORTING REQUIREMENTS OF SECTION 16(A)
Section 16(a) of the Exchange Act requires the Trustees, Directors and
executive officers of the Company, and persons who own more than 10 percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of Paired Shares and other equity securities of the Company. Trustees,
Directors, officers and greater than 10 percent shareholders are required to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1997, all
Section 16(a) filing requirements applicable to its Trustees, Directors,
officers and greater than 10 percent beneficial owners were complied with for
the most recent fiscal year and prior fiscal years, with the exception that
through inadvertence, Mr. Sternlicht in 1994 did not include in his Form 3 an
indirect pecuniary interest in Paired Shares held by a partnership that he may
be deemed to indirectly control, and omitted in 1995 to file two Forms 4
reporting the indirect pecuniary interest in Units exchangeable for Paired
Shares acquired in exchange for assets contributed to the Partnerships in the
Reorganization by limited partnerships that Mr. Sternlicht may be deemed to
indirectly control. A Form 5 reporting these holdings and transactions was
promptly filed by Mr. Sternlicht after the oversight was discovered. The Company
believes that all such holdings and transactions were properly and timely
reported by Mr. Sternlicht on Schedule 13D and amendments thereto, and that all
such holdings and transactions have been properly and timely disclosed in the
Company's proxy statements and annual reports.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Starwood Capital
Barry Sternlicht, the Chairman and Chief Executive Officer and a Trustee of
the Trust and the Chairman of the Board of Directors of the Corporation,
controls and has been the President and Chief Executive Officer of Starwood
Capital since its formation. In addition, Madison Grose, a Trustee of the Trust,
is the General Counsel of Starwood Capital, and Messrs. Grose and Jonathan
Eilian, a Director of the Corporation, are Managing Directors of, and hold
indirect interests in, Starwood Capital. As of March 27, 1998, Starwood Capital
and its affiliates and Mr. Sternlicht beneficially owned 5.2% of the Paired
Shares then outstanding on a fully diluted basis. See "Security Ownership of
Certain Beneficial Owners and Management -- Certain Beneficial Owners" in Item
12 of this Joint Annual Report. Daniel Stern, a Director of the Corporation,
also is an affiliate of a limited partner of Starwood Capital.
Starwood Capital Reimbursement Agreement. Starwood Capital and the Company
have agreed that subject to approval by the independent Trustees or Directors,
as appropriate, the Company will reimburse Starwood Capital for its
out-of-pocket expenses and internal costs (including allocation of overhead) for
services provided to the Company, other than internal costs of Starwood Capital
for services of senior management of Starwood Capital or (effective August 12,
1997) services of any employee of Starwood
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Capital. Starwood Capital's engagement to act as financial advisor to the
Company in connection with the ITT Merger was not subject to this reimbursement
limitation.
Starwood Capital Noncompete. In connection with the Reorganization,
Starwood Capital agreed (the "Starwood Capital Noncompete") that it would not
compete within the United States directly or indirectly with the Realty
Partnership or the Operating Partnership and would present to the Partnerships
all acquisitions of (i) fee or ground interests or other equity interests in
hotels in the United States and (ii) debt interests in hotels in the United
States where it is anticipated that the equity will be acquired by the debt
holder within one year from the acquisition of such debt. During the term of the
Starwood Noncompete, Starwood Capital is not to acquire any such interest. The
term of the Starwood Noncompete is until the later of July 1998 or the time at
which no officer, director, general partner or employee of Starwood Capital is
on either the Board of Trustees or the Board of Directors (subject to exception
for certain reorganizations, mergers or other combination transactions with
unaffiliated parties). During 1997, the Company granted a limited number of
waivers of the Starwood Noncompete. On February 20, 1997, the Board of Trustees
and the Board of Directors granted a waiver of the Starwood Noncompete to an
affiliate of Starwood Capital to permit such affiliate to purchase a fixed
stream of lease payments and residuals in a portfolio of hotels formerly leased
to and operated by Red Lion Hotels. On May 19, 1997 the Board of Trustees and
the Board of Directors granted a waiver of the Starwood Noncompete to Starwood
Capital to permit an affiliate of Starwood Capital to invest in certain
time-share properties in Mexico. On July 25, 1997 the Board of Trustees and the
Board of Directors granted Starwood Capital a waiver of the Starwood Noncompete
to permit an affiliate of Starwood Capital to sell its interest in the Davidson
Hotel Properties 15-hotel portfolio, taking into account the fact that such a
sale would result in the termination of any option the Company might have to
purchase such portfolio. On September 8, 1997 the Board of Trustees and the
Board of Directors waived the Starwood Noncompete to the extent necessary to
permit an affiliate of Starwood Capital to purchase and immediately resell the
Radisson Golden Triangle Hotel in Raleigh, North Carolina. On September 25,
1997, the Board of Trustees and the Board of Directors approved a waiver of the
Starwood Noncompete with respect to the proposed purchase of the Hillsborough
Days Inn by an affiliate of Starwood Capital.
As described below, Starwood Capital owned an interest in Westin. Prior to
the Westin acquisition, the Trust and the Corporation entered into an agreement
with Westin pursuant to which Westin agreed that during the period in which an
officer, director, general partner or employee of Starwood Capital is on either
the Board of Trustees or the Board of Directors, and Starwood Capital
co-controlled Westin, Westin would not acquire or seek to acquire hotel equity
interests in the United States, other than certain specified acquisitions,
including, without limitation, minority equity investments made in connection
with Westin's acquisition of a management contract. The Trust and the
Corporation each waived the foregoing restriction to the extent applicable with
respect to a hotel property in the U.S. Virgin Islands. The Trust and the
Corporation also agreed that under certain circumstances, if Westin were
prohibited from consummating an opportunity that was not being independently
pursued by the Trust and the Corporation prior to such prohibition, the Trust
and the Corporation would not pursue such opportunity for 270 days after such
prohibition. Upon the consummation of the Westin Merger, the agreements with
Westin described in this paragraph were terminated.
Acquisition of Westin. Prior to the Westin Merger, Starwood Capital and
certain of its affiliates and certain Trustees, Directors and executive officers
had interests in Westin as follows:
(i) WHWE held an approximately 50% voting (an approximately 35.16%
interest in profits) Class A membership interests in W&S LLC, which owned
in excess of 99% of the outstanding equity securities of each of Westin
Worldwide, Seattle, Lauderdale, Atlanta, St. John and Denver (the "Westin
Subsidiaries"). The majority of the interests in WHWE were held by
investment funds under the indirect control of The Goldman Sachs Group,
L.P. The Goldman Sachs. Group, L.P. nay be deemed to have been the
beneficial owners of the shares held by WHWE and Messrs. Volpert and
Rothenberg may be deemed to have been the beneficial owners of the shares
of Westin Worldwide and a similar proportion number of shares of the other
Westin Subsidiaries beneficially owned by WHWE or The Goldman Sachs Group,
L.P. through partnership in or employment by Goldman Sachs or one or more
of its affiliates; however, such beneficial ownership was disclaimed.
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(ii) Starwood Capital, through certain of its affiliates, was the
general partner of Woodstar, which held an approximately 50% voting
interest (an approximately 35.23% interest in profits) in WHWE. Starwood
Capital and, therefore, Mr. Sternlicht, may be deemed to have been the
beneficial owner of the shares held by Woodstar Investor Partnership, a
privately held real property investment partnership.
(iii) Mr. Stern was a director of Westin immediately prior to the
Westin Merger, and Mr. Sternlicht had been a director of Westin prior to
September 1997.
(iv) Mr. Bartels held a 2.69% Class A interest in the profits of the
LLC and accordingly may be deemed to have been the beneficial owner of
2.69% of Westin Worldwide and a similar proportional number of shares of
the other Westin Subsidiaries; however, Mr. Bartels disclaimed such
beneficial ownership.
(v) Messrs. Sternlicht, Grose and Eilian were investors in, and Mr.
Stern was an affiliate of an investor in, Marswood, a partner in Woodstar.
In connection with the Westin Merger, all of the outstanding shares of
Westin Worldwide were canceled and the Members received their proportionate
shares (which approximated their respective profit interests in the LLC) of the
shares of Class A EPS and the shares of Class B EPS that were issued in the
Westin merger. In connection with the Subsidiary Contributions, the Members
received their proportionate shares (which approximated their profit interests
in the LLC ) of the Class A RP Units and the Class B OP Units that were issued
in connection with the Subsidiary Contributions.
Other Westin Relationships. Starwood Capital and its affiliates hold a 37%
interest in a golf course management company that currently manages one golf
course that is associated with a Westin hotel and a 20% interest in a Mexican
company that operates timeshare resorts adjacent to the three Westin hotels that
make up the Westin Regina Portfolio. Individuals affiliated with Starwood
Capital, including individuals who are Trustees and Directors, and certain other
affiliates of Starwood Capital hold a 75% interest in the company that operates
the Westin Innisbrook Resort and the Tamarron Hilton.
Acquisition of ITT. Starwood Hotels engaged Starwood Capital to act as
financial advisor to the Company in connection with the transactions
contemplated by the ITT Merger Agreement. Starwood Capital received a fee of
$17.5 million (of which $10.5 million was paid in cash and $7 million was paid
in Paired Shares) plus a tax gross-up payment of $5 million upon the closing of
the ITT Merger as full consideration for services rendered in connection with
the ITT Merger and related dispositions. Pursuant to its engagement by Starwood
Hotels, the principals of Starwood Capital led the structuring and negotiations
of the ITT Merger, conducted and coordinated the due diligence investigation
(including conducting management interviews, reviewing and analyzing financial
data and visiting properties), advised and procured financing, oversaw the
implementation of the public and investor relations and political lobbying
campaigns, coordinated the receipt of gaming regulatory approvals and
coordinated legal and tax advice. In addition, the principals of Starwood
Capital have led and continue to lead negotiations for the disposition of
non-strategic ITT assets, including the disposition of ITT World Directories,
and are advising Starwood Hotels with respect to the integration of both ITT and
Westin into Starwood Hotels.
Trademark License. Starwood Capital has granted to the Company an
exclusive, non-transferable royalty-free license to use the "Starwood" name and
trademarks in connection with the hotel and hospitality services business in
North America, and to use the "Starwood" name in its corporate name worldwide,
in perpetuity.
Loans to Officers
During 1996, the Corporation made a $150,000 non-interest-bearing loan to
Eric A. Danziger, President and Chief Executive Officer of the Corporation,
secured by a second mortgage on Mr. Danziger's residence in Phoenix, Arizona.
The loan was repaid in full in February 1998.
During 1996, the Corporation made a $266,000 non-interest-bearing loan to
Theodore W. Darnall, then Executive Vice President and Chief Operating Officer
(and currently) Executive Vice President of the Hotel
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Group of the Corporation. The loan is secured by a second mortgage on Mr.
Darnall's residence in Phoenix, Arizona. Upon the sale of Mr. Darnall's home in
Pittsburgh in 1997, $116,000 of the loan was repaid. The unpaid loan balance of
$150,000 matures upon termination of Mr. Darnall's employment with the
Corporation.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this Joint Annual
Report:
1. The financial statements and financial statements schedules listed
in the Index to Financial Statements and Financial Statements Schedules
following the signature pages hereof.
2. Exhibits:
<TABLE>
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EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
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<S> <C>
2.1 Formation Agreement, dated as of November 11, 1994, among
the Trust, the Corporation, Starwood Capital and the
Starwood Partners (incorporated by reference to Exhibit 2 to
the Trust's and the Corporation's Joint Current Report on
Form 8-K dated November 16, 1994(1)).
2.2 Form of Amendment No. 1 to Formation Agreement, dated as of
July 1995, among the Trust, the Corporation and the Starwood
Partners (incorporated by reference to Exhibit 10.23 to the
Trust's and the Corporation's Joint Registration Statement
on Form S-2 filed with the SEC on June 29, 1995
(Registration Nos. 33-59155 and 33-59155-01) (the "S-2
Registration Statement")).
2.3 Transaction Agreement, dated as of September 8, 1997, by and
among the Trust, the Corporation, Realty Partnership,
Operating Partnership, WHWE L.L.C., Woodstar Investor
Partnership ("Woodstar"), Nomura Asset Capital Corporation,
Juergen Bartels, Westin Hotels & Resorts Worldwide, Inc.,
W&S Lauderdale Corp., W&S Seattle Corp., Westin St. John
Hotel Company, Inc., W&S Denver Corp., W&S Atlanta Corp. and
W&S Hotel L.L.C. (incorporated by reference to Exhibit 2 to
the Trust's and the Corporation's Joint Current Report on
Form 8-K dated September 9, 1997, as amended by the Form
8-K/A dated December 18, 1997).
2.4 Amended and Restated Agreement and Plan of Merger, dated as
of November 12, 1997, by and among the Corporation, the
Trust, Chess Acquisition Corp. ("Chess") and ITT
(incorporated by reference to Exhibit 2.1 to the Trust's and
the Corporation's Joint Current Report on Form 8-K dated
November 13, 1997).
3.1 Declaration of Trust of the Trust, amended and restated as
of June 6, 1988, as amended through February 23, 1998.(3)
3.2 Articles of Incorporation of the Corporation, amended and
restated as of February 1, 1995, as amended through March
19, 1998.(3)
3.3 Amended and Restated Trustee's Regulations of the Trust, as
amended through December 18, 1997.(3)
3.4 Amended and Restated Bylaws of the Corporation, as amended
through December 18, 1997.(3)
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 (the "1994
Form 10-K")).
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 (the "1995 Form 10-K")).
4.3 Amendment No. 2 to the Pairing Agreement, dated as of
January 2, 1998, between the Trust and the Corporation.(3)
10.1 Form of Second Amended and Restated Limited Partnership
Agreement for Realty Partnership, dated November 14, 1997,
among the Trust and the limited partners of Realty
Partnership, together with the First Amendment thereto,
dated January 1, 1998, and Certificate of Admission of
Realty Partnership, effective January 2, 1998.(3)
</TABLE>
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<TABLE>
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EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
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<S> <C>
10.2 Form of Second Amended and Restated Limited Partnership
Agreement for Operating Partnership, dated November 14,
1997, among the Corporation and the limited partners of
Operating Partnership, together with the First Amendment
thereto, dated January 1, 1998, and Certificate of Admission
of Operating Partnership, effective January 2, 1998.(3)
10.3 Form of Amended and Restated Lease Agreement, entered into
as of January 1, 1993, between the Trust as Lessor and the
Corporation (or a subsidiary) as Lessee (incorporated by
reference to Exhibit 10.19 to the Trust's and the
Corporation's Joint Annual Report on Form 10-K for the year
ended December 31, 1992).
10.4 Form of Stock Purchase Agreement, dated as of February 23,
1998, between the Trust and the Corporation.(3)
10.5 Amended and Restated Employment Agreement, dated as of
February 17, 1998, between the Trust and Barry S.
Sternlicht, together with an amendment, dated as of March
11, 1998.(2)(3)
10.6 Non-Qualified Stock Option Agreement, dated as of February
17, 1998, between the Trust and Barry S. Sternlicht.(2)(3)
10.7 Employment Agreement, dated March 2, 1998, between the
Corporation and Susan R. Bolger.(2)(3)
10.8 Employment Agreement, dated March 25, 1998, between the
Corporation and Ronald C. Brown.(2)(3)
10.9 Employment Agreement, dated March 25, 1998, between the
Corporation and Juergen Bartels.(2)(3)
10.10 Employment Agreement, dated March 25, 1998, between the
Corporation and Theodore W. Darnall.(2)(3)
10.11 Employment Agreement, dated March 25, 1998, between the
Trust and Steven R. Goldman.(2)(3)
10.12 Employment Agreement, dated June 27, 1996, between the
Corporation and Eric A. Danziger (incorporated by reference
to Exhibit 10.4 to the Trust's and the Corporation's Joint
Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1996 (the "1996 Form 10-Q2").(2)
10.13 Employment Agreement, dated as of January 15, 1997, between
the Trust and Gary M. Mendell (incorporated by reference to
Exhibit 10.1 to the Trust's and the Corporation's Joint
Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1997 (the "1997 Form 10-Q1").(2)
10.14 Separation Agreement, dated June 18, 1996, between the Trust
and Jeffrey C. Lapin (incorporated by reference to Exhibit
10.5 to the 1996 Form 10-Q2).(2)
10.15 Starwood Hotels & Resorts 1995 Long-Term Incentive Plan
(Amended and Restated as of November 12, 1997) (the "Trust
LTIP") (incorporated by reference to Exhibit C to the
Trust's and the Corporation's Joint Proxy Statement, dated
November 12, 1997 (the "1997 Proxy Statement")).(2)
10.16 Starwood Hotels & Resorts Worldwide, Inc., 1995 Long-Term
Incentive Plan (Amended and Restated as of November 12,
1997) (the "Corporation LTIP") (incorporated by reference to
Exhibit D to the 1997 Proxy Statement).(2)
10.17 Form of Indemnification Agreement and Amendment No. 1 to
Indemnification Agreement between the Trust and each of its
Trustees and executive officers (incorporated by reference
to Exhibit 10.7 to the 1995 Form 10-K).(2)
10.18 Form of Indemnification Agreement and Amendment No. 1 to
Indemnification Agreement between the Corporation and each
of its Directors and executive officers (incorporated by
reference to Exhibit 10.8 to the 1995 Form 10-K).(2)
10.19 Form of Amendment No. 2 to Indemnification Agreement, dated
June 26, 1997, between the Trust and each of its Trustees
and executive officers (incorporated by reference to Exhibit
10.1 to the Trust's and the Corporation's Joint Quarterly
Report on Form 10-Q for the quarterly period ended June 30,
1997 (the "1997 Form 10-Q2")).(2)
10.20 Form of Amendment No. 2 to Indemnification Agreement, dated
June 26, 1997, between the Corporation and each of its
Directors and executive officers (incorporated by reference
to Exhibit 10.2 to the 1997 Form 10-Q2).(2)
</TABLE>
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<TABLE>
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EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
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<S> <C>
10.21 Form of Westin/HOT Agreement, dated as of May 1995, among
W&S Hotel L.L.C., W&S Hotel Holding Corp., Westin Hotel
Company, Realty Partnership, Operating Partnership, WHWE
L.L.C. and Woodstar Limited Partnership (incorporated by
reference to Exhibit 10.24 to the S-2 Registration
Statement).
10.22 Form of Trademark License Agreement, dated as of December
10, 1997, between Starwood Capital and the Trust.(3)
10.23 Exchange Rights Agreement, dated as of January 1, 1995,
among the Trust, the Corporation, Realty Partnership,
Operating Partnership and the Starwood Partners
(incorporated by reference to Exhibit 2B to the Trust's and
the Corporation's Joint Current Report on Form 8-K dated
January 31, 1995 (the "Formation Form 8-K")).
10.24 Registration Rights Agreement, dated as of January 1, 1995,
among the Trust, the Corporation and Starwood Capital
(incorporated by reference to Exhibit 2C to the Formation
Form 8-K).
10.25 Amended and Restated Loan Agreement, dated as of April 26,
1996, among Realty Partnership, CP Hotel Realty Partnership
Limited Partnership ("CP Hotel"), Midland Building
Corporation ("Midland"), the Trust and Lehman Capital
(incorporated by reference to Exhibit 10.31 to the Trust's
and the Corporation's Joint Annual Report on Form 10-K for
the year ended December 31, 1996, as amended by the Form
10-K/A dated April 25, 1997, and by the Form 10-K/A dated
December 18, 1997 (collectively, the "1996 Form 10-K")).
10.26 Form of Amendment No. 2, dated as of April 25, 1997, to
Amended and Restated Loan Agreement among Realty
Partnership, the Trust, CP Hotel, Midland and Lehman Capital
(incorporated by reference to Exhibit 10.3 to the 1997 Form
10-Q2).
10.27 Purchase and Sale Agreement, dated as of May 3, 1996, among,
inter alia, 730 Cal Hotel Properties II, Inc., Cal Hotel
Properties I Associates, Realty Partnership and Operating
Partnership (incorporated by reference to Exhibit 10.6 to
the 1996 Form 10-Q2).
10.28 Exchange Rights Agreement, dated as of June 3, 1996, among
the Trust, the Corporation, Realty Partnership, Operating
Partnership, Philadelphia HIR Limited Partnership and
Philadelphia HSR Limited Partnership (incorporated by
reference to Exhibit 10.1 to the 1996 Form 10-Q2).
10.29 Registration Rights Agreement, dated as of June 3, 1996,
among the Trust, the Corporation and Philadelphia HSR
Limited Partnership (incorporated by reference to Exhibit
10.2 to the 1996 Form 10-Q2).
10.30 Asset Purchase Agreement, dated as of March 25, 1996,
between Hotels of Distinction, Inc., and Realty Partnership
(effective July 3, 1996) (incorporated by reference to
Exhibit 10.7 to the 1996 Form 10-K).
10.31 Loan Agreement, dated as of August 16, 1996, between the
Realty Partnership and the Trust, as the borrower, and
Goldman Sachs Mortgage Company, as lender (incorporated by
reference to Exhibit 10.33 to the 1996 Form 10-K).
10.32 Contribution Agreement, dated as of January 15, 1997, by and
among HEI Hotels, L.L.C., Westport Management, L.L.C.,
Savior Limited Partnership, Judith Rushmore, Orna L.
Shulman, Murray Dow, Steve Mendell, Gary Mendell, Zapco
Communications, Inc., Westport Hospitality, Inc., the
Corporation and Operating Partnership (incorporated by
reference to Exhibit 10.3 to the 1997 Form 10-Q1).
10.33 Contribution Agreement, dated as of January 15, 1997, by and
among, inter alia, Realty Partnership, Operating
Partnership, the Trust, the Corporation, Prudential HEI
Joint Venture and Gary M. Mendell (incorporated by reference
to Exhibit 10.4 to the 1997 Form 10-Q1).
10.34 Units Exchange Rights Agreement, dated as of February 14,
1997, by and among, inter alia, the Trust, the Corporation,
Realty Partnership, Operating Partnership and the Starwood
Partners.(3)
10.35 Class A Exchange Rights Agreement, dated as of February 14,
1997, by and among, inter alia, the Trust, the Corporation,
Operating Partnership and the Starwood Partners.(3)
10.36 Promissory Note, dated as of February 14, 1997, by Realty
Partnership and the Trust, the Corporation, and Operating
Partnership, in favor of The Prudential Insurance Company of
America ("Prudential"), on behalf of Prudential Property
Investment Separate Account II ("PRISA II") (incorporated by
reference to Exhibit 10.2 to the 1997 Form 10-Q1).
10.37 Form of letter, dated April 9, 1997, from Realty Partnership
and the Trust to PRISA II extending the maturity date of the
Promissory Note, dated as of February 14, 1997 (incorporated
by reference to Exhibit 10.4 to the 1997 Form 10-Q2).
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
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<S> <C>
10.38 Form of Amendment to Purchase Money Promissory Note, dated
April 26, 1997, between Realty Partnership and the Trust in
favor of Prudential, on behalf of PRISA II (incorporated by
reference to Exhibit 10.5 to the 1997 Form 10-Q2).
10.39 Form of Amendment No. 2 to Purchase Money Promissory Note,
dated May 28, 1997, between Realty Partnership and the Trust
in favor of Prudential, on behalf of PRISA II (incorporated
by reference to Exhibit 10.6 to the 1997 Form 10-Q2).
10.40 Amended and Restated Installment Sale Agreement, dated as of
February 1, 1997, between Philadelphia Authority for
Industrial Development and Realty Partnership (incorporated
by reference to Exhibit 10.5 to the 1997 Form 10-Q1).
10.41 Exchange Rights Agreement, dated as of March 11, 1997, among
the Corporation, the Trust, Realty Partnership, Operating
Partnership and the Hermitage, L.P.(3)
10.42 Registration Rights Agreement, dated as of March 11, 1997,
among the Corporation, the Trust, Realty Partnership,
Operating Partnership and the Hermitage, L.P.(3)
10.43 Credit Agreement, dated as of August 18, 1997, among SLT
Mexico, S. de R.L. de C.V., as Borrower, Realty Partnership
and the Trust, as Guarantors, the Lenders party thereto and
Bancomer, S.A., Cayman Islands Branch, as Agent.(3)
10.44 Purchase and Sale Agreement, dated as of July 18, 1997, by
and among, inter alia, Thomas J. Flately, Tara Hotel
Management Co. LLC, Realty Partnership and Operating
Partnership (incorporated by reference to Exhibit 2 to the
Trust's and the Corporation's Joint Current Report on Form
8-K dated September 10, 1997, as amended by the Form 8-K/A
dated December 18, 1997).
10.45 Credit Agreement, dated as of September 10, 1997, between
Realty Partnership and the Trust and BTC, Lehman Capital,
BankBoston, N.A., and Bank of Montreal (incorporated by
reference to Exhibit 10.1 to the Trust's and the
Corporation's Joint Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1997, as amended by the
Form 10-Q/A dated November 10, 1997 (as so amended, the
"1997 Form 10-Q3")).
10.46 Purchase Agreement, dated as of October 10, 1997, by and
among the Trust, the Corporation, UBS Limited, Union Bank of
Switzerland, London Branch and UBS Securities LLC.(3)
10.47 ISDA Master Agreement and Forward Stock Contract, each dated
as of October 13, 1997, by and among the Trust, the
Corporation, UBS Limited, Union Bank of Switzerland, London
Branch and UBS Securities LLC.(3)
10.48 Loan Agreement, dated as of December 29, 1997, among
Woodstar, the Lenders party thereto, BT Alex. Brown
Incorporated ("Alex Brown") and Chase Securities Inc. as
Arranging Agents and BTC and Chase Bank as Administrative
Agents.(3)
10.49 Loan Agreement, dated as of December 29, 1997, among WHWE
L.L.C., the Lenders party thereto, Alex Brown and Chase
Securities Inc. as Arranging Agents and BTC and Chase Bank
as Administrative Agents.(3)
10.50 Exchange Rights Agreement, dated as of January 2, 1998,
among, inter alia, the Trust, Realty Partnership and
Woodstar.(3)
10.51 Exchange Rights Agreement, dated as of January 2, 1998,
among, inter alia, the Corporation, Operating Partnership
and Woodstar.(3)
10.52 Registration Rights Agreement, dated as of January 2, 1998,
among, inter alia, the Trust, the Corporation, and
Woodstar.(3)
10.53 Purchase and Sale Agreement and Joint Escrow Instructions,
dated as of December 30, 1997, by and among the Corporation,
the Trust and New Remington Partners.(3)
10.54 Stock Agreement and Registration Rights Agreement, each
dated as of January 15, 1998 by and among the Corporation,
the Trust and New Remington Partners.(3)
10.55 Purchase and Sale Agreement and Joint Escrow Instructions,
dated as of December 30, 1997, by and among the Corporation,
the Trust and Savannah Limited Partnership.(3)
10.56 Stock Agreement and Registration Rights Agreement, each
dated as of January 15, 1998, by and among the Corporation,
the Trust and Savannah Limited Partnership.(3)
10.57 Purchase and Sale Agreement and Joint Escrow Instructions,
dated as of December 30, 1997, by and among the Corporation,
the Trust and N.Y. Overnight Partners, L.P.(3)
10.58 Stock Agreement and Registration Rights Agreement, each
dated as of January 15, 1998, by and among the Corporation,
the Trust and N.Y. Overnight Partners, L.P.(3)
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
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<S> <C>
10.59 Purchase and Sale Agreement and Joint Escrow Instructions,
dated as of December 30, 1997, by and among the Corporation,
the Trust and D.C. Overnight Partners, L.P.(3)
10.60 Stock Agreement and Registration Rights Agreement, each
dated as of January 15, 1998, by and among the Corporation,
the Trust and D.C. Overnight Partners, L.P.(3)
10.61 Credit Agreement, dated as of February 23, 1998, among the
Trust, Realty Partnership, the Corporation, Chess (and ITT
as its successor by merger), certain additional borrowers,
various lenders, BTC and The Chase Manhattan Bank ("Chase
Bank"), as Administrative Agents, and Lehman Paper and Bank
of Montreal, as Syndication Agents (incorporated by
reference to Exhibit 10.1 to the Trust's and the
Corporation's Joint Current Report on Form 8-K dated
February 23, 1998 (the "ITT Form 8-K")).
10.62 First Amendment to the Credit Agreement, dated as of March
3, 1998, among the Trust, Realty Partnership, the
Corporation, ITT, the lenders party to the Credit Agreement,
BTC and The Chase Manhattan Bank, as Administrative Agents,
and Lehman Paper and Bank of Montreal, as Syndication
Agents, and the new lenders (incorporated by reference to
Exhibit 10.2 to the ITT Form 8-K).
10.63 Pledge and Security Agreement, dated as of February 23,
1998, executed and delivered by the Trust, the Corporation
and the other Pledgors party thereto, in favor of BTC as
Collateral Agent.(3)
10.64 Senior Secured Increasing Rate Note Agreement, dated as of
February 23, 1998, by and among the Corporation, the Trust,
the Guarantors named therein and the Lenders named therein
(incorporated by reference to Exhibit 10.3 to the ITT Form
8-K).
10.65 Loan Agreement, dated as of February 23, 1998, between the
Trust and the Corporation, together with Promissory Note
executed in connection therewith, by the Corporation to the
order of the Trust, in the principal amount of
$3,282,000,000.(3)
10.66 Loan Agreement, dated as of February 23, 1998, between the
Trust and the Corporation, together with Promissory Note
executed in connection therewith, by the Corporation to the
order of the Trust, in the principal amount of
$100,000,000.(3)
10.67 Loan Agreement, dated as of February 23, 1998, between the
Trust and the Corporation, together with Promissory Note
executed in connection therewith, by the Corporation to the
order of the Trust, in the principal amount of
$50,000,000.(3)
10.68 Purchase Agreement, dated as of February 23, 1998, by and
among the Trust, the Corporation, Lehman Brothers Inc. and
Lehman Brothers Finance S.A., together with Price Adjustment
Agreement entered into in connection therewith.(3)
10.69 Purchase Agreement, dated as of February 23, 1998, by and
among the Trust, the Corporation, NationsBanc Montgomery
Securities LLC and NMS Services, Inc., together with Price
Adjustment Agreement entered into in connection
therewith.(3)
10.70 Purchase Agreement, dated as of February 23, 1998, by and
among the Trust, the Corporation, Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Merrill Lynch International,
together with Price Adjustment Agreement entered into in
connection therewith.(3)
11.0 Combined statement regarding computation of per share
earnings (incorporated by reference to Exhibit 11 on the
First Quarter 10-Q).
21.1 Subsidiaries of the Trust.(3)
21.2 Subsidiaries of the Corporation.(3)
21.3 Subsidiaries of ITT Corporation.(3)
23. Consent of Coopers & Lybrand L.L.P.(3)
27.1 Financial Data Schedule for Starwood Hotels & Resorts
Worldwide, Inc.(3)
27.2 Financial Data Schedule for Starwood Hotels & Resorts(3)
</TABLE>
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(1) The SEC file numbers of all filings made by the Trust and the Corporation
pursuant to the Securities
Act of 1934, as amended, and referenced herein are: 1-6828 (the Trust) and
1-7959 (the Corporation).
(2) Management contract or compensatory plan or arrangement required to be filed
as an exhibit hereto pursuant to Item 14(c) of Form 10-K.
(3) Filed herewith.
90
<PAGE> 92
(b) Reports on Form 8-K.
During the fourth quarter of 1997, the Trust and the Corporation filed the
following Joint Current Reports on Form 8-K:
On October 21, 1997, the Company filed a Joint Current Report on Form 8-K
(as amended by the Form 8-K/A dated October 29, 1997) reporting under Item 5 the
execution and delivery of the ITT Merger Agreement.
On November 13, 1997, the Company filed a Joint Current Report on Form 8-K
(as amended by the Form 8-K/A dated December 18, 1997 and the Form 8-K/A dated
January 7, 1998) to file, under Item 7, pro forma financial statements in
connection with the Westin Merger.
On November 13, 1997, the Company filed a Joint Current Report on Form 8-K
to report under Item 5 of Form 8-K the amendment of the ITT Merger Agreement.
On December 18, 1997, the Company filed a Form 8-K/A dated December 18,
1997 as an amendment to a Joint Current Report on Form 8-K, dated February 10,
1997, which was filed to report under Item 5 the acquisition of HEI.
On December 18, 1997, the Company filed a Joint Current Report on Form
8-K/A amending the Joint Current Report on Form 8-K dated September 9, 1997,
which was filed to report under Item 5 the Company's acquisition of the Flatley
Portfolio.
On December 18, 1997, the Company filed a Joint Current Report on Form
8-K/A amending the Joint Current Report on Form 8-K dated September 10, 1997,
which was filed to report under Item 5 the entering into of the Westin Merger
Agreement.
91
<PAGE> 93
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
STARWOOD HOTELS & RESORTS
By: /s/ BARRY S. STERNLICHT
------------------------------------
Barry S. Sternlicht,
Chairman and Chief Executive Officer
Date: March 31, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ BARRY S. STERNLICHT Chairman, Chief Executive Officer March 31, 1998
- --------------------------------------------------- and Trustee (Principal Executive,
Barry S. Sternlicht Financial and Accounting Officer)
Trustee March , 1998
- ---------------------------------------------------
Steven R. Goldman
/s/ JEAN-MARC CHAPUS Trustee March 31, 1998
- ---------------------------------------------------
Jean-Marc Chapus
/s/ BRUCE W. DUNCAN Trustee March 31, 1998
- ---------------------------------------------------
Bruce W. Duncan
Trustee March , 1998
- ---------------------------------------------------
Madison F. Grose
Trustee March , 1998
- ---------------------------------------------------
George J. Mitchell
/s/ ROGER S. PRATT Trustee March 31, 1998
- ---------------------------------------------------
Roger S. Pratt
/s/ STEPHEN R. QUAZZO Trustee March 31, 1998
- ---------------------------------------------------
Stephen R. Quazzo
/s/ STUART M. ROTHENBERG Trustee March 31, 1998
- ---------------------------------------------------
Stuart M. Rothenberg
</TABLE>
92
<PAGE> 94
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
STARWOOD HOTELS & RESORTS
WORLDWIDE, INC.
By: /s/ RONALD C. BROWN
------------------------------------
Ronald C. Brown,
Executive Vice President and
Chief Financial Officer
Date: March 31, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ BARRY S. STERNLICHT Chairman of the Board of March 31, 1998
- --------------------------------------------------- Directors and Director
Barry S. Sternlicht
/s/ RONALD C. BROWN Executive Vice President and March 31, 1998
- --------------------------------------------------- Chief Financial Officer
Ronald C. Brown (Principal Financial and
Accounting Officer)
/s/ JUERGEN BARTELS Chief Executive, Hotel Operating March 31, 1998
- --------------------------------------------------- Group and Director (Principal
Juergen Bartels Executive Officer)
/s/ JONATHAN D. EILIAN Director March 31, 1998
- ---------------------------------------------------
Jonathan D. Eilian
/s/ BRUCE M. FORD Director March 31, 1998
- ---------------------------------------------------
Bruce M. Ford
Director March , 1998
- ---------------------------------------------------
Graeme W. Henderson
/s/ EARLE F. JONES Director March 31, 1998
- ---------------------------------------------------
Earle F. Jones
/s/ MICHAEL A. LEVEN Director March 31, 1998
- ---------------------------------------------------
Michael A. Leven
Director March , 1998
- ---------------------------------------------------
Daniel H. Stern
Director March , 1998
- ---------------------------------------------------
Barry S. Volpert
/s/ DANIEL W. YIH Director March 31, 1998
- ---------------------------------------------------
Daniel W. Yih
</TABLE>
93
<PAGE> 95
STARWOOD HOTELS & RESORTS
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
AS OF DECEMBER 31, 1997 AND 1996
AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED
DECEMBER 31, 1997
<TABLE>
<S> <C>
INDEPENDENT AUDITOR'S REPORT................................ F-2
STARWOOD HOTELS & RESORTS AND STARWOOD HOTELS & RESORTS
WORLDWIDE, INC.:
Combined Consolidated Balance Sheets................... F-3
Combined Consolidated Statements of Operations......... F-4
Combined Consolidated Statements of Cash Flows......... F-5
Combined Consolidated Statements of Shareholders'
Equity................................................ F-6
STARWOOD HOTELS & RESORTS:
Consolidated Balance Sheets............................ F-7
Consolidated Statements of Operations.................. F-8
Consolidated Statements of Cash Flows.................. F-9
Consolidated Statements of Shareholders' Equity........ F-10
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.:
Consolidated Balance Sheets............................ F-11
Consolidated Statements of Operations.................. F-12
Consolidated Statements of Cash Flows.................. F-13
Consolidated Statements of Shareholders' Equity........ F-14
NOTES TO FINANCIAL STATEMENTS............................... F-15
SCHEDULES:
Schedule III -- Real Estate and Accumulated
Depreciation.......................................... F-51
Schedule IV -- Mortgage Loans on Real Estate........... F-58
</TABLE>
F-1
<PAGE> 96
INDEPENDENT AUDITOR'S REPORT
To the Boards of Trustees and Directors and Shareholders of
Starwood Hotels & Resorts and Starwood Hotels & Resorts Worldwide, Inc.:
We have audited the accompanying separate and combined consolidated
financial statements and financial statement schedules of Starwood Hotels &
Resorts (a Maryland real estate investment trust) and its subsidiaries (the
"Trust") and Starwood Hotels & Resorts Worldwide, Inc. (a Maryland corporation)
and its subsidiaries (the "Corporation"), collectively the "Company," as of
December 31, 1997 and 1996, and for each of the three years in the period ended
December 31, 1997, listed in the foregoing index to financial statements and
financial statement schedules. These financial statements and financial
statement schedules are the responsibility of the Trust's and the Corporation's
managements. Our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such separate and combined financial statements present
fairly, in all material respects, the financial position of the Company and the
financial position of the Trust and the Corporation at December 31, 1997 and
1996, and the respective results of their operations and their cash flows for
each of the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
COOPERS & LYBRAND L.L.P.
Phoenix, Arizona
February 27, 1998
F-2
<PAGE> 97
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
COMBINED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Hotel assets held for sale -- net........................... $ 37,924 $ 21,644
Hotel assets -- net......................................... 2,590,939 1,100,030
---------- ----------
2,628,863 1,121,674
Mortgage notes receivable -- net............................ 51,197 90,741
Investments................................................. 1,698 948
---------- ----------
Total real estate investments..................... 2,681,758 1,213,363
Cash and cash equivalents................................... 23,462 25,426
Accounts, interest and rents receivable..................... 77,687 43,278
Notes receivable -- net..................................... 35,856 2,930
Inventories, prepaid expenses and other assets.............. 190,701 27,743
---------- ----------
$3,009,464 $1,312,740
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Collateralized notes payable and lines of credit............ $1,221,727 $ 422,334
Mortgage and other notes payable............................ 344,287 57,232
Accounts payable and other liabilities...................... 121,164 57,296
Distributions payable....................................... 30,374 19,258
---------- ----------
1,717,552 556,120
---------- ----------
Commitments and contingencies
MINORITY INTEREST........................................... 270,289 163,959
---------- ----------
SHAREHOLDERS' EQUITY
Trust common shares of beneficial interest at December 31,
1997 and 1996; $.01 par value; authorized 100,000,000
shares; outstanding 51,346,000 and 40,078,000 at December
31, 1997 and 1996, respectively........................... 513 401
Corporation common stock at December 31, 1997 and 1996; $.01
par value; authorized 100,000,000 shares; outstanding
51,346,000 and 40,078,000 at December 31, 1997 and 1996,
respectively.............................................. 513 401
Additional paid-in capital.................................. 1,335,532 827,760
Distributions in excess of earnings......................... (314,935) (235,901)
---------- ----------
1,021,623 592,661
---------- ----------
$3,009,464 $1,312,740
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 98
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
REVENUE
Rooms..................................................... $577,318 $260,175 $ 87,270
Food and beverage......................................... 248,072 94,816 26,609
Other..................................................... 63,524 30,119 7,371
-------- -------- --------
Total hotel revenue............................... 888,914 385,110 121,250
Gaming.................................................... 15,003 23,630 26,929
Interest from mortgage and other notes.................... 13,680 11,262 10,905
Rents from leased hotel properties and income from
investments............................................ 883 822 791
Management fees and other income.......................... 8,068 3,424 1,966
Gain (loss) on sale of real estate investments............ 7,035 4,290 (125)
-------- -------- --------
933,583 428,538 161,716
-------- -------- --------
EXPENSES
Rooms..................................................... 141,872 67,017 37,121
Food and beverage......................................... 181,430 72,696 19,520
Other..................................................... 290,852 135,302 28,376
-------- -------- --------
Total hotel expenses.............................. 614,154 275,015 85,017
Gaming.................................................... 16,499 21,834 24,242
Interest.................................................. 65,035 23,337 13,138
Depreciation and amortization............................. 125,446 55,745 15,469
Administrative and general................................ 27,241 16,495 5,712
Treasury lock settlement.................................. 25,000 -- --
-------- -------- --------
873,375 392,426 143,578
-------- -------- --------
Income before minority interest........................... 60,208 36,112 18,138
Minority interest......................................... 18,684 10,238 7,013
-------- -------- --------
Income before extraordinary items......................... 41,524 25,874 11,125
Extraordinary items due to early extinguishment of debt
(net of $971,000, $413,000 and $163,000 minority
interest, respectively)................................ (3,452) 1,077 (2,155)
-------- -------- --------
NET INCOME........................................ $ 38,072 $ 26,951 $ 8,970
======== ======== ========
EARNINGS PER PAIRED SHARE
Income before extraordinary items......................... $ 0.90 $ 0.88 $ 0.95
Extraordinary items....................................... (0.07) 0.04 (0.18)
-------- -------- --------
NET INCOME PER PAIRED SHARE....................... $ 0.83 $ 0.92 $ 0.77
======== ======== ========
EARNINGS PER PAIRED SHARE ASSUMING DILUTION
Income before extraordinary items......................... $ 0.85 $ 0.86 $ 0.95
Extraordinary items....................................... (0.07) 0.04 (0.18)
-------- -------- --------
NET INCOME PER PAIRED SHARE ASSUMING DILUTION..... $ 0.78 $ 0.90 $ 0.77
======== ======== ========
Weighted Average Number of Paired Shares.................... 46,022 29,204 11,657
======== ======== ========
Weighted Average Number of Paired Shares Assuming
Dilution.................................................. 48,663 29,884 11,710
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 99
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31,
-----------------------------------
1997 1996 1995
----------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................... $ 38,072 $ 26,951 $ 8,970
Adjustments to reconcile net income to net cash provided
by operating activities:
Minority interest..................................... 18,684 10,238 7,013
Extraordinary items due to early extinguishment of
debt................................................ 3,452 (1,077) 2,155
Depreciation and amortization......................... 125,446 55,745 15,469
Accretion of discount................................. (5,530) (3,140) (3,285)
Deferred interest..................................... -- -- 649
Provision for doubtful accounts....................... 1,293 1,044 470
Warrants and paired shares issued as compensation..... 3,400 -- --
(Gain) loss on sale of real estate investments........ (7,035) (4,290) 125
Changes in operating assets and liabilities:
Increase in accounts receivable, inventories, prepaid
expenses and other assets........................... (77,300) (46,676) (21,805)
Increase in accounts payable and other liabilities.... 56,451 35,372 6,650
----------- --------- ---------
Net cash provided by operating activities........ 156,933 74,167 16,411
----------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of hotel properties.......................... (1,100,401) (720,969) (160,880)
Improvements and additions to hotel assets............... (157,258) (27,775) (5,331)
Purchase of investments.................................. (1,450) (1,871) --
Sale of investments...................................... 940 3,764 --
Net proceeds from sale of real estate investments........ 18,549 21,991 --
Purchase of mortgage and other notes receivable.......... (34,200) (25,206) (19,795)
Principal received on mortgage and other notes
receivable............................................ 53,682 3,266 6,825
Reorganization costs..................................... -- -- (2,814)
----------- --------- ---------
Net cash used in investing activities............ (1,220,138) (746,800) (181,995)
----------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under collateralized notes payable and lines
of credit............................................. 1,864,328 367,561 119,100
Borrowings under mortgage and other notes payable........ 101,755 3,497 9,637
Payments on collateralized notes payable and lines of
credit................................................ (1,064,980) (64,327) (102,899)
Principal payments on mortgage and other notes payable... (98,667) (1,535) (104,722)
Net proceeds from equity offerings....................... 383,081 429,618 245,701
Contributed capital and adjustments...................... 1,056 131 13,599
Stock repurchase......................................... (25,724) -- --
Distributions paid....................................... (99,608) (46,218) (9,265)
Purchase of warrants..................................... -- -- (1,300)
----------- --------- ---------
Net cash provided by financing activities........ 1,061,241 688,727 169,851
----------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........... (1,964) 16,094 4,267
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD... 25,426 9,332 5,065
----------- --------- ---------
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD......... $ 23,462 $ 25,426 $ 9,332
=========== ========= =========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE> 100
STARWOOD HOTELS & RESORTS AND
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
COMBINED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
TRUST SHARES CORPORATION ADDITIONAL DISTRIBUTIONS TOTAL
OF BENEFICIAL COMMON PAID-IN IN EXCESS OF SHAREHOLDERS'
INTEREST STOCK CAPITAL EARNINGS EQUITY
------------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1994........ $ 12,133 $ 1,213 $ 210,251 $(214,889) $ 8,708
Decrease in par value to
$0.01....................... (12,012) (1,092) 13,104 -- --
One-for-six reverse stock
split....................... (101) (101) 202 -- --
Contributed capital............ -- -- 59,120 -- 59,120
Equity offerings............... 118 118 245,465 -- 245,701
Minority interest.............. -- -- (92,735) -- (92,735)
Net income..................... -- -- -- 8,970 8,970
Distributions.................. -- -- -- (12,996) (12,996)
Warrant purchase............... -- -- (1,300) -- (1,300)
-------- ------- ---------- --------- ----------
Balance December 31, 1995........ 138 138 434,107 (218,915) 215,468
Three-for-two stock dividend... 135 135 (270) -- --
Contributed capital............ -- -- 7,783 -- 7,783
Equity offerings............... 128 128 429,362 -- 429,618
Net income..................... -- -- -- 26,951 26,951
Distributions.................. -- -- -- (43,937) (43,937)
Change in minority interest.... -- -- (43,222) -- (43,222)
-------- ------- ---------- --------- ----------
Balance December 31, 1996........ 401 401 827,760 (235,901) 592,661
Contributed capital............ 53 53 233,558 -- 233,664
Equity offerings............... 63 63 382,955 -- 383,081
Stock repurchase............... (4) (4) (12,493) (13,223) (25,724)
Net income..................... -- -- -- 38,072 38,072
Distributions.................. -- -- -- (103,883) (103,883)
Change in minority interest.... -- -- (96,248) -- (96,248)
-------- ------- ---------- --------- ----------
Balance December 31, 1997........ $ 513 $ 513 $1,335,532 $(314,935) $1,021,623
======== ======= ========== ========= ==========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE> 101
STARWOOD HOTELS & RESORTS
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Hotel assets held for sale -- net........................... $ 16,591 $ 12,615
Hotel assets -- net......................................... 2,293,947 988,309
---------- ----------
2,310,538 1,000,924
Mortgage notes receivable -- net............................ 51,197 90,741
Mortgage notes receivable -- Corporation.................... 241,432 88,077
Investments................................................. 1,451 948
---------- ----------
Total real estate investments..................... 2,604,618 1,180,690
Cash and cash equivalents................................... 9,818 3,810
Accounts, interest and rents receivable..................... 5,203 12,617
Notes receivable -- net..................................... 35,255 2,237
Notes receivable -- Corporation............................. 80,178 17,741
Prepaid expenses and other assets........................... 37,351 16,271
---------- ----------
$2,772,423 $1,233,366
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Collateralized notes payable and lines of credit............ $1,221,727 $ 422,334
Mortgage and other notes payable............................ 217,567 55,269
Accounts payable and other liabilities...................... 61,135 9,200
Distributions payable....................................... 30,250 19,258
---------- ----------
1,530,679 506,061
---------- ----------
Commitments and contingencies
MINORITY INTEREST........................................... 259,118 158,005
---------- ----------
SHAREHOLDERS' EQUITY
Trust common shares of beneficial interest at December 31,
1997 and 1996; $.01 par value; authorized 100,000,000
shares; outstanding 51,346,000 and 40,078,000 at December
31, 1997 and 1996, respectively........................... 513 401
Additional paid-in capital.................................. 1,211,196 729,276
Distributions in excess of earnings......................... (229,083) (160,377)
---------- ----------
982,626 569,300
---------- ----------
$2,772,423 $1,233,366
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE> 102
STARWOOD HOTELS & RESORTS
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
REVENUE
Rents from Corporation.................................... $234,537 $ 87,593 $26,730
Interest from Corporation................................. 16,336 9,084 4,761
Interest from mortgage and other notes.................... 13,680 11,262 10,792
Rents from leased hotel properties and income from
investments............................................ 883 822 791
Other income.............................................. 2,161 2,008 1,074
Gain (loss) on sale of real estate investments............ 3,171 4,290 (125)
-------- -------- -------
270,768 115,059 44,023
-------- -------- -------
EXPENSES
Interest.................................................. 64,872 23,088 12,429
Depreciation and amortization............................. 100,151 42,517 8,977
Administrative and general................................ 12,212 4,134 2,439
Treasury lock settlement.................................. 25,000 -- --
-------- -------- -------
202,235 69,739 23,845
-------- -------- -------
Income before minority interest........................... 68,533 45,320 20,178
Minority interest......................................... 17,786 11,731 7,314
-------- -------- -------
Income before extraordinary items......................... 50,747 33,589 12,864
Extraordinary items due to early extinguishment of debt
(net of $971,000 and $163,000 minority interest in 1997
and 1995, respectively)................................ (3,452) -- (2,155)
-------- -------- -------
NET INCOME........................................ $ 47,295 $ 33,589 $10,709
======== ======== =======
EARNINGS PER SHARE
Income before extraordinary items......................... $ 1.10 $ 1.15 $ 1.10
Extraordinary items....................................... (0.07) -- (0.18)
-------- -------- -------
NET INCOME PER SHARE.............................. $ 1.03 $ 1.15 $ 0.92
======== ======== =======
EARNINGS PER SHARE ASSUMING DILUTION
Income before extraordinary items......................... $ 1.04 $ 1.12 $ 1.10
Extraordinary items....................................... (0.07) -- (0.18)
-------- -------- -------
NET INCOME PER SHARE ASSUMING DILUTION............ $ 0.97 $ 1.12 $ 0.92
======== ======== =======
Weighted Average Number of Shares........................... 46,022 29,204 11,657
======== ======== =======
Weighted Average Number of Shares Assuming Dilution......... 48,663 29,884 11,710
======== ======== =======
</TABLE>
See accompanying notes to financial statements.
F-8
<PAGE> 103
STARWOOD HOTELS & RESORTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
----------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $ 47,295 $ 33,589 $ 10,709
Adjustments to reconcile net income to net cash provided
by operating activities:
Minority interest....................................... 17,786 11,731 7,314
Extraordinary items due to early extinguishment of
debt.................................................. 3,452 -- 2,155
Depreciation and amortization........................... 100,151 42,517 8,977
Accretion of discount................................... (5,530) (3,140) (3,285)
Deferred interest....................................... -- -- 649
Deferred interest -- Corporation........................ (7,935) (2,055) --
Warrants and paired shares issued as compensation....... 3,177 -- --
(Gain) loss on sale of real estate investments.......... (3,171) (4,290) 125
Changes in operating assets and liabilities:
Increase in rent and interest receivable, prepaid
expenses and other assets............................. (23,072) (18,649) (17,056)
Increase in accounts payable and other liabilities...... 44,518 1,886 1,679
----------- --------- ---------
Net cash provided by operating activities.......... 176,671 61,589 11,267
----------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of hotel properties........................... (1,033,305) (699,438) (118,896)
Improvements and additions to hotel assets................ (116,994) (15,661) (4,660)
Purchase of investments................................... (1,443) (1,871) --
Sale of investments....................................... 940 3,764 --
Net proceeds from sale of real estate investments......... 10,271 21,991 --
Purchase of mortgage and other notes receivable........... (34,200) (25,012) (19,795)
Purchase of mortgage notes receivable -- Corporation...... (27,000) (18,216) --
Principal received on mortgage and other notes
receivable.............................................. 47,823 3,201 6,766
Reorganization costs...................................... -- -- (1,407)
Net change in notes receivable -- Corporation............. (63,225) 4,815 (37,514)
----------- --------- ---------
Net cash used in investing activities.............. (1,217,133) (726,427) (175,506)
----------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under collateralized notes payable and lines of
credit.................................................. 1,864,328 367,561 119,100
Borrowings under mortgage and other notes payable......... 101,755 2,829 9,637
Payments on collateralized notes payable and lines of
credit.................................................. (1,064,980) (64,327) --
Principal payments on mortgage and other notes payable.... (97,767) (35) (198,158)
Net proceeds from equity offerings........................ 363,952 408,000 233,418
Contributed capital and adjustments....................... 2,174 128 11,197
Stock repurchase.......................................... (24,438) -- --
Distributions paid........................................ (98,554) (46,218) (9,265)
Purchase of warrants...................................... -- -- (1,235)
----------- --------- ---------
Net cash provided by financing activities.......... 1,046,470 667,938 164,694
----------- --------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS....................... 6,008 3,100 455
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD.... 3,810 710 255
----------- --------- ---------
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD.......... $ 9,818 $ 3,810 $ 710
=========== ========= =========
</TABLE>
See accompanying notes to financial statements.
F-9
<PAGE> 104
STARWOOD HOTELS & RESORTS
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
TRUST SHARES ADDITIONAL DISTRIBUTIONS TOTAL
OF BENEFICIAL PAID-IN IN EXCESS OF SHAREHOLDERS'
INTEREST CAPITAL EARNINGS EQUITY
------------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
Balance January 1, 1995................... $ 12,133 $ 146,059 $(147,742) $ 10,450
Decrease in par value to $0.01.......... (12,012) 12,012 -- --
One-for-six reverse stock split......... (101) 101 -- --
Contributed capital..................... -- 52,495 -- 52,495
Equity offerings........................ 118 233,300 -- 233,418
Minority interest....................... -- (88,113) -- (88,113)
Net income.............................. -- -- 10,709 10,709
Distributions........................... -- -- (12,996) (12,996)
Warrant purchase........................ -- (1,235) -- (1,235)
-------- ---------- --------- ---------
Balance December 31, 1995................. 138 354,619 (150,029) 204,728
Three-for-two stock dividend............ 135 (135) -- --
Contributed capital..................... -- 7,780 -- 7,780
Equity offerings........................ 128 407,872 -- 408,000
Net income.............................. -- -- 33,589 33,589
Distributions........................... -- -- (43,937) (43,937)
Change in minority interest............. -- (40,860) -- (40,860)
-------- ---------- --------- ---------
Balance December 31, 1996................. 401 729,276 (160,377) 569,300
Contributed capital..................... 53 220,309 -- 220,362
Equity offerings........................ 63 363,888 -- 363,951
Stock repurchase........................ (4) (11,869) (12,565) (24,438)
Net income.............................. -- -- 47,295 47,295
Distributions........................... -- -- (103,436) (103,436)
Change in minority interest............. -- (90,408) -- (90,408)
-------- ---------- --------- ---------
Balance December 31, 1997................. $ 513 $1,211,196 $(229,083) $ 982,626
======== ========== ========= =========
</TABLE>
See accompanying notes to financial statements.
F-10
<PAGE> 105
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Hotel assets held for sale -- net........................... $ 21,333 $ 9,029
Hotel assets -- net......................................... 296,992 111,721
-------- --------
318,325 120,750
Investments................................................. 247 --
-------- --------
Total real estate investments..................... 318,572 120,750
Cash and cash equivalents................................... 13,644 21,616
Accounts receivable......................................... 72,484 30,661
Notes receivable............................................ 601 693
Inventories, prepaid expenses and other assets.............. 153,350 11,472
-------- --------
$558,651 $185,192
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Mortgage and other notes payable............................ $126,720 $ 1,963
Mortgage notes payable -- Trust............................. 241,432 88,077
Notes payable -- Trust...................................... 80,178 17,741
Accounts payable and other liabilities...................... 60,029 48,096
Distributions payable....................................... 124 --
-------- --------
508,483 155,877
-------- --------
Commitments and contingencies
MINORITY INTEREST........................................... 11,171 5,954
-------- --------
SHAREHOLDERS' EQUITY
Corporation common stock at December 31, 1997 and 1996; $.01
par value; authorized 100,000,000 shares; outstanding
51,346,000 and 40,078,000 at December 31, 1997 and 1996,
respectively.............................................. 513 401
Additional paid-in capital.................................. 124,336 98,484
Accumulated deficit......................................... (85,852) (75,524)
-------- --------
38,997 23,361
-------- --------
$558,651 $185,192
======== ========
</TABLE>
See accompanying notes to financial statements.
F-11
<PAGE> 106
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
REVENUE
Rooms.................................................... $577,318 $260,175 $ 87,270
Food and beverage........................................ 248,072 94,816 26,609
Other.................................................... 63,524 30,119 7,371
-------- -------- --------
Total hotel revenue.............................. 888,914 385,110 121,250
Gaming................................................... 15,003 23,630 26,929
Interest from notes receivable........................... -- -- 113
Management fees and other income......................... 5,907 1,416 892
Gain on sale of real estate investments.................. 3,864 -- --
-------- -------- --------
913,688 410,156 149,184
-------- -------- --------
EXPENSES
Rooms.................................................... 141,872 67,017 37,121
Food and beverage........................................ 181,430 72,696 19,520
Other.................................................... 290,852 135,302 28,376
-------- -------- --------
Total hotel expenses............................. 614,154 275,015 85,017
Gaming................................................... 16,499 21,834 24,242
Rent -- Trust............................................ 234,537 87,593 26,730
Interest -- Trust........................................ 16,336 9,084 4,761
Interest -- other........................................ 163 249 709
Depreciation and amortization............................ 25,295 13,228 6,492
Administrative and general............................... 15,029 12,361 3,273
-------- -------- --------
922,013 419,364 151,224
-------- -------- --------
Loss before minority interest............................ (8,325) (9,208) (2,040)
Minority interest........................................ 898 (1,493) (301)
-------- -------- --------
Loss before extraordinary items.......................... (9,223) (7,715) (1,739)
Extraordinary items due to early extinguishment of debt
(net of $413,000 minority interest)................... -- 1,077 --
-------- -------- --------
NET LOSS......................................... $ (9,223) $ (6,638) $ (1,739)
======== ======== ========
LOSS PER SHARE
Loss before extraordinary items.......................... $ (0.20) $ (0.26) $ (0.15)
Extraordinary items...................................... -- 0.04 --
-------- -------- --------
NET LOSS PER SHARE............................... $ (0.20) $ (0.22) $ (0.15)
======== ======== ========
LOSS PER SHARE ASSUMING DILUTION
Loss before extraordinary items.......................... $ (0.20) $ (0.26) $ (0.15)
Extraordinary items...................................... -- 0.04 --
-------- -------- --------
NET LOSS PER SHARE ASSUMING DILUTION............. $ (0.20) $ (0.22) $ (0.15)
======== ======== ========
Weighted Average Number of Shares.......................... 46,022 29,204 11,657
======== ======== ========
Weighted Average Number of Shares Assuming Dilution........ 46,022 29,204 11,657
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-12
<PAGE> 107
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss................................................. $ (9,223) $ (6,638) $ (1,739)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Minority interest..................................... 898 (1,493) (301)
Extraordinary items due to early extinguishment of
debt................................................ -- (1,077) --
Depreciation and amortization......................... 25,295 13,228 6,492
Deferred interest -- Trust............................ 7,935 2,055 --
Paired shares issued as compensation.................. 223 -- --
Gain on sale.......................................... (3,864) -- --
Provision for doubtful accounts....................... 1,293 1,044 470
Changes in operating assets and liabilities:
Increase in accounts receivable, inventories, prepaid
expenses and other assets........................... (54,228) (28,027) (4,749)
Increase in accounts payable and other liabilities.... 11,933 33,486 4,971
-------- -------- --------
Net cash provided by (used in) operating
activities..................................... (19,738) 12,578 5,144
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of hotel properties.......................... (67,096) (21,531) (21,551)
Improvements and additions to hotel assets............... (40,264) (12,114) (21,104)
Purchase of investments.................................. (7) -- --
Changes in investments................................... -- -- --
Net proceeds from sale of real estate investments........ 8,278 -- --
Purchase of notes receivable............................. -- (194) --
Principal received on notes receivable................... 5,859 65 59
Reorganization costs..................................... -- -- (1,407)
-------- -------- --------
Net cash used in investing activities............ (93,230) (33,774) (44,003)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under mortgage and other notes payable........ -- 668 --
Borrowings under mortgage notes payable -- Trust......... 27,000 18,216 --
Principal payments on mortgage and other notes payable... (900) (1,500) (9,463)
Net proceeds from equity offerings....................... 19,129 21,618 12,283
Contributed capital and adjustments...................... (1,118) 3 2,402
Stock repurchase......................................... (1,286) -- --
Distributions paid....................................... (1,054) -- --
Purchase of warrants..................................... -- -- (65)
Net change in notes payable -- Trust..................... 63,225 (4,815) 37,514
-------- -------- --------
Net cash provided by financing activities........ 104,996 34,190 42,671
-------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........... (7,972) 12,994 3,812
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD... 21,616 8,622 4,810
-------- -------- --------
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD......... $ 13,644 $ 21,616 $ 8,622
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-13
<PAGE> 108
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CORPORATION ADDITIONAL DISTRIBUTIONS TOTAL
COMMON PAID-IN IN EXCESS OF SHAREHOLDERS'
STOCK CAPITAL EARNINGS EQUITY
----------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
Balance January 1, 1995..................... $ 1,213 $ 64,192 $(67,147) $(1,742)
Decrease in par value to $0.01............ (1,092) 1,092 -- --
One-for-six reverse stock split........... (101) 101 -- --
Contributed capital....................... -- 6,625 -- 6,625
Equity offerings.......................... 118 12,165 -- 12,283
Minority interest......................... -- (4,622) -- (4,622)
Net loss.................................. -- -- (1,739) (1,739)
Warrant purchase.......................... -- (65) -- (65)
------- -------- -------- -------
Balance December 31, 1995................... 138 79,488 (68,886) 10,740
Contributed capital....................... -- 3 -- 3
Three-for-two stock split................. 135 (135) -- --
Equity offerings.......................... 128 21,490 -- 21,618
Net loss.................................. -- -- (6,638) (6,638)
Change in minority interest............... -- (2,362) -- (2,362)
------- -------- -------- -------
Balance December 31, 1996................... 401 98,484 (75,524) 23,361
Contributed capital....................... 53 13,249 -- 13,302
Equity offerings.......................... 63 19,067 -- 19,130
Stock repurchase.......................... (4) (624) (658) (1,286)
Net loss.................................. -- -- (9,223) (9,223)
Distributions............................. -- -- (447) (447)
Change in minority interest............... -- (5,840) -- (5,840)
------- -------- -------- -------
Balance December 31, 1997................... $ 513 $124,336 $(85,852) $38,997
======= ======== ======== =======
</TABLE>
See accompanying notes to financial statements.
F-14
<PAGE> 109
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND DESCRIPTION OF BUSINESS.
General
The accompanying financial statements 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, the "Company"). 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 of the Corporation (a
"Corporation Share") for each common share of beneficial interest 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.
As of December 31, 1997, the Company owned and operated primarily upscale
hotels located throughout the United States, Mexico and Scotland and leased and
operated one hotel/casino in Las Vegas, Nevada. The hotels, ranging in size from
90 to 960 rooms, offer services to both business and leisure travelers.
Reorganization
Effective January 1, 1995 (the "Reorganization Date"), the Trust and the
Corporation consummated a reorganization (the "Reorganization") with a
predecessor of Starwood Capital Group, L.L.C. ("Starwood Capital") and certain
affiliates of Starwood Capital (together with Starwood Capital, the "Starwood
Partners").
The Reorganization involved a number of related transactions that occurred
simultaneously on the Reorganization Date. Such transactions included (i) the
formation of SLT Realty Limited Partnership (the "Realty Partnership") and the
contribution by the Trust to the Realty Partnership of substantially all the
properties and assets of the Trust, at book value, subject to substantially all
the liabilities of the Trust (including the senior debt of the Trust), in
exchange for a 28.3% interest as general partner in the Realty Partnership, (ii)
the contribution by the Starwood Partners to the Realty Partnership of
approximately $12.6 million in cash in addition to certain hotel properties and
first mortgage notes, at book value, in exchange for limited partnership units
representing the remaining 71.7% interest in the Realty Partnership, (iii) the
formation of SLC Operating Limited Partnership (the "Operating Partnership," and
together with the Realty Partnership, the "Partnerships") and the contribution
by the Corporation of all its properties and operating assets (except gaming
assets, which are to be contributed upon approval by Nevada gaming authorities),
subject to substantially all liabilities, to the Operating Partnership, in
exchange for a 28.3% interest as general partner in the Operating Partnership,
and (iv) the contribution by the Starwood Partners to the Operating Partnership
of approximately $1.4 million in cash in addition to furniture, fixtures and
equipment of the hotel properties, at book value, in exchange for limited
partnership units representing the remaining 71.7% interest in the Operating
Partnership.
In addition, on March 24, 1995, a Starwood Partner exchanged $12 million of
senior debt of the Trust for additional limited partnership units of the Realty
Partnership and the Operating Partnership. After giving effect to the
Reorganization and this exchange of senior debt, the Trust had a 25.4% general
partnership interest in the Realty Partnership, the Corporation had a 25.4%
general partnership interest in the Operating Partnership, and the Starwood
Partners held limited partnership interests representing the remaining 74.6%
interest in each of the Realty Partnership and the Operating Partnership.
On July 6, 1995, the Company completed the 1995 Offering (see Note
19 -- Shareholders' Equity). Net proceeds of the 1995 Offering were contributed
by the Trust and the Corporation to the Realty Partnership and the Operating
Partnership, respectively. After giving effect to the 1995 Offering, the Trust
and the
F-15
<PAGE> 110
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Corporation had a majority general partnership interest in the Realty
Partnership and the Operating Partnership, respectively. Accordingly, the Realty
Partnership and the Operating Partnership are included in the consolidated
financial statements of the Trust and the Corporation, respectively.
2. SIGNIFICANT ACCOUNTING POLICIES.
Cash and cash equivalents
Cash and cash equivalents are defined as cash on hand and in banks plus all
short-term investments with a maturity, at the date of purchase, of three months
or less.
Investments
Gains and losses on sales of investments are calculated based on the
specific identification method and are recognized at the time the investments
are sold.
Inventories
Inventories, consisting primarily of food and beverage, are stated at the
lower of cost or market with cost determined on a first-in, first-out basis.
Debt issuance costs
The costs incurred in connection with certain of the Company's debt
financings are included in prepaid expenses and other assets and are being
amortized using the effective interest method over the term of the related debt.
Hotel assets
Hotel assets are stated at the lower of cost or fair value and are
depreciated using the straight-line method over estimated useful lives of 20 to
30 years for buildings and improvements and 3 to 12 years for furniture,
fixtures and equipment. Amounts allocated to leasehold interests are amortized
using the straight-line method over the lease terms.
The Company evaluates the carrying values of each of the Company's hotel
assets on a quarterly basis for any possible impairment. For each hotel asset
not held for sale, the expected undiscounted future cash flows of the asset
(generally over a five-year period) are compared to the net book values of the
asset. If the expected undiscounted future cash flows are less than the net book
value of the asset, the excess of the net book value over the estimated fair
value is charged to current earnings. When an asset is identified by management
as held for sale, the Company discontinues depreciating the asset and estimates
the fair value of such asset. If in management's opinion the fair value of a
hotel asset which has been identified for sale is less than the net book value
of the asset, a reserve for losses is established. Fair value is determined
based upon discounted cash flows of the hotel assets at rates (approximately
10%) deemed reasonable for the type of property and prevailing market
conditions, appraisals and, if appropriate, current estimated net sales proceeds
from pending offers.
A gain or loss is recorded to the extent the amounts ultimately received
for the sale of hotel assets differ from the adjusted book values of the hotel
assets. Gains and losses on sales of hotel assets are recognized at the time the
hotel assets are sold provided there is reasonable assurance of the
collectibility of the sales price and any future activities to be performed by
the Company relating to the hotel assets sold are insignificant.
F-16
<PAGE> 111
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Mortgage notes receivable
Interest income is not accrued for delinquent loans or loans for which
collectibility is uncertain and the fair value of the underlying property
collateralizing the loan is less than the outstanding principal and accrued
interest. An allowance for loss is established based upon an analysis of the net
realizable value of the underlying property collateralizing the loan.
Intangible assets
Intangible assets are included in other assets and are amortized on a
straight-line basis using lives ranging from 5 to 40 years based on management's
assessment of the future value of the intangible assets. The intangible assets
are valued based on market studies of the assets purchased. The Company
evaluates the carrying values of intangible assets in the same manner that it
evaluates the carrying values of hotel assets.
Derivatives
The Company enters into interest-rate protection agreements to manage
interest rate exposure on anticipated transactions. 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.
In order for the amounts paid or received to be deferred under such
agreements, and therefore treated as a hedge, the Company must determine that it
is probable that the future issuance of debt anticipated by the contract will
occur. In order to assess whether this criteria has been met, the Company
reviews current projections to determine if the issuance of such debt is in line
with the Company's plans and whether the Company has the ability to issue such
debt.
Interest-rate protection agreements associated with debt for which the
Company deems issuance to be improbable are recorded as an asset or liability at
fair value with changes in fair value reported as treasury lock settlement on
the statements of operations (the fair value method).
Hotel revenue
Revenue is recognized as earned. Earned is generally defined as the date
upon which a guest occupies a room and/or utilizes the hotel's services. Ongoing
credit evaluations are performed and potential credit losses are expensed at the
time the account receivable is estimated to be uncollectible. Historically,
credit losses have not been material to the hotels' results of operations.
Gaming revenue
Gaming revenue includes the net win from gaming activities, as well as
room, food and beverage and other revenues, net of promotional allowances for
the Company's gaming properties.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the
F-17
<PAGE> 112
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to the 1996 and 1995 financial
statements to conform with the 1997 financial statement presentation.
Principles of consolidation
The combined consolidated financial statements reflect the consolidated
financial statements of the Trust and the Corporation. The consolidated
financial statements of the Trust and the Corporation reflect the activities of
Starwood Hotels & Resorts and its subsidiaries and Starwood Hotels & Resorts
Worldwide, Inc. and its subsidiaries, respectively. All material intercompany
balances and transactions between the consolidated Trust and the consolidated
Corporation have been eliminated in the combined consolidated financial
statements.
Earnings (loss) per share
All earnings per share amounts for all periods have been presented and,
where appropriate, restated to conform to Statement of Financial Accounting
Standards No. 128, Earnings per Share (SFAS 128). The weighted average number of
shares and Paired Shares were determined as if the six-for-one reverse stock
split that occurred June 19, 1995 and the three-for-two stock split that
occurred on January 27, 1997 were both effective January 1, 1995. Historical per
share and per Paired Share information has been restated accordingly.
The outstanding limited partnership units of the Realty Partnership and the
Operating Partnership have been excluded from the diluted earnings per share
calculations as there would be no effect on the amounts since the minority
interests' share of income would also be added back to net income.
Share option plans
The Company has elected to apply APB Opinion 25 and related Interpretations
in accounting for its share option plans. However, the Company discloses pro
forma compensation cost consistent with Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123).
Impact of recently issued accounting standards
In February 1997, the Securities and Exchange Commission issued Financial
Reporting Release No. 48, Disclosure of Accounting Policies for Derivative
Financial Instruments and Derivative Commodity Instruments and Disclosure of
Quantitative and Qualitative Information about Market Risk Inherent in
Derivative Financial Instruments, Other Financial Instruments, and Derivative
Commodity Instruments (FRR 48). FRR 48 requires clarification and expansion of
existing disclosures in the footnotes to the financial statements for derivative
financial instruments, other financial instruments and derivative commodity
instruments, as defined therein. These disclosures are required in filings that
include financial statements for periods ending after June 15, 1997 and,
accordingly, have been included herein in the footnotes to the Company's
financial statements for the year ended December 31, 1997.
Additionally, the amendments expand existing disclosure requirements to
include quantitative and qualitative discussions with respect to market risk
inherent in market risk sensitive instruments. These amendments are designed to
provide additional information about market risk sensitive instruments which
investors can use to better understand and evaluate market risk exposures of
registrants, including the
F-18
<PAGE> 113
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Company. These disclosures, subject to certain market capitalization
requirements, as defined, are effective for filings that include annual
financial statements for years ending after September 15, 1998.
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income (SFAS 130), which establishes standards for the reporting and display of
comprehensive income and its components. This statement requires a separate
statement to report the components of comprehensive income for each period
reported. The provisions of this statement are effective for fiscal years
beginning after December 15, 1997. Management believes this statement will
require expanded disclosure in the Company's financial statements.
In June 1997, the FASB also issued Statement of Financial Accounting
Standards No. 131, Disclosures about Segments of an Enterprise and Related
Information (SFAS 131), 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 periods beginning after
December 15, 1997. Management believes this statement will require expanded
disclosure in the Company's financial statements.
3. FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK.
At December 31, 1997 and 1996, the Company had significant amounts in banks
that were in excess of federally insured amounts.
The financial position of the Company at December 31, 1997 and 1996
includes certain financial instruments which may have a fair value that is
different from the value currently reflected on the financial statements. The
following methods and assumptions were used to estimate the fair value of each
class of financial instruments for which it is practical to estimate that value.
However, considerable judgment is necessary to interpret market data and develop
the related estimates of fair value. Accordingly, the estimates presented herein
are not necessarily indicative of the amounts that could be realized upon
disposition of the financial instruments. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.
Investments
Fair value is based on market prices for the last day of the period if the
investment trades on quoted exchanges. For non-traded investments, fair value
was estimated based on the underlying value of the investment.
Mortgage and other notes receivable
For adjustable rate mortgages, fair value approximates carrying value due
to the variable nature of the interest rates. For fixed rate mortgages, fair
value is determined based upon discounted cash flows from the note at rates
deemed reasonable for the type of note and prevailing market conditions,
appraisals and, if appropriate, current estimated net sales proceeds from
pending offers.
Collateralized notes payable, lines of credit, mortgage and other notes
payable
For adjustable rate debt, fair value approximates carrying value due to the
variable nature of the interest rates. For fixed rate debt, fair value is
determined based upon discounted cash flows for the debt at rates deemed
reasonable for the type of debt and prevailing market conditions and, if
appropriate, the length to maturity for the debt.
F-19
<PAGE> 114
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The following balances represent the carrying amount and fair value of the
Trust's financial instruments as of December 31, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
1997 1996
--------------------- -------------------
FOOTNOTE CARRYING FAIR CARRYING FAIR
REFERENCE AMOUNT VALUE AMOUNT VALUE
--------- ---------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Investments............... Note 5 $ 1,451 $ --(4) $ 948 $ 2,085
Notes receivable.......... -- 35,255 --(2) 2,237 --(2)
Mortgage notes
receivable --
variable................ Note 14 10,344 --(1) 45,228 --(1)
Mortgage notes
receivable -- fixed..... Note 14 40,853 40,187(3) 45,513 47,800
Collateralized notes
payable and lines of
credit.................. Note 11 1,221,727 --(1) 422,334 --(1)
Mortgage and other notes
payable................. Note 12 217,567 --(1) 55,269 --(1)
</TABLE>
The following balances represent the carrying amount and fair value of the
Corporation's financial instruments as of December 31, 1997 and 1996 (in
thousands):
<TABLE>
<CAPTION>
1997 1996
--------------------- -------------------
FOOTNOTE CARRYING FAIR CARRYING FAIR
REFERENCE AMOUNT VALUE AMOUNT VALUE
--------- ---------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Investments............... Note 5 $ 247 $ 253 $ -- $ --
Notes receivable.......... -- 601 601 693 693
Mortgage and other notes
payable................. Note 12 126,720 --(2) 1,963 --(1)
</TABLE>
- ---------------
(1) The carrying value approximates fair value due to the interest rates being
variable or in line with market rates.
(2) The carrying value approximates fair value due to the short-term nature.
(3) These mortgage notes are collateralized by the hotel property which has a
fair value that is at least equal to the carrying value.
(4) The carrying value approximates fair value based on market prices and the
value of the underlying collateral.
4. INTANGIBLE ASSETS.
A summary of intangible assets at December 31 is as follows (in thousands):
<TABLE>
<CAPTION>
TRUST CORPORATION
------------------ ------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Organizational costs................ $ 3,541 $ 3,541 $ 3,541 $ 3,541
Management company.................. -- -- 14,500 --
Accumulated amortization............ (2,110) (1,373) (2,714) (1,373)
------- ------- ------- -------
Intangible assets, net.............. $ 1,431 $ 2,168 $15,327 $ 2,168
======= ======= ======= =======
</TABLE>
5. INVESTMENTS.
For the year ended December 31, 1997, the Trust recorded a $1.2 million
gain (net of related expenses) realized in conjunction with the sale of
securities.
F-20
<PAGE> 115
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
For the year ended December 31, 1996, the Trust recorded a $290,000 gain
(net of related expenses) realized in conjunction with the sale of securities
which were purchased in contemplation of acquiring a portfolio of hotel
properties and a $750,000 gain (net of related expenses) realized in connection
with the sale of securities.
6. ALLOWANCE FOR ACCOUNTS RECEIVABLE.
For the years ended December 31, 1997 and 1996, the Corporation recorded an
allowance for doubtful accounts of approximately $2.9 million and $1.5 million,
respectively.
7. INCOME TAXES.
The Trust has elected to be treated as a REIT under the provisions of the
Internal Revenue Code ("IRC") beginning with the 1995 year. As a result, the
Trust will not be subject to Federal income tax on its taxable income at
corporate rates to the extent it distributes annually 100% of its taxable income
to its shareholders and complies with certain other requirements.
Components of deferred income taxes for the Corporation as of December 31,
1997 and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Deferred income tax assets:
Net operating loss carryforwards..................... $ 7,574 $ 7,574
Investments in partnerships.......................... 2,725 2,725
Property and equipment............................... 3,669 745
Other................................................ 2,267 251
-------- --------
Total deferred income tax assets.................. 16,235 11,295
Valuation allowance.................................... (16,235) (11,295)
-------- --------
Net deferred income tax................................ $ -- $ --
======== ========
</TABLE>
As of December 31, 1997, the Corporation had net operating loss carry
forwards ("NOL") for federal income tax purposes of approximately $22.3 million.
The NOL expires in various years beginning in 2006 through 2011.
The utilization of the Corporation's NOL will be limited by the provisions
of IRC Section 382. A valuation allowance is provided for the full amount of the
NOL as the realization of tax benefits from the NOL is not assured.
8. EXTRAORDINARY ITEMS.
During 1997, the Trust recognized an extraordinary loss of $4.4 million
before minority interest resulting from early extinguishment of debt. The
extraordinary loss represents financing costs associated with the Trust's then
existing indebtedness that was retired upon entering into a new $1.2 billion
credit facility (the "$1.2 Billion Facility").
During 1996, the Corporation repaid a note secured by the Milwaukee
Sheraton at a discount of approximately $1.5 million. As a result, the
Corporation recognized an extraordinary gain from early extinguishment of debt
of $1.5 million before minority interest.
Under the terms of a Credit Agreement dated January 28, 1993 (the "1993
Credit Agreement"), the Trust restructured its debt existing at such time.
Management concluded that restructuring represented a
F-21
<PAGE> 116
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
"troubled debt restructuring" as defined under generally accepted accounting
principles and, accordingly, upon execution of the 1993 Credit Agreement,
accrued all known current or future identifiable debt restructuring costs as of
December 31, 1992. Upon execution of an Amended and Restated Credit Agreement
dated March 24, 1995 (the "1995 Credit Agreement"), the Realty Partnership
recognized extraordinary income of approximately $1.3 million relating to the
extinguishment of debt under the terms of the 1993 Credit Agreement,
representing the remaining amount of the accrual at March 24, 1995.
Additionally, in July 1995, the Realty Partnership repaid existing indebtedness
borrowed under the 1995 Credit Agreement and recorded an extraordinary charge to
net income of approximately $3.6 million relating to the extinguishment of such
debt.
9. LOAN RESTRUCTURING COSTS.
All restructuring costs in relation to the "troubled debt restructuring"
referred to in Note 8 were expensed as incurred. In 1993, upon execution of the
definitive debt restructuring agreement, $700,000 was paid by the Trust to
certain institutional lenders and approximately $4.0 million was added to the
loan balance under the terms of a credit agreement for restructuring costs due
the institutional lenders for legal and other experts. Previously accrued
restructuring costs of $611,000 were paid during the year ended December 31,
1995. As disclosed in Note 8 above, an additional $1.3 million of previously
accrued restructuring costs was recognized as extraordinary income during 1995.
At December 31, 1997 and 1996, there were no accrued loan restructuring costs
included in accounts payable and other liabilities.
10. SUPPLEMENTAL CASH FLOW DISCLOSURE.
Interest paid in cash by the Trust, net of amounts capitalized, for the
years ended December 31, 1997, 1996 and 1995 was approximately $55.7 million,
$21.5 million and $15.2 million, respectively. Interest paid in cash by the
Corporation in the years ended December 31, 1997, 1996 and 1995 was
approximately $16.5 million, $9.3 million and $1.3 million, respectively.
Dividends declared by the Trust in December 1997 and 1996 of approximately
$30.3 million and $19.3 million were paid in January 1998 and 1997,
respectively.
Interest expense incurred by the Corporation of approximately $3.0 million
on intercompany debt with the Trust was deferred in the year ended December 31,
1995.
A summary of non-cash items incurred by the Trust in the years ended
December 31, 1997, 1996 and 1995 is as follows:
Investing and operating activities
1997:
- Additional payments to the seller of the Westin Grand, Washington, DC,
of $3.0 million were accrued.
- Severance payments of $4.3 million, relating to the acquisition of HEI
Hotels L.L.C. and certain related hotels and management contracts (the
"HEI Portfolio"), were accrued.
Investing activities
1997:
- Approximately $2.1 million (net of $229,000 of accumulated depreciation)
in furniture, fixtures and equipment was received from the Corporation
increasing the intercompany payable by the same amount.
F-22
<PAGE> 117
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1996:
- Approximately $3.9 million (net of $116,000 of accumulated depreciation)
in furniture, fixtures and equipment was received from the Corporation
increasing the intercompany payable by the same amount.
- Approximately $19.8 million in mortgage notes receivable (net of
discounts of $3.4 million and allowances of $224,000) was reclassified
in conjunction with the acquisition of the equity of the Westin Hotel,
Washington, DC.
- Approximately $7.3 million in collateralized notes receivable was issued
in conjunction with the sale of the King 8 Hotel & Casino.
1995:
- Approximately $7.2 million (net of accumulated depreciation) in
furniture, fixtures and equipment was transferred to the Corporation
increasing the intercompany receivable by the same amount.
Investing and financing activities
1997:
- Approximately $29.0 million in mortgage debt was assumed in conjunction
with the acquisition of the New Orleans Crowne Plaza Hotel.
- Approximately $10.3 million in mortgage debt was assumed and $137,000 of
mortgage notes receivable was reclassified in conjunction with the
acquisition of the Stamford Sheraton Hotel.
- Approximately $215.0 million in limited partnership units and Paired
Shares was issued in conjunction with the acquisition of the HEI
Portfolio.
- Approximately $9.4 million in limited partnership units was issued in
conjunction with the acquisition of the Nashville Hermitage Hotel.
- Acquisitions of hotel properties were adjusted by approximately $2.1
million representing the minority interest in the Westwood Marquis
hotel.
- Approximately $118.8 million in mortgage debt was assumed in conjunction
with the acquisition of the three Westin Regina Resorts in Mexico (the
"Westin Reginas").
1996:
- Approximately $1.7 million in partnership units were issued in
conjunction with the acquisition of the Days Inn and Doubletree Guest
Suites in Philadelphia, PA.
- A one-time grant of approximately $6.0 million in restricted stock was
made in conjunction with the acquisition of a portfolio of eight upscale
and luxury full-service hotels containing 3,141 total rooms acquired
from an institutional seller (the "Institutional Portfolio").
- Approximately $25.0 million in mortgage debt was assumed in conjunction
with the acquisition of the Boston Park Plaza hotel.
- Approximately $27.4 million in mortgage debt and $2.9 million in
accounts payable and other liabilities was assumed in conjunction with
the acquisition of the Doral Court and the Doral Tuscany.
F-23
<PAGE> 118
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
- Acquisitions of hotel properties of approximately $29.5 million were
reduced representing the minority interest in the Boston Park Plaza
hotel.
1995:
- In conjunction with the Reorganization in 1995, the Starwood Partners
contributed approximately $30.2 million (net of $474,000 of
depreciation) in land and buildings, approximately $49.2 million (net of
discounts of approximately $24.9 million and allowances of approximately
$2.9 million) in mortgage notes receivable and approximately $52.9
million (net of $6.0 million of debt forgiven by the Starwood Partners)
in long-term debt obligations for limited partnership units in the
Realty Partnership.
- A Starwood Partner exchanged approximately $12.0 million of senior debt
for partnership units of the Realty Partnership.
A summary of non-cash items incurred by the Corporation in the years ended
December 31, 1997, 1996 and 1995 is as follows:
Operating and financing activities
1997:
- In conjunction with the January 1998 acquisition of Westin Hotels &
Resorts Worldwide, Inc. ("Westin Hotels & Resorts") and certain
affiliates (collectively, "Westin" and such acquisition, the "Westin
Acquisition"), other assets including a wholly owned captive insurance
company and wholly owned payroll companies were purchased in December
1997 with a note payable to Westin Hotels & Resorts for approximately
$125.7 million (see Note 26 -- Subsequent Events).
Investing and financing activities
1997:
- Approximately $2.1 million (net of $229,000 of accumulated depreciation)
in furniture, fixtures and equipment was transferred to the Trust
increasing the intercompany receivable by the same amount.
- In conjunction with the acquisition of the Westin Regina Portfolio,
mortgage notes payable to the Trust increased by approximately $118.8
million.
1996:
- Approximately $3.9 million (net of $116,000 of accumulated depreciation)
in furniture, fixtures and equipment was transferred to the Trust
increasing the intercompany receivable by the same amount.
1995:
- In conjunction with the Reorganization in 1995, the Starwood Partners
contributed approximately $3.7 million (net of $757,000 of depreciation)
of furniture, fixtures and equipment for limited partnership units of
the Operating Partnership.
- A Starwood Partner exchanged approximately $12.0 million of senior debt
for partnership units of the Operating Partnership.
- Approximately $7.2 million (net of accumulated depreciation) in
furniture, fixtures and equipment was received from the Trust increasing
the intercompany payable by the same amount.
F-24
<PAGE> 119
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
11. COLLATERALIZED NOTES PAYABLE AND REVOLVING LINES OF CREDIT.
The following is a summary of the Trust's credit facilities (the
"Facilities") as of December 31, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
AMOUNT AMOUNT
AMOUNT OF OUTSTANDING OUTSTANDING
FACILITY/LENDER EXPIRATION DATE FACILITY AT 12/31/97 AT 12/31/96 INTEREST TERMS
--------------- ------------------ ---------- ----------- ----------- -------------------------
<S> <C> <C> <C> <C> <C>
$1.2 Billion Facility/Bankers Trust
Company............................. September 10, 2000 $1,200,000 $1,183,000 $ -- One-, two-, or
three-month LIBOR + 1.75%
Tax Exempt Bonds..................... October 2013 39,470 38,727 -- 6.70%
Goldman Facility/Goldman Sachs....... August 16, 1997 300,000 -- 140,000 One-month LIBOR + 1.75%
Acquisition Facility/Lehman
Brothers............................ October 1, 1998 135,000 -- 117,800 One-, two-, or
three-month LIBOR +
1.625%
Term Loan/Lehman Brothers............ April 26, 1997 93,960 -- 93,960 One-, two-, or
three-month LIBOR + 1.95%
for $23.96 million &
+1.75% for $70 million
Mortgage Facility/Lehman Brothers.... July 25, 1997 71,000 -- 70,600 One-month LIBOR + 1.75%
---------- ---------- --------
Totals............................... $1,839,430 $1,221,727 $422,360
========== ========== ========
<CAPTION>
FACILITY/LENDER COLLATERAL
--------------- -----------------------
<S> <C>
$1.2 Billion Facility/Bankers Trust
Company............................. Unsecured
Tax Exempt Bonds..................... Westin Philadelphia and
Days Inn Philadelphia
Goldman Facility/Goldman Sachs....... Certain properties of
the Company
Acquisition Facility/Lehman
Brothers............................ Certain properties of
the Company
Term Loan/Lehman Brothers............ Certain properties of
the Company
Mortgage Facility/Lehman Brothers.... Certain mortgage loans
Totals...............................
</TABLE>
At December 31, 1997 and 1996, unused commitments on the Facilities were
$17.0 million and $177.6 million, respectively.
At December 31, 1997, all Facilities outstanding at December 31, 1996 have
been repaid. At December 31, 1997, the only Facility that had covenants was the
$1.2 Billion Facility. This Facility required that the Company maintain a
specified debt service ratio, loan to value ratio, and minimum net worth. In
addition, the $1.2 Billion Facility placed restrictions on distributions and
required the Trust to maintain its REIT status. As of December 31, 1997 and
1996, the Company was in compliance with its covenants.
On May 27, 1997, the Company entered into an interest rate protection
agreement which had the effect of fixing the base rate of interest at 6.773% for
debt with an aggregate notional principal amount of $100 million and a term to
maturity of five years. On October 10, 1997, the Company rolled this position to
January 30, 1998, which had the effect of fixing the base rate of interest at
6.9105%. The actual interest rate was to be determined by reference to this base
rate. As of December 31, 1997, the Company determined that it did not intend to
issue debt using this treasury lock agreement and, accordingly, accrued $6.6
million. In January 1998, the Company settled this treasury lock agreement.
On July 29, 1997, the Company rolled a previously transacted interest rate
protection agreement to January 30, 1998, which had the effect of fixing the
base rate of interest at 6.09725% for debt that the Company intended to issue in
the first quarter of 1998 with an aggregate notional principal amount of $100
million and a term to maturity of seven years. The actual interest rate was to
be determined by reference to this base rate. As of December 31, 1997, the
Company determined that it did not intend to issue debt using this treasury lock
agreement and, accordingly, accrued $3.2 million. In January 1998, the Company
settled this treasury lock agreement.
On July 29, 1997, the Company rolled a previously transacted interest rate
protection agreement to January 30, 1998, which had the effect of fixing the
base rate of interest at 6.95% for debt that the Company intended to issue in
the first quarter of 1998 with an aggregate notional principal amount of $150
million and a term to maturity of ten years. The actual interest rate was to be
determined by reference to this base rate. As
F-25
<PAGE> 120
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
of December 31, 1997, the Company determined that it did not intend to issue
debt using this treasury lock agreement and, accordingly, accrued $15.2 million.
In January 1998, the Company settled this treasury lock agreement.
12. MORTGAGE AND OTHER NOTES PAYABLE.
At December 31, 1997 and 1996, the Trust had the following outstanding
mortgage and other notes payable (in thousands):
<TABLE>
<CAPTION>
FACILITY/LENDER DUE DATE 1997 1996 INTEREST TERMS
--------------- -------------- -------- ------- -------------------------
<S> <C> <C> <C> <C>
Bancomer Note/
Bancomer SA......... May 1998 $118,750 $ -- One-, two- or three-month
LIBOR + 1.69%
Crowne Plaza Note/
Hibernia National
Bank................ September 2002 29,000 -- One-month LIBOR + 2.00%
Doral Mortgage/
Sumitomo............ September 2001 27,375 27,375 7.64%
BPP Mortgage/ Georgia
Life................ July 2003 24,797 25,000 8.42%
Stamford Note/ Lehman
Brothers............ January 2000 10,250 -- One-month LIBOR + 2.25%
Term Note/Westin
Hotels & Resorts.... November 1999 7,395 2,830 Non-interest bearing
Other................. -- 64 Various
-------- -------
Total Mortgage and
Other Notes
Payable............. $217,567 $55,269
======== =======
</TABLE>
The Company intends to extend the terms of the Bancomer Note due in May
1998 or refinance this facility.
Minimum principal payments on the Trust's indebtedness for the years ending
December 31 are due as follows (in thousands):
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 THEREAFTER
-------- ------ ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total........................... $119,274 $7,965 $10,870 $28,049 $29,733 $21,676
</TABLE>
At December 31, 1997 and 1996, the Corporation had the following
outstanding mortgage and other notes payable (in thousands):
<TABLE>
<CAPTION>
FACILITY/LENDER DUE DATE 1997 1996 INTEREST TERMS
--------------- ------------ -------- ------ --------------
<S> <C> <C> <C> <C>
Westin Hotels & Resorts.................. January 1998 $125,657 $ -- 6.00%
First Mortgage Note...................... 1997 -- 341 9.75%
Other Notes Payable...................... 69 449 Various
Capital Leaseholds....................... 994 1,173 Various
-------- ------
Total Mortgage and Other Notes Payable... $126,720 $1,963
======== ======
</TABLE>
F-26
<PAGE> 121
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Minimum lease and principal payments on the Corporation's indebtedness for
the years ending December 31 are due as follows (in thousands):
<TABLE>
<CAPTION>
MINIMUM FUTURE PRINCIPAL PAYMENTS
YEAR LEASE PAYMENTS DUE UNDER NOTES
---- -------------- ------------------
<S> <C> <C>
1998........................................ $ 244 $125,726
1999........................................ 244 --
2000........................................ 244 --
2001........................................ 100 --
2002........................................ 100 --
Thereafter.................................. 400 --
------ --------
Total............................. 1,332 $125,726
========
Amount representing interest................ (338)
------
Future minimum lease payments............... $ 994
======
</TABLE>
At December 31, 1997 and 1996, the Corporation had approximately $1.2
million in assets (less $388,000 and $233,000, respectively, in accumulated
amortization) recorded under capital leaseholds. Such amounts are included in
furniture, fixtures and equipment.
13. SALES OF REAL ESTATE INVESTMENTS AND RESERVE FOR LOSSES.
During the year ended December 31, 1997, the Company sold its interests in
four hotel assets: the Radisson Marque Hotel located in Winston-Salem, North
Carolina; the Best Western located in Las Cruces, New Mexico; the Best Western
Airport located in El Paso, Texas; and the Best Western located in Savannah,
Georgia. The Radisson Marque was sold for approximately $7.6 million in cash
recognizing a loss of approximately $614,000. The Las Cruces, El Paso and
Savannah properties were sold concurrent with the Company's acquisition of the
Crowne Plaza Hotel in New Orleans, Louisiana, for approximately $12.0 million in
cash recognizing a loss of approximately $314,000.
For the year ended December 31, 1997, the Trust recognized a gain of $3.2
million on sales of real estate investments including $2.5 million resulting
from the payoff of the mortgage notes receivable relating to properties located
in Atlantic City, New Jersey, and $322,000 resulting from the payoff of the
mortgage note receivable relating to a property located in Milpitas, California.
For the year ended December 31, 1997, the Corporation recognized a gain of $3.9
million on sales of real estate investments including $4.5 million resulting
from the payoff of notes receivable relating to a property located in Milpitas,
California.
For the year ended December 31, 1997, the Trust accrued a loss of $1.8
million on three of its hotels held for sale at December 31, 1997. The loss was
calculated by subtracting the offer amount from the net book value of the hotel
assets. These hotels were subsequently sold in February 1998.
During the year ended December 31, 1996, the Company sold its interests in
three hotel assets: the Best Western Columbus North located in Columbus, Ohio;
the Bourbon Street Hotel & Casino located in Las Vegas, Nevada; and the King 8
Hotel & Casino located in Las Vegas, Nevada. The Columbus property was sold for
an all cash price of approximately $3.1 million. The Bourbon Street property was
sold for an all cash price of $7.6 million. The King 8 Hotel & Casino real
property was sold for $18.8 million, consisting of $11.6 million in cash and a
$7.2 million promissory note collateralized by the hotel and the casino. The
note bears interest at 13.5% per annum through November 5, 1997, 14.5% per annum
through November 5, 1998, 15.5% per annum through November 5, 1999 and 16.5% per
annum thereafter. Accrued interest on the note is due monthly with all unpaid
principal and accrued interest due in May 2000. The $7.2 million note was repaid
F-27
<PAGE> 122
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
in 1997. The personal property and casino equipment of the King 8 Hotel & Casino
will be sold for approximately $3.0 million to the hotel purchaser following
receipt by the purchaser of required gaming approvals. A subsidiary of the
Corporation, Hotel Investors Corporation of Nevada, leases the real property
from the purchaser and has agreed to continue to operate the hotel and casino to
the earlier of when the purchaser or his designee obtains required gaming
licenses and approvals or June 30, 1998.
During the year ended December 31, 1996, the Company sold an office
building adjacent to the Doubletree Guest Suites located in Lexington, Kentucky,
for an all cash price of approximately $675,000.
For the year ended December 31, 1996, the Trust recognized a gain of
approximately $4.3 million and the Corporation recognized no gain or loss on
sales of real estate investments.
During the year ended December 31, 1995, the Company did not sell any of
its real estate investments. 14. MORTGAGE NOTES RECEIVABLE.
A summary of the Trust's mortgage notes receivable at December 31 is as
follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------------------------------- --------------------------------
FIXED(1) VARIABLE(2) TOTAL FIXED(1) VARIABLE(2) TOTAL
-------- ----------- ------- -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
First mortgage............... $40,953 $10,344 $51,297 $45,479 $45,228 $90,707
Second, third, fourth
mortgage................... -- -- -- 134 -- 134
Allowance for loan loss...... (100) (100)
------- -------
Total.............. $51,197 $90,741
======= =======
</TABLE>
Aggregate principal payments under the mortgage notes receivable at
December 31, 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 THEREAFTER
------ ------- ------ ------ ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total.................... $7,429 $15,231 $3,664 $3,966 $31,213 $1,492
</TABLE>
- ---------------
(1) The fixed rate first mortgages had interest rates ranging from 8.0% to 10.0%
per annum at December 31, 1997 and 1996. The one fixed rate second mortgage
note had an interest rate of 7.0% per annum at December 31, 1996.
(2) The variable first mortgages had an interest rate of 6.97% per annum at
December 31, 1997 and 6.81% to 13.5% per annum at December 31, 1996.
15. MILWAUKEE SHERATON.
In December 1985, the Trust sold its interest in the Milwaukee Sheraton to
Milwaukee Brookfield Limited Partnership ("Brookfield"). In connection with the
sale, the Trust received a second mortgage note from Brookfield.
In July 1991, ownership and operation of the Milwaukee Sheraton was
reorganized and ownership of the hotel was transferred from Brookfield to
Moorland Hotel Limited Partnership ("MHLP"), a limited partnership in which the
Corporation (the sole general partner) at such time had a 51% interest and
Brookfield (the sole limited partner) at such time had the remaining 49%
interest. The operations of MHLP have been consolidated into the Corporation's
financial statements from the date of reorganization, and accordingly, the Trust
has recorded the notes receivable from MHLP as notes receivable from the
Corporation (see accompanying Schedule IV). The Corporation and MHLP entered
into an agreement for the Corporation to manage the property.
F-28
<PAGE> 123
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
During 1996, the Corporation purchased the remaining 49% interest in MHLP
for $240,000 and assumed all outstanding MHLP debt. Also in 1996, the
Corporation negotiated the repayment of all third-party debt at a discount of
$1.5 million. As a result, the Corporation recorded an extraordinary gain from
early extinguishment of debt (see Extraordinary Items in Note 8).
16. HOTEL PROPERTIES.
A summary of hotel assets at December 31 is as follows (in thousands):
<TABLE>
<CAPTION>
TRUST CORPORATION
------------------------ --------------------
1997 1996 1997 1996
---------- ---------- -------- --------
<S> <C> <C> <C> <C>
Land......................... $ 354,901 $ 164,472 $ 22,311 $ 3,111
Buildings and improvements... 1,797,944 807,918 246,069 93,876
Furniture, fixtures and
equipment.................. 261,584 85,717 115,692 68,395
Construction in progress..... 61,737 16,939 19,679 3,525
Accumulated depreciation and
amortization............... (161,459) (70,654) (85,038) (47,769)
Reserve for losses........... (4,169) (3,469) (388) (388)
---------- ---------- -------- --------
Hotel assets -- net..... $2,310,538 $1,000,924 $318,325 $120,750
========== ========== ======== ========
</TABLE>
17. REAL ESTATE INVESTMENTS AND INTERCOMPANY TRANSACTIONS.
At December 31, 1997, the Trust owned equity interests in 96 hotels. Of
that number, ninety properties were owned in fee and six were held pursuant to
long-term leases.
Ninety-three of the Trust's hotels are leased to the Corporation.
As of December 31, 1997, three hotels were leased to and operated by
Imperial Hotels Corporation, formerly Vagabond Inns, Inc. pursuant to ground
leases. These hotels were subsequently sold in February 1998. As of December 31,
1997, five of the hotels leased by the Corporation from the Trust were managed
by third-party operators. The management agreements are for various terms,
expiring between 1999 and 2009, and are subject to certain cancellation
provisions. One management agreement has management fees calculated as a
percentage of operating profit, whereas the other agreements provide for base
management fees that range from 3% to 3.5% of gross revenues with incentive
management fees based upon hotel profitability.
The leases between the Trust and the Corporation are generally long-term
and provide for annual base, or minimum rents, plus contingent, or percentage
rents based on the gross revenues of the properties and are accounted for as
operating leases. The leases are "triple-net" in that the lessee is generally
responsible for paying all operating expenses of the properties, including
maintenance, insurance and real property taxes. Total rental expense paid by the
Corporation to the Trust under such leases was approximately $234.5 million,
$87.6 million and $26.7 million for the years ended December 31, 1997, 1996 and
1995, respectively, of which approximately $98.9 million, $26.8 million and $5.4
million was contingent. The lessee is also generally responsible for any
payments required pursuant to underlying ground leases.
The Trust's minimum future rents at December 31, 1997 to be received under
non-cancelable operating leases for the years ending December 31 are as follows
(in thousands):
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 THEREAFTER
-------- -------- ------- ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Corporation.......... $218,912 $201,983 $98,662 $19,548 $7,570 $23,949
-------- -------- ------- ------- ------ -------
Total........... $218,912 $201,983 $98,662 $19,548 $7,570 $23,949
======== ======== ======= ======= ====== =======
</TABLE>
F-29
<PAGE> 124
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Corporation's minimum future rents at December 31, 1997 to be received
under non-cancelable operating leases for the years ending December 31 are as
follows (in thousands):
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 THEREAFTER
------ ------ ------ ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Other......................... $2,378 $1,882 $1,551 $837 $550 $1,933
------ ------ ------ ---- ---- ------
Total.................... $2,378 $1,882 $1,551 $837 $550 $1,933
====== ====== ====== ==== ==== ======
</TABLE>
The Corporation's minimum future rents at December 31, 1997 payable under
non-cancelable operating leases for the years ended December 31 are as follows
(in thousands):
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 THEREAFTER
-------- -------- -------- ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Trust................ $218,912 $201,983 $ 98,662 $19,548 $7,570 $23,949
Other................ 4,589 3,389 2,692 2,144 1,927 72,486
-------- -------- -------- ------- ------ -------
Total........... $223,501 $205,372 $101,354 $21,692 $9,497 $96,435
======== ======== ======== ======= ====== =======
</TABLE>
The Corporation is committed under its leases with the Trust to pay the
rents payable with respect to ground leases which expire in 1999 through 2067,
including renewal options. The ground leases generally provide for a minimum
rent plus a percentage of gross revenues of the properties in excess of the
minimum rent. Future minimum lease payments under the ground leases are included
in other rents payable in the table above. The Trust is the primary obligor
under the leases; however, the Corporation as lessee/operator of the hotels
makes payments under these leases directly to the lessors. Rent expense incurred
by the Corporation as a lessee/operator under these ground leases was
approximately $2.0 million, $871,000 and $739,000 in the years ended December
31, 1997, 1996 and 1995, respectively.
The Corporation leases certain equipment for the hotel's operations under
various lease agreements. The leases extend for varying periods through 2014 and
generally are for a fixed amount each month. Future minimum lease payments under
the non-cancelable operating leases are also included in other rents payable in
the table above.
The Trust's rents receivable from leased hotel properties at December 31
are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------- ---- ----
<S> <C> <C> <C>
Corporation:
Minimum....................................... $16,666 $ -- $ --
Contingent.................................... 4,240 510 --
------- ---- ----
20,906 510 --
------- ---- ----
Other:
Contingent.................................... 413 373 362
------- ---- ----
413 373 362
------- ---- ----
Total.................................... $21,319 $883 $362
======= ==== ====
</TABLE>
F-30
<PAGE> 125
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the Corporation's indebtedness to the Trust at December 31,
1997 and 1996 is as follows (in thousands):
<TABLE>
<CAPTION>
FOOTNOTE
REFERENCE 1997 1996
--------- -------- --------
<S> <C> <C> <C>
Intercompany Mortgage Notes:
Doral Lease Obligation............................ Note 17 $ 40,250 $ 40,250
MHLP Mortgage Notes............................... Note 15 31,785 29,611
Midland Hotel..................................... 19,975 18,216
Westin Regina Resort -- Cancun.................... 42,335 --
Westin Regina Resort -- Los Cabos................. 54,693 --
Westin Regina Resort -- Puerto Vallarta........... 25,327 --
Turnberry Hotel and Golf Resort................... 27,067 --
-------- --------
Total Intercompany Mortgage Notes......... 241,432 88,077
General Intercompany Notes.......................... 80,178 17,741
-------- --------
Total Intercompany Indebtedness........... $321,610 $105,818
======== ========
</TABLE>
Effective January 1, 1995, the general intercompany notes bear interest at
prime plus 2% with interest payable monthly and are due on January 1, 2000.
On September 20, 1995, the Realty Partnership purchased land for $3.0
million and mortgage notes receivable collateralized by the Doral Inn for $40.3
million. The mortgage note bears interest at 9.5% and matures on October 1,
2006. The Realty Partnership also entered into a long-term lease agreement with
SBK Delaware Realty Holdings, L.L.C. ("SBK"), the owners of the Doral Inn, to
lease SBK the land for $240,000 per year. Simultaneously, the Operating
Partnership entered into a long-term lease agreement with SBK to lease the land
and the building for $240,000 per year, plus the debt service on the mortgage
held by the Realty Partnership. The Operating Partnership lease agreement
includes a clause under which SBK is paid a management fee of 0.5% of gross
revenues. Under certain circumstances, SBK may be entitled to a share of hotel
profits above certain thresholds. The Realty Partnership has the option of
acquiring the building for the value of the mortgage note plus $400,000 after
ten years. It is management's intention to exercise that option. The Operating
Partnership has recorded the transaction as a capitalized lease with an
intercompany obligation to the Realty Partnership.
18. STOCK-BASED COMPENSATION AND EMPLOYEE BENEFITS.
Warrants to purchase Paired Shares
In 1996, two restricted stock awards were granted in the form of warrants
to purchase 22,500 Paired Shares each at an exercise price of $0.67. The Company
recognized $515,000 and $500,000 in compensation expense during 1997 and 1996,
respectively, related to the grant of these warrants. The warrants were
exercised in 1997.
At December 31, 1995, there were outstanding 414,993 warrants to purchase
Paired Shares at an exercise price of $67.80 per Paired Share through September
15, 1996. At the expiration date, each 100 warrants were convertible into one
Paired Share. Pursuant to the warrant agreement, the warrants were converted
into 3,954 Paired Shares and 196 fractional warrants were paid in cash at the
then current market value of a single Paired Share.
F-31
<PAGE> 126
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Restricted stock awards
The Company recognized approximately $2.2 million and $811,000 in
compensation expense during 1997 and 1996, respectively, related to the grant of
218,714 restricted stock awards granted in 1996 with a weighted average fair
value at the date of grant of $23.60 with a three-year vesting period.
In 1996, the Company granted a restricted stock award of 250,870 Paired
Shares in connection with the acquisition of the Institutional Portfolio. Such
restricted stock award vests as to two-thirds of such amount on August 12, 1997
and as to the remaining amount on August 12, 1998. The fair value of the
restricted stock (approximately $6 million based on the Paired Share closing
price on the date of award) at the date of grant was capitalized to hotel
assets.
Share option plans
The Trust and the Corporation each adopted Incentive and Non-Qualified
Share Option Plans in 1986 which provided for the purchase of up to an aggregate
of 175,000 Paired Shares by Trustees, Directors, officers and employees pursuant
to option grants. During the year ended December 31, 1995, the Trust and the
Corporation granted options to purchase 85,338 Paired Shares at exercise prices
ranging from $11.00 to $14.50 per Paired Share. Such options, which have
exercise prices equal to the Paired Shares' fair market value on the date of
grant, vest over three years.
During 1995, the Trust and the Corporation each also adopted a 1995 Share
Option Plan (the "Plans") which provided for the purchase of Paired Shares by
Trustees, Directors, officers, employees, consultants and advisors, pursuant to
option grants. The aggregate number of Paired Shares subject to options which
were available to be granted under the Plans was approximately 2.4 million plus
8% of any additional partnership units or Paired Shares issued subsequent to
August 17, 1995 (other than Paired Shares issued in exchange for partnership
units, Paired Shares issued pursuant to employee benefit plans or Paired Shares
that were previously issued and re-acquired by the Trust or the Corporation).
During 1996, the Trust and the Corporation each adopted an amendment and
restatement of their respective 1995 Share Option Plans (as amended, the
"LTIPs"). The LTIPs increased the number of Paired Shares which may be issued
pursuant to awards granted under each LTIP to approximately 6.4 million and
provided for the grant of Paired Shares that are subject to performance measures
or restriction periods and performance awards in tandem with certain Paired
Options to be paid in cash subject to performance measures. The LTIPs also
reduced the automatic annual grant of Paired Options (as defined) to Trustees
and Directors from options for 9,000 Paired Shares to options for 4,500 Paired
Shares and provides for the annual fee of Trustees and Directors to be paid in
Paired Shares, subject to each Trustee's and Director's option to receive up to
half in cash and to defer receipt of such annual fee until after terminating
service with the Company.
During 1997, the Trust and the Corporation each adopted a further amendment
and restatement of their respective LTIPs. The LTIP amendments increased the
number of Paired Shares for which awards may be granted under each LTIP to
approximately 9.85 million.
Under the provisions of SFAS 123, no compensation cost has been recognized
for the Company's stock option plans. However, had compensation cost for the
Company's stock-based compensation plans been determined based on the fair value
at the grant dates for awards under those plans consistent with the method of
SFAS 123, the Company's net income and earnings per Paired Share would have been
reduced to the pro forma amounts indicated below.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for 1997 and 1996, respectively (the
F-32
<PAGE> 127
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
statement is effective for grants starting in 1995): dividend yield of 3.96% and
3.9%, expected volatility of 30.36% and 57.21%, risk-free interest rate of U.S.
zero coupon bonds with time to maturity approximately equal to the options'
average time to exercise, and expected lives of the full vesting period for each
option.
<TABLE>
<CAPTION>
COMBINED COMBINED
1997 1996
-------- --------
<S> <C> <C>
Net Income (in thousands)
Pro forma.............................................. $25,677 $16,908
Earnings per Paired Share
Pro forma.............................................. $ 0.56 $ 0.57
Earnings per Paired Share Assuming Dilution
Pro forma.............................................. $ 0.53 $ 0.56
</TABLE>
During the years ended December 31, 1997 and 1996, the Trust and the
Corporation granted options under the LTIPs to purchase approximately 1.7
million and 2.9 million Paired Shares, respectively, to Trustees, Directors,
officers and employees, at exercise prices ranging from $34.75 to $57.44 and
$15.33 to $26.50 per Paired Share during 1997 and 1996, respectively. At
December 31, 1997, outstanding options granted under all plans of the Trust and
Corporation (including options granted to officers and directors of a company
previously acquired by the Trust) aggregated approximately 5.6 million Paired
Shares. At December 31, 1997, options for approximately 1.9 million Paired
Shares were fully vested with exercise prices ranging from $11.00 to $61.50 per
Paired Share.
A summary of the Company's stock option activity and related information
for the years ended December 31 follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------- --------------------------- ---------------------------
OPTIONS WEIGHTED-AVERAGE OPTIONS WEIGHTED-AVERAGE OPTIONS WEIGHTED-AVERAGE
(000'S) EXERCISE PRICE(1) (000'S) EXERCISE PRICE(1) (000'S) EXERCISE PRICE(1)
------- ----------------- ------- ----------------- ------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding --
beginning of
year............... 4,195 $21.06 1,503 $15.70 38 $20.46
Granted.............. 1,716 $43.57 2,890 $23.60 1,485 $15.45
Exercised............ (203) $17.12 (99) $11.96 (16) $ 4.66
Cancellations........ (129) $27.96 (99) $22.85 (4) $15.33
----- ----- -----
Outstanding -- end of
year............... 5,579 $26.78 4,195 $21.06 1,503 $15.70
===== ===== =====
Exercisable -- end of
year............... 1,877 $22.21 681 $17.39 195 $16.63
===== ===== =====
</TABLE>
- ---------------
(1) The weighted average exercise price equals weighted average fair value at
date of grant as all options were granted at fair market value on the date
of grant.
F-33
<PAGE> 128
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the Company's outstanding and exercisable options and related
information at December 31, 1997 follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------------------------- OPTIONS EXERCISABLE
WEIGHTED-AVERAGE --------------------------
RANGES OF OPTIONS REMAINING WEIGHTED-AVERAGE OPTIONS WEIGHTED-AVERAGE
EXERCISE PRICES (000'S) CONTRACTUAL LIFE EXERCISE PRICE (000'S) EXERCISE PRICE
- --------------- ------- ---------------- ---------------- ------- ----------------
<S> <C> <C> <C> <C> <C>
$ 0.00 - $15.33 1,061 7.30 $15.32 757 $15.32
$16.25 - $22.92 721 7.99 $21.20 291 $20.72
$23.92 - $23.92 1,687 8.61 $23.92 325 $23.92
$24.25 - $38.50 1,345 8.35 $33.22 444 $30.66
$40.63 - $61.50 765 9.65 $50.98 60 $44.44
----- -----
5,579 8.37 $26.78 1,877 $22.21
===== =====
</TABLE>
401(k) savings plan
Effective April 1, 1997, the Company implemented the Star Saver 401(k)
savings plan ("401(k) Plan"), which is a voluntary, defined contribution plan.
All employees are eligible to participate in the 401(k) Plan following
completion of one year of continuous service with the Company. Each participant
may contribute on a pre-tax basis between 1% and 15% of such participant's
compensation. The Company makes matching contributions on the participant's
behalf equal to 100% of each dollar contributed by the participant up to the
first 2% of the participant's compensation plus 50% of each dollar contributed
by the participant up to an additional 2% of the participant's compensation. The
Company made matching contributions of approximately $1.6 million for the year
ended December 31, 1997.
19. SHAREHOLDERS' EQUITY.
Preferred shares
The Corporation has 10.0 million authorized preferred shares, $0.01 par
value, none of which were issued or outstanding at December 31, 1997.
The Offerings
At December 31, 1997 and 1996, minority interest includes the 18.8% and
18.2%, respectively, limited partnership interests of the Realty Partnership and
the Operating Partnership, the 41.8% limited partnership interest in the joint
venture that owns the Boston Park Plaza, and various other interests in joint
ventures. The minority interest is adjusted to its relative ownership interest
at year end by reclassification from additional paid-in capital. The total
number of units outstanding were approximately 63.3 million and 49.0 million at
December 31, 1997 and 1996, respectively.
On March 26, 1997, the Company completed a public offering of 3.0 million
Paired Shares (the "March 1997 Offering"). Net proceeds of approximately $130.0
million were contributed by the Trust and the Corporation to the Realty
Partnership and the Operating Partnership, respectively.
On October 2, 1997, the Company sold approximately 2.5 million Paired
Shares (the "October 1997 Direct Placement") to a group of institutional buyers
in a direct placement. Net proceeds of approximately $131.6 million were
contributed by the Trust and the Corporation to the Realty Partnership and the
Operating Partnership, respectively.
On October 15, 1997, the Company sold approximately 2.2 million Paired
Shares (the "UBS Shares") to Union Bank of Switzerland ("UBS") in a private
placement (the "October 1997 UBS Placement" and
F-34
<PAGE> 129
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
together with the March 1997 Offering and the October 1997 Direct Placement, the
"1997 Offerings"). Net proceeds of approximately $125.0 million were contributed
by the Trust and the Corporation to the Realty Partnership and the Operating
Partnership, respectively.
Separately, the Company entered into a Forward Stock Agreement with UBS.
(See Note 20 -- Commitments and Contingencies).
On April 12, 1996, the Company completed a public offering of 3.0 million
Paired Shares (the "April 1996 Offering"). Net proceeds of the April 1996
Offering of approximately $62.4 million were contributed by the Trust and the
Corporation to the Realty Partnership and the Operating Partnership,
respectively.
On August 12, 1996, the Company completed a public offering (the "August
1996 Offering") of 16.2 million Paired Shares at a price of $23.92 per Paired
Share. Net proceeds of approximately $367.2 million were contributed by the
Trust and the Corporation to the Realty Partnership and the Operating
Partnership, respectively.
On July 6, 1995, the Company completed a public offering (the "1995
Offering") of 17.7 million Paired Shares at a price of $15.33 per Paired Share.
Net proceeds of the 1995 Offering of approximately $245.7 million were
contributed by the Trust and the Corporation to the Realty Partnership and the
Operating Partnership, respectively.
F-35
<PAGE> 130
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Earnings per share
The following sets forth the computation of basic and diluted earnings per
share for the years ended December 31 (in thousands except per share data):
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------------- ----------------------------------- ---------------------
COMBINED(1) TRUST CORPORATION COMBINED(1) TRUST CORPORATION COMBINED(1) TRUST
----------- ------- ----------- ----------- ------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NUMERATOR:
Numerator for basic and
diluted earnings per
share/Paired
Share -- income (loss)
before extraordinary
items...................... $41,524 $50,747 $(9,223) $25,874 $33,589 $(7,715) $11,125 $12,864
Extraordinary items.......... (3,452) (3,452) -- 1,077 -- 1,077 (2,155) (2,155)
------- ------- ------- ------- ------- ------- ------- -------
Numerator for basic and
diluted earnings per
share/Paired Share --income
(loss) from continuing
operations................. $38,072 $47,295 $(9,223) $26,951 $33,589 $(6,638) $ 8,970 $10,709
======= ======= ======= ======= ======= ======= ======= =======
DENOMINATOR:
Denominator for basic
earnings per share/Paired
Share -- weighted-average
shares..................... 46,022 46,022 46,022 29,204 29,204 29,204 11,657 11,657
Effect of dilutive
securities:
Employee stock
options(2)............... 2,310 2,310 -- 557 557 -- 53 53
Restricted stock awards.... 329 329 -- 85 85 -- -- --
Deferred stock grants...... 2 2 -- -- -- -- -- --
Warrants................... -- -- -- 38 38 -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Dilutive potential common
shares..................... 2,641 2,641 -- 680 680 -- 53 53
Denominator for earnings per
share/Paired Share assuming
dilution................... 48,663 48,663 46,022 29,884 29,884 29,204 11,710 11,710
======= ======= ======= ======= ======= ======= ======= =======
Earnings (loss) per
share/Paired Share before
extraordinary items........ $ 0.90 $ 1.10 $ (0.20) $ 0.88 $ 1.15 $ (0.26) $ 0.95 $ 1.10
Earnings (loss) per
share/Paired Share from
continuing operations...... $ 0.83 $ 1.03 $ (0.20) $ 0.92 $ 1.15 $ (0.22) $ 0.77 $ 0.92
Earnings (loss) per
share/Paired Share before
extraordinary items
assuming dilution.......... $ 0.85 $ 1.04 $ (0.20) $ 0.86 $ 1.12 $ (0.26) $ 0.95 $ 1.10
Earnings (loss) per
share/Paired Share from
continuing operations
assuming dilution.......... $ 0.78 $ 0.97 $ (0.20) $ 0.90 $ 1.12 $ (0.22) $ 0.77 $ 0.92
<CAPTION>
1995
-----------
CORPORATION
-----------
<S> <C>
NUMERATOR:
Numerator for basic and
diluted earnings per
share/Paired
Share -- income (loss)
before extraordinary
items...................... $(1,739)
Extraordinary items.......... --
-------
Numerator for basic and
diluted earnings per
share/Paired Share --income
(loss) from continuing
operations................. $(1,739)
=======
DENOMINATOR:
Denominator for basic
earnings per share/Paired
Share -- weighted-average
shares..................... 11,657
Effect of dilutive
securities:
Employee stock
options(2)............... --
Restricted stock awards.... --
Deferred stock grants...... --
Warrants................... --
-------
Dilutive potential common
shares..................... --
Denominator for earnings per
share/Paired Share assuming
dilution................... 11,657
=======
Earnings (loss) per
share/Paired Share before
extraordinary items........ $ (0.15)
Earnings (loss) per
share/Paired Share from
continuing operations...... $ (0.15)
Earnings (loss) per
share/Paired Share before
extraordinary items
assuming dilution.......... $ (0.15)
Earnings (loss) per
share/Paired Share from
continuing operations
assuming dilution.......... $ (0.15)
</TABLE>
For the Corporation, the following dilutive securities were not included in
the computation of earnings per share assuming dilution because the effect would
have been antidilutive (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
----- ---- ----
<S> <C> <C> <C>
Employee stock options(2).............................. 2,310 557 53
Restricted stock awards................................ 329 85 --
Deferred stock grants.................................. 2 -- --
Warrants............................................... -- 38 --
----- --- --
Total antidilutive securities for the
Corporation................................ 2,641 680 53
===== === ==
</TABLE>
F-36
<PAGE> 131
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
For additional disclosures regarding stock-based compensation, see Note 18.
- ---------------
(1) The individual amounts with respect to the Trust and the Corporation do not
add to the Combined amounts in the computation of earnings per share
assuming dilution due to the exclusion of antidilutive securities for the
Corporation.
(2) For 1997, 169,576 antidilutive weighted shares/Paired Shares have been
excluded.
20. COMMITMENTS AND CONTINGENCIES.
Year 2000
Many computer systems were originally designed to recognize calendar years
by their last two digits. Calculations performed using these shortened fields
may not work properly with dates from the year 2000 and beyond. The Company is
undertaking a review and an evaluation of its existing computerized systems as
part of a program to bring all such systems into Year 2000 compliance. As a part
of this evaluation, the Company expects that its central reservation system will
be Year 2000 compliant by the end of the third quarter of 1998. The Company is
also communicating with vendors of the Company's third-party software to obtain
Year 2000 compliance certification. The Company expects, to the extent
necessary, to either modify or upgrade third-party software to ensure Year 2000
compliance.
The Company has not yet determined the total cost of modifications to its
computerized systems; however, based upon the review and evaluations conducted
to date, the Company believes the costs associated with this process will not
have a material adverse effect on the Company's results of operations or
liquidity.
Stock commitment
In October 1997, the Company entered into a Forward Stock Agreement with
UBS (the "UBS Price Adjustment Agreement"). The UBS Price Adjustment Agreement
provides for a settlement payment to be made, in the form of Paired Shares, by
the Company to UBS, or by UBS to the Company, based on the market price of the
UBS 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 declared on the UBS Shares, in each case during
the term of the UBS Price Adjustment Agreement).
The Company has the right at any time during a preliminary term of one year
to elect to deliver or receive Paired Shares in settlement of the UBS Price
Adjustment Agreement. The Company has the further right, but not the obligation,
to settle by repurchasing for cash all of the UBS Shares at the Forward Price.
The Company has the obligation to settle the UBS Price Adjustment Agreement at
the end of one year unless UBS agrees to extend its term. UBS has the right to
cause an earlier settlement upon the occurrence of certain events of default or
a substantial decline in the market price of the Paired Shares. The Company has
the right under the UBS Price Adjustment Agreement to settle the Company's
obligation (if any) by making a cash payment, but cannot compel UBS to settle
UBS's obligation through the payment of cash to the Company.
In the event that at various quarterly dates during the term of the UBS
Price Adjustment Agreement the Forward Price is higher than the then current
market price of the Paired Shares, the Company is obligated to deliver
additional Paired Shares (or at the Company's election, cash) to UBS to be held
as security for the Company's settlement obligation. In February 1998, the
Company paid $7,835,000 to UBS as such security. The Company may, prior to April
15, 1998, deliver Paired Shares to UBS and receive the \return of the Company's
cash deposit. Any and all Paired Shares delivered as security will be issued and
outstanding when delivered and will adjust the Forward Price in accordance with
the formula contained in the UBS Price Adjustment Agreement.
F-37
<PAGE> 132
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Upon final settlement of the UBS Price Adjustment Agreement, the Company is
obligated to pay a placement fee based on the amount of the net stock
settlement, if any, as well as an unwind accretion fee equal to one-half of the
settlement amount multiplied by an interest factor calculated for the number of
actual days the UBS Price Adjustment Agreement was in effect prior to final
settlement.
The Company is required to cause to be registered under the Securities Act
of 1933 for resale by UBS, the Paired Shares sold to UBS on October 15, 1997 and
the Paired Shares issued or issuable to UBS under the UBS Price Adjustment
Agreement.
Litigation
There are various legal actions pending against the Company, some of which
involve claims for substantial amounts. Although there can be no assurance as to
the ultimate outcome of any litigation involving the Company, managements of the
Trust and the Corporation do not believe that any pending legal proceeding will
have, after taking into account the Company's existing insurance coverage,
indemnification rights and provisions for such liabilities, a material adverse
effect on the consolidated financial condition of the Company.
During the year ended December 31, 1995, the Trust and the Corporation
completed settlements of two purported class action complaints and one complaint
which was purportedly brought on behalf of the Trust and the Corporation
(collectively, the "Shareholder Actions"). Holders of an aggregate of 299,750
Paired Shares (approximately 0.7% of the outstanding Paired Shares as of
December 31, 1996), all of which were owned by Mr. Leonard Ross and his
affiliates (collectively, "Ross"), opted out of the Shareholder Actions and did
not share in the settlement.
Ross threatened to bring a separate action alleging similar causes of
action as those alleged in the Shareholder Actions as well as other alleged
causes of action. In November 1994, Ross assigned to Starwood Capital all of his
claims against the Trust and Corporation. In connection with such assignment,
Starwood Capital agreed to purchase all of Ross's Paired Shares at Ross's
election during a 60-day period beginning in December 1995, at a price of $22.50
per Paired Share (as adjusted for the three-for-two stock split in January 1997)
subject to certain adjustments. Starwood Capital, as the assignee of Ross's
claims against the Trust and the Corporation, agreed that the maximum amount
Starwood Capital may recover under such claims would not exceed an aggregate of
$1.8 million and the Trust and the Corporation agreed to toll the statute of
limitations respecting such claims until January 31, 1996. The Trust and
Corporation also agreed that under certain circumstances they may be obligated
severally to indemnify Starwood Capital with respect to Starwood Capital's
obligations to Ross, up to a maximum of $1.8 million, upon receipt of a full
release from Starwood Capital of all of the claims assigned by Ross.
Ross elected to sell his Paired Shares, and in January 1996, those Paired
Shares were sold to a third-party through Merrill Lynch. The Paired Shares were
sold at a price of $19.75 per Paired Share (as adjusted for the three-for-two
stock split in January 1997); the Trust and Corporation paid Starwood Capital
approximately $1.4 million in the aggregate pursuant to their indemnity
obligations, and Starwood Capital released the Trust and the Corporation from
all the claims assigned to it by Ross.
Environmental matters
The Company is subject to certain requirements and potential liabilities
under various federal, state and local environmental laws, ordinances and
regulations ("Environmental Laws"). For example, a current or previous owner or
operator of real property may become liable for the costs of removal or
remediation of hazardous or toxic substances on, under or in such property. Such
laws often impose liability without regard to whether the owner or operator knew
of, or was responsible for, the presence of such hazardous or toxic
F-38
<PAGE> 133
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
substances. The presence of hazardous or toxic substances may adversely affect
the owner's ability to sell or rent such real property or to borrow using such
real property as collateral. Persons who arrange for the disposal or treatment
of hazardous or toxic wastes may be liable for the costs of removal or
remediation of such wastes at the treatment, storage or disposal facility,
regardless of whether such facility is owned or operated by such person. The
Company uses certain substances and generates certain wastes that may be deemed
hazardous or toxic under applicable Environmental Laws, and the Company from
time to time has incurred, and in the future may incur, costs related to
cleaning up contamination resulting from historic uses of certain of the
Company's current or former properties or the Company's treatment, storage or
disposal of wastes at facilities owned by others. Other Environmental Laws
require abatement or removal of certain asbestos-containing materials ("ACMs")
(limited quantities of which are present in various building materials such as
spray-on insulation, floor coverings, ceiling coverings, tiles, decorative
treatments and piping located at certain of the Company's hotels) in the event
of damage or demolition, or certain renovations or remodeling. These laws also
govern emissions of and exposure to asbestos fibers in the air. Environmental
Laws also regulate polychlorinated biphenyls ("PCBs"), which may be present in
electrical equipment. A number of the Company's hotels have underground storage
tanks ("USTs") and equipment containing chlorofluorocarbons ("CFCs"); the
operation and subsequent removal or upgrading of certain USTs and the use of
equipment containing CFCs also are regulated by Environmental Laws. In
connection with the Company's ownership, operation and management of its
properties, the Company could be held liable for the costs of remedial or other
action with respect to PCBs, USTs or CFCs.
Environmental Laws are not the only source of environmental liability.
Under the common law, owners and operators of real property may face liability
for personal injury or property damage because of various environmental
conditions such as alleged exposure to hazardous or toxic substances (including,
but not limited to, ACMs, PCBs and CFCs), poor indoor air quality, radon and
poor drinking water quality.
Although the Company has incurred and expects to incur remediation and
other environmental costs during the ordinary course of operations, management
anticipates that such costs will not have a material adverse effect on the
operations or financial condition of the Company.
Franchise Agreements
Seventy-three of the 102 hotel properties in which the Trust had an equity
interest at December 31, 1997, were operated at such time pursuant to franchise
or license agreements ("Franchise Agreements") including 14 with Westin and 13
with Sheraton. The Franchise Agreements generally require the payment of a
monthly royalty fee based on gross room revenue and various other fees
associated with certain marketing or advertising and centralized reservation
services, also generally based on gross room revenues.
The Franchise Agreements have various durations but generally may be
terminated upon not more than three years' prior notice or upon payment of
certain specified fees.
The Franchise Agreements generally contain specific standards for, and
restrictions and limitations on, the operation and maintenance of the hotels
which are established by the franchisors to maintain uniformity in the system
created by each such franchisor. Such standards generally regulate the
appearance of the hotel, quality and type of goods and services offered,
signage, and protection of marks. Compliance with such standards may from time
to time require significant expenditures for capital improvements.
The Franchise Agreements also generally contain financial reporting
requirements relating to the calculation of royalty and other fees and insurance
requirements with respect to specified liabilities, approved coverage limits and
minimum insurance company rating.
The Franchise Agreements generally require the consent of the franchisor to
a transfer of an interest in the applicable franchise, and both the consent of
the franchisor and the execution of a new franchise
F-39
<PAGE> 134
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
agreement in the event of a transfer of all or controlling portion of the
franchisee under the relevant Franchise Agreement. In addition, some Franchise
Agreements may require payment of an initial fee upon establishment of a
franchise relationship.
The Company intends to convert many of its hotels to a Westin or Sheraton
brand.
Performance bonds and restricted cash
The Corporation is required to post performance bonds or cash collateral
for certain obligations. At December 31, 1997 and 1996, the Corporation had
posted performance bonds totaling approximately $786,000 and $780,000,
respectively, to cover such obligations; however, no amounts had been drawn
against such bonds. These amounts are included in inventories, prepaid expenses
and other assets and are restricted as to use at December 31, 1997 and 1996.
21. RELATED PARTY TRANSACTIONS.
Starwood Capital
The Company and Starwood Capital have agreed that, subject to approval by
the independent Trustees or Directors, as appropriate, Starwood Capital will be
reimbursed for out-of-pocket costs and expenses for any services provided to the
Company. Prior to August 12, 1996, Starwood Capital was also reimbursed for its
internal costs (including allocation of overhead) for services provided to the
Company, provided that, where such costs were currently expensed by the Company,
such reimbursement could not exceed $250,000 for the twelve months ending June
30, 1996. In connection with the acquisition of the Institutional Portfolio in
August 1996, the Trust granted Starwood Capital a restricted stock award of
250,870 Paired Shares (an approximate value of $6.0 million based on the Paired
Share closing price on the date of award). Effective August 12, 1996, the
Company's reimbursement arrangement with Starwood Capital was changed so as to
eliminate reimbursements for internal costs of Starwood Capital for any services
of senior management of Starwood Capital (subject to the same annual limitation
of $250,000 as set forth above for services of employees of Starwood Capital
other than such senior management) and after one year, for any services of any
employee of Starwood Capital.
The Company engaged Starwood Capital to act as its financial advisor in
connection with the ITT Merger. This engagement is not subject to the
reimbursement arrangement described above.
During 1997, the Company did not make any reimbursements to Starwood
Capital for internal costs. During 1996, the Company reimbursed Starwood Capital
for $414,000 of internal costs, of which $226,000 related to 1995. Aside from
Starwood Capital's internal costs, during 1996, Starwood Capital incurred
approximately $199,000 of costs paid directly by the Company to third-party
vendors for services provided to the Company, representing costs associated with
the Reorganization, the Offerings and hotel acquisitions.
Westin
At December 31, 1997, Starwood Capital owned an interest in Westin, which
owns equity interests in domestic and international hotels and manages,
franchises or represents hotels worldwide. On January 2, 1998, pursuant to a
Transaction Agreement dated September 8, 1997, the Company acquired Westin (see
Note 26 -- Subsequent Events).
As of December 31, 1997, the Company converted six hotels to Westins. In
connection with the conversions, at December 31, 1997 and 1996, the Trust had
interest-free indebtedness to Westin of $7.4 million and $2.8 million,
respectively, to cover certain conversion and termination costs.
F-40
<PAGE> 135
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
On December 19, 1997, the Trust loaned approximately $2.0 million and $1.1
million to Westin WC Sport L.L.C. ("WC Sport") and Westin MV Sport L.L.C. ("MV
Sport"), respectively, wholly owned subsidiaries of Westin, under two separate
note agreements. The loans, which are included in other assets, bear interest at
the 90-day LIBOR rate and mature as to principal and accrued interest on
December 22, 1998. On January 2, 1998, in conjunction with the Westin
Acquisition, WC Sport and MV Sport were acquired by the Trust thereby
eliminating these notes receivable.
On December 29, 1997, the Trust loaned $34.2 million to W&S Atlanta Corp.
("Atlanta"), a wholly owned subsidiary of Westin. The loan bears interest at the
Prime lending rate to be paid monthly and matures on December 2, 1998. On
January 2, 1998, in conjunction with the Westin Acquisition, Atlanta's note
payable to the Trust was assumed by the Corporation.
On December 31, 1997, the Corporation purchased other assets valued at
approximately $125.7 million from Westin entering into a note payable to Westin
for the same amount bearing interest at 6.0%. On January 2, 1998, the note
matured and was paid in conjunction with the Westin Acquisition.
During 1997, in conjunction with the Westin Acquisition, the Company paid
Daniel W. Yih, Director of the Corporation, and Stephen R. Quazzo, Trustee of
the Trust, each $200,000 in cash and an award of 5,000 Paired Shares (an
approximate value of $220,000 each based on the Paired Share closing price on
the date of award) as compensation for acting as Chairmen of the Special
Committees.
Loans to officers and former officers
At December 31, 1997, the Trust has a receivable of approximately $268,000
from an officer of the Trust, Steven R. Goldman, for tax withholdings paid by
the Trust on Mr. Goldman's behalf related to the vesting of restricted stock.
At December 31, 1997 and 1996, the Trust holds an $800,000 uncollateralized
note receivable from a former President and Chief Executive Officer of the
Trust. The principal amount of the note receivable is due in 1999 and bears
interest due annually at 10%.
During 1996, the Corporation made a $150,000 non-interest bearing bridge
loan to an officer of the Corporation, Eric A. Danziger, secured by a second
mortgage on Mr. Danziger's residence in Phoenix, Arizona. The bridge loan
matured in September 1997 and was repaid in February 1998.
During 1996, the Corporation made a $266,000 non-interest bearing bridge
loan to an officer of the Corporation, Theodore W. Darnall. The bridge loan is
secured by a second mortgage on Mr. Darnall's residence in Phoenix, Arizona.
During 1997, the bridge loan matured as to $100,000 upon the sale of Mr.
Darnall's home in Pittsburgh at which time $116,000 of the loan was repaid. The
unpaid balance of $150,000 matures upon termination of Mr. Darnall's employment
with the Corporation.
During 1995, the Trust loaned $250,000 to a former officer of the Trust.
The loan has a term of 10 years and bears interest, to be paid quarterly, at the
lowest applicable rate prescribed by IRC Section 1274(d). At December 31, 1997,
the loan had an applicable rate of 6.6% and was current. During 1997, the Trust
forgave $150,000 of the loan pursuant to a separation agreement with such
officer.
22. INDUSTRY SEGMENT INFORMATION.
Gaming
The Corporation operated in two segments of the hospitality industry, hotel
and gaming. The hotel segment consists of room, food and beverage and other
revenues recognized in connection with the operation of hotels owned by the
Corporation or under lease from the Trust, and income from management contracts.
F-41
<PAGE> 136
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company has disclosed these segments in the combined and separate statements
of operations. The gaming segment consists of net win from casino operations, as
well as room, food and beverage and other revenues recognized in connection with
the operation of the two hotel/casinos under lease from the Trust or a third
party unaffiliated with Starwood Hotels. For the years ended December 31, 1997
and 1996, the gaming segment was not a material component of the Corporation's
operations. As a result, 1997 and 1996 segment information relating to gaming is
not disclosed herein. The following information summarizes revenue and operating
results for the gaming segment for the year ended December 31, 1995 (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
GAMING:
Revenue:
Casino................................................. $14,009
Rooms.................................................. 4,682
Food and beverage...................................... 5,155
Other.................................................. 5,313
Less promotional allowances............................ (2,230)
-------
Gaming revenues........................................ 26,929
-------
Expenses:
Casino................................................. 6,156
Rooms.................................................. 2,220
Food and beverage...................................... 4,896
Other (including undistributed operating expenses and
fixed charges)....................................... 10,970
-------
Expenses of gaming operations.......................... 24,242
Rent to Trust.......................................... 2,400
Depreciation and amortization.......................... 205
-------
Total expenses......................................... 26,847
-------
Operating income............................................ $ 82
=======
</TABLE>
A reconciliation of the combined segment operating income to the net loss
of the Corporation is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
Hotel operating income...................................... $ 5,419
Gaming operating income..................................... 82
-------
Combined operating income................................... 5,501
Interest and other income................................... 632
Interest expense............................................ (5,470)
Corporate expenses.......................................... (2,703)
-------
Loss before minority interest.......................... $(2,040)
=======
</TABLE>
F-42
<PAGE> 137
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Additional financial data by industry segment for the Corporation is as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
DEPRECIATION AND AMORTIZATION:
Hotel................................................ $5,126
Gaming............................................... 205
Corporate and other.................................. 1,161
------
Total...................................... $6,492
======
</TABLE>
The Trust is an owner/lessor of real property and does not "operate" in
different segments, and is therefore not subject to disclosure by segment. The
Trust's net investment (initial cost less accumulated depreciation and provision
for loss) in the two Las Vegas hotel/casinos was approximately $20.5 million at
December 31, 1995. The Trust sold its interest in the two properties during
1996.
Foreign operations
In 1997, the Corporation purchased four hotels located in Mexico and
Scotland. The foreign segment consists of hotel revenue and expense from foreign
hotels. The following information summarizes revenue and operating results for
the foreign segment for the year ended December 31, 1997 (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
FOREIGN OPERATIONS:
Hotel revenue:
Rooms........................................... $11,447
Food and beverage............................... 5,588
Other........................................... 1,973
-------
Foreign hotel revenues.......................... 19,008
-------
Hotel expenses:
Rooms........................................... 1,899
Food and beverage............................... 3,190
Other........................................... 7,779
-------
Foreign hotel expenses.......................... 12,868
Interest -- Trust............................... 3,681
Depreciation and amortization................... 2,847
-------
Foreign expenses................................ 19,396
-------
Operating income..................................... $ (388)
=======
</TABLE>
F-43
<PAGE> 138
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the consolidated segment results to the net loss of the
Corporation is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
Domestic hotel operating income............................. $ 1,035
Foreign hotel operating loss................................ (388)
Gaming operating loss....................................... (1,646)
--------
Consolidated operating income............................... (999)
Management fees and other income............................ 5,907
Gain on sale of real estate investments..................... 3,864
Depreciation and amortization -- Corporate.................. (2,068)
Corporate expenses.......................................... (15,029)
--------
Loss before minority interest.......................... $ (8,325)
========
</TABLE>
Additional financial data by industry segment for the Corporation is as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
REVENUE:
Domestic hotel.............................................. $869,906
Foreign hotel............................................... 19,008
--------
Total............................................. $888,914
========
IDENTIFIABLE ASSETS:
Domestic hotel.............................................. $313,816
Foreign hotel............................................... 189,411
Corporate................................................... 55,424
--------
Total............................................. $558,651
========
CAPITAL EXPENDITURES:
Domestic hotel.............................................. $ 54,090
Foreign hotel............................................... 185,293
Corporate................................................... 8,629
--------
Total............................................. $248,012
========
DEPRECIATION AND AMORTIZATION:
Domestic hotel.............................................. $ 20,380
Foreign hotel............................................... 2,847
Corporate................................................... 2,068
--------
Total............................................. $ 25,295
========
</TABLE>
F-44
<PAGE> 139
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
23. SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED).
<TABLE>
<CAPTION>
COMBINED TRUST CORPORATION
-------------------- ------------------ --------------------
1997 1996 1997 1996 1997 1996
-------- -------- ------- ------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
First Quarter
Revenue..................... $172,719 $ 60,579 $49,087 $18,801 $167,113 $ 57,486
Net income (loss)........... 7,786 4,090 12,183 7,142 (4,397) (3,052)
Net income (loss) per
share/Paired Share....... 0.19 0.20 0.29 0.35 (0.10) (0.15)
Net income (loss) per
share/Paired Share
Assuming Dilution........ 0.18 0.20 0.28 0.35 (0.10) (0.15)
Second Quarter
Revenue..................... $223,149 $ 82,665 $60,913 $18,959 $219,550 $ 79,871
Net income.................. 18,135 9,598(2) 16,844 5,600 1,291 3,998(2)
Net income (loss) per
share/Paired Share....... 0.40 0.41 0.37 0.24 0.03 0.17
Net income per share/Paired
Share Assuming
Dilution................. 0.38 0.41 0.35 0.24 0.03 0.17
Third Quarter
Revenue..................... $236,920 $122,138 $70,760 $30,565 $232,712 $119,695
Net income (loss)........... (1,127)(1) 6,099 2,092(1) 7,608 (3,219) (1,509)
Net income (loss) per
share/Paired Share....... (0.03) 0.18 0.04 0.23 (0.07) (0.05)
Net income (loss) per
share/Paired Share
Assuming Dilution........ (0.03) 0.19 0.04 0.23 (0.07) (0.05)
Fourth Quarter
Revenue..................... $300,795 $163,156 $90,008 $46,734 $294,313 $153,104
Net income (loss)........... 13,278(3) 7,164 16,176(3) 13,239 (2,898)(3) (6,075)
Net income (loss) per
share/Paired Share....... 0.26 0.18 0.32 0.33 (0.06) (0.15)
Net income (loss) per
share/Paired Share
Assuming Dilution........ 0.25 0.17 0.30 0.32 (0.06) (0.15)
</TABLE>
- ---------------
(1) During the quarter ended September 30, 1997, the Trust recorded an
extraordinary loss of approximately $3.5 million (net of minority interest
of $971,000) relating to extinguishment of debt (see Note 8).
(2) During the quarter ended June 30, 1996, the Corporation recorded an
extraordinary gain of approximately $1.1 million (net of minority interest
of $413,000) relating to extinguishment of debt (see Note 8).
(3) During the quarter ended December 31, 1997, the Company recorded
depreciation adjustments related to cost segregation studies performed on
properties acquired in 1997 which resulted in a decrease in depreciation
expense of approximately $27.4 million for the Trust and an increase in
depreciation expense of $1.7 million for the Corporation. The Trust recorded
a loss on anticipated treasury lock settlements of approximately $25.0
million (see Note 11 for further discussion). The Trust recorded an
adjustment of approximately $2.6 million in the fourth quarter for 1997
executive bonuses.
F-45
<PAGE> 140
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
24. PURCHASE BUSINESS COMBINATIONS.
The following represents all purchase business combinations for the year
ending December 31, 1997:
<TABLE>
<CAPTION>
DATE OF PURCHASE PRICE
HOTEL(1) PURCHASE(4) (000'S)(7)
-------- ----------- --------------
<S> <C> <C>
Deerfield Beach Hilton..................................... 01/08/97 $ 11,500
Radisson Denver South...................................... 01/20/97 21,750
The HEI Owned Hotels consisting of: 312,000
Sheraton Hotel........................................... 02/14/97
Omni Waterside Hotel..................................... 02/14/97
BWI Airport Marriott..................................... 02/14/97
Crowne Plaza Edison...................................... 02/14/97
Courtyard by Marriott Crystal City....................... 02/14/97
Charleston Hilton........................................ 02/14/97
Park Ridge Hotel......................................... 02/14/97
Sonoma County Hilton..................................... 02/14/97
Novi Hilton.............................................. 02/14/97
Embassy Suites........................................... 02/14/97
Days Inn Chicago........................................... 02/21/97 48,000
Westin Hermitage........................................... 03/11/97 15,800(5)
Hotel De La Poste.......................................... 03/12/97 16,000
San Diego Marriott Suites.................................. 04/03/97 32,500
Tremont Hotel.............................................. 04/04/97 14,400
Raphael Hotel.............................................. 05/07/97 17,750
Sheraton Stamford.......................................... 06/12/97 14,600
Westin Southfield -- Detroit............................... 07/10/97 40,000
Westin Regina Portfolio consisting of: 133,000(3)
Westin Regina Resort -- Cancun........................... 08/21/97
Westin Regina Resort -- Los Cabos........................ 08/21/97
Westin Regina Resort -- Puerto Vallarta.................. 08/21/97
The Flatley Portfolio consisting of: 469,970
Wayfarer Inn............................................. 09/11/97
Sheraton Tara Hotel -- Braintree......................... 09/11/97
Tara's Ferncroft Conf. Resort............................ 09/11/97
Sheraton Tara Hotel -- Framingham........................ 09/11/97
Tara's Cape Codder Hotel................................. 09/11/97
Tara Hyannis Hotel & Resort.............................. 09/11/97
Sheraton Tara Lexington Inn.............................. 09/11/97
Colonial Hilton and Resort............................... 09/11/97
Merrimack Hotel & Conference Center...................... 09/11/97
Sheraton Tara Hotel -- Nashua............................ 09/11/97
Sheraton Tara Hotel -- Newton............................ 09/11/97
Sheraton Tara Hotel -- Parsippany........................ 09/11/97
Sheraton Tara Hotel -- South Portland.................... 09/11/97
Tara Stamford Hotel...................................... 09/11/97
Sheraton Tara Airport Hotel.............................. 09/11/97
Crowne Plaza............................................... 09/23/97 58,750(6)
One Washington Circle...................................... 09/30/97 19,000
Radisson Plaza & Suite Hotel............................... 10/30/97 54,000
Westin Aquila.............................................. 12/08/97 14,000
Westin Mission Hills Resort................................ 12/15/97 118,000(2)
Turnberry Hotel and Golf Resort............................ 12/23/97 51,500(3)
----------
$1,462,520
==========
</TABLE>
F-46
<PAGE> 141
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
On February 14, 1997, in addition to the acquisition of the ten hotels
referred to above as the HEI Owned Hotels from PRISA II, an institutional real
estate investment fund managed by Prudential Real Estate Investors, and HEI
Hotels LLC ("HEI"), a Westport, Connecticut based hotel operating company, the
Company also completed the acquisition of HEI (together with the HEI Owned
Hotels, the "HEI Portfolio"). The Company paid $112 million in cash and notes
and the remainder in limited partnership interests in the Realty Partnership and
the Operating Partnership exchangeable for 6.548 million Paired Shares of the
Trust and Corporation (valued for purposes of the transaction at approximately
$215 million). See Note 4 for discussion on the value of the HEI Management
Company, an intangible asset. The HEI Portfolio also included contracts to
manage the following nine hotels: Sheraton Gateway Houston Airport, Ontario
Airport Hilton, Grand Junction Hilton, Danbury Hilton & Towers, Residence Inn By
Marriott, Long Island Sheraton Hotel, Wilmington Hilton Hotel, Ramada Hotel
Bethesda and The Pavillion Towers Hotel.
- ---------------
(1) The Trust acquired a 100% equity interest in each of these hotel properties
except for the Westin Mission Hills Resort (see footnote (2) below), the
Westin Regina Portfolio and Turnberry Hotel & Golf Resort (see footnote (3)
below).
(2) Represents 100% interest. The Trust acquired a 95% interest in a joint
venture that acquired the property.
(3) The Corporation acquired a 100% equity interest in these hotel properties.
(4) The results of operations are included in the Corporation for the period
from date of purchase through December 31, 1997.
(5) The purchase price consists of approximately $6.4 million in cash and
limited partnership interests in Realty & Operating exchangeable for 233,106
Paired Shares (valued for the purpose of this transaction at $9.4 million).
(6) The purchase price consists of approximately $29.0 million in assumed debt,
approximately $17.8 million in cash and approximately $12.0 million for the
sale of three of the Company's hotels (see further information in Note 13).
(7) For all purchases, the Company records the allocation of the purchase price
between Land, Building and Furniture, Fixtures and Equipment based upon the
purchase agreements, if applicable, or based upon a cost segregation study.
25. COMBINED PRO FORMA FINANCIAL INFORMATION (UNAUDITED).
Due to the impact of the 44 hotels acquired by the Company in 1997 and the
1997 Offerings, the following combined pro forma statements of operations are
presented to supplement the historical statements of operations. These combined
pro forma statements reflect the 1997 Offerings and the acquisitions of the HEI
Portfolio and the Flatley Portfolio as if they occurred on January 1, 1996:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996
------------ ----------
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
Revenues............................................. $1,054,178 $694,066
Net income........................................... $ 29,036 $ 7,540
Net income per share................................. $ 0.58 $ 0.26
Net income per share assuming dilution............... $ 0.55 $ 0.25
</TABLE>
F-47
<PAGE> 142
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
26. SUBSEQUENT EVENTS (UNAUDITED).
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 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"),
W&S Hotel L.L.C. ("W&S LLC" and, together with Westin, the "Westin Companies"),
the Trust, the Realty Partnership, the Corporation and the Operating
Partnership, the Company 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 of the issued and outstanding shares
of capital stock of Westin Worldwide (other than shares held by Westin and
its subsidiaries or by the Company) were converted into an aggregate of
6,285,783 Class A Exchangeable Preferred Shares, par value $.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 of 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 of 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 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-to-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-to-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 holders with the right, from and after the fifth
anniversary of the closing date of the Westin acquisition, to require the Trust
to redeem such shares at a price of $38.50.
F-48
<PAGE> 143
STARWOOD HOTELS & RESORTS
AND STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 the $1.2
Billion Facility.
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., a newly formed Nevada corporation and
a subsidiary of the Corporation ("Merger Sub"), the Trust and ITT, the Company
acquired ITT.
Pursuant to the terms of the ITT Merger Agreement, Merger Sub 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 35,195,664 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
$.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). 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 additional credit facilities
($5.6 billion in total) with Lehman Brothers, Bankers Trust 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) 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 increasing rates 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, a 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 is one-, two- or three-month LIBOR, at the
Company's option, plus 187.5 basis points for the four months ending June 24,
1998, one-, two-or three-month LIBOR plus 162.5 basis points for the two months
ending August 24, 1998, and thereafter 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, forth and fifth year, 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 subsidiaries, and is secured by a pledge of
all the capital stock, partnership interests and other equity interests of the
guarantor subsidiaries.
F-49
<PAGE> 144
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 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.
In conjunction with the acquisition of ITT, the Amended and Restated
Declaration of Trust of the Trust was further amended increasing the authorized
shares of beneficial interests in the Trust to 1.35 billion shares. The charter
of the Corporation was amended increasing the authorized stock of the
Corporation to 1.35 billion shares.
In conjunction with the acquisition of ITT, the Company sold an aggregate
of 4,641,000 Paired Shares to Merrill Lynch International, NMS Services, Inc.
and Lehman Brothers Inc. (collectively, the "February Purchasers"), in a private
placement, for approximately $245.0 million. The Company paid the February
Purchasers a customary placement fee.
Separately, the Company entered into agreements (the "February Price
Adjustment Agreements") with the February Purchasers (and with Merrill Lynch,
Pierce, Fenner & Smith Incorporated, NationsBanc Montgomery Securities LLC and
Lehman Brothers Finance S.A., each of which is an affiliate of a February
Purchaser) with terms that are essentially the same as the terms of the UBS
Price Adjustment Agreement, except that (i) under the February Price Adjustment
Agreements, the Company does not have any right to deliver cash in settlement of
its obligation to deliver Paired Shares or any right to repurchase the Shares
sold to the February Purchasers, and (ii) the Forward Price under the February
Price Adjustment Agreements is based on a price of $53.875 per share.
The Company is required to cause to be registered under the Securities Act
of 1933, for resale by the February Purchasers the Paired Shares sold to the
February Purchasers on February 24, 1998 and the Paired Shares issued or
issuable to the February Purchasers under the February Price Adjustment
Agreement.
Other
On January 15, 1998, the Company completed the purchase of four Sheraton
Hotel assets with 916 hotel rooms located in Aspen, Colorado; Houston, Texas;
Washington, DC; and New York, New York for $334 million, which consists of
approximately $150 million in cash and 3.718 million Paired Shares of the Trust
and the Corporation (valued for purposes of this transaction at approximately
$184 million).
F-50
<PAGE> 145
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
STARWOOD HOTELS & RESORTS
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNT BOOK
INITIAL COST TO COSTS SUBSEQUENT TO VALUE
COMPANY ACQUISITION AT DECEMBER 31, 1997
------------------------ ---------------------- -----------------------
(1) (3)
(1) ACCUMULATED
BUILDING AND BUILDING AND BUILDING AND DEPRECIATION &
DESCRIPTION LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS AMORTIZATION
----------- -------- ------------ ------- ------------ -------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
HOTEL ASSETS:
Embassy Suites Phoenix
Airport -- Phoenix, AZ........... $ 2,889 $ 11,658 $ 877 $ 2,889 $ 12,535 $ 5,645
Tempe Embassy Suites -- Tempe,
AZ............................... 1,000 14,458 179 1,000 14,637 1,165
Hotel Park Tucson -- Tucson, AZ.... 1,800 7,911 108 1,800 8,019 523
Plaza Hotel & Conference
Center -- Tucson, AZ............. 350 4,357 574 350 4,931 1,521
Sheraton Hotel -- Long Beach, CA... 4,280 27,390 4,280 27,390 1,270
Westin Los Angeles Airport -- Los
Angeles, CA...................... 8,800 22,397 1,651 8,800 24,048 1,634
Westwood Marquis Hotel &
Gardens -- Westwood, CA.......... 5,250(4) 23,558(4) 3,049 5,250 26,607 1,294
Clarion at San Francisco
Airport -- Millbrae, CA.......... 7,210 19,537 139 7,210 19,676 1,630
Palm Desert Embassy Suites -- Palm
Desert, CA....................... 2,790 9,309 94 2,790 9,403 618
Doubletree Club Hotel -- Rancho
Bernardo, CA..................... 1,256 6,275 17 1,256 6,292 624
Westin Mission Hills
Resort -- Rancho Mirage, CA...... 14,149 85,374 14,149 85,374 359
Vagabond Inn -- Rosemead, CA....... 700 2,100 700 2,100 1,135
Vagabond Inn -- Sacramento, CA..... 700 3,200 700 3,200 1,408
San Diego Marriott Suites -- San
Diego, CA........................ 2,200 27,243 2,200 27,243 1,021
Westin Horton Plaza San
Diego -- San Diego, CA........... 6,500 35,732 1,191 6,500 36,923 2,554
Sonoma County Hilton -- Santa Rosa,
CA............................... 1,830 15,208 1,830 15,208 698
Vagabond Inn -- Woodland Hills,
CA............................... 1,200 3,200 1,200 3,200 1,408
Radisson Denver South -- Denver,
CO............................... 2,270 17,000 2,270 17,000 777
Sheraton Stamford -- Stamford,
CT............................... 375 16,443 375 16,443 431
Tara Stamford Hotel -- Stamford,
CT............................... 8,951 41,410 8,951 41,410 689
Deerfield Beach
Hilton -- Deerfield, FL.......... 1,510 8,862 1,510 8,862 436
Doubletree Guest Suites Cypress
Creek -- Ft. Lauderdale, FL...... 3,050 17,718 423 3,050 18,141 1,482
Wyndham Hotel at Ft. Lauderdale
Airport -- Dania, FL............. 2,910 17,017 915 2,910 17,932 1,210
Gainesville Radisson
Hotel -- Gainesville, FL......... 1,002 3,759 1,932 1,002 5,691 1,857
Westin Tampa Airport -- Tampa,
FL............................... 2,340 16,941 1,557 2,340 18,498 1,442
Holiday Inn -- Albany, GA.......... 796 4,980 361 796 5,341 1,477
Embassy Suites Hotel -- College
Park, GA......................... 1,530 19,177 1,530 19,177 892
Lenox Inn -- Atlanta, GA........... 4,383 4,197 155 4,383 4,352 308
Marque of Atlanta -- Atlanta, GA... 3,780 15,777 350 3,780 16,127 1,053
<CAPTION>
YEAR OF DATE
DESCRIPTION CONSTRUCTION ACQUIRED LIFE
----------- ------------ -------- ----
<S> <C> <C> <C>
HOTEL ASSETS:
Embassy Suites Phoenix
Airport -- Phoenix, AZ........... 1981 12/13/83 35
Tempe Embassy Suites -- Tempe,
AZ............................... 1984 07/25/95 35
Hotel Park Tucson -- Tucson, AZ.... 1986 08/16/96 35
Plaza Hotel & Conference
Center -- Tucson, AZ............. 1971 09/16/86 35
Sheraton Hotel -- Long Beach, CA... 1988 02/14/97 30
Westin Los Angeles Airport -- Los
Angeles, CA...................... 1986 08/12/96 35
Westwood Marquis Hotel &
Gardens -- Westwood, CA.......... 1969 12/30/96 35
Clarion at San Francisco
Airport -- Millbrae, CA.......... 1962 04/25/96 35
Palm Desert Embassy Suites -- Palm
Desert, CA....................... 1985 08/16/96 35
Doubletree Club Hotel -- Rancho
Bernardo, CA..................... 1988 01/01/95 35
Westin Mission Hills
Resort -- Rancho Mirage, CA...... 1987 12/15/97 30
Vagabond Inn -- Rosemead, CA....... 1974 09/16/86 35
Vagabond Inn -- Sacramento, CA..... 1975 09/16/86 35
San Diego Marriott Suites -- San
Diego, CA........................ 1989 04/03/97 30
Westin Horton Plaza San
Diego -- San Diego, CA........... 1987 08/12/96 35
Sonoma County Hilton -- Santa Rosa,
CA............................... 1984 02/14/97 30
Vagabond Inn -- Woodland Hills,
CA............................... 1973 09/16/86 35
Radisson Denver South -- Denver,
CO............................... 1986 01/20/97 30
Sheraton Stamford -- Stamford,
CT............................... 1985 06/12/97 30
Tara Stamford Hotel -- Stamford,
CT............................... 1984 09/11/97 30
Deerfield Beach
Hilton -- Deerfield, FL.......... 1985 01/08/97 30
Doubletree Guest Suites Cypress
Creek -- Ft. Lauderdale, FL...... 1985 04/26/96 35
Wyndham Hotel at Ft. Lauderdale
Airport -- Dania, FL............. 1985 08/12/96 35
Gainesville Radisson
Hotel -- Gainesville, FL......... 1974 11/24/86 35
Westin Tampa Airport -- Tampa,
FL............................... 1987 04/26/96 35
Holiday Inn -- Albany, GA.......... 1989 06/08/89 35
Embassy Suites Hotel -- College
Park, GA......................... 1989 02/14/97 30
Lenox Inn -- Atlanta, GA........... 1965 10/31/95 35
Marque of Atlanta -- Atlanta, GA... 1980 08/16/96 35
</TABLE>
F-51
<PAGE> 146
<TABLE>
<CAPTION>
SCHEDULE III (CONTINUED)
REAL ESTATE AND ACCUMULATED DEPRECIATION
STARWOOD HOTELS & RESORTS
DECEMBER 31, 1997
(IN THOUSANDS)
GROSS AMOUNT BOOK
INITIAL COST TO COSTS SUBSEQUENT TO VALUE
COMPANY ACQUISITION AT DECEMBER 31, 1997
------------------------ ---------------------- -----------------------
(1)
(1)
BUILDING AND BUILDING AND BUILDING AND
DESCRIPTION LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS
----------- -------- ------------ ------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sheraton Colony Square -- Atlanta,
GA............................... 2,000 25,285 4,146 2,000 29,431
Terrace Garden Hotel -- Atlanta,
GA............................... 5,875 19,944 476 5,875 20,420
Westin Atlanta North at
Perimeter -- Atlanta, GA......... 5,370 41,977 674 5,370 42,651
Arlington Park Hilton -- Arlington
Heights, IL...................... 5,500 6,877 571 5,500 7,448
Days Inn Lake Shore
Drive -- Chicago, IL............. 11,280 30,857 11,280 30,857
Raphael Hotel -- Chicago, IL....... 2,950 12,837 2,950 12,837
Tremont Hotel -- Chicago, IL....... 3,170 9,980 3,170 9,980
Radisson Plaza & Suite
Hotel -- Indianapolis, IN........ 8,236 41,049 8,236 41,049
Harvey Hotel -- Wichita, KS........ 341 3,571 337 341 3,908
Doubletree Guest
Suites -- Lexington, KY.......... 1,237 9,573 319 1,237 9,892
Crowne Plaza -- New Orleans, LA.... 8,820 43,557 8,820 43,557
Hotel De La Poste -- New Orleans,
LA............................... 1,730 12,463 1,730 12,463
Park Plaza Hotel -- Boston, MA..... 21,000(4) 66,619(4) 1,768 21,000 68,387
Sheraton Tara Hotel -- Braintree,
MA............................... 8,034 38,103 8,034 38,103
Tara's Ferncroft Conference
Resort -- Danvers, MA............ 12,315 43,466 12,315 43,466
Sheraton Tara Hotel -- Framingham,
MA............................... 7,905 37,463 7,905 37,463
Cape Codder -- Hyannis, MA......... 1,602 7,121 1,602 7,121
Hotel & Resort -- Hyannis, MA...... 4,459 15,708 4,459 15,708
Sheraton Tara Lexington
Inn -- Lexington, MA............. 3,136 12,639 3,136 12,639
Colonial Hilton and
Resort -- Lynnfield, MA.......... 14,107 43,600 14,107 43,600
Sheraton Needham -- Needham, MA.... 3,040 14,167 74 3,040 14,241
Sheraton Tara Hotel -- Newton,
MA............................... 17,884 17,884
Westin Waltham Hotel -- Waltham,
MA............................... 5,000 31,703 198 5,000 31,901
BWI Airport Marriott -- Baltimore,
MD............................... 3,600 36,291 3,600 36,291
Holiday Inn
Calverton -- Beltsville, MD...... 1,636 8,489 9 215 1,645 8,704
Sheraton Tara Hotel -- South
Portland, ME..................... 2,708 12,504 2,708 12,504
Bay Valley Hotel & Resort -- Bay
City, MI......................... 2,500 5,472 2 1,407 2,502 6,879
Novi Hilton -- Novi, MI............ 1,800 29,456 1,800 29,456
Westin Southfield
Detroit -- Southfield, MI........ 1,700 32,508 1,700 32,508
Doubletree Mall of
America -- Bloomington, MN....... 2,890 30,491 352 2,890 30,843
Sheraton Metrodome -- Minneapolis,
MN............................... 1,830(4) 13,759 211 1,830 13,970
<CAPTION>
SCHEDULE III (CONTINUED)
REAL ESTATE AND ACCUMULATED DEPRECIATION
STARWOOD HOTELS & RESORTS
DECEMBER 31, 1997
(IN THOUSANDS)
(3)
ACCUMULATED
DEPRECIATION & YEAR OF DATE
DESCRIPTION AMORTIZATION CONSTRUCTION ACQUIRED LIFE
----------- -------------- ------------ -------- ----
<S> <C> <C> <C> <C>
Sheraton Colony Square -- Atlanta,
GA............................... 2,056 1973 07/18/95 35
Terrace Garden Hotel -- Atlanta,
GA............................... 1,452 1975 10/31/95 35
Westin Atlanta North at
Perimeter -- Atlanta, GA......... 2,972 1986 08/12/96 35
Arlington Park Hilton -- Arlington
Heights, IL...................... 455 1968 08/16/96 35
Days Inn Lake Shore
Drive -- Chicago, IL............. 1,280 1965 02/21/97 30
Raphael Hotel -- Chicago, IL....... 426 1929 05/07/97 30
Tremont Hotel -- Chicago, IL....... 362 1974 04/04/97 30
Radisson Plaza & Suite
Hotel -- Indianapolis, IN........ 341 1983 10/30/97 30
Harvey Hotel -- Wichita, KS........ 358 1974 01/01/95 35
Doubletree Guest
Suites -- Lexington, KY.......... 956 1989 01/01/95 35
Crowne Plaza -- New Orleans, LA.... 543 1984 09/23/97 30
Hotel De La Poste -- New Orleans,
LA............................... 517 1973 03/12/97 30
Park Plaza Hotel -- Boston, MA..... 6,548 1927 01/24/96 35
Sheraton Tara Hotel -- Braintree,
MA............................... 634 1971 09/11/97 30
Tara's Ferncroft Conference
Resort -- Danvers, MA............ 485 1978 09/11/97 30
Sheraton Tara Hotel -- Framingham,
MA............................... 622 1973 09/11/97 30
Cape Codder -- Hyannis, MA......... 118 1975 09/11/97 30
Hotel & Resort -- Hyannis, MA...... 261 1967 09/11/97 30
Sheraton Tara Lexington
Inn -- Lexington, MA............. 210 1958 09/11/97 30
Colonial Hilton and
Resort -- Lynnfield, MA.......... 725 1966 09/11/97 30
Sheraton Needham -- Needham, MA.... 939 1986 08/16/96 35
Sheraton Tara Hotel -- Newton,
MA............................... 496 1968 09/11/97 30
Westin Waltham Hotel -- Waltham,
MA............................... 2,248 1990 08/12/96 35
BWI Airport Marriott -- Baltimore,
MD............................... 1,678 1988 02/14/97 30
Holiday Inn
Calverton -- Beltsville, MD...... 595 1987 11/30/95 35
Sheraton Tara Hotel -- South
Portland, ME..................... 208 1973 09/11/97 30
Bay Valley Hotel & Resort -- Bay
City, MI......................... 2,768 1973 05/10/84 35
Novi Hilton -- Novi, MI............ 1,354 1985 02/14/97 30
Westin Southfield
Detroit -- Southfield, MI........ 813 1987 07/10/97 30
Doubletree Mall of
America -- Bloomington, MN....... 2,158 1975 08/12/96 35
Sheraton Metrodome -- Minneapolis,
MN............................... 917 1980 09/05/96 35
</TABLE>
F-52
<PAGE> 147
<TABLE>
<CAPTION>
SCHEDULE III (CONTINUED)
REAL ESTATE AND ACCUMULATED DEPRECIATION
STARWOOD HOTELS & RESORTS
DECEMBER 31, 1997
(IN THOUSANDS)
GROSS AMOUNT BOOK
INITIAL COST TO COSTS SUBSEQUENT TO VALUE
COMPANY ACQUISITION AT DECEMBER 31, 1997
------------------------ ---------------------- -----------------------
(1)
(1)
BUILDING AND BUILDING AND BUILDING AND
DESCRIPTION LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS
----------- -------- ------------ ------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
St. Louis Embassy Suites -- St.
Louis, MO........................ 2,330 14,895 111 2,330 15,006
Ritz Carlton Kansas City -- Kansas
City, MO......................... 9,420 29,990 21 9,420 30,011
Omni Hotel -- Chapel Hill, NC...... 500 8,920 97 500 9,017
Westin Aquila -- Omaha, NE......... 1,783 10,776 1,783 10,776
Wayfarer Inn -- Bedford, NH........ 2,151 10,036 2,151 10,036
Merrimack Hotel & Conference
Center -- Merrimack, NH.......... 595 2,597 595 2,597
Sheraton Tara Hotel -- Nashua,
NH............................... 4,345 20,036 4,345 20,036
Crowne Plaza Edison -- Edison,
NJ............................... 1,700 17,045 1,700 17,045
Sheraton Tara Hotel -- Parsippany,
NJ............................... 11,077 55,232 11,077 55,232
Marriott Forrestal Village
Hotel -- Princeton, NJ........... 3,150 14,724 60 3,150 14,784
Best Western Airport
Inn -- Albuquerque, NM........... 5,165 189 5,354
Doral Court -- New York, NY........ 6,060(4) 12,673(4) 1,132 6,060 13,805
Doral Inn -- New York, NY.......... 3,112 3,112
Doral Tuscany -- New York, NY...... 1,700(4) 9,723(4) 816 1,700 10,539
Days Inn City Center -- Portland,
OR............................... 1,900 3,768 120 563 2,020 4,331
Riverside Inn -- Portland, OR...... 1,300 3,375 120 2,921 1,420 6,296
Allentown Hilton -- Allentown,
PA............................... 1,200 5,343 126 1,200 5,469
Park Ridge Hotel -- King of
Prussia, PA...................... 3,111 21,896 3,111 21,896
Days Inn Airport -- Philadelphia,
PA............................... 1,900 1,672 397 1,900 2,069
Westin Philadelphia International
Airport -- Philadelphia, PA...... 2,850 12,400 987 2,850 13,387
Ritz Carlton
Philadelphia -- Philadelphia,
PA............................... 5,220 25,072 198 5,220 25,270
Sheraton Tara Airport
Hotel -- Warwick, RI............. 2,095 9,707 2,095 9,707
Charleston Hilton
North -- Charleston, SC.......... 2,600 17,368 2,600 17,368
Westin Hermitage -- Nashville,
TN............................... 2,350 11,824 2,350 11,824
Radisson Park Central -- Dallas,
TX............................... 11,832 1,830 12,359 1,830 24,191
Doubletree Guest Suites DFW
Airport -- Irving, TX............ 3,080 21,707 539 3,080 22,246
Courtyard by Marriott Crystal
City -- Arlington, VA............ 3,740 23,695 3,740 23,695
Omni Waterside Hotel -- Norfolk,
VA............................... 5,200 40,913 5,200 40,913
Residence Inn Tyson's
Corner -- Vienna, VA............. 1,418 4,119 568 1,418 4,687
Tyee Hotel -- Olympia, WA(2)....... 1,008 1,562 (63) 1,097 945 2,659
<CAPTION>
SCHEDULE III (CONTINUED)
REAL ESTATE AND ACCUMULATED DEPRECIATION
STARWOOD HOTELS & RESORTS
DECEMBER 31, 1997
(IN THOUSANDS)
(3)
ACCUMULATED
DEPRECIATION & YEAR OF DATE
DESCRIPTION AMORTIZATION CONSTRUCTION ACQUIRED LIFE
----------- -------------- ------------ -------- ----
<S> <C> <C> <C> <C>
St. Louis Embassy Suites -- St.
Louis, MO........................ 990 1985 08/16/96 35
Ritz Carlton Kansas City -- Kansas
City, MO......................... 2,110 1973 08/12/96 35
Omni Hotel -- Chapel Hill, NC...... 822 1981 04/07/95 35
Westin Aquila -- Omaha, NE......... 45 1924 12/08/97 30
Wayfarer Inn -- Bedford, NH........ 167 1966 09/11/97 30
Merrimack Hotel & Conference
Center -- Merrimack, NH.......... 43 1979 09/11/97 30
Sheraton Tara Hotel -- Nashua,
NH............................... 333 1980 09/11/97 30
Crowne Plaza Edison -- Edison,
NJ............................... 781 1987 02/14/97 30
Sheraton Tara Hotel -- Parsippany,
NJ............................... 919 1987 09/11/97 30
Marriott Forrestal Village
Hotel -- Princeton, NJ........... 963 1987 08/29/96 35
Best Western Airport
Inn -- Albuquerque, NM........... 1,912 1980 09/16/86 35
Doral Court -- New York, NY........ 792 1927 09/19/96 35
Doral Inn -- New York, NY.......... 1927 09/20/95 35
Doral Tuscany -- New York, NY...... 610 1935 09/19/96 35
Days Inn City Center -- Portland,
OR............................... 1,480 1962 09/16/86 35
Riverside Inn -- Portland, OR...... 1,407 1964 09/16/86 35
Allentown Hilton -- Allentown,
PA............................... 355 1981 08/16/96 35
Park Ridge Hotel -- King of
Prussia, PA...................... 1,020 1973 02/14/97 30
Days Inn Airport -- Philadelphia,
PA............................... 124 1984 06/28/96 35
Westin Philadelphia International
Airport -- Philadelphia, PA...... 988 1985 06/01/96 35
Ritz Carlton
Philadelphia -- Philadelphia,
PA............................... 1,775 1990 08/12/96 35
Sheraton Tara Airport
Hotel -- Warwick, RI............. 162 1979 09/11/97 30
Charleston Hilton
North -- Charleston, SC.......... 791 1983 02/14/97 30
Westin Hermitage -- Nashville,
TN............................... 489 1910 03/11/97 30
Radisson Park Central -- Dallas,
TX............................... 6,437 1972 09/09/88 35
Doubletree Guest Suites DFW
Airport -- Irving, TX............ 1,814 1985 04/26/96 35
Courtyard by Marriott Crystal
City -- Arlington, VA............ 1,098 1990 02/14/97 30
Omni Waterside Hotel -- Norfolk,
VA............................... 1,880 1976 02/14/97 30
Residence Inn Tyson's
Corner -- Vienna, VA............. 1,982 1984 07/01/84 35
Tyee Hotel -- Olympia, WA(2)....... 783 1961 02/17/87 35
</TABLE>
F-53
<PAGE> 148
<TABLE>
<CAPTION>
SCHEDULE III (CONTINUED)
REAL ESTATE AND ACCUMULATED DEPRECIATION
STARWOOD HOTELS & RESORTS
DECEMBER 31, 1997
(IN THOUSANDS)
GROSS AMOUNT BOOK
INITIAL COST TO COSTS SUBSEQUENT TO VALUE
COMPANY ACQUISITION AT DECEMBER 31, 1997
------------------------ ---------------------- -----------------------
(1)
(1)
BUILDING AND BUILDING AND BUILDING AND
DESCRIPTION LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS
----------- -------- ------------ ------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Days Inn Town Center -- Seattle,
WA............................... 1,733 288 2,021
Edmond Meany Tower
Hotel -- Seattle, WA(2).......... 1,700 6,270 120 4,631 1,820 10,901
Sixth Avenue Inn -- Seattle, WA.... 2,720 210 2,930
Capitol Hill Suites -- Washington,
DC............................... 1,276 6,868 385 1,276 7,253
One Washington Circle -- Washington
DC............................... 2,850 14,343 2,850 14,343
Westin Washington,
DC -- Washington, DC............. 8,470 22,422 5,907 8,470 28,329
-------- ---------- ------- ------- -------- ----------
$352,763 $1,740,022 $ 2,138 $57,922 $354,901 $1,797,944
======== ========== ======= ======= ========
Land............................... 354,901
Furniture, fixtures & equipment.... 261,584
Construction in progress........... 61,737
----------
$2,476,166
==========
<CAPTION>
SCHEDULE III (CONTINUED)
REAL ESTATE AND ACCUMULATED DEPRECIATION
STARWOOD HOTELS & RESORTS
DECEMBER 31, 1997
(IN THOUSANDS)
(3)
ACCUMULATED
DEPRECIATION & YEAR OF DATE
DESCRIPTION AMORTIZATION CONSTRUCTION ACQUIRED LIFE
----------- -------------- ------------ -------- ----
<S> <C> <C> <C> <C>
Days Inn Town Center -- Seattle,
WA............................... 1,628 1957 09/16/86 13
Edmond Meany Tower
Hotel -- Seattle, WA(2).......... 2,575 1932 09/16/86 35
Sixth Avenue Inn -- Seattle, WA.... 2,453 1959 09/16/86 13
Capitol Hill Suites -- Washington,
DC............................... 697 1955 01/01/95 35
One Washington Circle -- Washington
DC............................... 175 1964 09/30/97 30
Westin Washington,
DC -- Washington, DC............. 2,330 1984 01/04/96 35
--------
$114,986
Land...............................
Furniture, fixtures & equipment.... 50,642
Construction in progress...........
--------
$165,628
========
</TABLE>
- ---------------
(1) As of December 31, 1997, real estate and furniture, fixtures and equipment
have a cost for federal income tax purposes which reasonably approximates
their carrying value.
(2) Land costs represent costs allocated to leasehold interest in land.
(3) Includes reserve for losses discussed in Notes 1 and 13 of Notes to the
Financial Statements.
(4) Certain amounts may have been adjusted due to cost segregation studies and
other adjustments.
F-54
<PAGE> 149
SCHEDULE III (CONTINUED)
REAL ESTATE AND ACCUMULATED DEPRECIATION
STARWOOD HOTELS & RESORTS
A reconciliation of the Trust's investment in real estate, furniture and
fixtures and related accumulated depreciation is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1997 1996 1995
---------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
REAL ESTATE AND FURNITURE AND FIXTURES:
Balance at beginning of period.......................... $1,075,047 $ 305,637 $188,608
Additions during period:
Acquisitions....................................... 1,295,429 803,895 100,749
Contributed properties............................. -- -- 30,642
Improvements....................................... 116,994 15,661 4,660
Transfer of Properties............................. 2,372 4,014 --
Deductions during period:
Sale of properties................................. (13,676) (54,160) --
Transfer of properties............................. -- -- (19,022)
---------- ---------- --------
Balance at end of period................................ $2,476,166 $1,075,047 $305,637
========== ========== ========
ACCUMULATED DEPRECIATION:
Balance at beginning of period.......................... $ 74,123 $ 64,027 $ 71,899
Additions during period:
Depreciation expense............................... 95,018 39,137 7,674
Contributed properties............................. -- -- 890
Transfer of properties............................. 229 116 --
Deductions during period:
Sale of properties................................. (3,742) (29,157) --
Transfer of properties............................. -- -- (16,436)
---------- ---------- --------
Balance at end of period................................ $ 165,628 $ 74,123 $ 64,027
========== ========== ========
</TABLE>
F-55
<PAGE> 150
SCHEDULE III (CONTINUED)
REAL ESTATE AND ACCUMULATED DEPRECIATION
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COSTS SUBSEQUENT TO GROSS AMOUNT BOOK VALUE
INITIAL COST TO COMPANY ACQUISITION AT DECEMBER 31, 1997
----------------------- ------------------- ------------------------
(1)
(1)
BUILDING AND BUILDING AND BUILDING AND
DESCRIPTION LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS
----------- ------- ------------ ---- ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C>
HOTEL ASSETS:
Corporate office -- Phoenix, AZ................ $ 243 $ 243
Plaza Hotel & Conference Center -- Tucson,
AZ........................................... $ 595 383 978
Midland Hotel -- Chicago, IL................... $ 1,551(4) 17,215 11,879 $ 1,551 29,094
Best Western Airport Inn -- Albuquerque, NM.... 325 47 372
Doral Inn -- New York, NY...................... 33,948 5,208 39,156
Days Inn City Center -- Portland, OR........... 2,185 2,185
Riverside Inn -- Portland, OR.................. 2,123(4) 2,123
Days Inn Town Center -- Seattle, WA............ 429(4) 429
Edmond Meany Tower Hotel -- Seattle, WA........ 3,437(4) 3,437
Sixth Avenue Inn -- Seattle, WA................ 1,515(4) 1,515
Milwaukee Marriott -- Brookfield, WI(3)........ 2,500 17,422 3,706 2,500 21,128
Westin Washington, DC -- Washington, DC........ 345 345
Westin Regina Resort -- Cancun, Mexico......... 4,200 37,197 4,200 37,197
Westin Regina Resort -- Cabo San Lucas,
Mexico....................................... 5,392 47,991 5,392 47,991
Westin Regina Resort -- Puerto Vallarta,
Mexico....................................... 2,500 22,261 2,500 22,261
Turnberry Hotel and Golf Resort -- Ayreshire,
Scotland..................................... 6,168 37,615 6,168 37,615
------- -------- -- ------- ------- --------
$22,311 $224,603 $0 $21,466 $22,311 $246,069
======= ======== == ======= ======= ========
Land........................................... 22,311
Furniture, fixtures & equipment................ 115,692
Construction in progress....................... 19,679
--------
$403,751
========
<CAPTION>
(2)
ACCUMULATED
DEPRECIATION & YEAR OF DATE
DESCRIPTION AMORTIZATION CONSTRUCTION ACQUIRED LIFE
----------- -------------- ------------ -------- ----
<S> <C> <C> <C> <C>
HOTEL ASSETS:
Corporate office -- Phoenix, AZ................ $ 4 N/A N/A 30
Plaza Hotel & Conference Center -- Tucson,
AZ........................................... 277 1971 09/16/86 35
Midland Hotel -- Chicago, IL................... 20,038 1934 03/22/96 35
Best Western Airport Inn -- Albuquerque, NM.... 130 1980 09/16/86 35
Doral Inn -- New York, NY...................... 2,545 1927 09/20/95 35
Days Inn City Center -- Portland, OR........... 702 1962 09/16/86 35
Riverside Inn -- Portland, OR.................. 682 1964 09/16/86 35
Days Inn Town Center -- Seattle, WA............ 358 1957 09/16/86 13
Edmond Meany Tower Hotel -- Seattle, WA........ 1,105 1932 09/16/86 35
Sixth Avenue Inn -- Seattle, WA................ 1,321 1959 09/16/86 13
Milwaukee Marriott -- Brookfield, WI(3)........ 4,097 1972 07/01/91 35
Westin Washington, DC -- Washington, DC........ 181 1984 01/04/96 35
Westin Regina Resort -- Cancun, Mexico......... 617 1991 08/21/97 30
Westin Regina Resort -- Cabo San Lucas,
Mexico....................................... 795 1994 08/21/97 30
Westin Regina Resort -- Puerto Vallarta,
Mexico....................................... 368 1992 08/21/97 30
Turnberry Hotel and Golf Resort -- Ayreshire,
Scotland..................................... 1905 12/23/97 30
-------
$33,220
=======
Land...........................................
Furniture, fixtures & equipment................ 52,206
Construction in progress.......................
-------
$85,426
=======
</TABLE>
- ---------------
(1) As of December 31, 1997, real estate and furniture, fixtures and equipment
have a cost for federal income tax purposes which reasonably approximates
their carrying value.
(2) Includes reserve for losses discussed in Notes 1 and 13 of Notes to the
Financial Statements.
(3) Land costs represent costs allocated to leasehold interest in land.
(4) Certain amounts may have been adjusted due to cost segregation studies and
other adjustments.
F-56
<PAGE> 151
SCHEDULE III (CONTINUED)
REAL ESTATE AND ACCUMULATED DEPRECIATION
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
A reconciliation of the Corporation's investment in real estate, furniture
and fixtures and related accumulated depreciation is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
REAL ESTATE AND FURNITURE AND FIXTURES:
Balance at beginning of period............................. $168,907 $134,722 $ 51,741
Additions during period:
Acquisitions.......................................... 185,293 29,939 38,396
Contributed properties................................ 22,455 -- 4,459
Improvements.......................................... 40,264 12,114 21,104
Transfer of properties................................ -- -- 19,022
Deductions during period:
Transfer of properties................................ (2,372) (4,014) --
Sale of properties.................................... (10,796) (3,854) --
-------- -------- --------
Balance at end of period................................... $403,751 $168,907 $134,722
======== ======== ========
ACCUMULATED DEPRECIATION:
Balance at beginning of year............................... $ 48,157 $ 39,374 $ 17,266
Additions during period:
Depreciation expense.................................. 23,419 12,191 5,269
Transfer of properties................................ -- -- 16,436
Contributed properties................................ 15,980 -- 403
Deductions during period:
Transfer of properties................................ (229) (116) --
Sale of properties.................................... (1,901) (3,292) --
-------- -------- --------
Balance at end of period................................... $ 85,426 $ 48,157 $ 39,374
======== ======== ========
</TABLE>
F-57
<PAGE> 152
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
STARWOOD HOTELS AND RESORTS
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
ORIGINAL OF LOANS SUBJECT
FACE CARRYING TO DELINQUENT
INTEREST FINAL PRIOR AMOUNT OF AMOUNT OF PRINCIPAL OR
DESCRIPTION RATE MATURITY PERIODIC PAYMENT LIENS MORTGAGES MORTGAGES(1) INTEREST
----------- ---------- -------- ---------------- ----- --------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
First Mortgages:
Vagabond
Inns -- Modesto,
CA................... 10.00% 2006 (3) no $ 1,995 $ 1,126
Ramada Inn -- Tucker,
GA................... 9.00% 1998 16,700(4) no 1,985 1,878
Ramada
Inn -- Jacksonville,
FL................... 9.00% 2001 18,500(5) no 2,300 2,252
Ramada
Inn -- Fayetteville,
NC................... 9.00% 2006 9,100(6) no 800 668
Ramada
Suites -- Secaucus,
NJ................... (2) 1999 Adjustable(7) no 13,813 10,344
Harvey Hotel
Addison -- Dallas,
TX................... 8.00% 2002 323,600(8) no 11,250 6,900
Harvey Bristol
Suites -- Dallas,
TX................... 8.00% 2002 517,800(9) no 18,000 11,079
Harvey DFW Airport
Hotel -- Dallas,
TX................... 8.00% 2002 805,500(10) no 28,000 17,050
Second Mortgages:
Harvey Hotel
Addison -- Dallas,
TX................... Prin. Only 2002 1,900(11) yes 75 --
Harvey Bristol
Suites -- Dallas,
TX................... Prin. Only 2002 4,800(12) yes 190 --
Harvey DFW Airport
Hotel -- Dallas,
TX................... Prin. Only 2002 1,800(13) yes 72 --
Allowance for loan
losses................... (100)
-------- --------
$ 78,480 $ 51,197
======== ========
Intercompany Mortgage Loans
First Mortgages:
Midland
Hotel -- Chicago,
IL................... 10.00% 1999 (14) no $ 17,000 $ 19,975
Milwaukee
Sheraton -- Milwaukee,
WI (Aetna)........... 10.50% 1998 (15) no 10,000 8,494
Milwaukee
Sheraton -- Milwaukee,
WI (Aetna
Addition)............ 1998 (15) yes 600
Doral Inn -- New York,
NY................... 9.50% 2006 (16) no 40,250 40,250
Westin Regina
Resort -- Cancun,
Mexico............... (17) 1998 (17) no 41,088 42,335
Westin Regina
Resort -- Cabo San
Lucas, Mexico........ (17) 1998 (17) no 53,081 54,693
Westin Regina
Resort -- Puerto
Vallarta, Mexico..... (17) 1998 (17) no 24,581 25,327
Turnberry Hotel and
Golf Resort --
Ayreshire,
Scotland............. 10.00% 2000 (18) no 27,000 27,067
Third Mortgages:
Milwaukee
Sheraton -- Milwaukee,
WI................... 10.50% 1998 (15) yes 1,000 1,000
Fourth Mortgages:
Milwaukee
Sheraton -- Milwaukee,
WI................... 10.50% 1998 (15) yes 12,667 21,691
-------- --------
$226,667 $241,432
======== ========
</TABLE>
(Continued)
F-58
<PAGE> 153
- ---------------
(1) As of December 31, 1997, the aggregate cost (before allowance for loan
losses) for federal income tax purposes is not significantly different from
that used for book purposes.
(2) The interest rate is the ninety-day LIBOR plus 1.25% or prime rate, at
borrower's option. At December 31, 1997, the rate was 6.97%.
(3) The note provides for monthly payments of interest plus additional annual
payments based on a percentage of the hotel's sales, a portion of which is
applied to principal. On April 29, 1996, the borrower exercised its right
under the terms of the note to extend the maturity of the note to June
2006.
(4) Principal and interest due monthly based on a 25-year amortization schedule
with unpaid principal of approximately $1.8 million due in June 1998.
(5) Principal and interest due monthly based on a 30-year amortization schedule
with unpaid principal of approximately $2.2 million due in December 2001.
(6) Principal and interest due monthly based on a 12-year amortization schedule
with unpaid principal of $9,000 due in December 2006.
(7) Principal and interest due monthly. Principal amount adjusts annually based
on note schedule. The note carrying amount is net of approximately $1.7
million discount.
(8) Principal and interest due quarterly based on note schedule. The note
carrying amount is net of approximately $2.0 million discount. A 25%
participation on both the first and second mortgages was sold to a third
party in 1995.
(9) Principal and interest due quarterly based on note schedule. The note
carrying amount is net of approximately $3.1 million discount.
(10) Principal and interest due quarterly based on note schedule. The note
carrying amount is net of approximately $5.0 million discount.
(11) Forty equal principal payments of $125,125 each of which the Realty
Partnership has a 1.5% interest. The note carrying amount is net of $47,000
allowance. The face amount represents the Realty Partnership's 1.5%
interest in the mortgage loan. The remaining payment amounts are passed
through to the participants.
(12) Forty equal principal payments of $237,500 each of which the Realty
Partnership has a 2% interest. The note carrying amount is net of $95,000
allowance. The face amount represents the Realty Partnership's 2% interest
in the mortgage loan. The remaining payment amounts are passed through to
the participants.
(13) Forty equal principal payments of $90,000 each of which the Realty
Partnership has a 2% interest. The note carrying amount is net of $36,000
allowance. The face amount represents the Realty Partnership's 2% interest
in the mortgage loan. The remaining payment amounts are passed through to
the participants.
(14) Interest only payable monthly. Principal and all accrued and unpaid
interest are due March 1999.
(15) In June 1997, the maturity of the notes was extended to June 1998.
(16) One hundred thirty-two equal installments of interest only. Principal and
all accrued and unpaid interest are due October 2006.
(17) The interest rate is the ninety-day LIBOR plus 2.69%. At December 31, 1997,
the rate was 8.34%. Principal and all accrued and unpaid interest are due
May 1998.
(18) Interest only payable monthly. Principal and all accrued and unpaid
interest are due December 2000.
(Continued)
F-59
<PAGE> 154
SCHEDULE IV (CONTINUED)
RECONCILIATION OF MORTGAGE LOANS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Balance at beginning of period.............................. $90,741 $79,261 $14,049
Additions --
New mortgage loans........................................ -- 31,289 71,779
Amortization of discount.................................. 5,575 3,140 3,285
Deductions --
Principal repayments...................................... (45,245) (22,949) (6,940)
Allowance for loan loss................................... 126 -- (2,912)
------- ------- -------
Balance at end of period.................................... $51,197 $90,741 $79,261
======= ======= =======
</TABLE>
INTERCOMPANY MORTGAGE LOANS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Balance at beginning of period.............................. $ 88,077 $68,486 $16,916
Additions --
New mortgage loans........................................ 145,750 18,216 50,073
Accrued interest (1)...................................... 7,935 2,055 2,010
Deductions --
Principal repayments...................................... (330) (680) (513)
-------- ------- -------
Balance at end of period.................................... $241,432 $88,077 $68,486
======== ======= =======
</TABLE>
- ---------------
(1) Per mortgage loan agreements, the borrowers are not required to pay monthly
interest if the cash flows are insufficient. Thus, the Trust has accrued
interest on the notes.
F-60
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED DECLARATION OF TRUST
OF
STARWOOD HOTELS & RESORTS
Dated as of August 15, 1969 as
Amended and Restated as of June 6, 1988
Amended as of February 23, 1998
<PAGE> 2
AMENDED AND RESTATED DECLARATION OF TRUST
OF
STARWOOD HOTELS & RESORTS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I. The Trust; Definitions....................................................... 1
1.1 Name......................................................................... 1
1.2 Place of Business............................................................ 1
1.3 Nature of Trust.............................................................. 1
1.4 Definitions.................................................................. 2
ARTICLE II. Trustees..................................................................... 6
2.1 Number, Term of Office, Qualifications of Trustees........................... 6
2.2 Compensation and Other Remuneration.......................................... 7
2.3 Resignation, Removal and Death of Trustees................................... 7
2.4 Vacancies.................................................................... 8
2.5 Successor and Additional Trustees............................................ 8
2.6 Actions by Trustees.......................................................... 8
2.7 Executive Committee.......................................................... 8
2.8 Names and Addresses of Trustees and Officers................................. 8
2.9 Non-Affiliated Trustees...................................................... 9
ARTICLE III. Trustees' Powers................................................................. 9
3.1 Power and Authority of Trustees.............................................. 9
3.2 Specific Powers and Authorities.............................................. 10
3.3 Trustees Regulations......................................................... 14
3.4 Additional Powers............................................................ 14
3.5 Incorporation................................................................ 14
ARTICLE IV. Advisor; Limitation on Operating Expenses......................................... 14
4.1 Employment of Advisor........................................................ 14
4.2 Term......................................................................... 15
4.3 Restrictions on Advisor...................................................... 15
4.4 Limitation on Operating Expenses............................................. 15
4.5 Initial Advisor.............................................................. 18
4.6 Sale of Shares of the Advisor................................................ 18
ARTICLE V. Investment Policy.................................................................. 18
5.1 General Statement of Policy.................................................. 18
5.2 [Deleted.]................................................................... 19
5.3 [Deleted.]................................................................... 19
5.4 Obligor's Default............................................................ 19
5.5 Changes Investment Policies and Restrictions................................. 19
5.6 [Deleted.]................................................................... 19
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE VI. The Shares and Shareholders....................................................... 19
6.1 Shares....................................................................... 19
6.2 Legal Ownership of Trust Estate.............................................. 20
6.3 Shares Deemed Personal Property.............................................. 21
6.4 Share Record: Issuance and Transferability Shares............................ 21
6.5 Dividends or Distributions to Shareholders................................... 22
6.6 Transfer Agent, Dividend Distributing Agent and Registrar.................... 22
6.7 Shareholders' Meeting........................................................ 22
6.8 Proxies...................................................................... 23
6.9 Reports to Shareholders...................................................... 23
6.10 Fixing Record Date........................................................... 23
6.11 Notice to Shareholders....................................................... 24
6.12 Restrictions on Transfer..................................................... 24
6.13 Excess Shares................................................................ 29
6.14 Pairing...................................................................... 32
6.15 See Exhibit A................................................................ 32
6.16 See Exhibit A................................................................ 32
ARTICLE VII. Liability of Trustees, Shareholders and Officers, and Other Matters.............. 32
7.1 Exculpation of Trustee and Officers.......................................... 32
7.2 Limitation of Liability of Shareholders, Trustees and Officers............... 33
7.3 Express Exculpatory Clauses and Instruments.................................. 33
7.4 Indemnification of Trustees, Officers, Employees and Other Agents............ 34
7.5 Right of Trustees and officers to Own Shares or Other Property and
to Engage in Other Business.................................................. 34
7.6 Transactions Between the Trustees and the Trust.............................. 35
7.7 Restriction of Duties and Liabilities........................................ 37
7.8 Persons Dealing with Trustees or Officers.................................... 37
7.9 Reliance..................................................................... 37
7.10 Income Tax Status............................................................ 37
ARTICLE VIII. Duration, Amendment, Termination and Qualification of Trust..................... 38
8.1 Duration of Trust............................................................ 38
8.2 Termination of Trust......................................................... 38
8.3 Amendment Procedure.......................................................... 39
8.4 Qualification Under the REIT Provisions of the Internal Revenue Code......... 39
ARTICLE IX. Miscellaneous..................................................................... 39
9.1 Applicable Law............................................................... 39
9.2 Index and Headings for Reference Only........................................ 39
9.3 Successors in Interest....................................................... 39
9.4 Inspection of Records........................................................ 39
9.5 Counterparts................................................................. 40
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
<S> <C>
9.6 Provisions of the Trust in Conflict with Law or Regulations.................. 40
9.7 Certifications............................................................... 40
9.8 Recording and Filing......................................................... 41
9.9 Resident Agent............................................................... 41
</TABLE>
<PAGE> 5
AMENDED AND RESTATED DECLARATION OF TRUST
As of August 15, 1969, the initial Trustees agreed, pursuant to a
Declaration of Trust dated as of said date (the "Declaration of Trust"), to hold
in trust as trustees any and all property, real, personal or otherwise, tangible
or intangible, which is transferred, conveyed or paid to them as such Trustees
and all rents, income, profits and gains therefrom for the benefit of the
Shareholders thereunder, subject to the terms and conditions and for the uses
and purposes set forth therein. As of August 5, 1970, the Trustees who were a
majority of the Trustees on said date agreed, pursuant to an Amended Declaration
of Trust dated as of said date to restate in its entirety the Declaration of
Trust, as theretofore amended, The effect of this Amended and Restated
Declaration of Trust shall be to restate in its entirety said Amended
Declaration of Trust as heretofore amended (the "Amended Declaration of Trust"),
and it shall not have the effect of dissolving or terminating or in any way
affecting the continuity of, but shall continue without interruption, the trust
created by the Declaration of Trust (the "Trust").
The undersigned, being a majority of the Trustees as of June 6, 1988,
under the Amended Declaration of Trust, do hereby set forth this Amended and
Restated Declaration of Trust, do hereby agree to be bound by this Amended and
Restated Declaration of Trust and do hereby certify that the amendments to the
Amended Declaration of Trust included in this Amended and Restated Declaration
of Trust were duly adopted by the Shareholders of the Trust in accordance with
the Amended Declaration of Trust.
ARTICLE I.
The Trust; Definitions
1.1 Name. The name of the Trust shall be "Starwood Hotels & Resorts."
As far as practicable and except as otherwise provided in this Declaration, the
Trustees shall conduct the Trust's activities, execute all documents, and sue or
be sued in the name of Starwood Hotels & Resorts, or in their names as Trustees
of Starwood Hotels & Resorts.
1.2 Place of Business. The principal office of the Trust shall be in
the State of Maryland. However, the Trustees may, from time to time, change such
location and maintain other offices or places of business.
1.3 Nature of Trust. The Trust is a real estate investment trust
organized under Article 78C of the Annotated Code of the State of Maryland. It
is intended that the Trust shall carry on business as a "real estate investment
trust" (hereinafter called "REIT" or "Real Estate Investment Trust") as
described in the REIT Provisions of the Internal Revenue Code. The Trust is not
a general partnership, limited partnership, joint venture, corporation or joint
stock company or association (but nothing herein shall preclude the Trust from
being taxed as an association under the REIT Provisions of the Internal Revenue
Code) nor shall the Trustees or Shareholders or any of them for any purpose be,
or be deemed to be treated in any way whatsoever to be, liable or responsible
hereunder as partners or joint ventures. The
<PAGE> 6
relationship of the Shareholders to the Trustees shall be solely that of
beneficiaries of the Trust and their rights shall be limited to those conferred
upon them by this Declaration.
1.4 Definitions. The terms defined in this Section 1.4 whenever used in
this Declaration shall unless the context otherwise requires, have the
respective meanings hereinafter specified in this Section 1.4. In this
Declaration, words in the singular number include the plural and in the plural
number include the singular.
(a) Accommodations Field. "Accommodations Field" shall mean the hotel,
motel, motor inn, restaurant, and lodgings field generally, and shall also be
deemed to include activities undertakings and businesses directly allied or
connected with, or directly related to, hotels, motels, motor inns, restaurants
or lodgings.
(b) Advisor. "Advisor" shall mean the Person employed by the Trustees
under the provisions of Article IV.
(c) Affiliate. "Affiliate" shall mean (i) with respect to any Person,
any other Person (A) which such Person directly or indirectly controls, is
controlled by, or is under common control with or (B) of which such Person is a
director, officer, employee, partner or trustee or (C) of which such Person
directly or indirectly owns, controls or holds with power to vote five percent
(5%) or more of the outstanding voting securities or (D) which directly or
indirectly owns, controls or holds with power to vote five percent (5%) or more
of the outstanding voting securities of such Person and (ii) with respect to the
Trust, the Advisor and any other investment adviser, manager or independent
contractor (as that term is defined in Section 856(d)(3) of the Internal Revenue
Code) of the Trust.
(d) Annual Meeting of Shareholders. "Annual Meeting of Shareholders"
shall have the meaning set forth in the first sentence of Section 6.7.
(e) Annual Report. "Annual Report" shall have the meaning set forth in
Section 6.9.
(f) Appraisal. "Appraisal" shall mean the fair market value, as of the
date of the appraisal, of Real Property in its existing state or in a state as
to be created or improved, as determined by the Trustees or as determined by any
bank, insurance company or other Person which makes appraisals in connection
with its lending or services activities or as determined by a disinterested
Person having no interest in the Real Property, provided, however, that, any
such Person, is, in the sole judgment of the Trustees properly qualified to make
a determination; provided further that an appraisal shall be included within the
meaning of the term Appraisal as used herein upon which the Trustees may in good
faith rely if it is made on behalf of a Person or Persons other than the Trust
at or prior to the time of the investment by the Trust if the Trust is acquiring
an interest (either in whole or in part) in the investment with respect to which
such appraisal is or has been made.
<PAGE> 7
(g) Construction Loans. "Construction Loans" shall mean Mortgage Loans
incurred to finance all or part of the cost of acquiring and improving land
(including leaseholds therein) and the construction or improvement of buildings
and other improvements thereon.
(h) Declaration. "Declaration" shall mean this Declaration of Trust and
all amendments or modifications thereof, References in this Declaration to
"herein" and "hereunder" shall be deemed to refer to this Declaration and shall
not be limited to the particular text, article or section in which such words
appear.
(i) Development Loans. "Development Loans" shall mean Mortgage Loans
incurred to finance all or part of the cost of acquiring and improving vacant
land and developing it into a site or sites suitable for the construction of
buildings thereon or suitable for other residential, commercial, industrial or
public uses.
(j) Equity Investments. "Equity Investments" shall mean investments in
Real Property (other than Mortgage Loans), or in borrowing or leasing entities
or other organizations owning, operating or managing Real Property.
(k) Equity Participations. "Equity Participations" shall mean
participations acquired in connection with making any Real Property Investment
including, but not limited to, participations in contingent interest based upon
operating revenues, participations in the ownership of Real Property,
participations in rental based upon operating revenues or based upon a
percentage of sales or room rents, or participations in the ownership of
borrowing or leasing entities or other organizations owning, operating or
managing Real Property.
(l) First Mortgage. "First Mortgage" shall mean a Mortgage which takes
priority or precedence over all other charges or liens upon the Real Property
and which must be satisfied before such other charges are entitled to
participate in the proceeds of any sale. Such priority shall not be deemed as
abrogated by liens for taxes, or assessments which are not delinquent or remain
payable without penalty, contracts (other than contracts for repayment of
borrowed moneys), or leases, mechanics and materialman's liens for work
performed and materials furnished which are not in default or are in good faith
being contested and other claims normally deemed in the same local jurisdiction
not to abrogate the priority of a first mortgage.
(m) First Mortgage Loans. "First Mortgage Loans" shall mean Mortgage
Loans secured or collateralized at the time of acquisition thereof by the Trust
by First Mortgages.
(n) Interim Loans, "Interim Loans" shall mean Mortgage Loans secured or
collateralized by Mortgages made on improved properties and having a maturity of
three years or less,
(o) Junior Mortgage. "Junior Mortgage" shall mean any Mortgage (other
than a Mortgage securing a Wrap-Around Mortgage Loan or a Mortgage securing the
junior portion of a Mortgage Loan with respect to which a Senior Participation
has been issued) which has the same priority or precedence over all charges or
encumbrances on Real Property as is
<PAGE> 8
required for a First Mortgage, except that it is subject to the priority of one
or more Mortgages which must be satisfied before such Junior Mortgage is
entitled to participate in the proceeds of any sale or other disposition of such
Real Property,
(p) Junior Mortgage Loans. "Junior Mortgage Loans" shall mean Mortgage
Loans (other than Wrap-Around Mortgage Loans and the junior portion of Mortgage
Loans with respect to which a Senior Participation has been sold) secured or
collateralized by Junior Mortgages.
(q) Long Term. "Long Term" shall mean, when used with respect to a
Mortgage Loan, a Mortgage Loan other than an Interim Loan or a Construction Loan
and, when used with respect to any other Real Property Investment, shall mean
such an investment which is not expected to be amortized in full within a period
of three years from the date on which such investment is made.
(r) Mortgage Loans. "Mortgage Loans" shall mean notes, debentures,
bonds and other evidence of indebtedness or obligation which are negotiable or
non-negotiable and which are secured or collateralized by Mortgages.
(s) Mortgages. "Mortgages" shall mean mortgages, deeds of trust or
other security deeds on Real Property or rights or interests in Real Property.
(t) National Hotel Companies. "National Hotel Companies" shall mean
Hilton Hotels Corporation, Marriott Corporation, Holiday Inns, Inc., TraveLodge
International, Inc. and any other nationally known hotel companies which are
engaged in operations in the Accommodations Field or the granting of franchises
to other Persons with respect to such operations and the Affiliates of any of
them.
(u) Net Assets. "Net Assets" shall mean the "Total Assets of the
Trust", after deducting therefrom all liabilities of the Trust; provided,
however, that depreciable assets shall be included in such Assets at the lesser
of either:
(i) the cost of such Assets on the books of the Trust less
depreciation thereof on a straight-line basis over the useful life of
such Assets in accordance with generally accepted accounting
principles, and in making such calculation the useful life of such
Assets shall correspond to the useful life used as the basis of
depreciation on the Trust's federal income tax returns; or
(ii) fair market value of such Assets, in the judgment of the
Trustees.
(v) Person. "Person" shall mean and include individuals, corporations,
limited partnerships, general partnerships, joint stock companies or
associations, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts, or other entities and governments and
agencies and political subdivisions thereof.
<PAGE> 9
(w) Real Property. "Real Property" shall mean and include land, rights
in land, leasehold interests (including but not limited to interests of a lessor
or lessee therein), and any building, structures, improvements, fixtures and
equipment located on or used in connection with land, leasehold interests and
rights in land or interest therein, but does not include Mortgages, Mortgage
Loans or interests therein.
(x) Real Property Investments. "Real Property Investments" shall mean
and include investments in Real Property or in obligations secured, directly or
indirectly, by liens on Real Property, including, but not limited to, Long-Term
Mortgage Loans (with or without Equity Participations), interim Loans,
Development Loans, Construction Loans, First Mortgage Loans, Junior Mortgage
Loans, Wrap-Around Mortgage Loans and Equity Investments in Real Property
(including, but not limited to, land leaseback and leasehold mortgage loans, net
lease financings and sale and leaseback transactions).
(y) REIT Provisions of the Internal Revenue Code. "REIT Provisions of
the Internal Revenue Code" shall mean Part 11, Subchapter M of Chapter 1, of the
Internal Revenue Code of 1954, as now enacted or hereafter amended, or successor
statutes and regulations promulgated thereunder.
(z) Securities. "Securities" shall mean any stock, shares, voting trust
certificates, bonds, debentures, notes, or other evidences of indebtedness, or
in general any instruments commonly known as "securities" or any certificates of
interest shares or participations in temporary or interim certificates for,
receipts for, guarantees of, or warrants, options or rights to subscribe to,
purchase or acquire any of the foregoing.
(aa) Senior Participation. "Senior Participation" shall mean a
participation or interest which shall have been sold by the Trust in a Mortgage
Loan, on terms and conditions satisfactory to the Trustees, pursuant to which
the participation sold takes priority or precedence as to charges and liens upon
the mortgaged property and satisfaction out of the proceeds of any sale over the
junior portion of the Mortgage Loan retained by the Trust; provided, however,
that a participation sold in a Mortgage Loan shall not be deemed to be a Senior
Participation as such term is used in this Declaration unless such Mortgage
Loan, considered as a single Mortgage Loan including the junior portion retained
by the Trust, would satisfy all of the requirements relating to the investment
by the Trust in a First Mortgage Loan.
(bb) Shares, "Shares" shall mean the shares of beneficial interest of
the Trust as described in Section 6.1.
(cc) Shareholders. "Shareholders" shall mean, as of any particular
time, all holders of record of outstanding Shares at such time.
(dd) Total Assets of the Trust. "Total Assets of the Trust" shall mean
the value of all the assets of the Trust Estate as such value appears an the
most recent quarterly balance sheet of :he Trust available to the Trustees.
<PAGE> 10
(ee) Trust. "Trust" shall mean the Trust created by this Declaration.
(ff) Trustees. "Trustees" shall mean, as of any particular time
Trustees holding office under this Declaration at such time, whether they be the
Trustees named herein or additional or successor Trustees, and shall not include
the officers, representatives or agents of the Trust, or the Shareholders, but
nothing herein shall be deemed to preclude the Trustees from also serving as
officers, representatives, or agents of the Trust, or owning Shares.
(gg) Trust Estate. "Trust Estate" shall mean. as of any particular
time, any and all property, real, personal, or otherwise, tangible or
intangible, which is owned or held by the Trust or the Trustees, including, but
not limited to, property which is transferred, conveyed or paid to the Trust or
Trustees, and all rents, income, profits and gains therefrom.
(hh) Trustees' Regulations. "Trustees' Regulations" shall have the
meaning set forth in Section 3.3.
(ii) Wrap-Around Mortgage Loans. "Wrap-Around Mortgage Loans" shall
mean Mortgage Loans which are subject to prior First Mortgages (which have been
created prior to or simultaneously with the creation of the Wrap-Around Mortgage
Loan) and are made on the basis of the current values of the mortgaged
properties without regard to and without discharging the prior First Mortgages;
provided, however, that a Mortgage Loan shall not be included in the term
Wrap-Around Mortgage Loan for purposes of this Declaration unless the
indebtedness evidenced by the Wrap-Around Mortgage Loan when added to the
indebtedness evidenced by the prior First Mortgage and considered as a single
First Mortgage Loan would comply in all respects with the requirements relating
to an investment by the Trust in such a First Mortgage Loan.
ARTICLE II.
Trustees
2.1 Number, Term of Office, Qualifications of Trustees. There shall be
no less than three (3) nor more than fifteen (15) Trustees. The initial Trustees
shall be the signatories to this Declaration as originally executed. Within the
limits set forth in this Section 2.1, the number of Trustees may be fixed,
increased or decreased from time to time by the Trustees or by the Shareholders
at any particular time provided however that, subject to the provisions of
section 2.3, each Trustee shall hold office until the expiration of his term and
until the election and qualification of his successor, Trustees may be
re-elected, The Trustee shall be an individual at least twenty-one (21) years of
age who is not under legal disability Such individual shall qualify as a Trustee
when he has either signed the Declaration or agreed in writing to be bound by
it. Unless otherwise required by law, no Trustee shall be required to give bond,
surety or security in any jurisdiction for the performance of any duties or
obligations hereunder. The Trustees, in their capacity as trustees, shall no; be
required to devote their entire time to the business and affairs of the Trust.
The Trustees shall be divided, with respect to the time for which they
severally hold office, into three classes, as nearly equal in number as
reasonably possible, with the term of
<PAGE> 11
office of the first class to expire at the 1995 Annual Meeting of Shareholders,
the term of office of the second class to expire at the 1996 Annual Meeting of
Shareholders and the term of office of the third class to expire at the 1997
Annual Meeting of Shareholders, with each Trustee to hold office until his or
her successor shall have been duly elected and qualified. At each Annual Meeting
of Shareholders, commencing with the 1995 Annual Meeting, (i) Trustees elected
to succeed those Trustees whose terms then expire shall be elected for a term of
office to expire at the third succeeding Annual Meeting of Shareholders after
their election, with each Trustee to hold office until his or her successor
shall have been duly elected and qualified, and (ii) if authorized by a
resolution of the Board of Trustees, Trustees may be elected to fill any vacancy
on the Board of Trustees, regardless of how such vacancy shall have been
created.
2.2 Compensation and Other Remuneration. The Trustees shall be entitled
to receive such reasonable compensation for their services as Trustees as they
may determine from time to time. The Trustees, either directly or indirectly,
shall also be entitled to receive remuneration for services rendered to the
Trust in any other capacity. Such services may include, without limitation,
services as an officer of the Trust, legal, accounting or other professional
services, or services as a broker, transfer agent or underwriter, whether
performed by a Trustee or any person affiliated with a Trustee. Notwithstanding
the foregoing, except as provided in Section 7.6, no Trustee shall receive any
fee or other remuneration, directly or indirectly, as a result of any sale of
property to or purchase of property from the Trust.
2.3 Resignation, Removal and Death of Trustees. A Trustee may resign at
any time by giving written notice in recordable form to the remaining Trustees
at the principal office of the Trust. Such resignation shall take effect on the
date such notice is given, or at any later time specified in the notice, without
need for prior accounting. A Trustee may be removed at any time, with or without
cause, by vote or written consent of holders of two-thirds (2/3rds) of the
outstanding Shares entitled to vote thereon, or with cause by all remaining
Trustees. A Trustee judged incompetent, or for whom a guardian or conservator
has been appointed, shall be deemed to have resigned as of the date of such
adjudication or appointment. Upon the resignation or removal of any Trustee, or
his otherwise ceasing to be a Trustee, he shall execute and deliver such
documents as the remaining Trustee shall require for the conveyance of any Trust
property held in his name, and shall account to the remaining Trustee or
Trustees, as they require, for all property which he holds as Trustee, and shall
thereupon be discharged as Trustee. Upon the incapacity or death of any Trustee,
his legal representative shall perform the acts set forth in the preceding
sentence and the discharge mentioned therein shall run to such legal
representative and to the incapacitated Trustee or the estate of the deceased
Trustee, as the case may be.
2.4 Vacancies. If any or all of the Trustees cease to be Trustees
hereunder, whether by reason of resignation, removal, incapacity, death or
otherwise, such event shall not terminate the Trust or affect its continuity,
Until vacancies are filled, the remaining Trustee or Trustees, if any (even
though less than three (3)), may exercise the powers of the Trustees hereunder.
Vacancies occurring among the Trustees (including vacancies created by increases
in number) may be filled by a majority of the remaining Trustees, though less
than a quorum,
<PAGE> 12
or by a sole remaining Trustee, and the person so appointed shall hold office
for a term expiring at the Annual Meeting of Shareholders at which the term of
office of the class to which they have been appointed expires and until his
successor is elected and qualified. If at any time there shall be no Trustees in
office, successor Trustees shall be elected by the Shareholders as provided in
Section 6.7.
2.5 Successor and Additional Trustees. The right, title and interest of
the Trustees in and to the Trust Estate shall also vest in successor and
additional Trustees upon their qualification, and they shall thereupon have all
the rights and obligations of Trustees hereunder. Such right, title and interest
shall vest in the Trustees, whether or not conveyance documents have been
executed and delivered pursuant to Section 2.3, or otherwise.
2.6 Actions by Trustees. A quorum for all meetings of the Trustees
shall be a majority of the Trustees. Common or interested Trustees may be
counted in determining the presence of a quorum at a meeting of the Trustees.
Unless specifically provided otherwise in this Declaration, the Trustees may act
by a vote or resolution at a meeting at which a quorum is present, or without a
meeting by a written vote, resolution, or other writing consenting to said
action, signed by a majority of the Trustees. Any agreement, deed, mortgage,
lease or other instrument or writing executed by one or more of the Trustees, or
by any authorized person, shall be valid and binding upon the Trustees and upon
the Trust when ratified by action of the Trustees.
2.7 Executive Committee. The Trustees may appoint from among their own
number an executive committee of two or more persons to whom they may delegate
from time to time such of the powers herein given to the Trustees as they may
deem advisable.
2.8 Names and Addresses of Trustees and Officers. The names and
addresses of the Trustees and officers of the Trust on the date hereof2 are as
follows:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
John P. Traynor 6308 Midnight Pass Road Villa 4
Trustee and Chairman Sarasota, Florida 33581
Harold W, Milner 1503 Walden Drive
Trustee and President McLean, Virginia
Raymond C. Brophy 1725 DeSales N.W.
Trustee Washington, D.C.
Richard S. Ellwood 10 Heron Road
Trustee Middletown, New Jersey 07748
Charles J, Kelley, Jr. 400 East 57th Street
</TABLE>
2 Refers to date of the Amended Declaration of Trust (August 5, 1970).
<PAGE> 13
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Trustee New York, New-York
Frederick X. Wilson 7009 Chansory Lane
Trustee Hyattsville, Maryland 20782
C. Lawrence Wiser 12702 Littleton Street
Trustee and Secretary Silver
Spring, Maryland 20906
- Treasurer
</TABLE>
2.9 Non-Affiliated Trustees. Affiliates of the Advisor and of any
National Hotel Company may be Trustees; however, there shall at all times be at
least a majority of the Trustees who are not Affiliates of the Advisor or of any
National Hotel Company or Affiliates of such Affiliates. If at any time, by
reason of one or more vacancies, there shall not be at least a majority of such
Trustees who are not such Affiliates, then within sixty (60) days after such
vacancy occurs, the continuing Trustee or Trustees then in office shall appoint,
pursuant to Section 2.4, a sufficient number of other Persons who are not such
Affiliates so that there shall be at least a majority of such Trustees in
office.
ARTICLE III.
Trustees' Powers
3.1 Power and Authority of Trustees. The Trustees, subject only to the
specific limitations contained in this Declaration, shall have without further
or other authorization, and free from any power or control on the part of the
Shareholders, full, absolute and exclusive power, control and authority over the
Trust Estate and over the business and affairs of the Trust to the same extent
as if the Trustees were the sole owners thereof in their own right, and to do
all such acts and things as in their sole judgment and discretion are necessary
or incidental to, or desirable, for the carrying out of any of the purposes of
the Trust or conducting the business of the Trust. Any determination made in
good faith by the Trustees of the purposes of the Trust or the existence of any
power or authority hereunder shall be conclusive. In construing the provisions
of this Declaration, presumption shall be in favor of the grant of powers and
authority to the Trustees. The enumeration of any specific power or authority
herein shall not be construed as limiting the general powers or authority or any
other specified power or authority conferred herein upon the Trustees.
3.2 Specific Powers and Authorities. Subject only to the express
limitations contained in this Declaration and in addition to any powers and
authorities conferred by this Declaration or which the Trustees may have by
virtue of any present or future statute or rule or law, the Trustees without any
action or consent by the Shareholders shall have and may exercise at any time
and from time to time the following powers and authorities which may or may not
be exercised by them in their sole judgment and discretion and in such manner
and upon such terms and conditions as they may from time to time deem proper:
(a) To retain, invest and reinvest the capital or other funds of the
Trust in real or personal property of any kind, all without regard to whether
any such property is authorized
<PAGE> 14
by law for the investment of trust funds and to possess and exercise all the
rights, powers and privileges appertaining to the ownership of the Trust Estate
and to increase the capital of the Trust at any time by the issuance of
additional Shares for such consideration as they deem appropriate.
(b) For such consideration as they deem proper, to invest in, purchase
or otherwise acquire for cash or other property or through the issuance of
Shares or through the issuance of notes, debentures, bonds or other obligations
of the Trust and hold for investment the entire of any participating interest in
notes, bonds, or other obligations which are secured by Mortgages, In connection
with any such investment, purchase or acquisition, the Trustees shall have the
power to acquire a share of rents, lease payments or other gross income from or
a share of the profits from or a share in the equity or ownership of Real
Property, either directly or through joint venture, general or limited
partnership, or other lawful combinations or associations; to invest in loans
secured by the pledge or transfer of mortgage obligations; to develop, operate,
pool, utilize, grant production payments out of or lease or otherwise dispose of
mineral, oil and gas properties and rights.
(c) To sell, rent, lease, hire, exchange, release, partition, assign,
mortgage, pledge, hypothecate, grant security interests in, encumber, negotiate,
convey, transfer or otherwise dispose of any and all of the Trust Estate by
deeds, trust deeds, assignments, bills of sale, transfers, leases, mortgages,
financing statements, security agreements and other instruments for any of such
purposes executed and delivered for and on behalf of the Trust or the Trustees
by one or more of the Trustees or by a duly authorized officer, employee, agent
or any nominee of the Trust.
(d) To issue Shares, bonds, debentures, notes or other evidences of
indebtedness which may be secured or unsecured and may be subordinated to any
indebtedness of the Trust and may be convertible into Shares and which may
include options, warrants and rights to subscribe to, purchase or acquire any of
the foregoing, all without vote of or other action by the Shareholders to such
Persons for such cash, property or other consideration (including Securities
issued or created by, or interest in any Person) at such time or times and on
such terms as the Trustees may deem advisable and to list any of the foregoing
Securities issued by the Trust on any securities exchange and to purchase or
otherwise acquire, hold, cancel, reissue, sell and transfer any of such
Securities.
(e) To enter into leases, contracts, obligations, and other agreements
for a term extending beyond the term of office of the Trustees and beyond the
possible termination of the Trust or for a lesser term.
(f) To borrow money and give negotiable or non-negotiable instruments
therefor; to guarantee, indemnify or act as surety with respect to payment or
performance of obligations of third parties; to enter into other obligations on
behalf of the Trust; and to assign, convey, transfer, mortgage, subordinate,
pledge, grant security interests in, encumber or hypothecate the Trust Estate to
secure any of the foregoing.
(g) To lend money, whether secured or unsecured.
<PAGE> 15
(h) To create reserve funds for any purpose.
(i) To incur and pay out of the Trust Estate any charges or expenses,
and disburse any funds of the Trust, which charges, expenses or disbursements
are, in the opinion of the Trustees, necessary or incidental to or desirable for
the carrying out of any of the purposes of the Trust or conducting the business
of the Trust, including without limitation taxes and other governmental levies,
charges and assessments, of whatever kind, or nature, imposed upon or against
the Trustees in connection with the Trust or the Trust Estate or upon or against
the Trust Estate or any part thereof, and for any of the purposes herein.
(j) To deposit funds of the Trust in banks, trust companies, savings
and loan associations and other depositories, whether or not such deposits will
draw interest, the same to be subject to withdrawal on such terms and in such
manner and by such Person or Persons (including any one or more Trustees, of
officers, agents or representatives) all the Trustees may determine.
(k) To possess and exercise all the rights, powers and privileges
appertaining to the ownership of ill or any Mortgages or Securities, issued or
created by, or interests in, any Person, forming part of the Trust Estate, to
the same extent that an individual might, and, without limiting the generality
of the foregoing, to vote or give any consent, request or notice, or waive any
notice, either in person or by proxy or power of attorney, with or without power
of substitution, to one or more Persons, which proxies and powers of attorney
may be for meetings or action generally or for any particular meeting or action,
and may include the exercise of discretionary powers,
(l) To cause to be organized or assist in organizing any Person under
the laws of any jurisdiction to acquire the Trust Estate or any part or parts
thereof or to carry on any business in which the Trust shall directly or
indirectly have any interest, and to sell, rent, lease, hire, convey, negotiate,
assign, exchange or transfer the Trust Estate or any part or parts thereof to or
with any such Person in exchange for the Securities thereof or otherwise, and to
lend money to, subscribe for the Securities of, and enter into any contracts
with, any such Person in which the Trust holds or is about to acquire Securities
or any other interest.
(m) To enter into joint ventures, general or limited partnerships and
any other lawful combinations or associations.
(n) To elect, appoint, engage or employ officers for the Trust
(including a President, Secretary, Treasurer and such Vice Presidents and other
officers as the Trustees may determine), who may be removed or discharged at the
discretion of the Trustees, such officers to have such powers and duties, and to
serve such terms, as may be prescribed by the Trustees or by the Trustees'
Regulations; to engage or employ any Persons (including, subject to the
provisions of Sections 7.5 and 7.6, any Trustee or officer and any Person in
which any Trustee or officer is directly or indirectly interested or with which
he is directly or indirectly connected) as agents, representatives, employees,
or independent contractors (including without limitation, real estate advisors,
investment advisors, transfer agents, registrars, underwriters, accountants,
attorneys at law, real estate agents, managers, appraisers, brokers,
<PAGE> 16
architects, engineers, construction managers, general contractors or otherwise)
in one or more capacities, and to pay compensation from the Trust for services
in as many capacities as such Person may be so engaged or employed; and, except
as prohibited by law, to delegate any of the powers and duties of the Trustees
to any one or more Trustees, agents, representatives, officers, employees
independent contractors or other Persons. The Trustees may elect one of the
Trustees as Chairman, to preside at meetings of the Trustees and exercise such
other powers and duties as the Trustees may from time to time assign to him;
provided that the Chairman shall not be or act as an officer of the Trust.
(o) To determine whether moneys, Securities or other assets received by
the Trust shall be charged or credited to income or capital or allocated between
income and capital, including the power to amortize or fail to amortize any part
or all of any premium or discount, to treat any part of all of the profit
resulting from the maturity or sale of any asset whether purchased at a premium
or at a discount, as income or capital, or apportion the same between income and
capital, to apportion the sales price of any asset between income and capital,
and to determine in what manner any expenses or disbursements are to be borne as
between income and capital, whether or not in the absence of the power and
authority conferred by this subsection such moneys, Securities or other assets
would be regarded as income or as capital or such expense or disbursement would
be charged to income or to capital; to treat any dividend or other distribution
on any investment as income or capital or apportion the same between income and
capital; to provide or fail to provide reserves for depreciation, amortization
or obsolescence in respect of all or any part of the Trust Estate subject to
depreciation, amortization or obsolescence in such amounts and by such methods
as they shall determine; and to determine the method or form in which the
accounts and records of the Trust shall be kept and to change from time to time
such method or form.
(p) To determine from time to time, the value of all or any part of the
Trust Estate and of any services, Securities, property or other consideration to
be furnished to or acquired by the Trust, and from time to time to revalue all
or any part of the Trust Estate in accordance with such appraisals or other
information as are, in the Trustees' sole judgment, necessary and/or
satisfactory.
(q) To collect, sue for, and receive all sums of money coming due to
the Trust, and to engage in, intervene in, prosecute, join, defend, compound,
compromise, abandon or adjust, by arbitration or otherwise, any actions, suits,
proceeding, disputes, claims, controversies demands or other litigation relating
to the Trust, the Trust Estate or the Trust's affairs, to enter into agreements
therefor, whether or not any suit is commenced or claim accrued or asserted and,
in advance of any controversy, to enter into agreements regarding arbitration,
adjudication or settlement thereof.
(r) To renew, modify, release, compromise, extend, consolidate, or
cancel, in whole or in part, any obligation to or of the Trust.
(s) To purchase and pay for out of the Trust Estate insurance contracts
and policies insuring the Trust Estate against any and all risks and insuring
the Trust and/or any or all of
<PAGE> 17
the Trustees, the Shareholders or officers against any and all claims and
liabilities of every nature asserted by any Person arising by reason of any
action alleged to have been taken or omitted by the Trust or by the Trustees,
Shareholders, or officers.
(t) To cause legal title to any of the Trust Estate to be held by
and/or in the name of the Trustees, or except as prohibited by law, by and/or in
the name of the Trust or one or more of the Trustees or any other Person, on
such terms, in such manner, with such powers in such Person as the Trustees may
determine, and with or without disclosure that the Trust or Trustees are
interested therein.
(u) To adopt a fiscal year for the Trust, and from time to time to
change such fiscal year.
(v) To adopt and use a seal (but the use of a seal shall not be
required for the execution of instruments or obligations of the Trust).
(w) To make, perform, and carry out, or cancel and rescind, contracts
of every kind for any lawful purpose without limit as to amount, with any
person, firm, trust, association, corporation, municipality, county, parish,
state, territory, government or other municipal or governmental subdivision.
These contracts shall be for such duration and upon such terms as the Trustees
in their sole discretion shall determine.
(x) To do all other such acts and things as are incident to the
foregoing, and to exercise all powers which are necessary or useful to carry on
the business of the Trust, to promote any of the purposes for which the Trust is
formed, and to carry out the provisions of this Declaration.
3.3 Trustees Regulations. The Trustees may make, adopt, amend or repeal
regulations (the "Trustees' Regulations") containing provisions relating to the
business of the Trust, the conduct of its affairs, its rights or powers and the
rights or powers of its Shareholders, Trustees or officers not inconsistent with
law or with this Declaration.
3.4 Additional Powers. The Trustees shall additionally have and
exercise all the powers conferred by the laws of the State of Maryland upon real
estate investment trusts formed under such laws, insofar as such laws are not in
conflict with the provisions of this Declaration.
3.5 Incorporation. With the approval of the holders of a majority of
the shares, the Trustees may cause to be organized or assist in organizing a
corporation or corporations under the laws of any jurisdiction or any other
trust, partnership, association, or other organization to take over the Trust
property or any part or parts thereof or to carry on any business in which the
Trust shall directly or indirectly have any interest, and to sell, convey and
transfer the Trust property or any part or parts thereof to any such
corporation, trust, association, or organization in exchange for the shares or
securities thereof or otherwise, and to lend money to, subscribe for the shares
or securities of, and enter into any contracts with any such corporation, trust,
association, or organization, or any corporation, trust, partnership,
<PAGE> 18
association, or organization in which the Trust holds or is about to acquire
shares or any other interest. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation if and to the extent permitted by law, provided that under the law
then in effect, the federal income tax benefits available to Real Estate
Investment Trusts, or substantially similar benefits, are also available to such
corporation, trust, association or organization.
ARTICLE IV.
Advisor; Limitation on Operating Expenses
4.1 Employment of Advisor. The Trustees are responsible for the general
policies of the Trust and for such general supervision of the business of the
Trust conducted by all officers, agents, employees, advisors, managers or
independent contractors of the Trust as may be necessary to insure that such
business conforms to the provisions of this Declaration. However, the Trustees
shall not be required personally to conduct the business of the Trust, and
consistent with their ultimate responsibility as stated above, the Trustees
shall have the power to appoint, employ or contract with such Person or Persons
(including one or more of themselves or any corporation, partnership, or trust
in which one or more of them may be directors, officers, stockholders, partners
or trustees) as the Trustees may deem necessary or proper for the transaction of
the business of the Trust. The Trustees may therefor employ or contract with
such Person (herein referred to as the "Advisor") as an investment adviser and
administrator of the affairs of the Trust and may grant or delegate such
authority to the Advisor as the Trustees may in their sole discretion deem
necessary or desirable without regard to whether such authority is normally
granted or delegated by Trustees.
The Trustees shall have the power to determine the terms and
compensation of the Advisor or any other Person whom they may employ or with
whom they may contract; provided, however, that any determination to employ or
contract with any Trustee or any Person in which a Trustee may be a director,
Officer, stockholder, partner, employee or trustee, shall be valid only if made,
approved or ratified by a majority of the other Trustees. The Trustees may
exercise broad discretion in allowing the Advisor to administer and regulate the
operations of the Trust, to act as agent for the Trust, to execute documents on
behalf of the Trustees, and to make executive decisions which conform to general
policies and general principles previously established by the Trustees.
4.2 Term. The Trustees shall not enter into any contract with the
Advisor unless such contract has an initial term expiring at the end of the
Trust's fiscal year commencing in 1971 and provides for annual renewal or
extension thereafter. The Trustees shall not enter into such a contract with any
Person unless such contract provides for renewal or extension thereof only by
the affirmative vote of a majority of the other Trustees. Any such contract
shall provide that it may be terminated (a) by the Trust upon sixty (60) days'
written notice by unanimous vote of the Trustees who are not affiliated with the
Advisor, (b) by the Advisor upon one hundred twenty (120) days' written notice
by unanimous vote of the directors of the Advisor who are not Trustees or (c) by
the holders of more than a majority of the shares of the Trust.
<PAGE> 19
4.3 Restrictions on Advisor. The Advisor may administer the Trust as
its sole and exclusive function or engage in other activities including the
rendering of advice to other investors and the management of other investments.
The Advisor shall not, however, without prior written consent of a majority of
the Trustees, render advice or service to any other Real Estate Investment
Trust, except that the Advisor may with respect to any loan or other investment
in which the Trust may participate or allot a participation, render advice and
service, with or without remuneration, to each and every participant in such
loan or other investment.
4.4 Limitation on Operating Expenses. Each contract made with the
Advisor shall provide that, within 120 days after the end of any Fiscal Year
which begins on a date following the effective date of the Trust's first
Registration Statement filed under the Securities Act of 1933, the Advisor will
refund to the Trust (or, at the election of the Trustees, reduce its
compensation payable by) (A) the amount, if any, by which the Operating Expenses
of the Trust during such Fiscal Year exceed the lesser of (a) 1.2% of the
Average Value of Invested Assets for such Fiscal Year or (b) the greater of (i)
1.2% of the Month-end Average Net Assets of the Trust for such Fiscal Year or
(ii) 25% of the Net Income of the Trust for such Fiscal Year and (B) the amount,
if any, by which the aggregate of fees and expenses (including travel expenses
and other out-of-pocket expenses) paid to Trustees who are not affiliates of the
Advisor and expenses of the type referred to in clause (m) of the definition of
operating Expenses contained in this Section 4.4 during such Fiscal Year
exceeded 0.3% of the Average Value of Invested Assets for such Fiscal Year.
For purposes of this Section 4.4 the following terms shall have the
meanings set forth below:
(a) "Average Value" for any period shall mean the arithmetic average of
the aggregate Value of the assets reflected in the computation at the close of
the last business day of each month during the period to which such computation
relates.
(b) "Average Value of Invested Assets" shall mean the Average Value of
the Trust's total assets (without deduction of any liabilities) plus the
undisbursed commitments of the Trust in respect of closed loans or other closed
investments, but excluding good will and other intangible assets, cash, cash
items and obligations of municipal, state and the federal governments and
governmental agencies (other than obligations secured by a lien on real property
owned, or to be acquired, by such governments or governmental agencies and
securities of the Federal Housing Administration, the Federal National Mortgage
Administration, and other governmental agencies issuing securities backed by a
pool of mortgages).
(c) "Value" of an asset or assets shall mean the value of such asset or
assets on the books of the Trust, reduced by provision for amortization,
depreciation or depletion but before deducting any indebtedness or other
liability in respect thereof. Depreciable assets shall be valued at the lesser
or fair market value (in the judgment of the Trustees) or cost less straight
line depreciation.
<PAGE> 20
(d) "Fiscal Year" shall mean any period for which an income tax return
is submitted to the Internal Revenue Service and which is treated by the
Internal Revenue Service as a reporting period.
(e) "Net Income" for any period shall mean the net income of the Trust
for such period computed on the basis of its results of operations for such
period, after deduction of all expenses other than the regular, incentive and
additional compensation payable to the Advisor or fees payable to any mortgage
service, and excluding extraordinary items and gains and losses from the
disposition of assets of the Trust.
(f) "Month-End Average Net Assets" shall mean the Average Value of all
the assets of the Trust minus all the liabilities of the Trust reflected in the
computation at the close of each month during the period to which such
computation relates.
(g) "Operating Expenses" during any Fiscal Year shall mean the
aggregate annual expenses of every character regarded as operating expenses in
accordance with generally accepted accounting principles, as determined by the
independent public or certified accountants who shall have reported on the
financial statements of the Trust at the end of and for such Fiscal Year but
excluding:
(a) interest, discount and other costs of borrowed money;
(b) taxes on income and taxes and assessments on real property
and all other taxes (including license fees) applicable to the Trust;
(c) legal, audit, accounting, underwriting, brokerage,
listing, registration and other fees, printing, engraving and other
expenses and taxes incurred in connection with the issuance,
distribution, transfer, registration and stock exchange listing of the
Trust's securities;
(d) fees and expenses (including travel expenses and other
out-of-pocket expenses) paid to Trustees (other than fees paid to
Trustees who are affiliates of the Advisor), independent contractors,
consultants, managers, closing i d disbursement agents, and other
agents employed by or on behalf of the Trust (other than the Advisor);
(e) expenses connected with the acquisition, disposition and
ownership of real estate interests or mortgage loans or other property
(including the costs of closing, foreclosure, insurance premiums, legal
services, brokerage and sales commissions, maintenance, repair and
improvement of property);
(f) expenses of maintenance, up-keep and management of real
estate equity interests and processing and servicing mortgage,
construction and other loans;
(g) insurance as required by the Trustees (including Trustees'
liability insurance);
<PAGE> 21
(h) the expenses of organizing, revising, amending,
converting, modifying or terminating the Trust;
(i) expenses connected with payments of dividends or interest
or distributions in cash or any other form made or caused to be made by
the Trustees to holders of securities of the Trust;
(j) all expenses connected with communications to holders of
securities of the Trust and the other bookkeeping and clerical work
necessary in maintaining relations with holders of securities,
including the cost of printing and mailing certificates for securities
and proxy solicitation materials and reports to holders of the Trust's
securities;
(k) the cost of any accounting, statistical, or bookkeeping
equipment necessary for the maintenance of the books and records of the
Trust;
(l) transfer agent's, registrars and indenture trustees fees
and charges;
(m) legal, accounting and auditing fees and expenses incurred
in connection with the administration and operation of the business of
the Trust in the ordinary course of its business and not included in
clauses (a) through (1) of this definition; and
(n) depletion, depreciation, amortization and losses on
disposition of investments and reserves therefor.
All calculations made in accordance with this Section 4.4 shall be
based upon statements (which may be unaudited, except as provided herein)
prepared on an accrual basis consistent with generally accepted accounting
principles, regardless of whether the Trust may also prepare statements on a
different basis.
4.5 Initial Advisor. Hotel Advisors, Inc. shall serve as the initial
Advisor.
4.6 Sale of Shares of the Advisor. Any advisory agreement entered into
by the Trustees with an Advisor shall contain, among other provisions, a
provision permitting any transfer, directly or indirectly, of securities of the
Advisor without the consent of the Trust or its shareholders and a waiver to the
fullest extent permitted by law of any rights which the Trust or its
shareholders might have to any income or profits realized on any such direct or
indirect transfer by the transferor of such securities. By purchasing Shares of
the Trust, each shareholder shall be deemed to have consented to any such
transfer and to have expressly and irrevocably waived any interest in or rights
to any such income or profits. Such waiver shall not be effective as to any
transfer of a majority of the voting stock of the Advisor unless such transfer
shall have been consented to by the holders of a majority of the Shares of the
Trust.
ARTICLE V.
Investment Policy
<PAGE> 22
5.1 General Statement of Policy. The Trust has been established to
provide investors with the opportunity to invest in a portfolio of Real Property
investments consisting primarily of Long-Term Mortgage Loans with Equity
Participations and Equity Investments in Real Property made in transactions not
relating to the Trust's lending activities. The Trust may also make Construction
Loans primarily in connection with Long-Term Real Property Investments. It is
the policy of the Trust to concentrate its Real Property Investments in the
Accommodations Field; however, other types of income producing Real Property
Investments may be made by the Trust if, in the opinion of the Trustees, such
investments are more advantageous to the Trust than available Real Property
Investments in the Accommodations Field. In addition to the foregoing the Trust
is empowered to make any other investment or engage in any other activity which
does not adversely affect the Trust's status as a real estate investment trust
under the REIT Provisions of the Internal Revenue Code. In each case the
Trustees may make the Trust's investments or engage in an activity alone or in
participation with others, including the granting of Senior Participations to
other lenders.
5.2 [Deleted.]
5.3 [Deleted.]
5.4 Obligor's Default. Notwithstanding any provision of this
Declaration, when an obligor to the Trust is in default under the terms of any
obligation to the Trust, the Trustees shall have the power to pursue any
remedies permitted by law which in their sole judgment are in the interest of
the Trust, and the Trustees shall have the power to enter into any necessary
investment, commitment or obligation of the Trust which results from the pursuit
of such remedies or which is necessary or desirable to dispose of property
acquired in the pursuit of such remedies.
5.5 Changes Investment Policies and Restrictions. Notwithstanding the
foregoing provisions of this Article 5, the investment policies and the
restrictions thereon set forth in Sections 5.1 through 5.6 of this Declaration
may be altered or modified by the Trustees, or additional or substitute policies
or restrictions may be adopted by the Trustees if they shall determine, and so
specify in a duly adopted resolution, that the alteration or modification of
such policies or restrictions or the adoption of additional or substitute
policies or restrictions are in the best interests of the Trust and its
Shareholders and are not prohibited by the Real Estate Investment Trust
provisions of the Internal Revenue Code and no consent or approval of, or other
action by, Shareholders shall be required for any such alteration, modification
or adoption. Any policy or restriction altered, modified, or adopted pursuant to
this Section 5.8 shall be subject to subsequent alteration or modification only
with the consent of Shareholders- holding a majority of the outstanding Shares
entitled to vote on such alteration or modification if the Trustees shall so
specify in the resolution adopted with respect to such policy or restriction.
Any resolution adopted by the Trustees pursuant to this Section 5.8 shall be
recorded within the State of Maryland in such public offices as this Declaration
and any amendments hereto shall have been recorded in accordance with Section
9.8 of this Declaration.
5.6 [Deleted.]
<PAGE> 23
ARTICLE VI.
The Shares and Shareholders
6.1 Shares. The units into which the beneficial interests in the Trust
will be divided shall be designated as Shares consisting of (a) 1,000,000,000
Trust Shares with a par value of $0.01 per share and having equal dividend,
distribution, liquidation and other rights but without preference, pre-emptive,
appraisal, conversion or exchange rights of any kind, (b) 200,000,000 Excess
Trust Shares with a par value of $0.01 per share and having the rights provided
in Article VI hereof, (c) 100 million Trust Preferred Shares with a par value of
$0.01 per share and having the rights provided in Article VI hereof and (d)
50,000,000 Excess Preferred Shares with a par value of $0.01 per share and
having the rights provided in Article VI hereof, provided, however, that the
Trustees may, in their discretion, create and authorize the issuance of Shares
of one or more additional classes, or one or more series within any such class,
with or without par value, having such voting rights, such rights to dividends,
distributions and in liquidation, such conversion, exchange and redemption
rights, and such designations, preferences, participation, and other limitations
or restrictions, as shall not be prohibited by this Declaration or the Real
Estate Investment Trust provisions of the Internal Revenue Code or the laws of
the State of Maryland and as shall be specified by the Board of Trustees in
their discretion in a resolution or resolutions duly adopted by the Board of
Trustees and filed and accepted for record with the State Department of
Assessments and Taxation of Maryland. As used herein, the term "Shares" shall
mean and include (i) the Trust Shares, Excess Trust Shares, Trust Preferred
Shares and Excess Preferred Shares, and (ii) from and after the issuance of
Shares of any other and additional classes of Shares so created and authorized
by the Trustees, such Shares. The certificates evidencing the Shares shall be in
such form and signed (manually or by facsimile) on behalf of the Trust in such
manner as the Trustees may from time to time prescribe or as may be prescribed
in the Trustees' Regulations. The certificates shall be negotiable and title
thereto and to the Shares evidenced thereby shall be transferred by assignment
and delivery thereof to the same extent and in all respects as a share
certificate of a Maryland corporation. The Shares may be issued for such
consideration as the Trustees shall determine or by way of share dividend or
share split in the discretion of the Trustees. Shares reacquired by the Trust
shall no longer be deemed outstanding and shall have no voting or other rights
unless and until reissued. Shares reacquired by the Trust may be canceled and
restored to the status of authorized and unissued Shares by action of the
Trustees. All Shares shall be fully paid and non-assessable by or on behalf of
the Trust upon receipt of full consideration for which they have been issued or
without additional consideration if issued by way of share dividend or share
split. The Board of Trustees may authorize the issuance from time to time of
shares of beneficial interest of the Trust of any class or series, whether now
or hereafter authorized, or securities or rights convertible into shares of
beneficial interest of any class or series, whether now or hereafter authorized,
for such consideration (whether in cash, property, past or future services,
obligation for future payment or otherwise) as the Board of Trustees may deem
advisable (or without consideration in the case of a share split, share dividend
or contribution), subject to such restrictions or limitations, if any, as may be
set forth in this Declaration or the Trustees' Regulations.
<PAGE> 24
6.2 Legal Ownership of Trust Estate. The legal ownership of the Trust
Estate and the right to conduct the business of the Trust are vested exclusively
in the Trustees and the Shareholders shall have no interest therein other than
beneficial interest in the Trust conferred by their Shares issued hereunder and
they shall have no right to compel any partition, division, dividend or
distribution of the Trust or any of the Trust Estate.
6.3 Shares Deemed Personal Property. The Shares shall be personal
property and shall confer upon the holders thereof only the interest and rights
specifically set forth in this Declaration. The death, insolvency or incapacity
of a Shareholder shall not dissolve or terminate the Trust or affect its
continuity nor give his legal representative any rights whatsoever, whether
against or in respect of other Shareholders, the Trustees or the Trust Estate or
otherwise except the sole right to demand and, subject to the provisions of this
Declaration, the Trustees' Regulations and any requirements of law, to receive a
new certificate for Shares registered in the name of such legal representative,
in exchange for the certificate held by such Shareholder.
6.4 Share Record: Issuance and Transferability Shares. Records shall be
kept by or on behalf of and under the direction of the Trustees, which shall
contain the names and addresses of the Shareholders, the number of Shares held
by them respectively, and the numbers of the certificates representing the
Shares, and in which there shall be recorded all transfers of Shares.
Certificates shall be issued, listed and transferred in accordance with the
Trustees, Regulations. The Persons in whose names certificates are registered on
the records of the Trust shall be deemed the absolute owners of the shares
represented thereby for all purposes of this Trust; but nothing herein shall be
deemed to preclude the Trustees or officers, or their agents or representatives,
from inquiring as to the actual ownership of Shares. Prior to due presentment
for registration of transfer, the Trustees shall not be affected by any notice
of such transfer, either actual or constructive. The receipt by the person in
whose name any Shares age registered on the records of the Trust or of the duly
authorized agent of such Person, or if such Shares are so registered in the
names of more than one Person, the receipt of any one of such Persons, or of the
duly authorized agent of such Person, shall be a sufficient discharge for all
dividends or distributions payable or deliverable in respect of such Shares and
from all liability to see to the application thereof.
Shares shall be transferable on the records of the Trust only by the
record holder thereof or by his agent thereunto duly authorized in writing upon
delivery to the Trustees or a transfer agent of the certificate or certificates
therefor, properly endorsed or accompanied by duly executed instruments of
transfer and accompanied by all necessary documentary stamps together with such
evidence of the genuineness of each such endorsement, execution or authorization
and of other matters as may reasonably be required by the Trustees or such
transfer agent. Upon such delivery, the transfer shall be recorded in the
records of the Trust and a new certificate for the Shares so transferred shall
be issued to the transferee and in case of a transfer of only a part of the
Shares represented by any certificate, a new certificate for the balance shall
be issued to the transferor. Any Person becoming entitled to any Shares in
consequence of the death of a Shareholder or otherwise by operation of law shall
be recorded as the holder of such Shares and shall receive a new certificate
therefor but only upon delivery to the Trustees or a transfer agent of
instruments and other evidence required by the Trustees
<PAGE> 25
or the transfer agent to demonstrate such entitlement, the existing certificate
for such Shares and such necessary releases from applicable governmental
authorities. In case of the loss, mutilation or destruction of any certificate
for Shares, the Trustees may issue or cause to be issued a replacement
certificate on such terms and subject to such rules and regulations as the
Trustees may from time to time prescribe. Nothing in this Declaration shall
impose upon the Trustees or a transfer agent a duty or limit their rights to
inquire into adverse claims.
6.5 Dividends or Distributions to Shareholders. The Trustees may from
time to time declare and pay to Shareholders such dividends or distributions in
cash or other form, out of current or accumulated income, capital, capital
gains, principal, surplus, proceeds from the increase or refinancing of Trust
obligations, or from the sale of portions of the Trust Estate or from any other
source as the Trustees in their discretion shall determine. Shareholders shall
have no right to any dividend or distribution unless and until declared by the
Trustees. The Trustees shall furnish the Shareholders at the time of each such
distribution with a statement in writing advising as to the source of the funds
so distributed or, if the source thereof has not then been determined, the
communication shall so state and in such event the statement as to such source
shall be sent to the Shareholders not later than sixty (60) days after she close
of the fiscal year in which the distribution was made.
6.6 Transfer Agent, Dividend Distributing Agent and Registrar. The
Trustees shall have power to employ one or more transfer agents, dividend
disbursing agents and registrars and to authorize them on behalf of the Trust to
keep records, to hold and disburse any dividends and distributions, and to have
and perform in respect of all original issues and transfers of Shares, dividends
and distributions and reports and communications to Shareholders, the powers and
duties usually had and performed by transfer agents, dividend disbursing agents
and registrars of a Maryland corporation.
6.7 Shareholders' Meeting. There shall be an Annual Meeting of the
Shareholders which shall be held at the principal office of the Trust, or at
such other convenient location as may be determined by the Trustees or by the
written consent of all Shareholders entitled to vote thereat, at such time as
the Trustees shall determine, at which the Trustees shall be elected and any
other proper business may be conducted. The Annual Meeting shall be held after
delivery to the Shareholders of the Annual Report. At least ten (10) days and
not more than forty (40) days notice shall be given of the time and place of the
Annual Meeting of the Shareholders, Special meetings of Shareholders may be
called by the Trustees and shall be called upon the written request of
Shareholders holding not less than twenty-five percent (25%) of the outstanding
Shares of the Trust entitled to vote in the manner provided in the Trustees'
Regulations. If there shall be no Trustees, the officers of the Trust shall
promptly call a special meeting of the Shareholders for the election of
successor Trustees. Notice of any special meeting shall state the purposes of
the meeting. A majority of the outstanding Shares entitled to vote at any
meeting represented in person or by proxy shall constitute a quorum at any such
meeting. Whenever any action is to be taken by the Shareholders, such action
shall, except as otherwise required by this Declaration or by law, be authorized
by a majority of the votes cast at a meeting of Shareholders by holders of
Shares entitled to vote thereon.
<PAGE> 26
Notwithstanding anything in this Declaration to the contrary, the Trust
shall not consummate a merger, the shareholder approval of which is required by
the applicable laws unless such transaction is approved by the shareholders by
the affirmative vote of a majority of all the votes entitled to be cast on the
matter.
The affirmative vote at a meeting of Shareholders of the holders of a
majority of all outstanding Shares shall be required to approve the principal
terms of the transaction and the nature and amount of the consideration
involving any sale, lease, exchange or other disposition of more than 50% of the
Trust Estate. Whenever Shareholders are required or permitted to take any
action, such action may be taken without a meeting on written consent setting
forth the action so taken, signed by the holders of a majority of all
outstanding Shares entitled to vote thereon, or such larger proportion thereof
as would be required for a vote of Shareholders at a meeting. The vote or
consent of Shareholders shall not be required for the pledging, hypothecating,
granting security interest in, mortgaging, or encumbering of all or any of the
Trust Estate, or for the sale, lease, exchange or other disposition of less than
50% of the Trust Estate.
6.8 Proxies. Whenever the vote or consent of Shareholders is required
or permitted under this Declaration, such vote or consent may be given either
directly by the Shareholder or to a proxy in the form prescribed in the Trustees
Regulations, The Trustees may solicit such proxies from the Shareholders or any
of them in any manner requiring or permitting the Shareholders' vote or consent.
6.9 Reports to Shareholders. Not later than ninety (90) days after the
close of each fiscal year of the Trust, the Trustees shall mail a report of the
business and operation of the Trust during such fiscal year to the Shareholders,
which report shall constitute the accounting of the Trustees for such fiscal
year. The report (herein "Annual Report") shall be in such form and have such
content as the Trustees deem proper, The Annual Report shall include a balance
sheet and a statement of income and surplus of the Trust. Such financial
statement shall be accompanied by a certificate of an independent certified
public accountant thereon, based on a full examination of the books and records
of the Trust and made in accordance with generally accepted auditing procedure,
A manually signed copy of the accountant's certificate shall be filed with the
Trustees, A signed copy of the Annual Report and accountant's certificate shall
be filed with the Department of Assessments and Taxation of the State of
Maryland within ninety (90) days after the close of each fiscal year.
6.10 Fixing Record Date. The Trustees' Regulations may provide for
fixing or in the absence of such provision, the Trustees may fix, in advance, a
date as the record date for determining the Shareholders entitled to notice of
or to vote at any meeting of Shareholders or to express consent to any proposal
without a meeting, or for the purpose of determining Shareholders entitled to
receive payment of any dividend or distribution (whether before or after
termination of the Trust) or any Annual Report or other communication from the
Trustees, or for any other purpose. The record date so fixed shall be not less
than five (5) days nor more than fifty (50) days prior to the date of the
meeting or event for the purposes of which it is fixed.
<PAGE> 27
6.11 Notice to Shareholders. Any notice of meeting o ocher notice,
communication or report to any Shareholder shall be deemed duly delivered as
such Shareholder when such notice, communication or report is deposited, with
postage thereon prepaid, in the United States mail, addressed to such
Shareholder at his address as it appears on the records of the Trust or is
delivered in person to such Shareholder.
6.12 Restrictions on Transfer.
(a) Definitions. The following terms shall have the following meanings:
"Beneficial Ownership" shall mean ownership of Shares by a Person who
would be treated as an owner of such Shares directly, indirectly-or
constructively through the application of Section 318 (a) of the Code, as
modified by Section 856(d) (5) of the Code, or Section 544 of the Code, as
modified by Section 856(h) of the Code, The terms "Beneficial Owner",
"Beneficially Owns* and *Beneficially Owned" shall have correlative meanings,
"Charitable Beneficiary" shall mean the organization or
organizations described in Section 170(c)(2) and 501(c)(3) of the Code
selected by the Excess Share Trustee,
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Excess Shares" shall mean the Excess Trust Shares and the
Excess Preferred Shares.
"Excess Share Trust" shall mean the trust created pursuant to
Section 6.13 hereof.
"Excess Share Trust Beneficiary' shall mean a beneficiary of
the Excess Share Trust as determined pursuant to Section 6.13 hereof,
"Excess Share Trustee" shall mean Nina Matis or any successor
appointed pursuant to Section 6.13 hereof.
"Market Price" of any class of Shares on any date shall mean
the average of the Closing Price for the five (5) consecutive trading
days ending on such date, or if such date is not a trading date, the
five consecutive trading days preceding such date. The "Closing Price"
on any date shall mean (i) the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing
bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock
Exchange, or (ii) if such class of Shares is not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which such
class of Shares is listed or admitted to trading, or (iii) if such
class of Shares is not listed or admitted to trading on any national
securities exchange,
<PAGE> 28
the last quoted price, or if not so quoted, the average of the high bid
and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers! Inc. Automated Quotation
System or, if such system is no longer in use, the principal other
automated quotations system that may then be in use, or (iv) if such
class of Shares is not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market
maker making a market in such class of Shares selected by the Trustees.
"Ownership Limit" shall mean (i) in the case of a Person other
than an Existing Holder (as defined below) Beneficial Ownership of more
than eight percent (8.0%t), by value, vote or number, of the Shares and
(ii) in the case of a Person who or which was the Beneficial Owner, as
of February 1, 1995 (the "Amendment Date"), of more than 8.0% (by vote,
value or number) of the Shares (any such Person being referred to as an
"Existing Holder"), a percentage (by vote, value or number) equal to
the lesser of (a) 9.9% and (b) the percentage of Shares Beneficially
Owned by such Existing Holder as of the Amendment Date; provided that
if, at any time and from time to time after the Amendment Date, the
percentage of Shares Beneficially Owned by an Existing Holder shall
decrease (whether by reason of a disposition b such Existing Holder, an
increase in the number of outstanding Shares or otherwise), then from
and after the time of such decrease the Ownership Limit in the case of
such Existing Holder shall be a percentage (by vote, value or number)
equal to the greater of (x) 8.O% and (y) the percentage of Shares
Beneficially Owned by such Existing Holder after giving effect to such
decrease.
"Purported Beneficial Holder" shall mean, with respect to any
event (other than a purported Transfer) which result in Excess Shares,
the Person for whom the Purported Record Holder held Shares that were,
pursuant to Section 6.12(c) hereof, automatically converted into Excess
Shares upon the occurrence of such event.
"Purported Beneficial Transferee" shall mean, with respect to
any purported Transfer which results in Excess Shares, the purported
beneficial transferee for whom the Purported Record Transferee would
have acquired Shares if such Transfer had been valid under Section
6.12(b) hereof.
"Purported Record Holder" Shall mean, with respect to any
event (other than a purported Transfer) which results in Excess Shares,
the record holder of the Shares that were, pursuant to Section 6.12(c)
hereof, automatically converted into Excess Shares upon the occurrence
of such event,
"Purported Record Transferee" shall mean, with respect to any
purported Transfer which results in Excess Shares, the record holder of
the Shares if such Transfer had been valid under Section 6.12(b)
hereof.
"Restriction Termination Date" shall mean the first day of the
taxable year for which the Trustees have determined to terminate the
Trust's status as a REIT.
<PAGE> 29
"Transfer" shall mean any sale, transfer, gift, hypothecation,
pledge, assignment, devise or other disposition of Shares (including
(i) the granting of any option or interest similar to an option
(including an option to acquire an option or any series of such
options) or entering into any agreement for the sale, transfer or other
disposition of Shares or (ii) the sale, transfer, assignment or other
disposition of any securities or rights convertible into or
exchangeable for Shares), whether voluntary or involuntary, whether of
record, constructively or beneficially and whether by operation of law
or otherwise. For purposes of this definition, whether securities or
rights are convertible or exchangeable for Shares shall be determined
in accordance with Sections 318 and 544 of the Code.
(b) Restrictions of Transfers and Other Events. On or after the
Restriction Termination Date, the provisions of Sections 6.12 and 6.13 hereof
shall be of no further force and effect. Prior to the Restriction Termination
Date and except as provided in Section 6.12(i) hereof:
(1) No Person shall Beneficially Own Shares in excess of the
Ownership Limit;
(2) Any Transfer that, if effective, would result in any
Person Beneficially Owning Shares in excess of the ownership Limit
shall be void ab initio as to the Transfer of that number of Shares
which would be otherwise Beneficially Owned by such Person in excess of
the ownership Limit and the intended transferee shall acquire no rights
in such Shares in excess of the Ownership Limit;
(3) Any Transfer that, if effective, would result in the
Shares being Beneficially Owned by fewer than one hundred (100) Persons
(determined without reference to any rules of attribution) shall be
void ab initio and the intended transferee shall acquire no rights in
such Shares; and
(4) Any Transfer of Shares that, if effective, would result in
the Trust being "closely held" within the meaning of Section 856(h) of
the Code shall be void ab initio as to the Transfer of that number of
Shares which would cause the Trust to be "closely held" within the
meaning of Section 856(h) of the Code and the intended transferee shall
acquire no rights in such Shares.
(c) Conversion into Excess Shares.
(1) If, notwithstanding the other Provisions contained in this
Article VI, at any time prior to the Restriction Termination Date,
there is a purported Transfer or other event such that any Person would
Beneficially Own Shares in excess of the Ownership Limit, then, except
as otherwise provided in Section 6.12(i) hereof, such Shares which
would be in excess of the Ownership Limit (rounded up to the nearest
whole share), shall automatically be converted into that number of
shares of Excess Trust Shares or Excess Preferred Shares, as
appropriate, equal to the number of Shares being converted, as further
described in Section 6.12(c)(3) hereof. Such conversion
<PAGE> 30
shall be effective as of the close of business on the business day
prior to the date of the Transfer or other event.
(2) If, notwithstanding the other provisions contained in this
Article VI, at any time prior to the Restriction Termination Date,
there is a purported Transfer or other event which, if effective, would
cause the Trust to become "closely held" within the meaning of Section
856(h) of the Code, then the Shares being Transferred or which are
otherwise affected by such event and which, in either case, would
cause, when taken together with all other Shares, the Trust to be
"closely held" within the meaning of Section 856(h) of the Code
(rounded up to the nearest whole share) shall automatically be
converted into that number of Excess Trust Shares or Excess Preferred
Shares, as appropriate, equal to the number of Shares being converted,
as further described in Section 6.12(c)(3) hereof. Such conversion
shall be effective as of the close of business on the business day
prior to the date of the Transfer or change in capital structure.
(3) Upon conversion of Trust Shares or Preferred Shares into
Excess Shares pursuant to this Section 6.12(c), Trust Shares shall be
converted into Excess Trust Shares and Preferred Shares shall be
converted in Excess Preferred Shares.
(d) Remedies for Breach. If the Trustees or their designees shall at
any time determine in good faith that a purported Transfer or other event has
taken place in violation of Section 6.12(b) hereof or that a Person intends to
acquire or has attempted to acquire Beneficial Ownership of any Shares in
violation of Section 6-12(b) hereof, the Trustees or their designees may take
such action as they deem advisable to refuse to give effect to or to prevent
such Transfer or other event, including, but not limited to, refusing to give
effect to such Transfer or other event on the books of the Trust or instituting
proceedings to enjoin such Transfer or other event or transaction; provided,
however, that any Transfers or attempted Transfers (or, in the case of events
other than a Transfer, Beneficial Ownership) in violation of Section 6.12(b)
hereof shall be void ab initio And automatically result in the conversion
described in Section 6.12(c)(3) hereof, irrespective of any action (or
non-action) by the Trustees or their designees,
(e) Notice of Restricted Transfer. Any Person who acquires or attempts
to acquire Shares in violation of Section 6.12(b) hereof, or any Person who is a
purported transferee such that Excess Shares result under Section 6.12(c)
hereof, shall immediately give written notice to the Trust of such Transfer,
attempted Transfer or other event and shall provide to the Trust such other
information as the Trust may request in order to determine the effect, if any,
of such Transfer or attempted Transfer or other event on the Trust*s status as a
REIT.
(f) Owners Required to Provide Information. Prior to the Restriction
Termination Date:
(1) Every Beneficial Owner of five percent (5%) or more, by
vote, value or number, or such lower percentages as required pursuant
to regulations under the Code, of the outstanding Shares shall, before
January 30 of each year, give written notice to
<PAGE> 31
the Trust stating the name and address of such Beneficial Owner, the
general ownership structure of such Beneficial Owner, the number of
shares of each class of Shares Beneficially Owned, and a description of
how such Shares are held.
(2) Each Person who is a Beneficial Owner of Shares and each
Person (including the shareholder of record) who is holding Shares for
a Beneficial Owner shall provide on demand to the Trust such
information as the Trust may request from time to time in order to
determine the Trust's status as a REIT and to ensure compliance with
the Ownership Limit and the REIT requirements of the Code and the
regulations published thereunder.
(g) Remedies Not Limited. Subject to Section 6.12(l) hereof, nothing
contained in this Article VI shall limit the authority of the Trustees to take
such ocher action as they-deem necessary or advisable to protect the Trust and
the interests of its Shareholders by preservation of the Trust's status as a
REIT and to ensure compliance with the ownership Limit.
(h) Ambiguity. In the case of an ambiguity in the application of any of
the provisions of this Section 6.12 or Section 6.13, including any definition
contained in Section 6.12(a) hereof, the Trustees shall have the power to
determine the application of the provisions of this Section 6.12 and Section
6.13 with respect to any situation based on the facts known to them.
(i) Exception. The Trustees upon receipt of a ruling from the Internal
Revenue Service or an opinion of tax counsel, satisfactory to them in their sole
and absolute discretion, in each case to the effect that the Trust*s status as a
REIT will not be jeopardized, may exempt a Person from the Ownership Limit if
the Trustees obtain such representations and undertakings from such Person as
are reasonably necessary to ascertain that such Person's Beneficial Ownership of
Shares will not jeopardize the Trust's status as a REIT.
(j) Legend. Until the Restriction Termination Date, each certificate
for the respective class of Shares shall bear the following legend:
The Shares represented by this certificate are subject to
restrictions on transfer. Unless excepted by the Trustees, no Person
may (1) Beneficially Own Shares in excess of 8.0% of the outstanding
Shares, by value, vote or number, determined as provided in the Trust's
Declaration of Trust, as the same may be amended from time to time (the
"Declaration"), and computed which regard to all outstanding Shares
and, to the extent provided by the Code, all Shares issuable under
existing options and exchange rights that have not been exercised; or
(2) Beneficially Own Shares which would result in the Trust being
"closely held". Unless so excepted, any acquisition of Shares and
continued holding of ownership constitutes a continuous representation
of compliance with the above limitations, and any Person who attempts
to Beneficially own Shares in excess of the above limitations has an
affirmative obligation to notify the Trust immediately upon such
attempt. If the restrictions on transfer are violated, the transfer
will be void ab initio and the Shares represented hereby will be
automatically converted into Excess Shares that will be held in trust.
Excess Shares may not be transferred at a
<PAGE> 32
profit and may be purchased by the Trust. In addition, certain
Beneficial Owners must give written notice as to certain information on
demand and an annual basis. All terms not defined in this legend have
the meanings provided in the Declaration, The Trust will mail without
charge to any requesting shareholder a copy of the Declaration,
including the express terms of each class and series of the authorized
Shares of the Trust, within five (5) days after receipt of a written
request therefor.
(k) Severability. If any provision of this Article VI or any
application of any such provision is determined to be invalid by any Federal or
state court having jurisdiction over the issues, the validity of the remaining
provisions shall not be affected, and other applications of such provision shall
be affected only to the extent necessary to comply with the determination of
such court.
(l) New York Stock Exchange Transactions. Nothing in this Article VI
shall preclude the settlement of any transaction entered into through the
facilities of the New York Stock Exchange.
(m) Amendment of Sections 6.12 or 6.13
Notwithstanding any other provisions of this Declaration or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any affirmative vote of the holders of any particular class or
series of Shares required by law or this Declaration, the affirmative vote of
the holders of at least two-thirds (2/3) of the voting power of all the then
outstanding Shares, voting together as a single class, shall be required to
alter, amend or repeal this Section 6.12 or Section 6.13.
6.13 Excess Shares.
(a) Ownership In Trust. Upon any purported Transfer or other event that
results in Excess Shares pursuant to Section 6.12(c) hereof, such Excess Shares
shall be deemed to have been transferred to Nina Matis (or any successor Excess
Share Trustee), as Excess Share Trustee of the Excess Share Trust for the
benefit of such Excess Share Trust Beneficiary or Beneficiaries and the
Charitable Beneficiary effective as of the close of business on the business day
prior to the date of the Transfer or other event. Excess Shares so held in trust
shall be issued and outstanding shares of the Trust. The Purported Record
Transferee or Purported Record Holder shall have no rights in such Excess
Shares. The Purported Beneficial Transferee or Purported Beneficial Holder shall
have no rights in such Excess Shares except as provided in Section 6.13(e). Nina
Matis, or any successor Excess Share Trustee, may resign by appointing a person
independent of the Trust, the Corporation (as defined in Section 6.14) or any
Excess Share Trust Beneficiary as the Excess Share Trustee. The Excess Share
Trustee shall, from time to time, designate one or more charitable organization
or organizations as the Charitable Beneficiary.
(b) Dividend Rights. Excess Shares shall be entitled to the same
dividends determined as if no conversion into Excess Shares had occurred. Pay
dividend or distribution paid prior to the discovery by the Trust that the
Shares have been converted into Excess Shares
<PAGE> 33
shall be repaid to the Excess Share Trust upon demand. Any dividend or
distribution declared but unpaid shall be paid to the Excess Share Trust. All
dividends received or other income earned by the Excess Share Trust shall be
paid over to the Charitable Beneficiary.
(c) Rights Upon Liquidation. Excess Shares shall not be entitled to
receive any portion of the assets of the Trust on the liquidation or dissolution
of the Trust. Upon conversion of Excess Shares into Shares pursuant to Section
6.13 (e) hereof, such shares shall be entitled to receive their pro rata share
of the assets of the Trust as a result of the liquidation or dissolution of the
Trust.
(d) Voting Rights. The Excess Share Trustee shall vote the Excess
Shares which shall have the same voting rights as the Shares into which they are
to be converted pursuant to Section 6.13(e) hereof. Any vote cast by the
Purported Beneficial Transferee or Purported Record Transferee will, at the
election of the Excess Share Trustee, be void ab initio.
(e) Restrictions On Transfer; Designation of Excess Share Trust
Beneficiary.
(1) Excess Shares shall not be transferrable. The Excess Share
Trustee may freely designate an Excess Share Trust Beneficiary of all
or any portion of the beneficial interest in the Excess Share Trust
(representing the number of Excess Shares held by the Excess Share
Trust attributable to a purported Transfer or other event that results
in Excess Shares and designated as to number and class of shares
pursuant to the notice provision of this Section 6.13(e)(1)), if the
Excess Shares held in the Excess Share Trust would not be Excess Shares
in the hands of such Excess Share Trust Beneficiary. If the Excess
Shares resulted from a purported Transfer, the Purported Beneficial
Transferee shall receive a payment from the Excess Share Trustee that
reflects a price per share for such Excess Shares equal to the lesser
of (A) the price per share received by the Excess Share Trustee and (B)
(x) the price per share such Purported Beneficial Transferee paid for
the Share of Beneficial interest in the purported Transfer that
resulted in the Excess Shares, or (y) if the Purported Beneficial
Transferee did not give value for such shares of Excess Shares (through
a gift, devise or other transaction) a price per share of Excess Shares
equal to the Market Price of the Shares on the date of the purported
Transfer that resulted in the Excess Shares. If the Excess Shares
resulted from an event other than a purported Transfer, the Purported
Beneficial Holder shall receive a payment from the Excess Share Trustee
that reflects a price per share of Excess Shares equal to the lesser of
(A) the price per share received by the Excess Share Trustee and (B)
the Market Price of the Shares on the date of the event that resulted
in Excess Shares. Upon such transfer of an interest in the Excess Share
Trust, the corresponding shares of Excess Shares in the Excess Share
Trust shall be automatically converted into such number of Shares (of
the same class as the shares that were converted into such Excess
Shares) as is equal to the number of shares of Excess Shares, and such
Shares shall be transferred of record to the Excess Share Trust
Beneficiary of the interest in the Excess Share Trust designated by the
Excess Share Trustee as described above if such Shares would not be
Excess Shares in the hands of such Excess Share Trust Beneficiary.
Prior to any transfer of any interest in the Excess Share Trust, the
Trust must have waived in writing its purchase rights, if any, under
<PAGE> 34
Section 6.13(f) hereof. Any funds received by the Excess Share Trustee
in excess of the funds payable to the Purported Beneficial Holder or
the Purported Beneficial Transferor shall be paid to the Charitable
Beneficiary. The Trust shall pay the costs and expenses of the Excess
Share Trustee.
(2) Notwithstanding the foregoing, if a Purported Beneficial
Transferee, Purported Beneficial Holder or Excess Share Trustee
receives a price for designating an Excess Share Trust Beneficiary of
an interest in the Excess Share Trust that exceeds the amounts
allowable under Section 6.13(e) (1) hereof, such Purported Beneficial
Transferee or Purported Beneficial Holder shall be personally liable
to, and shall pay, or cause the Excess Share Trust Beneficiary of the
interest in the Excess Share Trust to pay, such excess to the Excess
Share Trustee who shall pay over such excess to the Charitable
Beneficiary.
(3) Notwithstanding the foregoing, if the provisions of this
Section 6.13(e) are determined to be void or invalid by virtue of any
legal decision, statute, rule or regulation, then the Purported
Beneficial Transferee or Purported Beneficial Holder of any shares of
Excess Shares may be deemed, at the option of the Trust, to have acted
as an agent on behalf of the Trust, in acquiring or holding such Excess
Shares and to hold such Excess Shares on behalf of the Trust.
(f) Purchase Right in Excess Shares. Excess Shares shall be deemed to
have been offered for sale by the Excess Share Trustee to the Trust, or its
designee, at a price per Excess Share equal to (i) in the case of Excess Shares
resulting from a purported Transfer, the lesser of (A) the price per share of
the Shares in the transaction that created such Excess Shares (or, in the case
of devise or gift, the Market Price of the Shares at the time of such devise or
gift), or (B) the lowest Market Price of the class of Shares which resulted in
the Excess Shares at any time after the date such shares were converted into
Excess Shares and prior to the date the Trust, or its designee, accepts such
offer or (ii) in the case of Excess Shares resulting from an event other than a
purported Transfer, the lesser of (A) the Market Price of the Shares on the date
of such event or (B) the lowest Market Price for Shares which resulted in the
Excess Shares at any time from the date of the event resulting in such Excess
Shares and prior to the date the Trust, or its designee, accepts such offer. The
Trust shall have the right to accept such offer for a period of ninety (90) days
after the later of (i) the date of the Transfer which resulted in such Excess
Shares and (ii) the date the Trustees determine in good faith that a Transfer or
other event resulting in Excess Shares has occurred, if the Trust does not
receive a notice of such Transfer or other event pursuant to Section 6.12(e)
hereof,
6.14 Pairing. Beginning at the time that the payment of a distribution
in kind to the Shareholders of the Trust of the shares of common stock of
Starwood Lodging Corporation, a Maryland corporation ("Corporation"), shall have
occurred ("effective time of the restriction*), and continuing thereafter until
such time as the limitation on transfer provided for in the Pairing Agreement to
be entered into by the Trust and the Corporation shall be terminated:
<PAGE> 35
(a) The Trust Shares having a par value of $0.01 per share shall not be
transferable, and shall not be transferred on the books of the Trust, unless (1)
a simultaneous transfer is made by the same transferor to the same transferee,
or (2) such transfer has previously arranged with the Corporation for the
acquisition by the transferee, of a like number of shares of the Corporation and
such shares and Trust Shares are paired with one another.
(b) Each certificate evidencing ownership of Trust Shares issued and
not canceled prior to the effective time of the restriction shall be deemed to
evidence a like number of shares of common stock of the Corporation.
(c) Any registered holder of a certificate evidencing ownership of
Trust Shares issued prior to the effective time of the restriction may, upon
request and presentation of said certificate to the Corporations transfer agent,
obtain in substitution therefor a certificate or certificates registered in such
holder's name evidencing the same number of shares of common stock of the
Corporation and a like number of Trust Shares.
(d) A legend shall be placed on the face of each certificate evidencing
ownership of Trust Shares issued after the effective time of the restriction,
referring to the restrictions on transfer set forth herein.
6.15 See Exhibit A
6.16 See Exhibit A
6.17 Redemption. In the event that the Corporation shall redeem any
shares of its capital stock pursuant to Article FIFTEENTH of the Articles of
Incorporation of the Corporation and such shares are subject to the limitation
on transfer provided for in the Pairing Agreement, the Trust shall
simultaneously redeem, upon the terms of such Article FIFTEENTH, any Shares
that are paired with such shares of the Corporation's capital stock pursuant to
the Pairing Agreement.
ARTICLE VII.
Liability of Trustees, Shareholders
and Officers, and Other Matters
7.1 Exculpation of Trustee and Officers. No Trustee, officer or agent
of the Trust shall be liable or held to any personal liability whatsoever for an
obligation or contract of the Trust. The provisions of section 2-405,1 of the
Corporations and Associations Article of the Annotated Code of Maryland (as
amended and interpreted from time to time, and any successor statute thereto),
which sets forth the standard of care required of directors of corporations
organized under the laws of the State of Maryland, and all other statutory or
decisional law (as amended or interpreted from time to time) which sets forth
the standard of care required of officers, employees and agents for corporations
organized under the laws of the State of Maryland, shall be fully applicable to
the Trust, and to the Trustees, officers, employees and agents of the Trust, as
if the Trust were a corporation organized under the laws
<PAGE> 36
of the State of Maryland and its Trustees, officers, employees and agents were
respectively, directors, officers, employees and agents of such corporation.
Notwithstanding the foregoing, to the fullest extent permitted by
Maryland statutory or decisional law, as amended or interpreted from time to
time, no Trustee or officer of the Trust shall be liable to the Trust or its
shareholders for money damages arising out of acts or omissions occurring on or
after the date of this provision is approved by the shareholders of the Trust
(which date was June 6, 1988) provided however, that this provision shall not
restrict or limit the liability of the Trust's Trustees or officers to the Trust
or its shareholders (i) to the extent that it is proved that such Person
actually received an improper benefit or profit in money, property or services,
for the amount of the benefit or profit in money, property or services actually
received, or (ii) to the extent that a judgment or final adjudication adverse to
such Person is entered in a proceeding based on a finding in the proceeding that
such Person's action, or failure to act, was the result of active and deliberate
dishonesty which was material to the cause of action adjudicated in the
proceeding. No amendment to this Section 7.1 or repeal of any of its provisions
shall limit or eliminate the effect of this Section 7.1 with respect to any act
or omission which occurs prior to such amendment or repeal.
7.2 Limitation of Liability of Shareholders, Trustees and Officers. The
Trustees and officers in incurring any debts, liabilities or obligations, or in
taking or omitting any other actions for or in connection with the Trust are,
and shall be deemed to be, acting as Trustees or officers of the Trust and no in
their own individual capacities. Except to the extent provided by applicable
law, no Trustee, Shareholder, officer, employee or other agent shall be liable
for any debt, claim, demand, judgment, decree, liability or obligation of any
kind of, against or with respect to the Trust, arising out of any action taken
or omitted for or on behalf of the Trust and the Trust shall be solely liable
therefor and resort shall be had solely to the Trust Estate for the payment or
performance thereof. Each Shareholder shall be entitled to pro rata indemnity
from the Trust Estate if, contrary to the provisions hereof, such Shareholder
shall be held to any personal liability.
7.3 Express Exculpatory Clauses and Instruments. In all agreements
obligations, instruments, and actions in regard to the affairs of this Trust,
this Trust and not the Shareholders, officers, or agents shall be the principal
and entitled as such to enforce the same, collect damages, and take all other
action. All such agreements, obligations, instruments, and actions shall be
made, executed, incurred, or taken by or in the name and on behalf of this Trust
or by the Trustees as Trustees hereunder, but not personally. All such
agreements, obligations, and instruments shall acknowledge notice of this
paragraph or shall refer to this Declaration and contain a statement to the
effect that the name of this Trust refers to the Trustees as Trustees but not
personally, and that no Trustee, Shareholder, officer, or agent shall be held to
any personal liability thereunder; and neither the Trustees nor any officer or
agent shall have any power or authority to make, execute, incur, or take any
agreement, obligation, instrument or action unless the requirements of this
paragraph are met; however, the omission of such provision from any such
instrument shall not render the Shareholders or any Trustee or officer liable
nor shall the Trustees or any officer of the Trust be liable to anyone for such
omission.
<PAGE> 37
7.4 Indemnification of Trustees, Officers, Employees and Other Agents.
The provisions of Section 218 of the Corporations and Associations Article of
the Annotated Code of Maryland (as amended and interpreted from time to time,
and any successor statute thereto), which empowers a corporation organized under
the laws of the State of Maryland to indemnify its directors, officers,
employees and other agents against certain liabilities and obligations, and for
the light of directors, officers, employees and other agents of such corporation
to be so indemnified (as amended, interpreted and superseded, "Section 2-418"),
shall be fully applicable to the Trust and to the Trustees, officers, employees
and other agents of the Trust as if the Trust were a corporation organized under
the laws of the State of Maryland and its Trustees, officers, employees and
other agents were, respectively, directors, officers, employees and agents of
such corporation. In each and every situation where the Trust may do so under
said Section 2418 or other applicable law, the Trust hereby obligates itself to
so indemnify its Trustees, officers, employees and other agents, and in each
case where thy Trust must make certain investigations on a case-by-case basis
prior to Indemnification, the Trust hereby obligates itself to pursue such
investigations diligently, it being the specific intention of this Section 7.4
to obligate the Trust to indemnify each Person whom the Trust may indemnify to
the fullest extent permitted by Section 2-148 or by other applicable law at any
time and from time to time. The rights accruing to any Person under these
provisions shall not exclude any other right to which he may be lawfully
entitled, nor shall anything contained-herein restrict the right of the Trust to
indemnify or reimburse such Person in any proper case even though not
specifically provided for herein, nor shall anything contained herein restrict
such right of a Trustee to contribution as may be available under applicable
law. In addition, and without limiting the generality of the foregoing, the
Trust shall have the power to purchase and maintain insurance on behalf of any
Person entitled to indemnify hereunder against any liability asserted against
him and incurred by him in a capacity mentioned above, or arising out of his
status as such, whether or not the Trust would have the power to indemnify him
against such liability under the provisions hereof.
7.5 Right of Trustees and officers to Own Shares or Other Property and
to Engage in Other Business. Any Trustee or officer may acquire, own, hold and
dispose of Shares in the Trust, for his individual account, and may exercise all
rights of a Shareholder to the same extent and in the same manner as if he were
not a Trustee or officer. Any Trustee or officer may have personal business
interests and may engage in personal business activities, which interest and
activities may include the acquisition, syndication, holding, management,
operation or disposition, for his own account or for the account of others, or
interests in Mortgages, interests in Real Property, or interests in Persons
engaged in the real estate business, including serving as a trustee or officer
of any other Real Estate Investment Trust. Subject to the provisions of Article
IV any Trustee or officer may be interested as trustee, officer, director,
stockholder, partner, member, advisor or employee, or otherwise have a direct or
indirect interest in any Person who may be engaged to render advice or services
to the Trust, and may receive compensation from such Person as well as
compensation as Trustee, officer, or otherwise hereunder, None of these
activities shall be deemed to conflict with his duties and powers as Trustee or
officer.
7.6 Transactions Between the Trustees and the Trust.
<PAGE> 38
(a) If subsection (b) of this Section 7.6 is complied with, a contract
or other transaction between the Trust and any corporation, firm or other entity
in which any of the Trustees is a director or has a material financial interest
is not void or voidable solely because any one or more of the following: (i) the
common directorship or interest; (ii) the presence of the Trustee at the meeting
of the Board of Trustees or a committee of the Board of Trustees which
authorizes, approves or ratifies the contract or transaction; or (iii) the
counting of the vote of the Trustee for the authorization, approval or
ratification of the contract or transaction.
(b) Subsection (a) of this Section 7.6 applies if:
(i) The fact of the common directorship or interest is
disclosed or known to (a) the Board of Trustees or the committee, and
the Board of Trustees or committee authorizes, approves or ratifies the
contract or transaction by the affirmative vote of a majority of
disinterested Trustees, even if the disinterested Trustees constitute
less than a quorum; or (b) the shareholders entitled to vote, and the
contract or transaction is authorized, approved or ratified by a
majority of the votes cast by the shareholders entitled to vote other
than the votes of shares owned of record or beneficially by the
interested Trustee or corporation, firm or other entity; or
(ii) The contract or transaction is fair and reasonable to the
Trust.
(c) Common or interested Trustees, or the Shares of Beneficial Interest
owned by them or by an interested corporation, firm or other entity, may be
counted in determining the presence of a quorum at a meeting of the Board of
Trustees or a committee of the Board of Trustees or at a meeting of the
shareholders, as the case may be, at which the contract or transaction is
authorized, approved or ratified.
(d) If a contract or transaction is not authorized, approved or
ratified in one of the ways provided for in subsection (b)(i) of this Section
7.6. the person asserting the validity of the contract or transactions bears the
burden of proving that the contract or transaction was fair and reasonable to
the Trust at the time it was authorized, approved or ratified. This subsection
(d) does not apply to the fixing by the Board of Trustees of reasonable
compensation for a Trustee, whether as a Trustee or in any other capacity.
(e) Any procedures authorized by Section 7.4 of this Declaration shall
be deemed to satisfy subsection (b)(i) of this Section 7.6. Any provision of
this Declaration, the Trustees' Regulations or any contract, or any transaction,
requiring or permitting indemnification of Trustees, including advances of
expenses, is fair and reasonable to the Trust.
(f) Any Trustee or officer, employee or agent of the Trust may acquire,
own, hold and dispose of Securities of the Trust, for his individual account,
and may exercise all rights of a holder of such Securities to the same extent
and in the same manner as if he were not such a Trustee or officer, employee or
agent. The Trustees shall use their best efforts to obtain through an Advisor or
other Persons a continuing and suitable investment program, consistent with the
investment policies and objectives of the Trust, and the Trustees shall be
responsible for reviewing and approving or rejecting investment opportunities
presented by the Advisor or
<PAGE> 39
such other Persons, So long as there is such Advisor or other Person, the
Trustees shall have no responsibility for the origination of investment
opportunities for the Trust. Any Trustee or officer, employee, or agent of the
Trust may, in his personal capacity, or in a capacity of trustee, officer,
director, stockholder, partner, member, advisor or employee of any Person, have
business interests and engage in business activities in addition to those
relating to the Trust, which interests and activities may include the
acquisition, syndication, holding, management, operation or disposition, for his
own account or for the account of such Person, of interests in Mortgages,
interests in Real Property, or interests in Persons engaged in the real estate
business, and each Trustee, officer, employee and agent of the Trust shall be
free of any obligation to present to the Trust any investment opportunity which
comes to him in any capacity other than solely as Trustee, officer, employee or
agent of the Trust, even if such opportunity is of a character which, if
presented to the Trust, could be taken by the Trust; provided, however, that the
provisions of this sentence shall not extend to any of such Trustees or agents
of the Trust who are affiliates of the Advisor, or to any officer or employee of
the Trust or (at a time when there is no such Advisor or other Person providing
an investment program for the Trust as aforesaid) to any Trustee of the Trust,
in each case who is not acting as a trustee, officer, director, stockholder,
partner, member, advisor or employee of any Person but is acting for his own
personal account. Subject to the provisions of this Section 7.6, any Trustee or
officer, employee or agent of the Trust may be interested as trustee, officer,
director, stockholder, partner, member, advisor or employee of, or otherwise
have a direct or indirect interest in, any Person who may be engaged to render
advice or services to the Trust, and ray receive compensation from such Person
as well as compensation as Trustee, officer, employee or agent of the Trust or
otherwise hereunder, None of the activities in this paragraph shall be deemed to
conflict with his duties and powers as Trustee, officer, employee or agent of
the Trust.
(g) Nothing contained in this Declaration shall prohibit or in any way
limit any person described in Section 3.2(n) of this Declaration from
contracting with others for the performing of services similar or identical to
those undertaken by such Person pursuant to this Declaration or from conducting
the usual and normal business operations of such Person. The Trustees are not
restricted by this Section 7.6 from forming a corporation, partnership, trust or
other business association owned by the Trustees or by their nominees for the
purpose of holding title to property of the Trust or managing property of the
Trust providing the Trustees' motive for :he formation of such business
association is not their own enrichment.
7.7 Restriction of Duties and Liabilities. To the extent that the
nature of this Trust (that is, a Maryland real estate investment trust) will
permit, the duties and liabilities of Shareholders, Trustees and officers shall
in no event be greater than the duties and liabilities of shareholders,
directors and officers of a Maryland corporation. The Shareholders, Trustees and
officers shall in no event have any greater duties or liabilities than those
imposed by applicable law as shall be in effect from time to time.
7.8 Persons Dealing with Trustees or Officers. Any act of the Trustees
or officers purporting to be done in their capacity as such, shall, as to any
persons dealing with such Trustees or officers, be conclusively deemed to be
within the purposes of this Trust and within the power of the Trustees and
officers. No Person dealing with the Trustees or any of them,
<PAGE> 40
or with the authorized officers, agents or representatives of the Trust, shall
be bound to see to the application, of any funds or property passing into their
hands of control. The receipt of the Trustees, or any of them, or of authorized
officers, agents, or representatives of the Trust, for moneys or other
consideration, shall be binding upon the Trust.
7.9 Reliance. The Trustees and officers may consult with counsel and
the advice or opinion of such counsel shall be full and complete personal
protection to all of the Trustees and officers in respect to any action taken or
suffered by them in good faith and in reliance on and in accordance with such
advice or opinion. In discharging their duties, Trustees and officers, when
acting in good faith, may rely upon financial statements of the Trust
represented to them to be correct by the President or the officer of the Trust
having charge of its books of account, or stated in a written report by an
independent certified public accountant fairly to present the financial position
of the Trust. The Trustees may rely, and shall be personally protected in
acting, upon any instrument or other document believed by them to be genuine.
7.10 Income Tax Status. Anything to the contrary herein notwithstanding
and without limitation of any rights of indemnification or non-liability of the
Trustees herein, said Trustees by this Declaration make no commitment or
representation that the Trust will qualify for the dividends paid deduction
permitted by the Internal Revenue Code, by Article 81, Section 3I3A of the
Annotated Code of Maryland, or by any-Rules and Regulations hereunder pertaining
to Real Estate Investment Trusts, in any given year, The failure of the Trust to
qualify as a Real Estate Investment Trust under the Internal Revenue Code or
under the Maryland Code shall not render the Trustees liable to the Shareholders
or to any other person or in any manner operate to annul the Trust.
ARTICLE VIII.
Duration, Amendment, Termination and
Qualification of Trust
8.1 Duration of Trust. The Trust shall continue without limitation of
time, unless terminated as provided in Section 8.2.
8.2 Termination of Trust.
(a) The Trust may be terminated by the affirmative vote of the holders
of two-thirds (2/3) in interest of all outstanding Shares entitled to vote
thereon, at any meeting of Shareholders. Upon termination of the Trust:
(i) The Trust shall carry on no business except for the
purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the
Trust and all of the powers of the Trustees under this Declaration
shall continue until the affairs of the Trust shall have been wound up,
including the power to fulfill or discharge the
<PAGE> 41
contracts of the Trust, collect its assets, sell, convey, assign,
exchange, transfer, or otherwise dispose of all or any part of the
remaining Trust Estate to one or more persons at public or private sale
for consideration which may consist in whole or in part of cash,
securities or other property of any kind, discharge or pay its
liabilities and do all other acts appropriate to liquidate its
business; provided, that any sale, conveyance, assignment, exchange,
transfer or other disposition of more than fifty percent (50%) of the
Trust Estate shall require approval of the principal terms of the
transaction and the nature and amount of the consideration by vote or
consent of the holders of a majority of all the outstanding Shares
entitled to vote thereon.
(iii) After paying or adequately providing for the payment of
all liabilities, and upon the receipt of such releases, indemnities,
and refunding agreements as they deem necessary for their protection
the Trustees may distribute the remaining Trust Estate, in case or in
kind, or partly each, among the Shareholders, according to their
respective rights,
(b) After termination of the Trust and distribution to the shareholders
as herein provided, the Trustees shall execute and lodge among the records of
the Trust an instrument in writing, setting forth the fact of such termination,
and the Trustees shall thereupon be discharged from all further liabilities and
duties hereunder, and the rights and interests of all Shareholders shall
thereupon cease.
8.3 Amendment Procedure.
(a) This Declaration may be amended by the vote or written consent of
Shareholders holding a majority of the outstanding Shares entitled to vote
thereon. The Trustees may also amend this Declaration without the vote or
consent of Shareholders as provided in Section 9.6.
(b) A certification, in recordable form, signed by a majority of the
Trustees, setting forth an amendment and reciting that it was duly adopted by
the Shareholders or by the Trustees as aforesaid, or a copy of the Declaration,
as amended, in recordable form, and executed by a majority of the Trustees,
shall be conclusive evidence of such amendment when lodged among the records of
the Trust.
(c) Nothing contained in this Declaration shall permit the amendment of
this Declaration to impair the exception from personal liability of the
Shareholders, Trustees officers, and agents of this Trust,
8.4 Qualification Under the REIT Provisions of the Internal Revenue
Code. It is intended that the Trust shall qualify as a "real estate investment
trust" under the REIT Provisions of the Internal Revenue Code during such period
as the Trustees shall deem it advisable so to qualify the Trust.
ARTICLE IX.
Miscellaneous
<PAGE> 42
9.1 Applicable Law. This Declaration has been executed and acknowledged
by the Trustees with reference to the statutes and laws-of the State of Maryland
and the rights of all parties and the construction and effect of every provision
hereof shall be subject to and construed according to statutes and laws of said
State.
9.2 Index and Headings for Reference Only. The index and headings
preceding the text, articles and sections hereof have been inserted for
convenience and reference only and shall not be construed to affect the meaning,
construction or effect of this Declaration.
9.3 Successors in Interest. This Declaration and the Trustees,
Regulations shall be binding upon and inure to the benefit of the undersigned
Trustees and their successors assigns, heirs, distributes and legal
representatives, and every Shareholder and his successors, assigns, heirs,
distributees and legal representatives.
9.4 Inspection of Records. Trust records shall be available for
inspection by Shareholders at the same time and in the same manner and to the
extent that comparable records of a Maryland corporation would be available for
inspection by corporate shareholders under the laws of the State of Maryland.
Except as specifically provided for in this Declaration, Shareholders shall have
no greater right than shareholders of a Maryland corporation to require
financial or other information from the Trust, Trustees or officers. Any Federal
or state securities administration, the Department of Assessments and Taxation
of the State of Maryland, or other similar authority shall have the right, at
reasonable times during business hours and for proper purposes, to inspect the
books and records of the Trust.
9.5 Counterparts. This instrument may be simultaneously executed in
several counterparts, each of which when so executed shall be deemed to be an
original and such counterparts together shall constitute one in the same
instrument, which shall be sufficiently evidenced by any such original
counterparts
9.6 Provisions of the Trust in Conflict with Law or Regulations.
(a) The provisions of this Declaration are severable, and if the
Trustees shall determine with the advice of counsel, that any one or more of
such provisions (the "Conflicting Provisions") are in conflict with the REIT
Provisions of the Internal Revenue Code, with other applicable federal laws and
regulations, or with the REIT provisions of the Annotated Code of Maryland, the
Conflicting Provisions shall be deemed never to have constituted a part of the
Declaration; provided, however, that such determination by the Trustees shall
not affect or impair any of the remaining provisions of this Declaration or
render invalid or improper any action taken or omitted (including but not
limited to the election of Trustees) prior to such determination. A
certification in recordable form signed by a majority of the Trustees setting
forth any such determination and reciting that it was duly adopted by the
Trustees, or a copy of this Declaration, with the Conflicting Provisions removed
pursuant to such determination, in recordable form, signed by a majority of the
Trustees, shall be conclusive evidence of such determination when lodged in the
records of the Trust, The Trustees shall not be liable for failure to make any
determination under this Section
<PAGE> 43
9.6(a), Nothing in this Section 9.6(a) shall in any way limit or affect the
right of the Shareholders to amend this Declaration as provided in Section
8.3(a).
(b) If any provisions of this Declaration shall be held invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other provision of this Declaration, and this Declaration shall be carried
out as if any such invalid or unenforceable provision were not contained herein.
9.7 Certifications. The following certifications shall be final and
conclusive as to any persons dealing with the Trust:
(a) A certification of a vacancy among the Trustees by reason of
resignation, removal, increase in the number of Trustees, incapacity, death or
otherwise, when made in writing by majority of the remaining Trustees;
(b) A certification as to the persons holding office as Trustees or
officers at any particular time, when made in writing by the Secretary of the
Trust or by any Trustee;
(c) A certification that a copy of this Declaration or of the Trustees'
Regulations is a true and correct copy thereof as then in force, when made in
writing by the Secretary of the Trust or by any Trustee;
(d) The certification referred to in Section 8.3(b) and 9.6(a) hereof;
(e) A certification as to any action by Trustees, other than the above,
when made in writing by the Secretary of the Trust, or by any Trustee.
9.8 Recording and Filing. A copy of this instrument and any other
amendments to the Declaration shall be filed with the Department of Assessments
and Taxation of Maryland, and in the office of the County Recorder or its
equivalent in every county of Maryland where the Trust is or the Trustees are
the record owner or owners of Real Property; provided, however, that provision
is made in such county for such recording, and further provided that this
Declaration is accepted for recording, This Declaration and any amendments may
also be filed or recorded in such other places as the Trustees deem appropriate.
9.9 Resident Agent. The name and post office address of the resident
agent of the Trust in the State of Maryland is Lawrence Wiser, 12702 Littleton
Street, Silver Spring, Maryland 20906.(3) Said resident is a citizen of the
State of Maryland actually residing therein. The resident agent may be removed a
vacancy existing in such office for any reason may be filled by majority of the
Trustees.
(3) The resident agent of the Trust was changed to The Corporation Trust, 33
South Street, Baltimore, Maryland 21202, pursuant to documents recorded
on-January 16, 1976 on Film No. 2246, Frame No. 684 and on May 3, 1984, on Film
No. 2644, Frame No. 2123.
<PAGE> 44
EXHIBIT A
to
ARTICLES OF MERGER
*******************************************
Pursuant to the authority granted to the Board of Trustees of the Trust
under Section 6.1 of the Amended and Restated Declaration of Trust of the Trust,
as heretofore amended (the "Declaration"), the Board of Trustees of the Trust,
by resolution adopted by the Board of Trustees of the Trust on September 8,
1997, classified and designated 30,000,000 shares of beneficial interest in the
Trust as Class A Exchangeable Preferred Shares, par value $.01 per share, with
the following preferences, exchange and other rights, voting powers,
restrictions, limitations as to dividends and other distributions,
qualifications and terms and conditions of redemption, such classification and
designation to become effective upon the effective time of the merger of Westin
Hotels & Resorts Worldwide, Inc., a Delaware corporation, with and into the
Trust:
6.15 Class A Exchangeable Preferred Shares Articles Supplementary
6.15.1. NUMBER OF SHARES AND DESIGNATION.
The class of shares of beneficial interest in the Trust being
created by these Articles Supplementary shall be designated as "Class A
Exchangeable Preferred Shares", par value $.01 per share ("Class A EPS"), and
30,000,000 shall be the number of shares of Class A EPS constituting such class.
6.15.2. DEFINITIONS.
For purposes of the Class A EPS, the following terms have the
meanings indicated:
"Affiliate" shall mean with respect to any Person, any other
Person which directly or indirectly controls, is controlled by or is
under common control with such Person.
"Articles Supplementary" shall mean either this Article 6.15
or Article 6.16, as the case may be, of the Declaration of Trust.
"Board of Trustees" shall mean the Board of Trustees of the
Trust or any committee authorized by the Board of Trustees from time to
time to exercise any of its powers or perform any of its
responsibilities with respect to the Class A EPS.
"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which state or federally chartered banking
institutions in New York, New York are not required to be open.
40
<PAGE> 45
"Cash Equivalent" of Paired Shares or any other shares of
beneficial interest or other securities of the Trust or any other
issuer as of any date shall mean an amount of cash equal to (i) the
average of the daily Current Market Prices per unit of such Paired
Shares or other shares or securities during the five (5) consecutive
Trading Days immediately preceding such date or (ii) if the Paired
Shares or such other shares or securities are not publicly traded on
such date, the fair market value of such Paired Shares or other
securities as of such date as determined by the Board of Trustees in
good faith (subject to the rights of the holders of the Class A EPS to
request a valuation from a nationally recognized investment banking
firm as provided in paragraph (g)(v) of Article 6.15.5 hereof).
"Class A Articles Supplementary" shall mean this Article 6.15.
"Class A Dividend Replacement Shares" shall have the meaning
set forth in paragraph (d)(v) of Article 6.15.5 hereof.
"Class A EPS" shall have the meaning set forth in Article
6.15.1 hereof.
"Class A Exchange Notice" shall have the meaning set forth in
paragraph (a)(i) of Article 6.15.5 hereof.
"Class A Exchange Right" shall have the meaning set forth in
paragraph (a)(i) of Article 6.15.5 hereof.
"Class A Liquidation Preference" shall have the meaning set
forth in paragraph (b) of Article 6.15.4 hereof.
"Class A Liquidation Participation Right" shall have the
meaning set forth in paragraph (a) of Article 6.15.4 hereof.
"Class A Participation Dividend" shall have the meaning set
forth in paragraph (a) of Article 6.15.3 hereof.
"Class A Preferred Dividend" shall have the meaning set forth
in paragraph (a) of Article 6.15.3 hereof.
"Class A Underlying Corporation Shares" as of any time shall
mean the Corporation Shares component of the Class A Underlying Paired
Shares as of such time.
"Class A Underlying Paired Shares" as of any time shall mean
the Paired Shares (including, unless otherwise expressly provided
herein, fractional units of Paired Shares) for which each share of
Class A EPS is then exchangeable upon exercise of the Class A
41
<PAGE> 46
Exchange Right but excluding (except for the purposes of an actual
exercise of the Class A Exchange Right) any Class A Dividend
Replacement Shares.
"Class A Underlying Trust Shares" as of any time shall mean
the Trust Shares component of the Class A Underlying Paired Shares as
of such time.
"Class B Articles Supplementary" shall mean Article 6.16 of
the Declaration of Trust pursuant to which the Trust has classified and
designated 15,000,000 shares of beneficial interest in the Trust as
"Class B Exchangeable Preferred Shares".
"Class B EPS" shall mean the Class B Exchangeable Preferred
Shares, par value $0.01 per share, of the Trust created pursuant to the
Class B Articles Supplementary.
"Class B Liquidation Preference" shall have the meaning set
forth in paragraph (b) of Articles 6.16.4 hereof.
"Class B Liquidation Participation Right" shall have the
meaning set forth in paragraph (a) of Article 6.16.4 hereof.
"Class B Participation Dividend" shall have the meaning set
forth in paragraph (a) of Article 6.16.3 hereof.
"Class B Preferred Dividend" shall have the meaning set forth
in paragraph (a) of Article 6.16.3 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Conditionally Declared Class A Dividend" shall have the
meaning set forth in paragraph (b)(i) of Article 6.15.3 hereof.
"Constituent Person" shall have the meaning set forth in
paragraph (e)(ii) of Article 6.15.5 hereof.
"Corporation" shall mean Starwood Lodging Corporation, a
Maryland corporation, and any successor.
"Corporation Common Adjustment Event" shall mean any of the
following events that occurs after the Issue Date:
(i) The payment by the Corporation of a dividend on
the outstanding Corporation Shares that is payable in
additional Corporation Shares;
(ii) The subdivision of the outstanding Corporation
Shares into a greater number of shares (whether by share split
or otherwise);
42
<PAGE> 47
(iii) The combination of the outstanding Corporation
Shares into a smaller number of shares (whether by reverse
share split or otherwise); or
(iv) The issuance of any shares of stock of the
Corporation by reclassification of the Corporation Shares.
"Corporation Common Distribution" shall mean any dividend or
distribution paid or made by the Corporation (including, without
limitation, any distribution of assets on any liquidation, dissolution
or winding up of the Corporation) in respect of the Corporation Shares,
other than a dividend or distribution that constitutes a Corporation
Common Adjustment Event. In addition, a distribution to the holders of
Corporation Shares of rights to subscribe for or purchase additional
Corporation Shares under a shareholders protective rights plan or
agreement shall not be deemed to constitute a Corporation Common
Distribution to the extent that the Corporation makes provision so that
such rights, to the extent still outstanding with respect to the
outstanding Corporation Shares, shall be issued to the holders of any
Corporation Shares issued upon exercise of the Class A Exchange Right
(and, to the extent applicable, shall attach to such Corporation
Shares) in an amount and manner and to the extent provided in such
shareholders protective rights plans or agreements with respect to
already outstanding Corporation Shares.
"Corporation Shares" shall mean the shares of common stock,
par value $.01 per share, of the Corporation or any stock of the
Corporation into which such common stock may hereafter be changed.
"Current Market Price" of publicly traded Paired Shares or any
other shares of beneficial interest or other securities of the Trust or
any other issuer as of any Trading Day shall mean the last reported
sales price, regular way, on such day, or, if no sale takes place on
such day, the average of the reported closing bid and asked prices on
such day, regular way, in either case as reported on the NYSE or, if
such shares or other securities are not listed or admitted for trading
on the NYSE, on the principal national securities exchange on which
such shares or other securities are listed or admitted for trading or,
if not listed or admitted for trading on any national securities
exchange, on the NASDAQ National Market or, if such shares or other
securities are not quoted on such NASDAQ National Market, the average
of the closing bid and asked prices on such day in the
over-the-counter market as reported by NASDAQ or, if bid and asked
prices for such shares or other securities on such day shall not have
been reported through NASDAQ, the average of the bid and asked prices
on such day as furnished by any NYSE member firm regularly making a
market in such shares or other securities selected for such purpose by
the Chief Executive Officer or Chief Financial Officer of the Trust or
the Board of Trustees.
"Declaration" shall mean the Amended and Restated Declaration
of Trust of the Trust, as amended from time to time.
43
<PAGE> 48
"Delivered Shares" shall have the meaning set forth in
paragraph (a)(ii) of Article 6.15.5 hereof.
"Dividend Correspondence Ratio" shall have the meaning set
forth in paragraph (b)(i) of Article 6.15.3 hereof.
"Excess Shares" shall have the meaning set forth in paragraph
(a)(ii) of Article 6.15.5 hereof.
"Exchange Election Notice" shall have the meaning set forth in
paragraph (a)(i) of Article 6.15.5 hereof.
"Exchange Issuance Date" shall have the meaning set forth in
paragraph (b) of Article 6.15.5 hereof.
"Exchange Promissory Note" shall mean an unsecured promissory
note of the Trust in such form as the Trust shall reasonably prescribe
with a maturity date ninety (90) days after the date of issuance of
such note. Such Exchange Promissory Note shall bear interest in a
amount equal to the amount of any dividends paid during the period that
such note remains outstanding on a number of Paired Shares equal to the
number of Excess Shares for which such Exchange Promissory Note is
being substituted pursuant to paragraph (a)(ii) of Article 6.15.5
hereof, which interest shall be payable on the dates of payment of the
corresponding dividends.
"Exchange Ratio" shall have the meaning set forth in paragraph
(d)(i) of Article 6.15.5 hereof.
"Issue Date" shall mean the first date on which any shares of
Class A EPS are issued by the Trust.
"Junior Dividend" means a dividend payable in respect of any
class or series of shares of beneficial interest in the Trust over
which the Class A Preferred Dividends have preference or priority as to
the payment of dividends, including, without limitation, any Trust
Common Dividend, any Class A Participation Dividend and any Class B
Participation Dividend.
"Junior Liquidating Distribution" shall mean any distribution
of assets of the Trust in connection with a Liquidation Event to
holders of any class or series of shares of beneficial interest in the
Trust over which the Class A Liquidation Preference has preference or
priority in the distribution of assets upon the occurrence of such
Liquidation Event, including, without limitation, any such distribution
of assets to holders of Trust Shares or in respect of the Class A
Liquidation Participation Right or the Class B Liquidation
Participation Right.
"Junior Shares" shall mean the Trust Shares and any other
class or series of shares of beneficial interest in the Trust now or
hereafter issued and outstanding over which the Class A Preferred
Dividends have full preference or priority in the payment of dividends
or over
44
<PAGE> 49
which the Class A Liquidation Preference has full preference or
priority in the distribution of assets on the occurrence of any
Liquidation Event, including, without limitation, the Trust Shares but
excluding the Class B EPS.
"Liquidation Date" shall have the meaning set forth in
paragraph (a) of Article 6.15.4 hereof.
"Liquidation Event" shall mean any liquidation, dissolution or
winding up of the affairs of the Trust, whether voluntary or
involuntary. For the purposes hereof, (i) a consolidation or merger of
the Trust with one or more entities, (ii) a statutory share exchange
and (iii) a sale or transfer of all or substantially all of the Trust's
assets shall not be deemed to be a Liquidation Event.
"Non-Electing Shares" shall have the meaning set forth in
paragraph (e)(ii) of Article 6.15.5 hereof.
"NYSE" shall mean the New York Stock Exchange.
"Offered Shares" shall have the meaning set forth in paragraph
(a)(ii) of Article 6.15.5 hereof.
"Ownership Limit" shall have the meaning set forth in Section
6.12 of the Declaration.
"Paired Shares" shall mean units consisting of one Trust Share
paired with one Corporation Share (subject to adjustment as
contemplated provided in paragraph (e) of Article 6.15.5 hereof) and
represented by a single share certificate, as provided in the Pairing
Agreement dated as of June 25, 1980, between the Trust and the
Corporation, as amended from time to time.
"Paired Shares Adjustment Event" shall have the meaning set
forth in paragraph (d)(i) of Article 6.15.5 hereof.
"Parity Liquidation Preference" shall mean the liquidation
preference of any class or series of shares of beneficial interest in
the Trust that ranks on a parity with the Class A Liquidation
Preference.
"Parity Preferred Dividend" shall mean any dividend payable in
respect of any class or series of shares of beneficial interest in the
Trust that ranks on a parity in right of payment with the Class A
Preferred Dividends, whether or not the dividend rate, dividend payment
dates, liquidation preference, redemption rights, conversion or
exchange rights or other features of such class or series are different
from those of the Class A EPS.
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"Person" shall mean any individual, firm, partnership,
corporation, limited liability company or other entity, and shall
include any successor (by merger or otherwise) of such entity.
"Registered Sale Option" shall have the meaning set forth in
paragraph (a)(ii) of Article 6.15.5 hereof.
"REIT Rules" shall mean the requirements (i) for the Trust to
qualify as a real estate investment trust under the Code as set forth
in Sections 856(a)(5) and 856(a)(6) of the Code and (ii) for the
Corporation or any affiliate of the Corporation which is a tenant of
the Trust to not be treated as a related party pursuant to Section
856(d)(2)(B) of the Code.
"Requested Shares" shall have the meaning set forth in
paragraph (a)(ii) of Article 6.15.5 hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"set apart for payment" shall be deemed to include, without
any action other than the following, the recording by the Trust in its
accounting ledgers of any accounting or bookkeeping entry which
indicates, pursuant to a declaration of dividends or other distribution
by the Board of Trustees, the allocation of funds to be so paid on any
series or class of shares of beneficial interest of the Trust;
provided, however, that if any funds for any class or series of Junior
Shares or any class or series of shares of beneficial interest of the
Trust ranking on a parity with the Class A EPS as to the payment of
dividends are placed in a separate account of the Trust or delivered to
a disbursing, paying or other similar agent, then "set apart for
payment" with respect to the Class A EPS shall mean placing such funds
in a separate account or delivering such funds to a disbursing, paying
or similar agent.
"Trading Day" with respect to publicly traded Paired Shares or
any other shares of beneficial interest or other securities of the
Trust or any other issuer shall mean any day on which the shares or
other securities in question are traded on the NYSE, or if such shares
or other securities are not listed or admitted for trading on the NYSE,
on the principal national securities exchange on which such shares or
other securities are listed or admitted, or if not listed or admitted
for trading on any national securities exchange, on the NASDAQ National
Market, or if such shares or other securities are not quoted on such
NASDAQ National Market, in the applicable securities market in which
such shares or other securities are traded.
"Transaction" shall have the meaning set forth in paragraph
(e)(ii) of Article 6.15.5 hereof.
"Transfer Agent" shall mean ChaseMellon Shareholder Services,
L.L.C. (or any successor thereof), or such other agent or agents of the
Trust as may be designated by the Board of Trustees or their designee
as the transfer agent for the Class A EPS and the Class B EPS.
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"Trust" shall mean Starwood Lodging Trust, a Maryland real
estate investment trust, and any successor.
"Trust Common Adjustment Event" shall mean any of the
following events that occurs after the Issue Date:
(i) The payment by the Trust of a dividend on the
outstanding Trust Shares that is payable in additional Trust
Shares;
(ii) The subdivision of the outstanding Trust Shares
into a greater number of shares (whether by share split or
otherwise);
(iii) The combination of the outstanding Trust Shares
into a smaller number of shares (whether by reverse share
split or otherwise); or
(iv) The issuance of any shares of beneficial
interest in the Trust by reclassification of the Trust Shares.
"Trust Common Dividend" shall mean any dividend or
distribution paid or made by the Trust pro rata on the outstanding
Trust Shares other than (i) a distribution of assets of the Trust upon
the occurrence of a Trust Liquidation Event or (ii) on a dividend or
distribution that constitutes a Trust Common Adjustment Event. In
addition, a distribution to the holders of shares of beneficial
interest in the Trust of rights to subscribe for or purchase additional
Trust Shares under a shareholders protective rights plan or agreement
or any similar plan or agreement shall not be deemed to constitute a
Trust Common Dividend to the extent that the Trust makes provision so
that such rights, to the extent still outstanding with respect to the
outstanding Trust Shares, shall be issued to the holders of any Trust
Shares issued upon exercise of the Class A Exchange Right (and, to the
extent applicable, shall attach to such Trust Shares) in an amount and
manner and to the extent provided in such plans or agreements with
respect to already outstanding Trust Shares.
"Trust Shares" shall mean the common shares of beneficial
interest in the Trust, par value $.01 per share, or any shares of
beneficial interest in the Trust into which such common shares may be
changed.
"Westin Transaction Agreement" shall mean the Transaction
Agreement dated as of September 8, 1997 among WHWE L.L.C., Woodstar
Investor Partnership, Nomura Asset Capital Corporation, Juergen
Bartels, W&S Hotel L.L.C., Westin Hotels & Resorts Worldwide, Inc., W&S
Lauderdale Corp., W&S Seattle Corp., Westin St. John Hotel Company,
Inc., W&S Denver Corp., W&S Atlanta Corp., the Trust, SLT Realty
Limited Partnership, the Corporation and SLC Operating Limited
Partnership, as such agreement may be amended from time to time.
"Westin Transaction Securities" shall mean, with respect to a
holder of Class A EPS or an Affiliate thereof, any shares of Class A
EPS, shares of Class B EPS, Starwood
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Operating Partnership Units and Starwood Realty Partnership Units (as
such terms are defined in the Westin Transaction Agreement) received by
such holder or Affiliate pursuant to the Westin Transaction Agreement,
together with any shares of Class B EPS, Class A EPS or Paired Shares
(or other securities) issued upon exchange or conversion of any such
Westin Transaction Securities.
6.15.3. DIVIDENDS.
(a) In General. The holders of Class A EPS will be entitled
(i) to receive a preferred dividend payable as described in paragraph (b) below
(a "Class A Preferred Dividend"), when, as and if declared by the Board of
Trustees out of assets of the Trust legally available for that purpose, based on
the payment of any Corporation Common Distribution and (ii) to participate on
the basis described in paragraph (c) below in any Trust Common Dividend, when,
as and if declared by the Board of Trustees out of assets of the Trust available
for that purpose (a "Class A Participation Dividend").
(b) Class A Preferred Dividend.
(i) Upon the payment by the Corporation of any
Corporation Common Distribution prior to the occurrence of a Liquidation Event,
the right to receive a Class A Preferred Dividend will automatically accrue with
respect to each share of Class A EPS as of the payment date for such Corporation
Common Distribution in an amount equal to the value of the Corporation Common
Distribution paid on each Corporation Share multiplied by the applicable
Dividend Correspondence Ratio described below. To the extent that any
Corporation Common Distribution consists of securities or other property (other
than cash), the Trust will have the option of paying the corresponding Class A
Preferred Dividend either (A) in the same form as such Corporation Common
Distribution (i.e., by delivery of the same type of securities or other property
as distributed in the Corporation Common Distribution), (B) in cash in an amount
equal to the fair market value of such securities or other property as
determined in good faith by the Board of Trustees (subject to the rights of the
affected holders of Class A EPS to request a valuation from a nationally
recognized investment banking firm as provided in paragraph (g)(v) of Article
6.15.5 hereof) or (C) a combination thereof. Each Class A Preferred Dividend
will be cumulative from the payment date for the related Corporation Common
Distribution and will be payable to holders of record of Class A EPS on such
record date as shall be fixed by the Board of Trustees, which record date shall
be the same as the record date for the corresponding Class B Preferred Dividend
that will have accrued or will accrue based on such Corporation Common
Distribution and not earlier than the record date for such Corporation Common
Distribution. The Board of Trustees may, at any time between the declaration of
a Corporation Common Distribution and the related payment date, declare a
corresponding Class A Preferred Dividend conditioned on the actual payment of
such Corporation Common Distribution (any such Class A Preferred Dvidend being
sometimes referred to herein as a AConditionally Declared Class A Dividend@
until such time as the corresponding Corporation Common Distribution is paid, at
which time it will no longer be a Conditionally Declared Class A Dividend but
will instead be deemed to be an accrued Class A Preferred Dividend). The
"Dividend Correspondence Ratio" for the purposes of determining the amount of
any Class A Preferred Dividend shall mean the number of Class A Underlying
Corporation Shares for which each share of Class A EPS is exchangeable as
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of the record date for the related Corporation Common Distribution upon exercise
of the Class A Exchange Right, as such number shall be proportionately adjusted
to reflect any share dividend, share split, reverse share split or other
combination or subdivision of the Class A EPS that becomes effective between
(or, if the record date for such event is different from the effective date
therefor, that has a record date that falls between) (A) the record date for the
Corporation Common Distribution and (B) the date of payment of such Corporation
Common Distribution or, if earlier, the record date for such Class A Preferred
Dividend.
(ii) So long as any shares of Class A EPS are
outstanding: (A) no Junior Dividend may be declared or paid or set apart for
payment unless all accrued Class A Preferred Dividends and Conditionally
Declared Class A Dividends have been or are concurrently declared and paid, or
declared and a sum sufficient for the payment thereof set apart for payment, (B)
no Parity Preferred Dividend shall be declared or paid or set aside for payment
unless a ratable portion of all accrued but unpaid Class A Preferred Dividends
and Conditionally Declared Class A Dividends has been or is concurrently
declared and paid, or declared and a sum sufficient for the payment thereof set
apart for payment (with such ratable portion being based on the portion of the
accrued but unpaid Parity Preferred Dividends being paid) and (C) no Junior
Shares may be redeemed, purchased or otherwise acquired by the Trust (other than
a redemption, purchase or other acquisition of Trust Shares made for purposes of
and in compliance with requirements of an employee incentive or benefit plan of
the Trust or any subsidiary or upon any exchange or redemption of other
securities at the option of the holders thereof, or as required or permitted
under Article VI of the Declaration) for consideration (or any moneys paid or
made available for a sinking fund for the redemption of any Junior Shares),
directly or indirectly (except for conversion into or exchange for Junior
Shares) unless all accrued Class A Preferred Dividends and Conditionally
Declared Class A Dividends have been or are concurrently declared and paid, or
declared and a sum sufficient for the payment thereof set apart for payment.
(c) Class A Participation Dividend. No Trust Common Dividend
may be declared in respect of the Trust Shares unless the Board of Trustees
concurrently declares a Class A Participation Dividend entitling each share of
Class A EPS to receive an amount equal to the amount of the Trust Common
Dividend declared on each Trust Share multiplied by the number of Class A
Underlying Trust Shares for which each share of Class A EPS is then exchangeable
upon exercise of the Class A Exchange Right as of the record date for such Trust
Common Dividend. Such Class A Participation Dividend shall be payable on the
same date on which the corresponding Trust Common Dividend is payable, shall be
payable in the same form as the corresponding Trust Common Dividend and shall be
paid to holders of record of the Class A EPS on the same record date as is fixed
by the Board of Trustees for the payment of such Trust Common Dividend.
6.15.4. LIQUIDATION RIGHTS.
(a) In General. Upon the occurrence of any Liquidation Event,
the holders of Class A EPS will be entitled (i) to receive out of the assets of
the Trust legally available for liquidating distributions to holders of shares
of beneficial interests in the Trust, prior to the making of any Junior
Liquidating Distribution, a liquidating distribution in an amount equal to the
Class A Liquidation
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Preference described in paragraph (b) below determined as of the effective date
of such Liquidation Event or, if no effective date is provided, as of the record
date of the first liquidating distribution relating to such Liquidation Event
(in either such case, the "Liquidation Date") and (ii) to participate on the
basis described in paragraph (c) below in any liquidating distribution to
holders of Trust Shares (the "Class A Liquidation Participation Right"). In
determining whether a distribution (other than upon the occurrence of a
Liquidation Event), by dividend, redemption or other acquisition of shares of
beneficial interest in the Trust or otherwise, is permitted under Maryland law,
amounts that would be needed, if the Trust were to be dissolved at the time of
the distribution, to satisfy the preferential rights upon dissolution of the
holders of Class A EPS whose preferential rights upon dissolution are senior to
those receiving the distribution shall not be added to the Trust's total
liabilities.
(b) Class A Liquidation Preference. The "Class A Liquidation
Preference" of a share of Class A EPS as of the applicable Liquidation Date
shall mean the sum of (A) the fair market value (as determined in good faith by
the Board of Trustees, subject to the right of the holders of Class A EPS to
request a valuation from a nationally recognized investment banking firm
pursuant to paragraph (g)(v) of Article 6.15.5 hereof) as of such date of the
number of Class A Underlying Corporation Shares for which each Class A EPS is
exchangeable as of such date upon exercise of the Class A Exchange Right plus
(B) the amount of any accrued but unpaid Class A Preferred Dividends in respect
of each share of Class A EPS as of such date (other than any such accrued but
unpaid Class A Preferred Dividends that have been declared with a record date
prior to such Liquidation Date, which the Trust shall separately be obligated to
pay to the holders of record of the Class A EPS as of such record date). Until
each holder of shares of Class A EPS has received distributions equal to the
Class A Liquidation Preference, no Junior Liquidating Distributions may be paid
to holders of any other class or series of shares of beneficial interest in the
Trust. Subject to the rights of the holders of shares of beneficial interest in
the Trust with liquidation preferences ranking prior to or on a parity with the
Class A Liquidation Preference, after payment shall have been made in full of
the Class A Liquidation Preference as provided in this paragraph (b), Junior
Liquidating Distributions may be paid to the holders of any shares of beneficial
interest entitled to receive such distributions and the holders of the Class A
EPS shall not be entitled to share therein except as provided in paragraph (c)
of this Article 6.15.4. In the event that the assets of the Trust available for
liquidating distributions to holders of shares of beneficial interest in the
Trust in connection with any Liquidation Event are insufficient to pay the Class
A Liquidation Preference on all outstanding Class A PS and any Parity
Liquidation Preferences in respect of any other classes or series of shares of
beneficial interest in the Trust, then the holders of the Class A EPS and such
other classes and series of shares of beneficial interest in the Trust shall
share ratably in any such distribution of assets in proportion to the Class A
Liquidation Preference and the Parity Liquidation Preferences to which they
would otherwise be respectively entitled.
(c) Class A Liquidation Participation Right. In addition to
being entitled to receive the Class A Liquidation Preference, upon the
occurrence of any Liquidation Event the holders of Class A EPS shall be entitled
to participate, pursuant to the Class A Liquidation Participation Right, ratably
with the holders of Trust Shares in any liquidating distributions to such
holders. For such purpose, each share of Class A EPS shall be deemed to
represent a number of Trust Shares equal to the number of Class A Underlying
Trust Shares for which each share of Class A EPS could be
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exchanged upon exercise of the Class A Exchange Right as of the record date for
such distribution.
6.15.5. EXCHANGE RIGHT.
(a) Class A Exchange Right. (i) A holder of shares of Class A
EPS shall have the right to exchange such shares in whole or in part at any time
for fully paid and non-assessable Paired Shares to the extent described below
(the "Class A Exchange Right"). A holder of shares of Class A EPS desiring to
exchange such shares for Paired Shares shall surrender the certificate or
certificates evidencing such shares, duly endorsed or assigned to the Trust or
in blank, to the Transfer Agent together with a duly completed and executed
exchange notice (a "Class A Exchange Notice") in such form as the Trust shall
prescribe from time to time and such related certifications as the Trust may
reasonably prescribe from time to time. Unless any Paired Shares to be issued in
exchange for such shares of Class A EPS are to be issued in the same name as the
name in which such shares of Class A EPS are registered, each share certificate
surrendered shall be accompanied by instruments of transfer, in form reasonably
satisfactory to the Trust, duly executed by the holder or such holder=s duly
authorized attorney and an amount sufficient to pay any applicable transfer or
similar tax (or evidence reasonably satisfactory to the Trust demonstrating that
such taxes have been paid). As promptly as practicable (and in any event within
five (5) Business Days after receipt of a Class A Exchange Notice and such
required certificates and documents, the Trust shall elect, pursuant to an
election notice given to the exchanging holder (an "Exchange Election Notice"),
to either: (i) deliver to such holder the number of Paired Shares corresponding
to the number of shares of Class A EPS being exchanged based on the Exchange
Ratio described in paragraph (d) of this Article 6.15.5 (including procuring the
issuance by the Corporation of the Corporation Shares component of such Paired
Shares) or (ii) pay to the holder the Cash Equivalent of such Paired Shares or
(iii) a combination of (i) and (ii).
(ii) If the delivery to such holder of the full
number of Paired Shares requested to be delivered pursuant to the Class A
Exchange Notice (the "Requested Shares") would result in a violation of either
the Ownership Limit or the REIT Rules, the Trust may elect in the Exchange
Election Notice to either (A) deliver to such holder the maximum number of
Paired Shares that may be delivered without causing such a violation (the
"Delivered Shares", with the number of Requested Shares in excess of the
Delivered Shares being referred to herein as the "Excess Shares"), together with
either the Cash Equivalent (determined as of the date of delivery of the
applicable Class A Exchange Notice and the related certificates and other
documents described above) of the Excess Shares or an Exchange Promissory Note
in a principal amount equal to such Cash Equivalent or (B) deliver to such
holder the Cash Equivalent (determined as of such notice delivery date) of the
Requested Shares. Notwithstanding the foregoing, in the event that the delivery
of the full number of Requested Shares pursuant to a Class A Exchange Notice
would violate either the Ownership Limit or the REIT Rules because the
exchanging Class A EPS holder, together with such holder's Affiliates (but
without giving effect to any other applicable attribution rules under the Code),
beneficially owns, as of the date the Exchange Election Notice is given, Paired
Shares other than through the ownership of Westin Transaction Securities, the
Trust will have the option (the "Registered Sale Option"), exercisable in the
Exchange Election Notice, in lieu of delivering an Exchange Promissory Note in a
principal amount equal to the Cash Equivalent of the Excess Shares, to procure
the filing of a registration statement under the Securities Act, and to publicly
offer and sell
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pursuant to such registration statement in such manner as the Trust in good
faith determines to be appropriate a number of Paired Shares equal to the number
of such Excess Shares (the "Offered Shares"), the net roceeds of which sale
(after deducting any applicable underwriting discounts or commissions and the
expenses of such offering) shall be paid to such holder.
(iii) In the event that the issuance of the full
number of Requested Shares upon any exercise of the Class A Exchange Right would
violate either the Ownership Limit or the REIT Rules and either (i) the Trust
elects to deliver the Delivered Shares together with an Exchange Promissory Note
in a principal amount equal to the Cash Equivalent of the Excess Shares or (ii)
the Trust exercises the Registered Sale Option, the holder of the shares of
Class A EPS being exchanged will have the right to withdraw his or her Class A
Exchange Notice as to the Excess Shares, which withdrawal must be made by
written notice to the Transfer Agent within ten (10) Business Days after receipt
of the Trust's Exchange Election Notice.
(b) Delivery of Securities and Cash. If the Exchange Election
Notice relating to an exercise of the Class A Exchange Right does not give rise
to a withdrawal right pursuant to paragraph (a)(iii) above, such Exchange
Election Notice shall be accompanied by the delivery of the Paired Shares and/or
cash required to be delivered pursuant to such Exchange Election Notice. If the
Exchange Election Notice does give rise to such a withdrawal right, but such
right is not exercised by the exchanging holder, the Trust shall deliver the
Paired Shares, Exchange Promissory Note and/or cash required to be delivered
pursuant to such Exchange Election Notice within five (5) Business Days after
the expiration of such withdrawal right. If the Exchange Election Notice
includes the exercise of the Registered Sale Option, the proceeds from the sale
of the Offered Shares shall be paid over to the applicable holder promptly upon
receipt. Any cash payable to an exchanging holder hereunder shall be payable at
the election of the Trust by check or by wire transfer to an account designated
in writing by the exchanging holder, if one has been so designated. With respect
to any Paired Shares to be issued pursuant to an Exchange Election Notice, the
Trust shall issue and deliver (and shall cause the Corporation to issue and
deliver) at the office of the Transfer Agent to the exchanging holder, or on his
or her written order, a certificate or certificates for the number of full
Paired Shares deliverable in accordance with the provisions of this Article
6.15.5, and any fractional interest in respect of a unit of Paired Shares
arising upon such exercise of the Class A Exchange Right shall be settled as
provided in paragraph (c) of this Article 6.15.5 (the date of delivery of such
certificate or certificates being sometimes referred to herein as the "Exchange
Issuance Date"). Any such Paired Shares issued upon such exercise shall be
deemed to have been issued immediately prior to the close of business on the
Exchange Issuance Date, and the Person or Persons in whose name or nmes any
certificate or certificates for Paired Shares shall be issuable pursuant to such
Class A Exchange Notice shall be deemed to have become the holder or holders of
record of the Paired Shares represented thereby at such time on such date unless
the share transfer records for the Paired Shares shall be closed on such date,
in which event such Person or Persons shall be deemed to have become such holder
or holders of record at the close of business on the next succeeding day on
which such share transfer books are open. If less than the full number of shares
of Class A EPS represented by the certificate or certificates surrendered to the
Trust in connection with an exercise of the Class A Exchange Right are being
exchanged pursuant to such exercise, the Trust shall also deliver to the
exchanging holder a new certificate or certificates evidencing the excess shares
not being exchanged.
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(c) Fractional Interests. No fractional Paired Share units or
scrip evidencing fractions of Paired Shares shall be issued upon exercise of the
Class A Exchange Right. Instead of any fractional interest in a unit of Paired
Shares that would otherwise be deliverable upon such exercise, the Trust shall
pay to the exchanging holder an amount in cash equal to the corresponding
fraction of the Current Market Price of the Paired Shares on the Trading Day
immediately preceding the Exchange Issuance Date. If more than one share of
Class A EPS shall be surrendered for exchange at one time by the same holder,
the number of full Paired Shares issuable upon exercise of the Class A Exchange
Right shall be computed on the basis of the aggregate number of shares of Class
A EPS so surrendered.
(d) Exchange Ratio and Adjustments.
(i) Initially, one unit of Paired Shares will be
issuable upon exchange of each share of Class A EPS pursuant to the exercise of
the Class A Exchange Right (the "Exchange Ratio"). If, at any time after the
Issue Date, a Trust Common Adjustment Event shall occur in conjunction with the
occurrence of a corresponding Corporation Common Adjustment Event as a result of
which the number of outstanding Paired Shares is increased or decreased but
neither the nature of the securities comprising the Paired Shares nor the ratio
of outstanding Trust Shares to Common Shares is affected (a "Paired Shares
Adjustment Event"), the Exchange Ratio in effect as of the close of business on
the record date for such Paired Shares Adjustment Event or, if no such record
date applies, the effective date of such Paired Shares Adjustment Event shall be
adjusted so that a holder of shares of Class A EPS who thereafter exercises the
Class A Exchange Right with respect to such shares will be entitled to receive
upon such exercise the number of Paired Shares that such holder would have owned
or have been entitled to receive after the happening of such Paired Shares
Adjustment Event if such holder had exercised the Class A Exchange Right
immediately prior to such record date or effective date. An adjustment pursuant
to this subparagraph (i) shall become effective (subject to subparagraph (iv)
below) immediately upon the opening of business on the Business Day next
following the record date for the applicable Paired Shares Adjustment Event or,
if no such record date applies, the Business Day next following the effective
date of such Paired Shares Adjustment Event.
(ii) No adjustment in the Exchange Ratio shall be
required pursuant to subparagraph (i) above unless such adjustment would require
a cumulative increase or decrease of at least one percent (1%) in such ratio;
provided, however, that any adjustments that by reason of this subparagraph (ii)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment until made. All calculations of the Exchange Ratio
under this paragraph (d) shall be made to the nearest one-tenth of a share (with
.05 of a share being rounded upward).
(iii) Notwithstanding any other provisions of this
Article 6.15.5, the Trust shall not be required to make any adjustment to the
Exchange Ratio based on any issuance of Paired Shares pursuant to any plan
providing for the reinvestment of dividends or interest payable on securities of
the Trust (or the Corporation) and the investment of additional optional amounts
in Paired Shares under such plan.
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(iv) In any case in which this paragraph (d) provides
that an adjustment to the Exchange Ratio shall become effective immediately
following the record date for an event, the Trust may defer until the occurrence
of such event (A) issuing to the holder of any shares of Class A EPS exchanged
after such record date but before the occurrence of such event the additional
Paired Shares (or the cash, Exchange Promissory Notes or other property to be
delivered in lieu thereof pursuant to this Article 6.15.5) issuable pursuant to
such exchange by reason of the adjustment required pursuant to this paragraph
(d) in respect of such event and (B) paying to the exchanging holder any amount
of cash in lieu of any fractional interest in Paired Shares pursuant to
paragraph (c) of this Article 6.15.5.
(v) If at the time of any exercise of the Class A
Exchange Right there are any accrued but unpaid Class A Preferred Dividends or
Class A Participation Dividends other than Class A Preferred Dividends or Class
A Participation Dividends that have been declared with a record date prior to
such exercise, the Exchange Ratio shall be adjusted so that the number of Paired
Shares into which the shares of Class A EPS being exchanged are then
exchangeable is increased by a number of Paired Shares (the "Class A Dividend
Replacement Shares") equal to (A) the aggregate amount of such accrued but
unpaid Class A Preferred Dividends and Class A Participation Dividends with
respect to each share of Class A EPS being exchanged divided by (B) the Current
Market Price of the Paired Shares during the five (5) Trading Days immediately
preceding the date of delivery of the applicable Class A Exchange Notice and all
related certificates and other documents.
(e) Adjustments to Composition of Paired Shares Issuable Upon
Exchange.
(i) If, at any time after the Issue Date, a Trust
Common Adjustment Event or a Corporation Common Adjustment Event shall occur
other than as part of a Paired Shares Adjustment Event, each unit of Paired
Shares issuable upon exercise of the Class A Exchange Right shall be adjusted
(subject to subparagraph (iii) below) as of the close of business on the record
date for such event or, if no such record date applies, the effective date of
such event so as to consist of the number of Trust Shares, the number of
Corporation Shares and the number of any other shares of beneficial interest in
the Trust or shares of stock of the Corporation that a holder of one unit of
Paired Shares would have held or have been entitled to receive after giving
effect to such event.
(ii) If, at any time after the Issue Date, the Trust
or the Corporation shall become a party to any transaction, including, without
limitation, a merger, consolidation, statutory share exchange, self tender offer
for all or substantially all outstanding Trust Shares and/or Corporation Shares,
sale of all or substantially all of the Trust=s or the Corporation=s assets or
recapitalization of the Trust Shares and/or the Corporation Shares (but
excluding any event constituting a Trust Common Adjustment Event or a
Corporation Common Adjustment Event) (each of the foregoing being referred to
herein as a "Transaction"), in each case as a result of which the outstanding
Trust Shares and/or Corporation Shares shall be converted into or exchanged for
the right to receive stock, securities or other property (including cash or any
combination thereof), effective as of the effective date of such Transaction,
each unit of Paired Shares issuable upon exercise of the Class A Exchange Right
with respect to any shares of Class A EPS that are not converted into or
exchanged for the right to receive stock, securities or other property in
connection
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with such Transaction shall thereafter be deemed to consist of the kind and
amount of shares of beneficial interest in the Trust, shares of stock of the
Corporation and other securities and property (including cash or any combination
thereof) that would have been held or receivable upon the consummation of such
Transaction by a holder of a number of Paired Shares equal to the number of
Class A Underlying Paired Shares for which one share of Class A EPS would have
been exchangeable immediately prior to such Transaction, assuming such holder of
Paired Shares (A) is not a Person with which the Trust or the Corporation
consolidated or into which the Trust or the Corporation was merged or which
merged into the Trust or the Corporation or to which such sale or transfer was
made, as the case may be (a "Constituent Person"), or an Affiliate of a
Constituent Person and (B) failed to exercise his or her rights of election, if
any, as to the kind or amount of stock, securities and other property (including
cash) receivable upon such Transaction (provided that if the kind or amount of
stock, securities and other property (including cash) receivable upon such
Transaction is not the same for each unit of Paired Shares held immediately
prior to such Transacion by other than a Constituent Person or an Affiliate
thereof and in respect of which such rights of election shall not have been
exercised ("Non-Electing Shares"), then for the purposes of this subparagraph
(ii) the kind and amount of stock, securities and other property (including
cash) receivable upon such Transaction in respect of each Non-Electing Share
shall be deemed to be the kind and amount so receivable per share by a plurality
of the Non-Electing Shares). The provisions of this paragraph (e) shall
similarly apply to successive transactions.
(iii) In any case in which this paragraph (e)
provides that an adjustment to the composition of the units of Paired Shares
issuable upon exercise of the Class A Exchange Right shall become effective
immediately following the record date for an event, the Trust may defer until
the occurrence of such event (A) issuing to the holder of any shares of Class A
EPS exchanged after such record date but before the occurrence of such event the
additional Paired Shares (or the cash, Exchange Promissory Notes or other
property to be delivered in lieu thereof pursuant to this Article 6.15.5)
issuable pursuant to such exchange before giving effect to such adjustment and
(B) paying to the exchanging holder any amount of cash in lieu of any fractional
interest in Paired Shares pursuant to paragraph (c) of this Article 6.15.5.
(f) Notice of Adjustments. Whenever the Exchange Ratio or the
composition of a unit of Paired Shares is adjusted as provided in paragraph (d)
or (e) above, the Trust shall promptly file with the Transfer Agent an officer=s
certificate setting forth the Exchange Ratio after such adjustment and, in the
case of an adjustment pursuant to paragraph (e), describing the kind and amount
of stock, securities and other property (including cash) then constituting a
unit of Paired Shares. Such certificate shall also set forth a brief statement
of the facts requiring such adjustment and shall be conclusive evidence of the
correctness of such adjustment absent manifest error. Promptly after delivery of
such certificate, the Trust shall prepare a notice of such adjustment setting
forth the adjusted Exchange Ratio, the effective date of such adjustment and, in
the case of an adjustment pursuant to paragraph (e), a description of the kind
and amount of stock, securities and other property (including cash) then
constituting a unit of Paired Shares, and shall mail such notice of such
adjustment to the holder of each share of Class A EPS, and to the extent that
any shares of Class B EPS are then outstanding to each holder of Class B EPS, at
such holder=s last address as shown on the share records of the Trust.
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(g) Miscellaneous Provisions.
(i) There shall be no adjustment of the Exchange
Ratio or the composition of the units of Paired Shares issuable upon exercise of
the Class A Exchange Right in case of the issuance of any shares of beneficial
interest in the Trust in a reorganization, acquisition or other similar
transaction except as specifically set forth in this Article 6.15.5.
(ii) If the Trust shall take any action affecting the
Trust Shares or the Corporation shall take any action affecting the Corporation
Shares, other than an action described in this Article 6.15.5, that in the
opinion of the Board of Trustees would materially affect the exchange rights of
the holders of the Class A EPS provided for in this Article 6.15.5, the Exchange
Ratio and/or the composition of the units of Paired Shares may be adjusted, to
the extent permitted by law, in such manner, if any, and at such time, as the
Board of Trustees, in its sole discretion, may determine to be equitable in the
circumstances.
(iii) The Trust covenants that any Paired Shares
issued upon exercise of the Class A Exchange Right will be validly issued, fully
paid and non-assessable. The Trust shall reserve and shall at all times have
reserved out of its authorized but unissued Trust Shares, solely for issuance
pursuant to exercise of the Class A Exchange Right and shall use its best
efforts to cause the Corporation to reserve and at all times have, solely for
issuance pursuant to exercise of the Class A Exchange Right, sufficient
Corporation shares to permit the exercise of such Class A Exchange Right. The
Trust shall use its best efforts to cause the Corporation not to close its
transfer books so as to prevent the timely issuance of Corporation Shares upon
the exercise of the Class A Exchange Right. The Trust shall not close its
transfer books so as to prevent the timely issuance of Trust Shares upon the
exercise of the Class A Exchange Right. The Trust shall pay any and all
documentary stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of Paired Shares or other securities or property upon exercise
of the Class A Exchange Right; provided, however, that the Trust shall not be
required to pay any tax that may be payable in respect of any transfer involved
in the issue or delivery of any Paired Shares or other securities or property in
a name other than that of the holder of the shares of Class A EPS being
exchanged, and no such issue or delivery shall be made unless and until the
Person requesting such issue or delivery has paid to the Trust the amount of any
such tax or established, to the reasonable satisfaction of the Trust, that such
tax has been paid.
(iv) Except as provided in paragraph (g)(v) below,
any determination required or permitted to be made by the Board of Trustees by
these Articles Supplementary shall be final, conclusive and binding on the
holders of Class A EPS.
(v) In the event that: (A) the Trust elects to pay
the Cash Equivalent of Paired Shares or other securities pursuant to an exercise
of the Class A Exchange Right and in connection therewith the Board of Trustees
makes a determination of the value of the Paired Shares or other securities at a
time when the Paired Shares or such other securities are not publicly traded,
(B) the Trust elects to pay in cash a Class A Preferred Dividend corresponding
to a Corporation Common Distribution in the form of securities or other property
and in connection therewith the Board of Trustees makes a determination of the
fair market value of such securities or
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other property or (C) the Board of Trustees makes a determination of the fair
market value of Class A Underlying Corporation Shares for the purpose of
determining the amount of the Class A Liquidation Preference in connection with
a Liquidation Event, then the Trust shall deliver to each affected holder of
Class A EPS a written notice (which, in the case of an exercise of the Class A
Exchange Right may be set forth in the related Exchange Election Notice) setting
forth the valuation determined by the Board of Trustees. At any time within ten
(10) Business Days after receipt of such notice, any affected holder of Class A
EPS may request in writing that the Trust obtain a written valuation of such
Paired Shares, Class A Underlying Corporation Shares or other securities or
property from an investment banking firm. Promptly after receipt of any such
request, the Trust shall select a nationally recognized investment banking firm
to perform such valuation and shall provide such investment banking firm with
such relevant information as the Trust may have in relation thereto. Such
investment banking firm shall be instructed to prepare a written valuation
report within thirty (30) days after its appointment, and upon receipt of such
valuation report, the Trust shall mail a copy to each affected holder of Class A
EPS. If the valuation as determined by such investment banking firm is greater
than the valuation as determined by the Board of Trustees, the Trust shall
promptly pay the amount of such difference to each affected holder of Class A
EPS. If, however, the valuation as determined by such investment banking firm is
less than the valuation determined by the Board of Trustees, the Trust may at
its option require each affected holder of Class A EPS to repay the amount of
such difference to the Trust, which amount shall be so repaid by each such
holder promptl after receipt of the Trust's request. The fees and expenses of
such investment banking firm shall be paid by the Trust.
6.15.6. REACQUIRED SHARES TO BE RETIRED.
All shares of Class A EPS which shall have been issued and
reacquired in any manner by the Trust shall be restored to the status of
authorized but unissued shares of beneficial interest in the Trust without
designation as to class.
6.15.7. VOTING.
(a) General Voting Rights. The holders of shares of Class A
EPS shall be entitled to vote upon all matters upon which holders of Trust
Shares have the right to vote, and shall be entitled to the number of votes
equal to the largest whole number of Class A Underlying Trust Shares for which
such shares of Class A EPS could be exchanged pursuant to the provisions of
Article 6.15.5 hereof as of the record date for determination of the
shareholders entitled to vote on such matters, or, if no such record date is
established, as of the date such vote is taken or any written consent of
shareholders is solicited, such votes to be counted together with all other
shares of beneficial interest in the Trust having general voting powers and not
separately as a class.
(b) Special Voting Rights. So long as any shares of Class A
EPS are outstanding, in addition to any other vote or consent of holders of such
shares required by the Declaration or these Articles Supplementary, the
affirmative vote of at least a majority of the votes entitled to be cast by the
holders of all outstanding shares of Class A EPS, given in person or by proxy,
either in writing without a meeting or by vote at any meeting called for that
purpose, shall be necessary for
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effecting or validating any amendment, alteration or repeal of any of the
provisions of the Declaration or these Articles Supplementary that materially
and adversely affects the voting powers, rights or preferences of the holders of
the Class A EPS disproportionately (based on the number of Underlying Class A
Trust Shares at the time) to the effect of such amendment, alteration or repeal
on the holders of Trust Shares; provided, however, that (i) any amendment of the
provisions of the Declaration so as to authorize or create, or to increase the
authorized amount of, any class or series of shares of beneficial interest in
the Trust, whether ranking prior to, on a parity with or junior to the Class A
EPS shall not be deemed to materially and adversely affect the voting powers,
rights or preferences of the holders of Class A EPS and (ii) no filing with the
State Department of Assessments and Taxation of Maryland by the Trust in
connection with a merger, consolidation or sale of all or substantially all of
the assets of the Trust shall be deemed to be an amendment, alteration or repeal
of any of the provisions of the Declaration or these Articles Supplementary
unless such filing expressly purports to amend, alter or repeal one or more of
such provisions. For the purposes of this paragraph (b), each share of Class A
EPS will have one vote per share.
6.15.8. RECORD HOLDERS.
The Trust and the Transfer Agent may deem and treat the record
holder of any shares of Class A EPS as the true and lawful owner thereof for all
purposes, and neither the Trust nor the Transfer Agent shall be affected by any
notice to the contrary.
6.15.9. RESTRICTIONS ON OWNERSHIP AND TRANSFER.
The Class A EPS constitute shares of beneficial interest in
the Trust that are governed by and issued subject to all the limitations, terms
and conditions of the Declaration applicable to shares of beneficial interest in
the Trust generally, including, without limitation, the terms and conditions
(including exceptions and exemptions) of Article VI of the Declaration
applicable to shares of beneficial interest in the Trust. The foregoing sentence
shall not be construed to limit the applicability to the Class A EPS of any
other term or provision of the Declaration. No restrictions on the
transferability of shares of Class A EPS shall be enforced by the Trust to the
extent that such restrictions would otherwise cause the Trust to fail to meet
the requirements of Section 856(a)(2) of the Code.
**********************************
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Pursuant to the authority granted to the Board of Trustees of the Trust
under Section 6.1 of the Amended and Restated Declaration of Trust of the Trust,
as heretofore amended (the "Declaration"), the Board of Trustees of the Trust,
by resolution adopted by the Board of Trustees of the Trust on September 8,
1997, classified and designated 15,000,000 shares of beneficial interest in the
Trust as Class B Exchangeable Preferred Shares, par value $.01 per share, with
the following preferences, exchange and other rights, voting powers,
restrictions, limitations as to dividends and other distributions,
qualifications and terms and conditions of redemption, such classification and
designation to become effective upon the effective time of the merger of Westin
Hotels & Resorts Worldwide, Inc., a Delaware corporation, with and into the
Trust:
6.16 Class B Exchangeable Preferred Shares Articles Supplementary
6.16.1. NUMBER OF SHARES AND DESIGNATION.
There are hereby designated 15,000,000 "Class B Exchangeable
Preferred Shares", par value $.01 per share ("Class B EPS").
6.16.2. DEFINITIONS.
For purposes of the Class B EPS, the following terms have the
meanings indicated:
"Affiliate" shall mean with respect to any Person, any other
Person which directly or indirectly controls, is controlled by or is
under common control with such Person.
"Articles Supplementary" shall mean either Article 6.15 or
Article 6.16, as the case may be, of the Declaration of Trust.
"Base Preference Amount" per share of Class B EPS as of any
date shall mean the Stated Value per share as of such date.
"Board of Trustees" shall mean the Board of Trustees of the
Trust or any committee authorized by the Board of Trustees from time to
time to exercise any of its powers or perform any of its
responsibilities with respect to the Class B EPS.
"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which state or federally chartered banking
institutions in New York, New York are not required to be open.
"Class A Articles Supplementary" shall mean Article 6.15
hereof pursuant to which the Trust has classified and designated
30,000,000 shares of beneficial interest in the Trust as "Class A
Exchangeable Preferred Shares".
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"Class A EPS" means the Class A Exchangeable Preferred Shares,
par value $0.01 per share, created by the Class A Articles
Supplementary.
"Class A EPS Adjustment Event" shall mean any of the following
events that occurs after the Issue Date:
(i) The payment by the Trust of a dividend on the
outstanding Class A EPS that is payable in additional shares
of Class A EPS;
(ii) The subdivision of the outstanding Class A EPS
into a greater number of shares (whether by share split or
otherwise);
(iii) The combination of the outstanding Class A EPS
into a smaller number of shares (whether by reverse share
split or otherwise); or
(iv) The issuance of any shares of beneficial
interest in the Trust by reclassification of the Class A EPS.
"Class A Exchange Right" shall have the meaning set forth in
paragraph (a) of Article 6.15.5 hereof.
"Class A Liquidation Preference" shall have the meaning set
forth in paragraph (b) of Article 6.15.4 hereof.
"Class A Liquidation Participation Right" shall have the
meaning set forth in paragraph (a) of Article 6.15.4 hereof.
"Class A Participation Dividend" shall have the meaning set
forth in paragraph (a) of Article 6.15.3 hereof.
"Class A Preferred Dividend" shall have the meaning set forth
in paragraph (a) of Article 6.15.3 hereof.
"Class B Articles Supplementary" shall mean this Article 6.16.
"Class B Conversion Notice" shall have the meaning set forth
in paragraph (b)(ii) of Article 6.16.5 hereof.
"Class B Conversion/Redemption Election Right" shall have the
meaning set forth in Article 6.16.7 hereof.
"Class B Conversion/Redemption Notice" shall have the meaning
set forth in Article 6.16.7 hereof.
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"Class B Conversion Right" shall have the meaning set forth in
paragraph (b)(i) of Article 6.16.5 hereof.
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"Class B Dividend Replacement Shares" shall have the meaning
set forth in paragraph (e)(v) of Article 6.16.5 hereof.
"Class B EPS" shall have the meaning set forth in Article
6.16.1 hereof.
"Class B Liquidation Preference" shall have the meaning set
forth in paragraph (b) of Article 6.16.4 hereof.
"Class B Liquidation Participation Right" shall have the
meaning set forth in paragraph (a) of Article 6.16.4 hereof.
"Class B Participation Dividend" shall have the meaning set
forth in paragraph (a) of Article 6.16.3 hereof.
"Class B Preferred Dividend" shall have the meaning set forth
in paragraph (a) of Article 6.16.3 hereof.
"Class B Redemption Date" shall have the meaning set forth in
paragraph (c)(ii) of Article 6.16.6 hereof.
"Class B Redemption Notice" shall have the meaning set forth
in paragraph (c)(ii) of Article 6.16.6 hereof.
"Class B Redemption Right" shall have the meaning set forth in
paragraph (a) of Article 6.16.6 hereof.
"Class B Underlying Class A EPS" with respect to any shares of
Class B EPS as of a specified date shall mean the number of shares of
Class A EPS issuable on such date upon exercise of the Class B
Conversion Right with respect to such shares of Class B EPS (including
fractional interests but without taking into account any Class B
Dividend Replace ment Shares except for the purposes of an actual
exercise of the Class B Conversion Right).
"Class B Underlying Corporation Shares" as of any time shall
mean the Corporation Shares component of the Class B Underlying Paired
Shares as of such time.
"Class B Underlying Paired Shares" as of any time shall mean
the Paired Shares for which each share of Class B EPS is then
indirectly exchangeable assuming both (i) the conversion at such time
of such share of Class B EPS into the corresponding number of shares of
Class B Underlying Class A EPS upon exercise of the Class B Conversion
Right and (ii) the simultaneous exchange of such shares of Class A EPS
for Paired Shares (including, unless otherwise expressly provided
herein, fractional shares but excluding any Class A Dividend
Replacement Shares, as defined in paragraph (d)(v) of Article 6.15.5
hereof) upon exercise of the Class A Exchange Right.
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"Class B Underlying Trust Shares" as of any time shall mean
the Trust Shares component of the Class B Underlying Paired Shares as
of such time.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
AConditionally Declared Class B Dividend@ shall have the
meaning set forth in paragraph (b)(i) of Article 6.16.3 hereof.
"Constituent Person" shall have the meaning set forth in
paragraph (f) of Article 6.16.5 hereof.
"Conversion Ratio" shall have the meaning set forth in
paragraph (e)(i) of Article 6.16.5 hereof.
"Corporation" shall mean Starwood Lodging Corporation, a
Maryland corporation, and any successor.
"Corporation Common Adjustment Event" shall mean any of the
following events that occurs after the Issue Date:
(i) The payment by the Corporation of a dividend on
the outstanding Corporation Shares that is payable in
additional Corporation Shares;
(ii) The subdivision of the outstanding Corporation
Shares into a greater number of shares (whether by stock split
or otherwise);
(iii) The combination of the outstanding Corporation
Shares into a smaller number of shares (whether by reverse
stock split or otherwise); or
(iv) The issuance of any shares of stock of the
Corporation by reclassification of the Corporation Shares.
"Corporation Common Distribution" shall mean any dividend or
distribution paid or made by the Corporation (including, without
limitation, any distribution of assets on any liquidation, dissolution
or winding up of the Corporation) in respect of the Corporation Shares,
other than a dividend or distribution that constitutes a Corporation
Common Adjustment Event. In addition, a distribution to the holders of
Corporation Shares of rights to subscribe for or purchase additional
Corporation Shares under a shareholders protective rights plan or
agreement shall not be deemed to constitute a Corporation Common
Distribution to the extent that the Corporation makes provision so that
such rights, to the extent still outstanding with respect to the
outstanding Corporation Shares, shall be issued to the holders of any
Corporation Shares issued upon exercise of the Class A Exchange Right
(and, to the extent applicable, shall attach to such Corporation
Shares) in an amount and
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manner and to the extent provided in such shareholders protective
rights plans or agreements with respect to already outstanding
Corporation Shares.
"Corporation Shares" shall mean the shares of common stock,
par value $.01 per share, of the Corporation or any stock of the
Corporation into which such common stock may hereafter be changed.
"Cross-Over Date" shall mean the fifth anniversary of the
Issue Date, subject to extension as described in paragraph (a) of
Article 6.16.9 hereof.
"Current Market Price" of publicly traded Paired Shares or any
other shares of beneficial interest or other securities of the Trust or
any other issuer as of any Trading Day shall mean the last reported
sales price, regular way, on such day, or, if no sale takes place on
such day, the average of the reported closing bid and asked prices on
such day, regular way, in either case as reported on the NYSE or, if
such shares or other securities are not listed or admitted for trading
on the NYSE, on the principal national securities exchange on which
such shares or other securities are listed or admitted for trading or,
if not listed or admitted for trading on any national securities
exchange, on the NASDAQ National Market or, if such shares or other
securities are not quoted on such NASDAQ National Market, the average
of the closing bid and asked prices on such day in the over-the-counter
market as reported by NASDAQ or, if bid and asked prices for such
shares or other securities on such day shall not have been reported
through NASDAQ, the average of the bid and asked prices on such day as
furnished by any NYSE member firm regularly making a market in such
security selected for such purpose by the Chief Executive Officer or
Chief Financial Officer of the Trust or the Board of Trustees.
"Declaration" shall mean the Amended and Restated Declaration
of Trust of the Trust, as amended from time to time.
"Default Rate Dividends" shall have the meaning set forth in
paragraph (d) of Article 6.16.3 hereof.
"Dividend Correspondence Ratio" shall have the meaning set
forth in paragraph (b)(i) of Article 6.16.3 hereof.
"Issue Date" shall mean the first date on which any Class B
EPS are issued by the Trust.
"Junior Dividend" means a dividend payable in respect of any
class or series of shares of beneficial interest in the Trust over
which the Class B Preferred Dividends have preference or priority as to
the payment of dividends, including, without limitation, any Trust
Common Dividend, any Class B Participation Dividend and any Class A
Preferred Dividend and any Class A Participation Dividend.
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"Junior Liquidating Distribution" shall mean any distribution
of assets of the Trust in connection with a Liquidation Event to
holders of any class or series of shares of beneficial interest in the
Trust over which the Class B Liquidation Preference has preference or
priority in the distribution of assets upon the occurrence of such
Liquidation
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Event, including, without limitation, any such distribution of assets
to holders of Trust Shares or in respect of the Class B Liquidation
Participation Right, the Class A Liquidation Preference or the Class A
Liquidation Participation Right.
"Junior Shares" shall mean the Trust Shares and any other
class or series of shares of beneficial interest in the Trust now or
hereafter issued and outstanding over which the Class B Preferred
Dividends have full preference or priority in the payment of dividends
or over which the Class B Liquidation Preference has full preference or
priority in the distribution of assets on the occurrence of any
Liquidation Event. Without limiting the generality of the foregoing,
for the purposes hereof the Class A EPS and the Trust Shares constitute
Junior Shares.
"LIBOR" as of any date shall mean the rate of interest per
annum for United States dollar deposits in the amount of $100,000,000
with a one-month maturity which appears on "Telerate Page 3750" (as
defined below) as of 11:00 a.m. (London time) on such date; provided
that if such rate is no longer published, an interest rate per annum
equal to the arithmetic mean (rounded if necessary to the nearest
one-hundredth of one percent (0.01%) of the interest rates per annum
for United States dollar deposits in such amount and with such a
maturity quoted on Reuters Screen Page "LIBO" (or if such page on such
service ceases to display such information, such other page as may
replace it on that service for the purpose of displaying such
information) as of 11:00 a.m. on such date (the rate determined as
aforesaid being the "LIBO Screen Rate"). For such purposes, the term
"Telerate Page 3750" shall mean the display designated as "Page 3750"
on the Associated Press-Dow Jones Telerate Service (or such other page
as may replace Page 3750 on the Associated Press-Dow Jones Telerate
Service or such other service as may be nominated by the British
Bankers' Association as the information vendor for the purpose of
displaying British Bankers' Association interest rate settlement rates
for United States dollar deposits). Any LIBOR rate determined on the
basis of the rate displayed on Telerate Page 3750 or the LIBO Screen
Rate determined in accordance with the foregoing provisions of this
definition shall be subject to corrections, if any, made in such rate
and displayed by the Associated Press-Dow Jones Telerate Service or
Reuters, as applicable, within one hour of the time when such rate is
first displayed by such service. For the purposes of paragraph (d) of
Article 6.16.3, the LIBOR rate shall be determined in accordance with
the foregoing as of the date on which an Uncured Default arises and on
the nearest corresponding day of each subsequent calendar month and
shall apply for the approximate one-month period between the date of
such determination and the next succeeding date of determination.
"Liquidation Date" shall have the meaning set forth in
paragraph (a) of Article 6.16.4 hereof.
"Liquidation Event" shall mean any liquidation, dissolution or
winding up of the affairs of the Trust, whether voluntary or
involuntary. For the purposes hereof, (i) a consolidation or merger of
the Trust with one or more entities, (ii) a statutory share exchange
and (iii) a sale
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or transfer of all or substantially all of the Trust's assets shall not
be deemed to be a Liquidation Event.
"Non-Electing Shares" shall have the meaning set forth in
paragraph (f) of Article 6.16.5 hereof.
"NYSE" shall mean the New York Stock Exchange.
"Ownership Limit" shall have the meaning set forth in Section
6.12 of the Declaration.
"Paired Shares" shall mean units consisting of one Trust Share
paired with one Corporation Share (subject to adjustment as
contemplated in paragraph (e) of Article 6.15.5 hereof) and represented
by a single share certificate, as provided in the Pairing Agreement
dated as of June 25, 1980, between the Trust and the Corporation, as
amended from time to time.
"Parity Liquidation Preference" shall mean the liquidation
preference of any class or series of shares of beneficial interest in
the Trust that ranks on a parity with the Class B Liquidation
Preference. For such purposes: (i) the Base Preference Amount portion
of the Class B Liquidation Preference will rank on a parity with the
liquidation preferences of any class or series of Preferred Shares
issued by the Trust (other than the Class A EPS to which said portion
of the Class B Liquidation Preference will rank senior in liquidation
preference), unless the articles supplementary creating such class or
series provide that such class or series will rank junior to such
portion of the Class B Liquidation Preference in the distribution of
assets upon the occurrence of a Liquidation Event, and (ii) the
Supplemental Preference Amount portion of the Class B Liquidation
Preference will rank junior to the liquidation preferences of any class
or series of Preferred Shares issued by the Trust (other than the Class
A EPS), unless the articles supplementary creating such class or series
provide that such class or series will rank junior to or on a parity
with such portion of the Class B Liquidation Preference in the
distribution of assets upon the occurrence of a Liquidation Event.
"Parity Preferred Dividend" shall mean any dividend payable in
respect of any class or series of shares of beneficial interest in the
Trust that ranks on a parity in right of payment with the Class B
Preferred Dividends, whether or not the dividend rate, dividend payment
dates, liquidation preference or redemption price are different from
those of the Class B EPS.
"Person" shall mean any individual, firm, partnership,
corporation, limited liability company or other entity, and shall
include any successor (by merger or otherwise) of such entity.
"Preferred Shares" shall mean any class or series of shares of
beneficial interest in the Trust now or hereafter issued and
outstanding that have preference or priority over Trust Shares in the
payment of dividends or in the distribution of assets on the occurrence
of any Liquidation Event.
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"Redemption Price" shall have the meaning set forth in
paragraph (b)(i) of Article 6.16.6 hereof.
"Registration Rights Agreement" means the Registration Rights
Agreement entered into by the Trust, the Corporation and the other
parties thereto pursuant to the Westin Transaction Agreement.
"REIT Rules" shall mean the requirements (i) for the Trust to
qualify as a real estate investment trust under the Code as set forth
in Sections 856(a)(5) and 856(a)(6) of the Code and (ii) for the
Corporation or any affiliate of the Corporation which is a tenant of
the Trust to not be treated as a related party pursuant to Section
856(d)(2)(B) of the Code.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"set apart for payment" shall be deemed to include, without
any action other than the following, the recording by the Trust in its
accounting ledgers of any accounting or bookkeeping entry which
indicates, pursuant to a declaration of dividends or other distribution
by the Board of Trustees, the allocation of funds to be so paid on any
series or class of shares of beneficial interest in the Trust;
provided, however, that if any funds for any class or series of Junior
Shares or any class or series of shares of beneficial interest in the
Trust ranking on a parity with the Class B EPS as to the payment of
dividends are placed in a separate account of the Trust or delivered to
a disbursing, paying or other similar agent, then "set apart for
payment" with respect to the Class B EPS shall mean placing such funds
in a separate account or delivering such funds to a disbursing, paying
or similar agent.
"Stated Value" of each share of Class B EPS shall initially
mean Thirty-Eight Dollars and Fifty Cents ($38.50) per share. Upon the
occurrence of any share split, reverse share split or other subdivision
or combination of the Class B EPS subsequent to the Issue Date, the
Stated Amount shall be proportionately adjusted as determined in good
faith by the Board of Trustees.
"Supplemental Preference Amount" shall have the meaning set
forth in paragraph (b) of Article 6.16.4 hereof.
"Trading Day" with respect to publicly traded Paired Shares or
any other shares of beneficial interest or other securities of the
Trust or any other issuer shall mean any day on which the securities in
question are traded on the NYSE, or if such securities are not listed
or admitted for trading on the NYSE, on the principal national
securities exchange on which such securities are listed or admitted, or
if not listed or admitted for trading on any national securities
exchange, on the NASDAQ National Market, or if such securities are not
quoted on such NASDAQ National Market, in the applicable securities
market in which such securities are traded.
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"Transaction" shall have the meaning set forth in paragraph
(f) of Article 6.16.5 hereof.
"Transfer Agent" shall mean ChaseMellon Shareholder Services,
L.L.C. (or any successor thereof), or such other agent or agents of the
Trust as may be designated by the Board of Trustees or their designee
as the transfer agent for the Class B EPS and the Class A EPS.
"Trust" shall mean Starwood Lodging Trust, a Maryland real
estate investment trust, and any successor.
"Trust Common Adjustment Event" shall mean any of the
following events that occurs after the Issue Date:
(i) The payment by the Trust of a dividend on the
outstanding Trust Shares that is payable in additional Trust
Shares;
(ii) The subdivision of the outstanding Trust Shares
into a greater number of shares (whether by share split or
otherwise);
(iii) The combination of the outstanding Trust Shares
into a smaller number of shares (whether by reverse share
split or otherwise); or
(iv) The issuance of any shares of beneficial
interest in the Trust by reclassification of the Trust Shares.
"Trust Common Dividend" shall mean any dividend or
distribution paid or made by the Trust pro rata on the outstanding
Trust Shares other than (i) a distribution of assets of the Trust upon
the occurrence of a Trust Liquidation Event or (ii) on a dividend or
distribution that constitutes a Trust Common Adjustment Event. In
addition, a distribution to the holders of shares of beneficial
interest in the Trust of rights to subscribe for or purchase additional
Trust Shares under a shareholders protective rights plan or agreement
or any similar plan or agreement shall not be deemed to constitute a
Trust Common Dividend to the extent that the Trust makes provision so
that such rights, to the extent still outstanding with respect to the
outstanding Trust Shares, shall be issued to the holders of any Trust
Shares issued upon exercise of the Class A Exchange Right (and, to the
extent applicable, shall attach to such Trust Shares) in an amount and
manner and to the extent provided in such plans or agreements with
respect to already outstanding Trust Shares.
"Trust Conversion Notice" shall have the meaning set forth in
paragraph (c)(ii) of Article 6.16.5 hereof.
"Trust Conversion Right" shall have the meaning set forth in
paragraph (c)(i) of Article 6.16.5 hereof.
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"Trust Redemption Date" shall have the meaning set forth in
paragraph (b)(ii) of Article 6.16.6 hereof.
"Trust Redemption Notice" shall have the meaning set forth in
paragraph (b)(ii) of Article 6.16.6 hereof.
"Trust Redemption Right" shall have the meaning set forth in
paragraph (a) of Article 6.16.6 hereof.
"Trust Shares" shall mean the common shares of beneficial
interest in the Trust, par value $.01 per share, or any shares of
beneficial interest in the Trust into which such common shares may be
changed.
"Uncured Default" shall have the meaning set forth in
paragraph (a) of Article 6.16.9 hereof.
"Westin Transaction Agreement" shall mean the Transaction
Agreement dated as of September 8, 1997 among WHWE L.L.C., Woodstar
Investor Partnership, Nomura Asset Capital Corporation, Juergen
Bartels, W&S Hotel L.L.C., Westin Hotels & Resorts Worldwide, Inc., W&S
Lauderdale Corp., W&S Seattle Corp., Westin St. John Hotel Company,
Inc., W&S Denver Corp., W&S Atlanta Corp., the Trust, SLT Realty
Limited Partnership, the Corporation and SLC Operating Limited
Partnership, as such agreement may be amended from time to time.
6.16.3. DIVIDENDS.
(a) In General. The holders of Class B EPS will be entitled
(i) to receive a preferred dividend payable as described in paragraph (b) below
(a "Class B Preferred Dividend"), when, as and if declared by the Board of
Trustees out of assets of the Trust legally available for that purpose, based on
the payment of any Corporation Common Distribution and (ii) to participate on
the basis described in paragraph (c) below in any Trust Common Dividend, when,
as and if declared by the Board of Trustees out of assets of the Trust available
for that purpose (a "Class B Participation Dividend"). In certain circumstances,
the holders of Class B EPS will also be entitled to receive a Default Rate
Dividend, as provided in paragraph (d) below.
(b) Class B Preferred Dividend.
(i) Upon the payment by the Corporation of any
Corporation Common Distribution prior to the occurrence of a Liquidation Event,
the right to receive a Class B Preferred Dividend will automatically accrue with
respect to each share of Class B EPS as of the payment date for such Corporation
Common Distribution in an amount equal to the value of the Corporation Common
Distribution paid on each Corporation Share multiplied by the applicable
Dividend Correspondence Ratio described below. To the extent that any
Corporation Common Distribution consists of securities or other property (other
than cash), the Trust will have the option of paying the
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corresponding Class B Preferred Dividend either (A) in the same form as such
Corporation Common Distribution (i.e., by delivery of the same type of
securities or other property as distributed in the Corporation Common
Distribution), (B) in cash in an amount equal to the fair market value of such
securities or other property as determined in good faith by the Board of
Trustees subject to the rights of the holders of the Class B EPS to request a
valuation from a nationally recognized investment banking firm as provided in
paragraph (h)(v) of Article 6.16.5 hereof or (C) a combination thereof. Each
Class B Preferred Dividend will be cumulative from the payment date for the
related Corporation Common Distribution and will be payable to holders of record
of Class B EPS on such record date as shall be fixed by the Board of Trustees,
which record date shall be the same as the record date for the corresponding
Class A Preferred Dividend based on such Corporation Common Distribution and not
earlier than the record date for such Corporation Common Distribution. The Board
of Trustees may, at any time between the declaration of a Corporation Common
Distribution and the related payment date, declare a corresponding Class B
Preferred Dividend conditioned on the actual payment of such Corporation Common
Distribution (any such Class B Preferred Dividend being sometimes referred to
herein asa AConditionally Declared Class B Dividend@ until such time as the
corresponding Corporation Common Distribution is paid, at which time it will no
longer be deemed to be a Conditionally Declared Class B Dividend but will
instead be deemed to be an accrued Class A Preferred Dividend). The "Dividend
Correspondence Ratio" for the purposes of determining the amount of any Class B
Preferred Dividend accrual shall mean the number of Class B Underlying
Corporation Shares for which each share of Class B EPS is indirectly
exchangeable as of the record date for the related Corporation Common
Distribution upon exercise of the Class B Exchange Right, as such number shall
be proportionately adjusted to reflect any share dividend, share split, reverse
share split or other combination or subdivision of the Class B EPS or the Class
A EPS that becomes effective between (or, if the record date for such event is
different from the effective date therefor, that has a record date that falls
between) (A) the record date for the Corporation Common Distribution and (B) the
date of payment of such Corporation Common Distribution or, if earlier, the
record date for such Class B Preferred Dividend.
(ii) So long as any shares of Class B EPS are
outstanding: (A) no Junior Dividend may be declared or paid or set apart for
payment unless all accrued Class B Preferred Dividends and Conditionally
Declared Class B Dividends have been or are concurrently declared and paid, or
declared and a sum sufficient for the payment thereof set apart for payment, (B)
no Parity Preferred Dividend shall be declared or paid or set aside for payment
unless a ratable portion of all accrued but unpaid Class B Preferred Dividends
and Conditionally Declared Class B Dividends has been or is concurrently
declared and paid, or declared and a sum sufficient for the payment thereof set
apart for payment (with such ratable portion being based on the portion of the
accrued but unpaid Parity Preferred Dividends being paid) and (C) no Junior
Shares may be redeemed, purchased or otherwise acquired by the Trust (other than
a redemption, purchase or other acquisition of Trust Shares made for purposes of
and in compliance with requirements of an employee incentive or benefit plan of
the Trust or any subsidiary or upon any exchange or redemption of other
securities at the option of the holders thereof, or as required or permitted
under Article VI of the Declaration) for consideration (or any moneys paid or
made available for a sinking fund for the redemption of any Junior Shares),
directly or indirectly (except for conversion into or exchange for Junior
Shares) unless all accrued Class B Preferred Dividends and Conditionally
Declared Class B Dividends have been or
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are concurrently declared and paid, or declared and a sum sufficient for the
payment thereof set apart for payment.
(c) Class B Participation Dividend. No Trust Common Dividend
may be declared in respect of the Trust Shares unless the Board of Trustees
concurrently declares a Class B Participation Dividend entitling each share of
Class B EPS to receive an amount equal to the amount of the Trust Common
Dividend declared on each Trust Share multiplied by the number of Class B
Underlying Trust Shares for which each share of Class B EPS is indirectly
exchangeable upon exercise of the Class B Conversion Right as of the record date
for such Trust Common Dividend. Such Class B Participation Dividend shall be
payable on the same date on which the corresponding Trust Common Dividend is
payable, shall be payable in the same form as the corresponding Trust Common
Dividend and shall be paid to holders of record of the Class B EPS on the same
record date as is fixed by the Board of Trustees for the payment of such Trust
Common Dividend.
(d) Default Rate Dividends. Notwithstanding the foregoing
provisions of this Article 6.16.3 but subject to paragraph (b) of Article
6.16.9, upon the occurrence and during the continuation of any Uncured Default,
dividends ("Default Rate Dividends") shall accrue with respect to the
outstanding shares of Class B EPS in an amount equal to the product of (i) the
Stated Value of each such share multiplied by (ii) an interest rate per annum
equal to LIBOR plus four percent (4%). Any such Default Rate Dividends shall be
cumulative, shall be deemed to constitute Class B Preferred Dividends for the
purposes hereof and shall be payable quarterly on March 1, June 1, September 1
and December 1 of each year, when, as and if declared by the Board of Trustees
out of assets of the trust legally available for that purpose; provided that,
if, at any time when there are accrued but unpaid Default Rate Dividends on the
Class B EPS, a Class B Preferred Dividend or Class B Participation Dividend
accrues pursuant to paragraph (b) or (c) of this Article 6.16.3 in an amount per
share that exceeds the amount of such accrued but unpaid Default Rate Dividends
per share, the holders of shares of Class B EPS shall be entitled to receive
such Class B Preferred Dividend or Class B Participation Dividend in accordance
with the provisions of such paragraphs (b) and (c) and the Default Rate
Dividends accrued through the date of accrual of such Class B Preferred Dividend
or Class B Participation Dividend shall be reduced to zero (although additional
Default Rate Dividends shall again commence to accrue immediately following such
date of accrual to the extent that the Uncured Default continues unremedied).
6.16.4. LIQUIDATION RIGHTS.
(a) In General. Upon the occurrence of any Liquidation Event,
the holders of Class B EPS will be entitled (i) to receive out of the assets of
the Trust legally available for liquidating distributions to holders of shares
of beneficial interests in the Trust, prior to the making of any Junior
Liquidating Distribution, a liquidating distribution in an amount equal to the
Class B Liquidation Preference described in paragraph (b) below determined as of
the effective date of such Liquidation Event or, if no effective date is
provided, as of the record date of the first liquidating distribution relating
to such Liquidation Event (in either such case, the "Liquidation Date") and (ii)
to participate on the basis described in paragraph (c) below in any liquidating
distribution to holders of Trust Shares (the "Class B Liquidation Participation
Right"). In determining whether a distribution (other than
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upon the occurrence of a Liquidation Event), by dividend, redemption or other
acquisition of shares of beneficial interest in the Trust or otherwise, is
permitted under Maryland law, amounts that would be needed, if the Trust were to
be dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of the holders of Class A EPS whose preferential rights upon
dissolution are senior to those receiving the distribution shall not be added to
the Trust's total liabilities.
(b) Class B Liquidation Preference. The "Class B Liquidation
Preference" of a share of Class B EPS as of the applicable Liquidation Date
shall mean the sum of (A) the Base Preference Amount as of such date and (B) the
amount of any accrued but unpaid dividends in respect of each share of Class B
EPS as of such date (other than any such accrued but unpaid Class B Preferred
Dividends that have been declared with a record date prior to such Liquidation
Date, which the Trust shall separately be obligated to pay to the holders of
record of the Class B EPS as of such record date)(the "Supplemental Preference
Amount"). Until each holder of shares of Class B EPS has received distributions
equal to the Class B Liquidation Preference, no Junior Liquidating Distributions
may be paid to holders of any other class or series of shares of beneficial
interest in the Trust. Subject to the rights of the holders of shares of
beneficial interest in the Trust with liquidation preferences ranking prior to
or on a parity with the Class B Liquidation Preference, after payment shall have
been made in full of the Class B Liquidation Preference as provided in this
paragraph (b), Junior Liquidating Distributions may be paid to the holders of
any shares of beneficial interest entitled to receive such distributions and the
holders of the Class B EPS shall not be entitled to share therein except as
provided in paragraph (c) of this Article 6.16.4. In the event that the assets
of the Trust available for liquidating distributions to holders of shares of
beneficial interest in the Trust in connection with any Liquidation Event are
insufficient to pay the Class B Liquidation Preference on all outstanding Class
B EPS and any Parity Liquidation Preferences in respect of any other classes or
series of shares of beneficial interest in the Trust, then the holders of the
Class B EPS and such other classes and series of shares of beneficial interest
in the Trust shall share ratably in any such distribution of assets in
proportion to the Class B Liquidation Preference and the Parity Liquidation
Preferences to which they would otherwise be respectively entitled.
(c) Class B Liquidation Participation Rights. In addition to
being entitled to receive the Class B Liquidation Preference, upon the
occurrence of any Liquidation Event the holders of Class B EPS shall be entitled
to participate, pursuant to the Class B Liquidation Participation Right, ratably
with the holders of Trust Shares in any liquidating distributions to such
holders. For such purpose, each share of Class B EPS shall be deemed to
represent a number of Trust Shares equal to the number of Class B Underlying
Trust Shares for which each share of Class B EPS can be indirectly exchanged as
of the record date for such distribution.
6.16.5. CONVERSION RIGHTS.
(a) In General. Shares of Class B EPS shall be convertible
into shares of Class A EPS (A) at the option of the holder upon exercise of the
Class B Conversion Right at any time after the first anniversary of the Issue
Date and on or prior to the first anniversary of the Cross-Over Date, to the
extent provided in paragraph (b) of this Article 6.16.5, or (B) at the option of
the Trust upon exercise of the Trust Conversion Right at any time after the
Cross-Over Date, to the extent provided
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in paragraph (c) of this Article 6.16.5. In addition, as more specifically
provided in Article 6.16.7 hereof, upon receipt of a Class B
Conversion/Redemption Notice from any holder of shares of Class B EPS at any
time after the first anniversary of the Cross-Over Date, the Trust will be
required to elect to either exercise the Trust Conversion Right or the Trust
Redemption Right with respect to the shares specified in such Class B
Conversion/Redemption Notice.
(b) Class B Conversion Right.
(i) A holder of shares of Class B EPS shall have the
right, exercisable in the manner described in paragraph (b)(ii) below, at such
holder's option at any time after the first anniversary of the Issue Date and on
or prior to the first anniversary of the Cross-Over Date, to convert such shares
in whole or in part into fully paid and non-assessable shares of Class A EPS
based on the applicable Conversion Ratio described in paragraph (e) of this
Article 6.16.5 (the "Class B Conversion Right"); provided, however, that the
Class B Conversion Right may not be exercised (A) with respect to any shares of
Class B EPS that are already subject to a Trust Conversion Notice, (B) with
respect to any shares of Class B EPS that are already subject to a Class B
Redemption Notice or a Class B Conversion/Redemption Notice or (C) after the
applicable Redemption Date if the Trust has already given a Trust Redemption
Notice with respect to the applicable shares of Class B EPS, unless, in the case
of either (B) or (C), the Trust shall default in its obligations hereunder
arising as a result of such notice and such default shall not have been cured
within ten (10) days thereafter.
(ii) A holder of shares of Class B EPS desiring to
exercise the Class B Conversion Right with respect to such shares shall
surrender the certificate or certificates evidencing such shares, duly endorsed
or assigned to the Trust or in blank, to the Transfer Agent together with a duly
completed and executed conversion notice (a "Class B Conversion Notice") in such
form as the Trust shall prescribe from time to time and such related
certifications as the Trust may reasonably prescribe from time to time. Such
form of Class B Conversion Notice will also permit the holder of the Class B EPS
being converted to concurrently elect to exercise the Class A Exchange Right
with respect to the Class A EPS Shares to be issued pursuant to the exercise of
the Class B Conversion Right. Unless any shares of Class A EPS to be issued upon
conversion of such shares of Class B EPS are to be issued in the same name as
the name in which such shares of Class B EPS are registered, each share
certificate surrendered shall be accompanied by instruments of transfer, in form
reasonably satisfactory to the Trust, duly executed by the holder or such
holder=s duly authorized attorney and an amount sufficient to pay any applicable
transfer or similar tax (or evidence reasonably satisfactory to the Trust
demonstrating that such taxes have been paid).
(iii) As promptly as practicable after receipt by the
Transfer Agent of a Class B Conversion Notice and the certificates and other
documents described above, the Trust shall issue and deliver at the office of
the Transfer Agent to the holder of the shares of Class B EPS being converted,
or on his or her written order, a certificate or certificates for the full
number of shares of Class A EPS issuable upon such conversion in accordance with
the provisions of this Article 6.16.5, and any fractional interest in respect of
a share of Class A EPS resulting from such conversion shall be settled as
provided in paragraph (d) of this Article 6.16.5; provided, however, that to the
extent that the holder of shares of Class B EPS with respect to which the Class
B Conversion Right has been
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exercised has simultaneously exercised the Class A Exchange Right with respect
to the shares of Class A EPS issuable upon such conversion, no such certificate
or certificates shall be issued with respect to such shares of Class A EPS (and
there shall be no settlement of any such fractional interests), but such Class A
Exchange Right shall be deemed to have been exercised with respect to such
shares of Class A EPS (including any such fractional interests) as of the date
of receipt of the Class B Conversion Notice and the certificates and other
documents described above, and the rights and obligations of the Trust and such
holder arising therefrom shall be governed by Article 6.15.5 hereof. If less
than the full number of shares of Class B EPS represented by the certificate or
certificates surrendered to the Trust are to be converted pursuant to an
exercise of the Class B Conversion Right, the Trust shall also deliver to the
holder a new certificate or certificates evidencing the excess shares not being
converted.
(iv) The conversion resulting from any exercise of
the Class B Conversion Right shall be deemed to have been effected immediately
prior to the close of business on the date of receipt by the Transfer Agent of
the Class B Conversion Notice and the certificates and other documents described
above, and the Person or Persons in whose name or names any certificate or
certificates for shares of Class A EPS shall be issuable upon such conversion
shall be deemed to have become the holder or holders of record of the shares of
Class A EPS represented thereby at such time on such date, unless the
sharetransfer books of the Trust for the Class A EPS shall be closed on such
date, in which event such Person or Persons shall be deemed to have become such
holder or holders of record at the close of business on the next succeeding day
on which such sharetransfer books are open.
(c) Trust Conversion Right.
(i) Shares of Class B EPS will also be convertible at
any time after the first anniversary of the Cross-Over Date in whole or in part
at the option of the Trust into fully paid and non-assessable shares of Class A
EPS based on the applicable Conversion Ratio described below (the "Trust
Conversion Right"); provided, however, that the Trust Conversion Right may not
be exercised with respect to any shares of Class B EPS with respect to which (A)
the holder has already given a Class B Redemption Notice or a Class B Conversion
Notice or (B) the Trust has already given a Trust Redemption Notice.
(ii) The Trust Conversion Right may be exercised by
the Trust giving written notice of such exercise to the holders of the shares of
the Class B EPS with respect to which the Trust desires to exercise such right
(a "Trust Conversion Notice"). (iii) The shares of Class B EPS of a holder
specified in such Trust Conversion Notice shall be deemed to have been converted
as of the date of the applicable Trust Conversion Notice into the full number of
shares of Class A EPS issuable upon such conversion in accordance with the
provisions of this Article 6.16.5, and any fractional interest in respect of a
share of Class A EPS resulting from such conversion shall be settled as provided
in paragraph (d) of this Article 6.16.5. The conversion provided for in this
paragraph (c) shall be automatic without the requirement of any action on the
part of the affected holders of shares of Class B EPS and whether or not the
certificates evidencing such shares of Class B EPS are surrendered to the Trust
or the Transfer Agent;
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provided that the Trust shall not be obligated to issue to any such holders
certificates evidencing the shares of Class A EPS into which such Class B EPS
shares have been converted until certificates evidencing the shares of Class B
EPS held by such holder have been delivered to the Trust or the Transfer Agent.
If less than the full number of shares of Class B EPS represented by the
certificate or certificates surrendered to the Trust in connection with an
exercise of the Trust Conversion Right have been converted pursuant to such
exercise, the Trust shall also deliver to the holder a new certificate or
certificates evidencing the excess shares not being converted.
(d) Fractional Interests. No fractional shares or scrip
evidencing fractions of shares of Class A EPS shall be issued upon exercise of
the Class B Conversion Right or the Trust Conversion Right. Instead of any
fractional interest in a share of Class A EPS that would otherwise be
deliverable upon the conversion of shares of Class B EPS, the Trust shall pay to
the holder of such shares of Class B EPS an amount in cash equal to the product
of (A) such fraction, (B) the then current Exchange Ratio of Class A EPS for
Paired Shares, as determined pursuant to the provisions of paragraph (d) of
Article 6.15.5 hereof, and (C) the Current Market Price of the Paired Shares as
of the Trading Day immediately preceding the date on which the applicable Class
B Conversion Notice or Trust Conversion Notice (as applicable) and all related
certificates and other documents were received by the Transfer Agent.
(e) Conversion Ratio and Adjustments.
(i) Initially, one share of Class A EPS will be
issuable upon conversion of each share of Class B EPS pursuant to an exercise of
the Class B Conversion Right or the Trust Conversion Right (the "Conversion
Ratio"), which Conversion Ratio will be subject to adjustment from the Issue
Date through the Cross-Over Date. After such date, the Conversion Ratio will be
equal to the Class B Liquidation Preference (determined without taking into
consideration any accrued but unpaid dividends other than Default Rate
Dividends) as of the date of exercise of the Class B Conversion Right or the
Trust Conversion Right, as applicable, divided by the product of (A) the number
of Class A Underlying Paired Shares (including fractional interests) for which
each share of Class A EPS is exchangeable as of such date pursuant to Article
6.15.5 hereof multiplied by (B) the Current Market Price of the Paired Shares as
of such date. All calculations of the Conversion Ratio under this paragraph (e)
shall be made to the nearest one-tenth of a share (with .05 of a share being
rounded upward).
(ii) If, at any time between the Issue Date and the
Cross-Over Date, a Class A EPS Adjustment Event shall occur, the Conversion
Ratio in effect as of the close of business on the record date for such Class A
EPS Adjustment Event or, if no such record date applies, the effective date of
such Class A EPS Adjustment Event shall be adjusted so that in connection with
any exercise of the Class B Conversion Right or the Trust Conversion Right the
shares of Class B EPS subject to such exercise will be converted into the number
of shares of Class A EPS that such holder would have owned or been entitled to
receive after the happening of such Class A EPS Adjustment Event if such Class B
Conversion Right or Trust Conversion Right had been exercised immediately prior
to such record date or effective date. An adjustment pursuant to this
subparagraph (ii) shall become effective (subject to subparagraph (iv) below)
immediately upon the opening of business on the Business Day
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next following the record date for the applicable Class A EPS Adjustment Event
or, if no such record date applies, the Business Day next following the
effective date of such Class A EPS Adjustment Event.
(iii) No adjustment in the Conversion Ratio shall be
required pursuant to subparagraph (ii) above unless such adjustment would
require a cumulative increase or decrease of at least one percent (1%) in such
ratio; provided, however, that any adjustments that by reason of this
subparagraph (iii) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment until made.
(iv) In any case in which subparagraph (ii) above
provides that an adjustment to the Conversion Ratio shall become effective
immediately following the record date for a Class A EPS Adjustment Event, the
Trust may defer until the occurrence of such event (A) issuing to the holder of
any shares of Class B EPS converted after such record date but before the
occurrence of such event the additional shares of Class A EPS issuable pursuant
to such conversion by reason of the adjustment required pursuant to subparagraph
(ii) in respect of such Class A EPS Adjustment Event and (B) paying to such
holder any amount of cash in lieu of any fractional interest in shares of Class
EPS pursuant to paragraph (d) of this Article 6.16.5.
(v) If at the time of any exercise of the Class B
Conversion Right on or prior to the Cross-Over Date there are any accrued but
unpaid Default Rate Dividends with respect to the shares of Class B EPS being
converted, the Conversion Ratio shall be adjusted so that the number of shares
of Class A EPS issuable upon such exercise is increased by a number of shares
(the "Class B Dividend Replacement Shares", which term shall also be deemed to
refer to any shares of Class A EPS issued upon exercise of the Class B
Conversion Right in respect of accrued but unpaid Default Rate Dividends
pursuant to subparagraph (ii) above) equal to (A) the amount of the accrued but
unpaid Default Rate Dividends with respect to the shares of Class B EPS being
exchanged divided by (B) the product of (1) the number of Paired Shares for
which each share of Class A EPS is then exchangeable upon exercise of the Class
A Exchange Right multiplied by (2) the Current Market Price of the Paired Shares
during the five (5) Trading Days immediately preceding the date of delivery of
the applicable Class B Conversion Notice or Trust Conversion Notice and all
related certificates and other documents.
(f) Effect of Mergers and Certain Other Transactions. If, at
any time after the Issue Date, the Trust shall become a party to any
transaction, including, without limitation, a merger, consolidation, statutory
share exchange, self tender offer for all or substantially all outstanding Trust
Shares, sale of all or substantially all of the Trust=s assets or
recapitalization of the Class A EPS (but excluding any event constituting a
Class A EPS Adjustment Event)(each of the foregoing being referred to herein as
a "Transaction"), in each case as a result of which the outstanding shares of
Class A EPS shall be converted into or exchanged for the right to receive stock,
securities or other property (including cash or any combination thereof),
effective as of the effective date of such Transaction, each share of Class A
EPS issuable upon exercise of the Class B Conversion Right or the Trust
Conversion Right with respect to any shares of Class B EPS that are not
converted into or exchanged for the right to receive stock, securities or other
property in connection with such Transaction shall
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thereafter be deemed to consist of the kind and amount of shares of stock and
other securities and property (including cash or any combination thereof) that
would have been held or receivable upon the consummation of such Transaction by
a holder of a number of shares of Class A EPS equal to the number of Class B
Underlying Class A EPS Shares into which each share of Class B EPS would have
been convertible immediately prior to such Transaction, assuming such holder of
shares of Class A EPS (A) is not a Person with which the Trust consolidated or
into which the Trust was merged or which merged into the Trust or to which such
sale or transfer was made, as the case may be (a "Constituent Person"), or an
Affiliate of a Constituent Person and (B) failed to exercise his or her rights
of election, if any, as to the kind or amount of stock, securities an other
property (including cash) receivable upon such Transaction (provided that if the
kind or amount of stock, securities and other property (including cash)
receivable upon such Transaction is not the same for each share of Class A EPS
held immediately prior to such Transaction by other than a Constituent Person or
an Affiliate thereof and in respect of which such rights of election shall not
have been exercised ("Non-Electing Share"), then for the purposes of this
subparagraph (ii) the kind and amount of stock, securities and other property
(including cash) receivable upon such Transaction by each Non-Electing Shares
shall be deemed to be the kind and amount so receivable per share by a plurality
of the Non-Electing Shares). The provisions of this paragraph (f) shall
similarly apply to successive Transactions.
(g) Notice of Adjustment. Whenever the Conversion Ratio or the
nature and amount of the securities and other property issuable upon exercise of
the Class B Conversion Right or the Trust Conversion Right is adjusted as
provided in paragraph (e) or (f) above, the Trust shall promptly file with the
Transfer Agent an officer=s certificate setting forth the Conversion Ratio after
such adjustment and, in the case of an adjustment pursuant to paragraph (f),
describing the kind and amount of stock, securities and other property
(including cash) thereafter issuable upon such exercise. Such certificate shall
also set forth a brief statement of the facts requiring such adjustment and
shall be conclusive evidence of the correctness of such adjustment absent
manifest error. Promptly after delivery of such certificate, the Trust shall
prepare a notice of such adjustment setting forth the adjusted Conversion Ratio,
the effective date of such adjustment and, in the case of an adjustment pursuant
to paragraph (f), a description of the kind and amount of stock, securities and
other property (including cash) thereafter issuable upon exercise of the Class B
Conversion Right or the Trust Conversion Right, and shall mail such notice of
such adjustment to the holder of each share of Class B EPS at such holder=s last
address as shown on the sharerecords of the Trust.
(h) Miscellaneous Provisions.
(i) There shall be no adjustment of the Conversion
Ratio in case of the issuance of any shares of beneficial interest in the Trust
in a reorganization, acquisition or other similar transaction except as
specifically set forth in this Article 6.16.5.
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(ii) If the Trust shall take any action affecting the
Trust Shares or the Corporation shall take any action affecting the Corporation
Shares, other than an action described in this Article 6.16.5, that in the
opinion of the Board of Trustees would materially and adversely affect the
conversion rights of the holders of the Class B EPS provided for in this Article
6.16.5, the Conversion Ratio may be adjusted, to the extent permitted by law, in
such manner, if any, and at such time, as the Board of Trustees, in its sole
discretion, may determine to be equitable in the circumstances.
(iii) The Trust covenants that any shares of Class A
EPS issued upon exercise of the Class B Conversion Right or the Trust Conversion
Right will be validly issued, fully paid and non-assessable. The Trust shall
reserve and shall at all times have reserved out of its authorized but unissued
Class A EPS sufficient Class A EPS to permit the exercise of the Class B
Conversion Right. The Trust shall also comply with its obligations under
paragraph (g)(iii) of Article 6.15.5 hereof as if such shares of Class A EPS
issuable upon exercise of the Class B Conversion Right were issued and
outstanding. The Trust shall pay any and all documentary stamp or similar issue
or transfer taxes payable in respect of the issue or delivery of shares of Class
A EPS or other securities or property upon exercise of the Class B Conversion
Right or the Trust Conversion Right; provided, however, that the Trust shall not
be required to pay any tax that may be payable in respect of any transfer
involved in the issue or delivery of any shares of Class A EPS or other
securities or property in a name other than that of the holder of the shares of
Class B EPS being converted, and no such issue or delivery shall be made unless
and until the Person requesting such issue or delivery has paid to the Trust the
amount of any such tax or established, to the reasonable satisfaction of the
Trust, that such tax has been paid.
(iv) Except as provided in paragraph (g)(v) below,
any determination required or permitted to be made by the Board of Trustees by
these Articles Supplementary shall be final, conclusive and binding on the
holders of Class B EPS.
(v) In the event that the Trust elects to pay in cash
a Class B Preferred Dividend corresponding to a Corporation Common Distribution
in the form of securities or other property and in connection therewith the
Board of Trustees makes a determination of the fair market value of such
securities or other property, the Trust shall deliver to each affected holder of
Class B EPS a written notice setting forth the valuation determined by the Board
of Trustees. At any time within ten (10) Business Days after receipt of such
notice, any affected holder of Class B EPS may request in writing that the Trust
obtain a written valuation of such securities or other property from an
investment banking firm. Promptly after receipt of any such request, the Trust
shall select a nationally recognized investment banking firm to perform such
valuation and shall provide such investment banking firm with such relevant
information as the Trust may have in relation thereto. Such investment banking
firm shall be instructed to prepare a written valuation report within thirty
(30) days after its appointment, and upon receipt of such valuation report, the
Trust shall mail a copy to each affected holder of Class B EPS. If the valuation
as determined by such investment banking firm is greater than the valuation as
determined by the
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Board of Trustees, the Trust shall promptly pay the amount of such difference to
each affected holder of Class B EPS. If, however, the valuation as determined by
such investment banking firm is less than the valuation determined by the Board
of Trustees, the Trust may at its option require each affected holder of Class B
EPS to repay the amount of such difference to the Trust, which amount shall be
so repaid by each such holder promptly after receipt of the Trust's request. The
fees and expenses of such investment banking firm shall be paid by the Trust.
6.16.6. REDEMPTION RIGHTS.
(a) In General. Shares of Class B EPS will be redeemable at
the option of the Trust at any time after the Cross-Over Date in accordance with
the provisions of paragraph (b) of this Article 6.16.6 (the "Trust Redemption
Right") and will be redeemable at the option of the holders at any time during
the period commencing on the Cross-Over Date and ending on the first anniversary
of the Cross-Over Date in accordance with the provisions of paragraph (c) of
this Article 6.16.6 (the "Class B Redemption Right"). Prior to the Cross-Over
Date, shares of Class B EPS will not be redeemable at the option of either the
Trust or the holder. In addition, as more specifically provided in Article
6.16.7 hereof, upon receipt of a Class B Conversion/Redemption Notice from any
holder of shares of Class B EPS at any time after the first anniversary of the
Cross-Over Date, the Trust will be required to elect to either exercise the
Trust Conversion Right or the Trust Redemption Right with respect to the shares
specified in such Class B Conversion/Redemption Notice.
(b) Redemption at the Option of the Trust.
(i) Pursuant to the Trust Redemption Right, shares of
Class B EPS may be redeemed in cash in whole or in part at the option of the
Trust at any time and from time to time (in the case of partial redemptions)
after the Cross-Over Date at a redemption price (the "Redemption Price") equal
to the Class B Liquidation Preference of such shares as of the applicable Trust
Redemption Date; provided, however, that the Trust Redemption Right may not be
exercised with respect to any shares of Class B EPS that are already subject to
(A) a Trust Conversion Notice or (B) a Class B Conversion Notice or a Class B
Redemption Notice. Such redemption shall be deemed to have been made as of the
close of business on the applicable Trust Redemption Date, and after such Trust
Redemption Date, provided that the Trust Redemption Price has been duly paid or
set apart for payment, dividends shall cease to accrue on the shares of Class B
EPS called for redemption, such shares shall no longer be deemed to be
outstanding and all rights of the holders of such shares as shareholders of the
Trust shall cease, except the right to receive the Redemption Price, without
interest thereon, upon surrender of the certificates evidencing such shares.
(ii) Notice of any exercise of the Trust Redemption
Right (a "Trust Redemption Notice") shall be given to the holders of the shares
of Class B EPS to be redeemed not less than ten (10) nor more than sixty (60)
days prior to the date fixed for redemption (the "Trust Redemption Date"). Each
Trust Redemption Notice shall be given by first class mail to each holder of
shares to be redeemed at such holder's address as shown on the sharebooks of the
Trust and shall specify (A) the Trust Redemption Date, (B) the number of shares
of Class B EPS to be redeemed from such holder, (C) the Trust Redemption Price,
(D) the place or places where certificates for the
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shares of Class B EPS to be redeemed are to be surrendered for payment of the
Trust Redemption Price, (E) that dividends will cease to accrue on the shares of
Class B EPS to be redeemed on the Redemption Date and (F) that the ability of
the holders to exercise the Class B Conversion Right with respect to the shares
to be redeemed will terminate on the Trust Redemption Date. If less than all
outstanding shares of Class B EPS are to be redeemed upon exercise of the Trust
Redemption Right, the shares to be redeemed shall be selected in such manner as
the Trust deems appropriate.
(iii) Upon receipt of a Trust Redemption Notice, each
holder of shares of Class B EPS being redeemed shall surrender to the Transfer
Agent a certificate or certificates evidencing such shares. As soon as
practicable, and in any event within five (5) Business Days, after such
surrender, the Trust shall pay the applicable Redemption Price to such holder
and, if less than the full number of shares represented by the certificate or
certificates so surrendered are to be redeemed, the Trust shall deliver to such
holder a certificate or certificates evidencing the excess shares not being
redeemed. The Redemption Price shall be payable at the election of the Trust by
check or by wire transfer to an account designated in writing by the holder at
least two (2) Business Days prior to the applicable Trust Redemption Date, if
one has been so designated.
(c) Redemption at the Option of the Holders.
(i) Under the Class B Redemption Right, to the extent
permitted under applicable law, each holder of shares of Class B EPS shall have
the right, at his or her option, to require the Trust at any time or from time
to time (in the case of partial redemptions) after the CrossOver Date and on or
prior to the first anniversary of the Cross-Over Date to redeem some or all of
such shares in cash at the Redemption Price (determined as of the Class B
Redemption Date); provided, however, that the Class B Redemption Right may not
be exercised with respect to any shares of Class B EPS that are already subject
to (A) a Trust Conversion Notice or a Trust Redemption Notice or (B) a Class B
Conversion Notice. Such redemption shall be deemed to have been made as of the
close of business on the applicable Class B Redemption Date, and after such
Class B Redemption Date, provided that the Redemption Price has been duly paid
or set apart for payment, dividends shall cease to accrue on the shares of Class
B EPS surrendered for redemption, such shares shall no longer be deemed to be
outstanding and all rights of the holders of such shares as shareholders of the
Trust shall cease, except the right to receive the Redemption Price, without
interest thereon.
(ii) A holder of shares of Class B EPS may exercise
the Class B Redemption Right with respect to some or all of such shares by
surrendering a certificate or certificates evidencing the shares to be redeemed,
duly endorsed or assigned to the Trust in blank, to the Transfer Agent
accompanied by a written notice (a "Class B Redemption Notice") in such form as
the Trust shall prescribe from time to time specifying the number of shares
(which shall be a whole number) to be redeemed in accordance with the provisions
of this paragraph (c). As soon as practicable, and in any event within five (5)
Business Days, after receipt of a Class B Redemption Notice and the related
certificates (the date of such receipt being sometimes referred to herein as the
"Class B Redemption Date"), to the extent permitted under applicable law, the
Trust shall pay the Redemption Price to the holder and, if less than the full
number of shares of Class B EPS represented by the certificate or
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certificates surrendered together with such Class B Redemption Notice are to be
redeemed, the Trust shall deliver to such holder a certificate or certificates
evidencing the excess shares not being redeemed. The Redemption Price shall be
payable at the election of the Trust by check or by wire transfer to an account
designated in writing by the holder at least two (2) Business Days prior to the
applicable Class B Redemption Date, if one has been so designated.
6.16.7. CLASS B CONVERSION/REDEMPTION ELECTION RIGHT.
In addition to the Class B Conversion Right and the Class B
Redemption Right, at any time after the first anniversary of the Cross-Over
Date, each holder of shares of Class B EPS will have the right (the "Class B
Conversion/Redemption Election Right"), upon written notice to the Trust in such
form as the Trust shall prescribe from time to time (a "Class B
Conversion/Redemption Notice"), to require that the Trust elect either to
exercise the Trust Conversion Right or the Trust Redemption Right described
below with respect to the shares of Class B EPS held by such holder and
designated in the Class B Conversion/Redemption Notice; provided, however, that
the Class B Conversion Right may not be exercised with respect to any shares of
Class B EPS (A) with respect to which the holder has already given a Class B
Redemption Notice or (B) after the applicable Redemption Date if the Trust has
already given a Trust Redemption Notice with respect to such shares unless, in
either such case, the Trust shall default in the payment of the applicable
Redemption Price required to be paid pursuant to Article 6.16.6 above. Within
five (5) Business Days after receipt of any such Class B Conversion/Redemption
Notice, the Trust shall either give the relevant holder a Trust Conversion
Notice or a Trust Redemption Notice with respect to the shares of Class B EPS
specified in such Class B Conversion/Redemption Notice.
6.16.8. REACQUIRED SHARES TO BE RETIRED.
All shares of Class B EPS which shall have been issued and
reacquired in any manner by the Trust shall be restored to the status of
authorized but unissued shares of beneficial interest in the Trust without
designation as to class.
6.16.9. DEFAULT RIGHTS.
(a) Consequences of Uncured Default. Subject to paragraph (b)
of this Article 6.16.9, in the event that the Trust at any time defaults in its
obligations with respect to any exercise of the Class B Redemption Right, the
Class B Conversion Right or the Class B Conversion/Redemption Election Right,
and such default shall continue for a period of thirty (30) days from the date
that performance of such obligations was due (an "Uncured Default"), then: (i)
the holders of the outstanding shares of Class B EPS will have the rights with
respect to the election of two additional members of the Board of Trustees
described in paragraph (c) of Article 6.16.10 hereof, (ii) the dividend rate on
the Class B EPS will be increased as provided in paragraph (d) of Article 6.16.3
hereof, (iii) the Registration Rights Agreement will be amended to provide the
holders of Class B EPS with registration rights thereunder and (iv) the
Cross-Over Date (if not already past) will be extended by a number of days equal
to the number of days that an Uncured Default continues unremedied. Any
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Uncured Default may be waived at any time by the holders of shares of Class B
EPS constituting a majority of all shares of Class B EPS then outstanding.
6.16.10. VOTING.
(a) General Voting Rights. The holders of shares of Class B
EPS shall be entitled to vote upon all matters upon which holders of Trust
Shares have the right to vote, and shall be entitled to the number of votes
equal to the largest whole number of Class B Underlying Trust Shares for which
such shares of Class B EPS could be indirectly exchanged (assuming the exercise
of the Class B Conversion Right and the concurrent exercise of the Class A
Exchange Right with respect to the shares of Class A EPS issuable upon exercise
of such Class B Conversion Right) as of the record date for determination of the
shareholders entitled to vote on such matters, or, if no such record date is
established, as of the date such vote is taken or any written consent of
shareholders is solicited, such votes to be counted together with all other
shares of beneficial interest in the Trust having general voting powers and not
separately as a class.
(b) Special Voting Rights. So long as any shares of Class B
EPS are outstanding, in addition to any other vote or consent of holders of such
shares required by the Declaration or these Articles Supplementary, the
affirmative vote of at least a majority of the votes entitled to be cast by the
holders of all outstanding shares of Class B EPS, given in person or by proxy,
either in writing without a meeting or by vote at any meeting called for that
purpose, shall be necessary for effecting or validating any amendment,
alteration or repeal of any of the provisions of the Declaration or these
Articles Supplementary that materially and adversely affects the voting powers,
rights or preferences of the holders of the Class B EPS disproportionately
(based on the number of Underlying Class B Trust Shares at the time) to the
effect of such amendment, alteration or repeal on the holders of the Trust
Shares; provided, however, that (i) any amendment of the provisions of the
Declaration so as to authorize or create, or to increase the authorized amount
of, any class or series of shares of beneficial interest in the Trust, whether
ranking prior to, on a parity with or junior to the Class B EPS shall not be
deemed to materially and adversely affect the voting powers, rights or
preferences of the holders of Class B EPS and (ii) no filing with the State
Department of Assessments and Taxation of Maryland by the Trust in connection
with a merger, consolidation or sale of all or substantially all of the assets
of the Trust shall be deemed to be an amendment, alteration or repeal of any of
the provisions of the Declaration or these Articles Supplementary unless such
filing expressly purports to amend, alter or repeal one or more of such
provisions. For the purposes of this paragraph (b), each share of Class B EPS
will have one vote per share.
(c) Default Voting Rights.
(i) Upon the occurrence of any Uncured Default, the
number of trustees then constituting the Board of Trustees shall be increased by
two and the holders of the outstanding shares of Class B EPS shall be entitled
to elect the two additional trustees to serve on the Board of Trustees at any
annual meeting of shareholders, or at a special meeting of the holders of Class
B EPS then outstanding called as provided in subparagraph (ii) below. If such
Uncured Default shall at any time cease to be continuing or shall be waived,
then the right of the holders of the Class B EPS to elect
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such additional two trustees shall cease (but subject always to the same
provision for the vesting of such voting rights upon the occurrence of any
subsequent Uncured Default) and the terms of office of all persons elected as
trustees by such holders shall forthwith terminate and the number of trustees
constituting the Board of Trustees shall be reduced accordingly. For the
purposes of this paragraph (c), each share of Class B EPS will have one vote per
share.
(ii) At any time after the voting power described in
subparagraph (i) above shall have been vested in the holders of shares of Class
B EPS, the Secretary of the Trust may, and upon the written request of any
holder of Class B EPS (addressed to the Secretary at the principal office of the
Trust) shall, call a special meeting of the holders of the Class B EPS for the
election of the two trustees to be elected by them as herein provided, such call
to be made by notice similar to that provided in the Trustees' Regulations of
the Trust for a special meeting of the shareholders or as required by law. If
any such special meeting required to be called as above provided shall not be
called by the Secretary within twenty (20) days after receipt of such request,
then any holder of shares of Class B EPS may call such meeting, upon the notice
above provided and for that purpose shall have access to the sharebooks of the
Trust. The trustees elected at any such special meeting shall hold office until
the next annual meeting of the shareholders or special meeting held in lieu
thereof if such office shall not have previously terminated as above provided.
If any vacancy shall occur among the trustees elected by the holders of the
Class B EPS, a successor shall be elected by the Board of Trustees, upon the
nomination of the then-remaining trustee elected by the holders of the Class B
EPS or the successor of such remaining trustee, to serve until the next annual
meeting of the shareholders if such office shall not have previously terminated
as provided above.
6.16.11. RECORD HOLDERS.
The Trust and the Transfer Agent may deem and treat the record
holder of any Class B EPS as the true and lawful owner thereof for all purposes,
and neither the Trust nor the Transfer Agent shall be affected by any notice to
the contrary.
6.16.11. RESTRICTIONS ON OWNERSHIP AND TRANSFER.
The Class B EPS constitute shares of beneficial interest in
the Trust that are governed by and issued subject to all the limitations, terms
and conditions of the Declaration applicable to shares of beneficial interest in
the Trust generally, including, without limitation, the terms and conditions
(including exceptions and exemptions) of Article VI of the Declaration
applicable to shares of beneficial interest in the Trust. The foregoing sentence
shall not be construed to limit the applicability to the Class B EPS of any
other term or provision of the Declaration. No restrictions on the
transferability of shares of Class A EPS shall be enforced by the Trust to the
extent that such restrictions would otherwise cause the Trust to fail to meet
the requirements of Section 856(a)(2) of the Code.
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Exhibit 3.2
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
ARTICLES OF INCORPORATION
(AMENDED AND RESTATED
AS OF FEBRUARY 1, 1995,
as amended through March 19, 1998)
FIRST: The name of the corporation ("Corporation") is:
Starwood Hotels & Resorts Worldwide, Inc.
SECOND: The purposes for which the Corporation is formed are
as follows:
(a) To lease hotels, to acquire hotels, to manage hotels and
other real property, either directly or by entering into management
contracts, to perform services relating to real estate and to engage in
other activities involving hotels and other real estate.
(b) To engage in any lawful act or activity for which
corporations may be organized under, and to have and exercise any and
all powers or privileges now or hereafter conferred by, the Maryland
General Corporation Law or any Act amendatory thereof or supplemental
thereto or in substitution therefor.
THIRD: The post office address of the principal office of the
Corporation in Maryland is:
The Corporation Trust Incorporated
32 South Street
Baltimore, Maryland 21202
FOURTH: The name and post office address of the resident agent
of the Corporation in Maryland is:
The Corporation Trust Incorporated
32 South Street
Baltimore, Maryland 21202
FIFTH: The total number of shares of stock which the
Corporation has authority to issue is one billion three hundred and fifty
million (1,350,000,000) shares, consisting of (a) one billion (1,000,000,000)
shares of common stock with a par value of $0.01 per share, (b) two hundred
million (200,000,000) shares of preferred stock with a par value of $0.01 per
share, (c) fifty million (50,000,000) shares of excess common stock with a par
value of $0.01 per share, and (d) one hundred million (100,000,000) shares of
excess preferred stock with a par value of $0.01 per share. The preferred stock
may be issued in such series and with such preferences, conversion and other
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<PAGE> 2
rights, voting powers, restrictions, limitations as to dividends and other
distributions, qualifications, and terms and conditions of redemption, if any,
as may be fixed by the Board of Directors. The excess common stock and the
excess preferred stock shall have the rights provided in the NINTH Article
hereof. The aggregate par value of all shares of stock which the Corporation has
authority to issue is thirteen million five hundred thousand Dollars
($13,500,000). The Board of Directors may authorize the issuance from time to
time of shares of stock of the Corporation of any class or series, whether now
or hereafter authorized, or securities or rights convertible into shares of its
stock of any class or series, whether now or hereafter authorized, for such
consideration (whether in cash, property, past or future services, obligation
for future payment or otherwise) as the Board of Directors may deem advisable
(or without consideration in the case of a stock split or stock dividend),
subject to such restrictions or limitations, if any, as may be set forth in the
charter or the Bylaws.
SIXTH: (a) The Corporation shall have three Directors, which
number may be changed from time to time in such manner as the By-Laws of the
Corporation shall provide. The Directors shall be divided, with respect to the
time for which they severally hold office, into three classes, as nearly equal
in number as reasonably possible, with the term of office of the first class to
expire at the 1995 annual meeting of stockholders, the term of office of the
second class to expire at the 1996 annual meeting of stockholders and the term
of office of the third class to expire at the 1997 annual meeting of
stockholders, with each director to hold office until his or her successor shall
have been duly elected and qualified. At each annual meeting of stockholders,
commencing with the 1995 annual meeting, (i) Directors elected to succeed the
class of Directors whose terms then expire shall be elected for a term of office
to expire at the third succeeding annual meeting of stockholders after their
election, with each director of the class to hold office until his or her
successor shall have been duly elected and qualified, and (ii) except as
otherwise required by law, if authorized by a resolution of the Board of
Directors, Directors may be elected to fill any vacancy on the Board of
Directors, regardless of how such vacancy shall have been created.
(b) Except as otherwise required by law, unless the Board of
Directors otherwise determines, newly created Directorships resulting from any
increase in the authorized number of Directors or any vacancies on the Board of
Directors resulting from any cause shall be filled only by a majority vote of
the Directors then in office, though less than a quorum, and Directors so chosen
shall hold office for a term expiring at the annual meeting of stockholders at
which the term of office of the class to which they have been elected expires
and until such Director's successor shall have been duly elected and qualified.
No decrease in the numbers of authorized Directors constituting the entire Board
of Directors shall shorten the term of any incumbent Director.
(c) The names of the Directors of the Corporation as of the
amendment and restatement of the Charter herein set forth are as follows:
Bruce M. Ford
Graeme W. Henderson
Earle F. Jones
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SEVENTH: Notwithstanding the provisions of the SIXTH Article
or any limitations on removal of Directors, the stockholders of the Corporation
may remove any director, but only for cause, and only by the affirmative vote of
two-thirds (2/3) of all the votes entitled to be cast for the election of
Directors.
EIGHTH: No holder of capital stock of the Corporation shall be
entitled as a matter of right to subscribe for, purchase or receive any part of
any new or additional issue of capital stock of any class or any options or
warrants for such stock or any rights to subscribe to or purchase such stock or
securities convertible into or exchangeable for such stock whether now or
hereafter authorized or whether issued for money, for a consideration other than
money, or for no consideration.
NINTH: Restrictions on the transferability of stock of the
Corporation are as follows:
(a) Subject to paragraphs (b), (c) and (d) of this NINTH
Article, upon surrender to the Corporation or to any transfer agent of
the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority
to transfer, the Corporation, or its transfer agent, shall issue a new
certificate to the person entitled thereto, cancel the old certificate
and record the transaction upon the Corporation's books.
(b) Beginning at the time that the payment of a distribution
in kind of the shares of common stock of the Corporation shall have
occurred ("effective time of the restriction"), and continuing
thereafter until such time as the limitation on transfer provided for
in the Pairing Agreement to be entered into by Starwood Lodging Trust,
a Maryland real estate investment trust ("SLT"), and the Corporation
shall be terminated:
(i) The shares of common stock of the Corporation
shall not be transferable, and shall not be transferred on the
books of the Corporation unless (1) a simultaneous transfer of
a like number of shares of SLT is made by the same transferor
to the same transferee, or (2) such transferor has previously
arranged with SLT for the acquisition by the transferee of a
like number of shares of SLT, and in each case such shares are
paired with one another.
(ii) Each certificate evidencing ownership of shares
of SLT issued and not canceled prior to the effective time of
the restriction shall be deemed to evidence a like number of
shares of common stock of the Corporation.
(iii) Any registered holder of a certificate
evidencing ownership of shares of SLT issued prior to the
effective time of the restriction may, upon request and
presentation of such certificate to the Corporation's transfer
agent, obtain in substitution therefor a certificate or
certificates registered in such holder's name evidencing the
same number of shares of common stock of the Corporation and a
like number of shares of SLT.
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(iv) A legend shall be placed on the face of each
certificate evidencing ownership of shares of common stock of
the Corporation issued after the effective time of the
restriction, referring to the restrictions on transfer set
forth herein.
(c) Restrictions on Transfer.
(i) Definitions. The following terms shall have the
following meanings:
"Beneficial Ownership" shall mean ownership of shares
of capital stock by a Person who would be treated as an owner
of such shares of capital stock directly, indirectly or
constructively through the application of Section 318(a) of
the Code, as modified by Section 856(d)(5) of the Code, or
Section 544 of the Code, as modified by Section 856(h) of the
Code. The terms "Beneficial Owner", "Beneficially Owns" and
"Beneficially Owned" shall have correlative meanings.
"Charitable Beneficiary" shall mean the organization
or organizations described in Sections 170(c)(2) and 501(c)(3)
of the Code selected by the Excess Share Trustee.
"Code" shall mean the Internal Revenue Code of 1986
as amended from time to time.
"Excess Shares" shall mean the excess common stock
and the excess preferred stock.
"Excess Share Trust" shall mean the trust created
pursuant to paragraph (d) of this NINTH Article.
"Excess Share Trust Beneficiary" shall mean a
beneficiary of the Excess Share Trust as determined pursuant
to paragraph (d) of this NINTH Article.
"Excess Share Trustee" shall mean Nina Matis or any
successor appointed pursuant to paragraph (d) of this NINTH
Article.
"Market Price" of any class of shares of capital
stock on any date shall mean the average of the Closing Price
for the five (5) consecutive trading days ending on such date,
or if such date is not a trading date, the five consecutive
trading days preceding such date. The "Closing Price" on any
date shall mean (1) the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to
trading on the New York Stock Exchange, or (2) if such class
of shares of capital stock is not listed or admitted to
trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with
respect to
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securities listed on the principal national securities
exchange on which such class of shares of capital stock is
listed or admitted to trading, or (3) if such class of shares
of capital stock is not listed or admitted to trading on any
national securities exchange, the last quoted price, or if not
so quoted, the average of the high bid and low asked prices in
the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation
System or, if such system is no longer in use, the principal
other automated quotations system that may then be in use, or
(4) if such class of shares of capital stock is not quoted by
any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker
making a market in such class of shares of capital stock
selected by the Board of Directors.
"Ownership Limit" shall mean (i) in the case of a
Person other than an Existing Holder (as defined below),
Beneficial Ownership of more than eight percent (8.0%), by
value, vote or number, of the shares of capital stock and (ii)
in the case of a Person who or which was the Beneficial Owner,
as of January ___, 1995 (the "Amendment Date"), of more than
8.0% (by vote, value or number) of the shares of capital stock
(any such Person being referred to as an "Existing Holder"), a
percentage (by vote, value or number) equal to the lesser of
(a) 9.9% and (b) the percentage of shares of capital stock
Beneficially Owned by such Existing Holder as of the Amendment
Date; provided that if, at any time and from time to time
after the Amendment Date, the percentage of shares of capital
stock Beneficially Owned by an Existing Holder shall decrease
(whether by reason of a disposition by such Existing Holder,
an increase in the number of outstanding shares of capital
stock or otherwise), then from and after the time of such
decrease the Ownership Limit in the case of such Existing
Holder shall be a percentage (by vote, value or number) equal
to the greater of (x) 8.0% and (y) the percentage of shares of
capital stock Beneficially Owned by such Existing Holder after
giving effect to such decrease.
"Person" shall mean any individual, corporation,
partnership, joint stock company or association, joint
venture, association, company, trust, bank, limited liability
company, estate, foundation or other entity and any
government, agency or political subdivision thereof.
"Purported Beneficial Holder" shall mean, with
respect to any event (other than a purported Transfer) which
results in Excess Shares, the Person for whom the Purported
Record Holder held shares of capital stock that were, pursuant
to paragraph (c)(iii) of this NINTH Article, automatically
converted into Excess Shares upon the occurrence of such
event.
"Purported Beneficial Transferee, shall mean, with
respect to any purported Transfer which results in Excess
Shares, the purported beneficial transferee for whom the
Purported Record Transferee would have acquired shares of
capital stock if such Transfer had been valid under paragraph
(c)(ii) of this NINTH Article.
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"Purported Record Holder" shall mean, with respect to
any event (other than a purported Transfer) which results in
Excess Shares, the record holder of the shares of capital
stock that were, pursuant to paragraph (c)(iii) of this NINTH
Article, automatically converted into Excess Shares upon the
occurrence of such event.
"Purported Record Transferee" shall mean, with
respect to any purported Transfer which results in Excess
Shares, the record holder of the shares of capital stock if
such Transfer had been valid under paragraph (c)(ii) of this
NINTH Article.
"REIT" shall mean a real estate investment trust for
federal income tax purposes.
"Restriction Termination Date" shall mean the first
day of the taxable year for which the Trustees of SLT have
determined to terminate SLT's status as a REIT.
"Transfer" shall mean any sale, transfer, gift,
hypothecation, pledge, assignment, devise or other disposition
of shares of capital stock (including (1) the granting of any
option or interest similar to an option (including an option
to acquire an option or any series of such options) or
entering into any agreement for the sale, transfer or other
disposition of shares of capital stock or (2) the sale,
transfer, assignment or other disposition of any securities or
rights convertible into or exchangeable for shares of capital
stock), whether voluntary or involuntary, whether of record,
constructively or beneficially and whether by operation of law
or otherwise. For purposes of this definition, whether
securities or rights are convertible or exchangeable for
capital stock shall be determined in accordance with Sections
318 and 544 of the Code.
(ii) Restrictions on Transfers and Other Events. On
or after the Restriction Termination Date, the provisions of
paragraphs (c) and (d) of this NINTH Article shall be of no
further force and effect. Prior to the Restriction Termination
Date and except as provided in subparagraph (ix) below:
(1) No Person shall Beneficially Own shares
of capital stock in excess of the Ownership Limit;
(2) Any Transfer that, if effective, would
result in any Person Beneficially Owning shares of
capital stock in excess of the Ownership Limit shall
be void ab initio as to the Transfer of that number
of shares of capital stock which would be otherwise
Beneficially Owned by such Person in excess of the
Ownership Limit and the intended transferee shall
acquire no rights in such shares of capital stock in
excess of the Ownership Limit;
(3) Any Transfer that, if effective, would
result in the shares of capital stock being
Beneficially Owned by fewer than one hundred (100)
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Persons (determined without reference to any rules of
attribution) shall be void ab initio and the intended
transferee shall acquire no rights in such shares of
capital stock; and
(4) Any Transfer of shares of capital stock
that, if effective, would result in the Corporation
being "closely held" within the meaning of Section
856(h) of the Code (applied as if the Corporation was
a REIT) shall be void ab initio as to the Transfer of
that number of shares of capital stock which would
cause SLT to be "closely held" within the meaning of
Section 856(h) of the Code and the intended
transferee shall acquire no rights in such shares of
capital stock.
(iii) Conversion into Excess Shares.
(1) If, notwithstanding the other provisions
contained in this NINTH Article, at any time prior to
the Restriction Termination Date, there is a
purported Transfer or other event such that any
Person would Beneficially Own shares of capital stock
in excess of the Ownership Limit, then, except as
otherwise provided in subparagraph (ix) below, such
shares of capital stock which would be in excess of
the Ownership Limit (rounded up to the nearest whole
share), shall automatically be converted into that
number of shares of excess common stock or excess
preferred stock, as appropriate, equal to the number
of shares of capital stock being converted, as
further described in clause (3) below. Such
conversion shall be effective as of the close of
business on the business day prior to the date of the
Transfer or other event.
(2) If, notwithstanding the other provisions
contained in this NINTH Article, at any time prior to
the Restriction Termination Date, there is a
purported Transfer or other event which, if
effective, would cause the Corporation to become
"closely held" within the meaning of Section 856(h)
of the Code (applied as if the Corporation was a
REIT), then the shares of capital stock being
Transferred or which are otherwise affected by such
event and which, in either case, would cause, when
taken together with all other shares of capital
stock, the Corporation to be "closely held" within
the meaning of Section 856(h) of the Code (rounded up
to the nearest whole share) shall automatically be
converted into that number of shares of excess common
stock or excess preferred stock, as appropriate,
equal to the number of shares of capital stock being
converted, as further described in clause (3) below.
Such conversion shall be effective as of the close of
business on the business day prior to the date of the
Transfer or change in capital structure.
(3) Upon conversion of common stock or
preferred stock into Excess Shares pursuant to
subparagraph (iii), common stock shall be
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converted into excess common stock and preferred
stock shall be converted in excess preferred stock.
(iv) Remedies for Breach. If the Board of Directors
or its designees shall at any time determine in good faith
that a purported Transfer or other event has taken place in
violation of paragraph (c)(ii) of this NINTH Article or that a
Person intends to acquire or has attempted to acquire
Beneficial Ownership of any shares of capital stock in
violation of paragraph (c)(ii) of this NINTH Article, the
Board of Directors or its designees may take such action as it
deems advisable to refuse to give effect to or to prevent such
Transfer or other event, including, but not limited to,
refusing to give effect to such Transfer or other event on the
books of the Corporation or instituting proceedings to enjoin
such Transfer or other event or transaction; provided,
however, that any Transfers or attempted Transfers (or, in the
case of events other than a Transfer, Beneficial Ownership) in
violation of paragraph (c)(ii) of this NINTH Article, shall be
void ab initio and automatically result in the conversion
described in paragraph (c)(iii), irrespective of any action
(or non-action) by the Board of Directors or its designees.
(v) Notice of Restricted Transfer. Any Person who
acquires or attempts to acquire shares of capital stock in
violation of paragraph (c)(ii) of this NINTH Article, or any
Person who is a purported transferee such that Excess Shares
result under paragraph (c)(iii), shall immediately give
written notice to the Corporation of such Transfer, attempted
Transfer or other event and shall provide to the Corporation
such other information as the Corporation may request in order
to determine the effect, if any, of such Transfer or attempted
Transfer or other event on SLT's status as a REIT.
(vi) Owners Required to Provide Information. Prior
to the Restriction Termination Date:
(1) Every Beneficial Owner of five percent
(5% or more, by value, vote or number, or such lower
percentages as required pursuant to regulations under
the Code (applied as if the Corporation was a REIT),
of the outstanding shares of capital stock shall,
before January 30 of each year, give written notice
to the Corporation stating the name and address of
such Beneficial Owner, the general ownership
structure of such Beneficial Owner, the number of
shares of each class of capital stock Beneficially
Owned, and a description of how such shares are held.
(2) Each Person who is a Beneficial Owner of
shares of capital stock and each Person (including
the shareholder of record) who is holding shares of
capital stock for a Beneficial owner shall provide on
demand to the Corporation such information as the
Corporation may request from time to time in order to
ensure compliance with the ownership Limit and SLT's
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compliance with the REIT requirements of the Code and
the regulations published thereunder.
(vii) Remedies Not Limited. Subject to paragraph
(c)(xii) of this NINTH Article, nothing contained in this
NINTH Article shall limit the authority of the Board of
Directors to take such other action as it deems necessary or
advisable to protect SLT and the interests of the
Corporation's stockholders by preservation of SLT's status as
a REIT and to ensure compliance with the Ownership Limit.
(viii) Ambiguity. In the case of an ambiguity in the
application of any of the provisions of this paragraph (c) or
paragraph (d), including any definition contained in
subparagraph (c)(i), the Board of Directors shall have the
power to determine the application of the provisions of this
paragraph (c) or paragraph (d) with respect to any situation
based on the facts known to them.
(ix) Exception. The Board of Directors upon receipt
of a ruling from the Internal Revenue Service or an opinion of
tax counsel, satisfactory to them in their sole and absolute
discretion, in each case to the effect that SLT's status as a
REIT will not be jeopardized, may exempt a Person from the
Ownership Limit if the Board of Directors obtains such
representations and undertakings from such Person as are
reasonably necessary to ascertain that such Person's
Beneficial Ownership of shares of capital stock will not
jeopardize SLT's status as a REIT.
(x) Legend. Until the Restriction Termination Date,
each certificate for the respective class of shares of capital
stock shall bear the following legend:
The shares of capital stock represented by
this certificate are subject to restrictions on
transfer. Unless excepted by the Board of Directors,
no Person may (1) Beneficially Own shares of capital
stock in excess of 8.096 of the outstanding shares of
capital stock, by value, vote or number, determined
as provided in the Corporation's Articles of
Incorporation, as the same may be amended from time
to time (the "Articles"), and computed with regard to
all outstanding shares of capital stock and, to the
extent provided by the Code, all shares of capital
stock issuable under existing options and exchange
rights that have not been exercised; or (2)
Beneficially Own shares of capital stock which would
result in SLT being "closely held." Unless so
excepted, any acquisition of shares of capital stock
and continued holding of ownership constitutes a
continuous representation of compliance with the
above limitations, and any Person who attempts to
Beneficially Own shares of capital stock in excess of
the above limitations has an affirmative obligation
to notify the Corporation immediately upon such
attempt. If the restrictions on transfer are
violated, the transfer will be void ab initio and the
shares of capital
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stock represented hereby will be automatically
converted into Excess Shares that will be held in
trust. Excess Shares may not be transferred at a
profit and may be purchased by the Corporation. In
addition, certain Beneficial Owners must give written
notice as to certain information on demand and on an
annual basis. All terms not defined in this legend
have the meanings provided in the Articles. The
Corporation will mail without charge to any
requesting stockholder a copy of the Articles,
including the express terms of each class and series
of the authorized shares of capital stock of the
Corporation, within five (5) days after receipt of a
written request therefor.
(xi) Severability. If any provision of this NINTH
Article or any application of any such provision is determined
to be invalid by any Federal or state court having
jurisdiction over the issues, the validity of the remaining
provisions shall not be affected, and other applications of
such provision shall be affected only to the extent necessary
to comply with the determination of such court.
(xii) New York Stock Exchange Transactions. Nothing
in this NINTH Article shall preclude the settlement of any
transaction entered into through the facilities of the New
York Stock Exchange.
(d) Excess Shares.
(i) Ownership In Trust. Upon any purported Transfer
or other event that results in Excess Shares pursuant to
paragraph (c)(iii) of this NINTH Article, such Excess Shares
shall be deemed to have been transferred to Nina Matis (or any
successor Excess Share Trustee), as Excess Share Trustee of
the Excess Share Trust for the benefit of such Excess Share
Trust Beneficiary or Beneficiaries and the Charitable
Beneficiary effective as of the close of business on the
business day prior to the date of the Transfer or other event.
Excess Shares so held in trust shall be issued and outstanding
shares of the Corporation. The Purported Record Transferee or
Purported Record Holder shall have no rights in such Excess
Shares. The Purported Beneficial Transferee or Purported
Beneficial Holder shall have no rights in such Excess Shares
except as provided in paragraph (d)(v). Nina Matis, or any
successor Excess Share Trustee, may resign by appointing a
person independent of SLT, the Corporation or any Excess Share
Trust Beneficiary as the Excess Share Trustee. The Excess
Share Trustee shall, from time to time, designate one or more
charitable organization or organizations as the Charitable
Beneficiary.
(ii) Dividend Rights. Excess Shares shall be entitled
to the same dividends determined as if no conversion into
Excess Shares had occurred. Any dividend or distribution paid
prior to the discovery by the Corporation that the shares of
capital stock have been converted into Excess Shares shall be
repaid to the Excess Share Trust upon demand. Any dividend or
distribution declared but unpaid shall be paid
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to the Excess Share Trust. All dividends received or other
income earned by the Excess Share Trust shall be paid over to
the Charitable Beneficiary.
(iii) Rights Upon Liquidation. Excess Shares shall
not be entitled to receive any portion of the assets of the
Corporation on the liquidation or dissolution of the
Corporation. Upon conversion of Excess Shares into shares of
capital stock pursuant to paragraph (d)(v), such shares shall
be entitled to receive their pro rata share of the assets of
the Corporation as a result of the liquidation or dissolution
of the Corporation.
(iv) Voting Rights. The Excess Share Trustee shall
vote the Excess Shares which shall have the same voting rights
as the shares of capital stock into which they are to be
converted pursuant to paragraph (d)(v). Any vote cast by the
Purported Beneficial Transferee or Purported Record Transferee
will, at the option of the Excess Share Trustee, be void ab
initio.
(v) Restrictions On Transfer; Designation of Excess
Share Trust Beneficiary. (1) Excess Shares shall not be
transferrable. The Excess Share Trustee may freely designate
an Excess Share Trust Beneficiary of all or any portion of the
beneficial interest in the Excess Share Trust (representing
the number of Excess Shares held by the Excess Share Trust
attributable to a purported Transfer or other event that
results in Excess Shares and designated as to number and class
of shares pursuant to the notice provision of this clause), if
the Excess Shares held in the Excess Share Trust would not be
Excess Shares in the hands of such Excess Share Trust
Beneficiary. If the Excess Shares resulted from a purported
Transfer, the Purported Beneficial Transferee shall receive a
payment from the Excess Share Trustee that reflects a price
per share for such Excess Shares equal to the lesser of (A)
the price per share received by the Excess Share Trustee and
(B) (x) the price per share such Purported Beneficial
Transferee paid for the Share of Beneficial Interest in the
purported Transfer that resulted in the Excess Shares, or (y)
if the Purported Beneficial Transferee did not give value for
such shares of Excess Shares (through a gift, devise or other
transaction), a price per share of Excess Shares equal to the
Market Price of the shares of capital stock on the date of the
purported Transfer that resulted in the Excess Shares. If
Excess Shares resulted from an event other than a purported
Transfer, the Purported Beneficial Holder shall receive a
payment from the Excess Share Trustee that reflects a price
per share of Excess Shares equal to the lesser of (A) the
price per share received by the Excess Share Trustee or (B)
the Market Price of the shares of capital stock on the date of
the event that resulted in Excess Shares. Upon such transfer
of an interest in the Excess Share Trust, the corresponding
shares of Excess Shares in the Excess Share Trust shall be
automatically converted into such number of shares of common
or preferred stock (of the same class as the shares that were
converted into such Excess Shares) as is equal to the number
of shares of Excess Shares, and such shares of common or
preferred stock shall be transferred of record to the Excess
Share Trust Beneficiary of the
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interest in the Excess Share Trust designated by the Excess
Share Trustee as described above if such shares of capital
stock would not be Excess Shares in the hands of such Excess
Share Trust Beneficiary. Prior to any transfer of any interest
in the Excess Share Trust, the Corporation must have waived in
writing its purchase rights, if any, under paragraph (d)(vi).
Any funds received by the Excess Share Trustee in excess of
the funds payable to the Purported Beneficial Holder or the
Purported Beneficial Transferor shall be paid to the
Charitable Beneficiary. The Corporation shall pay the costs
and expenses of the Excess Share Trustee.
(2) Notwithstanding the foregoing, if a Purported
Beneficial Transferee, Purported Beneficial Holder or the
Excess Share Trustee receives a price for an interest in the
Excess Share Trust that exceeds the amounts allowable under
paragraph (d)(v)(1) of this NINTH Article, such Purported
Beneficial Transferee or Purported Beneficial Holder shall be
personally liable to, and shall pay, or cause the Excess Share
Trust Beneficiary of the interest in the Excess Share Trust to
pay, such excess to the Excess Share Trustee who shall pay
over such excess to the Charitable Beneficiary.
(3) Notwithstanding the foregoing, if the provisions
of this paragraph (d)(v) are determined to be void or invalid
by virtue of any legal decision, statute, rule or regulation,
then the Purported Beneficial Transferee or Purported
Beneficial Holder of any shares of Excess Shares may be
deemed, at the option of the Corporation, to have acted as an
agent on behalf of the Corporation, in acquiring or holding
such Excess Shares and to hold such Excess Shares on behalf of
the Corporation.
(vi) Purchase Right in Excess Shares. Excess Shares
shall be deemed to have been offered for sale by the Excess
Share Trustee to the Corporation, or its designee, at a price
per Excess Share equal to (I) in the case of Excess Shares
resulting from a purported Transfer, the lesser of (A) the
price per share of the shares of capital stock in the
transaction that created such Excess Shares (or, in the case
of devise or gift, the Market Price of the shares of capital
stock at the time of such devise or gift), or (B) the lowest
Market Price of the class of shares of capital stock which
resulted in the Excess Shares at any time after the date such
shares were converted into Excess Shares and prior to the date
the Corporation, or its designee, accepts such offer or (II)
in the case of Excess Shares resulting from an event other
than a purported Transfer, the lesser of (A) the Market Price
of the shares of capital stock on the date of such event or
(B) the lowest Market Price for shares of capital stock which
resulted in the Excess Shares at any time from the date of the
event resulting in such Excess Shares and prior to the date
the Corporation, or its designee, accepts such offer. The
Corporation shall have the right to accept such offer for a
period of ninety (90) days after the later of (i) the date of
the Transfer which resulted in such Excess Shares and (ii) the
date the Board of Directors determines in good faith that a
Transfer or other event resulting in Excess Shares has
occurred, if the
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Corporation does not receive a notice of such Transfer or
other event pursuant to paragraph (c)(v) of this NINTH
Article.
(e) Notwithstanding any other provision of these Articles of
Incorporation or any provision of law which might otherwise permit a
lesser vote or no vote, but in addition to any affirmative vote of the
holders of any particular class or series of capital stock required by
law or these Articles of Incorporation, the affirmative vote of the
holders of at least two-thirds (2/3) of the voting power of all the
then-outstanding shares of capital stock of the Corporation, voting
together as a single class, shall be required to alter, amend or repeal
this NINTH Article.
TENTH: The Corporation shall indemnify (A) its directors and
officers, whether serving the Corporation or at its request any other entity, to
the full extent required or permitted by the General Laws of the State of
Maryland now or hereafter in force, including the advance of expenses under the
procedures and to the full extent permitted by law and (B) other employees and
agents to such extent as shall be authorized by the Board of Directors or the
Corporation's By-Laws and be permitted by law. The foregoing rights of
indemnification shall not be exclusive of any other rights to which those
seeking indemnification may be entitled. The Board of Directors may take such
action as is necessary to carry out these indemnification provisions and is
expressly empowered to adopt, approve and amend from time to time such by-laws,
resolutions or contracts implementing such provisions or such further
indemnification arrangements as may be permitted by law. No amendment of the
charter of the Corporation or repeal of any of its provisions shall limit or
eliminate the right to indemnification provided hereunder with respect to acts
or omissions occurring prior to such amendment or repeal.
ELEVENTH: The provisions for the regulation of the internal
affairs of the Corporation are to be stated in the Bylaws of the Corporation, as
the same may be amended from time to time.
TWELFTH: Any amendments to these Articles of Incorporation
shall be approved by the stockholders of the Corporation by the affirmative vote
of a majority of all the votes entitled to be cast on the matter.
THIRTEENTH: The Corporation shall not consummate a
consolidation, merger, share exchange or sale, lease, exchange or other transfer
of all or substantially all of its assets, the stockholder approval of which is
required by applicable law, unless such transaction is approved by the
stockholders of the Corporation by the affirmative vote of a majority of all the
votes entitled to be cast on the matter.
FOURTEENTH: To the fullest extent permitted by Maryland
statutory or decisional law, as amended or interpreted from time to time, no
director or officer of the Corporation shall be liable to the Corporation or its
stockholders for money damages. No amendment to these Articles of Incorporation
or repeal of any of its provisions shall limit or eliminate the effect of this
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FOURTEENTH Article with respect to any act or omission which occurs prior to
such amendment or repeal.
FIFTEENTH: In order to enable the Corporation and any
Subsidiary (as hereinafter defined) to secure and maintain in good standing all
licenses, franchises and other regulatory approvals issued by Gaming Authorities
(as hereinafter defined) which are necessary for the lawful operation of gaming
and related businesses now or hereafter engaged in by the Corporation or any
Subsidiary within or without the United States of America, which licenses,
franchises or other regulatory approvals are conditioned upon some or all of the
holders of the Corporation's stock possessing prescribed qualifications (the
"Gaming Licenses"), and in order to insure that the business of the Corporation
and its Subsidiaries will be carried on in compliance
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with the laws and regulations governing the conduct of gaming and related
businesses (the "Gaming Laws"), the following provisions are made and shall
apply for so long as the Corporation is subject to Gaming Laws:
(a) Securities (as hereinafter defined) of the Corporation
shall be subject to redemption by the Corporation, pursuant to Section
78.196 of the Nevada Revised Statutes or any other applicable provision
of law, to the extent necessary to prevent the loss or to secure the
reinstatement of any Gaming License held by the Corporation or any
Subsidiary.
(b) Securities of the Corporation shall be held subject to the
condition that if a holder thereof is found by a Gaming Authority to be
disqualified or unsuitable pursuant to any Gaming Law (a "Disqualified
Holder"), such holder shall dispose of all of the Corporation's
Securities held by such holder within the 120 day period (the
"Disposition Period") commencing on the date (the "Notice Date") upon
which the Corporation shall have received notice from a Gaming
Authority of such holder's disqualification or unsuitability (the
"Disqualification Notice"). Promptly following its receipt of a
Disqualification Notice, the Corporation shall cause such
Disqualification Notice to be delivered to the Disqualified Holder
named therein by personal delivery, by mailing it to the address shown
on the Corporation's books and records or through the use of any other
reasonable means. Failure of the Corporation to provide such
Disqualification Notice to a Disqualified Holder after making
reasonable efforts to do so shall not preclude the Corporation from
exercising its rights.
(c) If any Disqualified Holder fails to dispose of the
Corporation's Securities within the Disposition Period, the Corporation
may redeem such Securities at the lesser of (1) the lowest closing sale
price of such Securities on any trading day during the Disposition
Period or (2) such Disqualified Holder's original purchase price;
provided, that if the Securities to be so redeemed are paired with
securities of SLT (the Securities of the Corporation and the securities
of SLT when so paired being herein referred to as "Paired Securities")
pursuant to the Pairing Agreement, dated as of June 25, 1980, as
amended, between SLT and the Corporation, the Corporation and SLT may
redeem such Paired Securities for an aggregate amount equal to the
lesser of (1) the lowest closing sale price of such Paired Securities
on any trading day during the Disposition Period or (2) such
Disqualified Holder's original purchase price for such Paired
Securities.
(d) Commencing on the Notice Date, it shall be unlawful for a
Disqualified Holder to:
(1) receive payments of dividends or interest upon
any Securities of the Corporation held by such Disqualified
Holder,
(2) exercise, directly or indirectly, any right
conferred by the Corporation's Securities upon the holders
thereof, or
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(3) receive any remuneration in any form, for
services rendered or otherwise, from the Subsidiary of the
Corporation that holds a Gaming License.
(e) The Board of Directors shall have the power to determine,
on the basis of information known to the Board after reasonable
inquiry, all questions arising under this Article FIFTEENTH including,
without limitation, (1) whether a person is a Disqualified Holder, (2)
whether a Disqualified Holder has disposed of Securities pursuant to
Paragraph (b) of this Article FIFTEENTH and (3) the amount of
Securities held directly or indirectly by any person. Any such
determination shall be binding and conclusive on all such persons.
(f) The Corporation shall be entitled to injunctive relief in
any court of competent jurisdiction to enforce the provisions of this
Article FIFTEENTH, and each holder of Securities of the Corporation
will be deemed to have acknowledged by acquiring or retaining
Securities of the Corporation that failure to comply with this Article
FIFTEENTH will expose the Corporation to irreparable injury for which
there is not adequate remedy at law and that the Corporation is
entitled to injunctive relief to enforce the provisions of this Article
FIFTEENTH.
(g) A Disqualified Holder shall indemnify the Corporation and
its Subsidiaries for any and all direct or indirect costs (including
attorney's fees) incurred by the Corporation as a result of such
holder's continuing ownership of or failure to divest the Securities.
(h) The following definitions shall apply with respect to this
Article FIFTEENTH.
(1) The term "Gaming Authorities" includes all
governmental authorities within or without the United States
of America which issue or grant any license, franchise or
regulatory approval necessary or appropriate for the lawful
operation of gaming and related businesses. With respect to
the State of Nevada, the term "Gaming Authorities" shall
include, without limitation, the Nevada Gaming Commission, the
Nevada State Gaming Control Board or their respective
successors; and with respect to Atlantic City, New Jersey, the
term "Gaming Authorities" shall include, without limitation,
the New Jersey Casino Control Commission, the Division of
Gaming Enforcement or their respective successors.
(2) The term "Securities" means any instrument
evidencing a direct or indirect beneficial ownership or
creditor interest in the Corporation, including but not
limited to, Common Stock, Preferred Stock, bonds, mortgages,
debentures, security agreements, notes, warrants, options and
rights.
(3) The term "Subsidiary" (A) in matters relating to
Gaming Laws of the State of New Jersey, shall have the
definition set forth in the New Jersey Statutes Annotated
5:12-47 or (B) in matters relating to Gaming Laws outside of
the State of New Jersey, means (i) a corporation, more than
50% of the outstanding voting
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securities of which the Corporation or a Subsidiary of the
Corporation owns or has the power to vote or (ii) a firm,
association, partnership, limited liability company, trust or
other form of business organization, not a natural person, of
which the Corporation or a Subsidiary of the Corporation owns
or has the power to vote a majority interest.
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Exhibit 3.3
AMENDED AND RESTATED
TRUSTEES' REGULATIONS OF
STARWOOD LODGING TRUST
(AS AMENDED AND RESTATED THROUGH DECEMBER 18, 1997)
ARTICLE I
TRUSTEES
SECTION 1. NUMBER. There shall be not less than three (3) nor
more than fifteen (15) Trustees; within such limits, the number of Trustees may
be fixed, increased or decreased from time to time by the Trustees.
SECTION 2. QUALIFYING SHARES NOT REQUIRED. No Trustee need be
a Shareholder.
SECTION 3. QUORUM. A majority of the Trustees shall constitute
a quorum.
SECTION 4. ELECTION. The Trustees shall be divided, with
respect to the time for which they severally hold office, into three classes, as
nearly equal in number as reasonably possible, with the term of office of the
first class to expire at the 1995 Annual Meeting of Shareholders, the term of
office of the second class to expire at the 1996 Annual Meeting of Shareholders
and the term of office of the third class to expire at the 1997 Annual Meeting
of Shareholders, with each Trustee to hold office until his or her successor
shall have been duly elected and qualified. At each Annual Meeting of
Shareholders, commencing with the 1995 Annual Meeting, (i) Trustees elected to
succeed those Trustees whose terms then expire shall be elected for a term of
office to expire at the third succeeding Annual Meeting of Shareholders after
their election, with each Trustee to hold office until his or her successor
shall have been duly elected and qualified, and (ii) if authorized by a
resolution of the Board of Trustees, Trustees may be elected to fill any vacancy
on the Board of Trustees, regardless of how such vacancy shall have been
created.
SECTION 5. VACANCIES. Vacancies occurring among the Trustees
(including vacancies created by increases in number) may be filled by a majority
of the remaining Trustees, though less than a quorum, or by a sole remaining
Trustee, and the person so appointed shall hold office for a term expiring at
the Annual Meeting of Shareholders at which the term of office of the class to
which he or she has been appointed expires and until his or her successor is
elected and qualified.
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SECTION 6. PLACE OF MEETING. Each meeting of the Trustees
shall be held at such place within or without the State of Maryland as is fixed
from time to time by resolution of the Trustees (or, in the absence of such
resolution, as specified in the notice of such meeting).
SECTION 7. ANNUAL MEETINGS. Promptly following each Annual
Meeting of Share holders, a meeting of the Trustees shall be held for the
purpose of electing officers and transacting other business. Notice of such
meetings need not be given.
SECTION 8. REGULAR MEETINGS. Regular meetings of the Board of
Trustees need not be held.
SECTION 9. SPECIAL MEETINGS. Special meetings of the Trustees
may be called at any time by the Chairman, and the Chairman shall call a special
meeting at any time upon the written request of two (2) Trustees. Written notice
of the time and place of a special meeting shall be given to each Trustee,
either personally or by sending a copy thereof by mail or by telecopier to his
or her address appearing on the books of the Trust or theretofore given by him
to the Trust for the purpose of notice. In case of personal service or notice by
telecopier, such notice shall be so delivered at least twenty-four (24) hours
prior to the time fixed for the meeting. If such notice is mailed, it shall be
deposited in the United States mail at least seventy-two (72) hours prior to the
time fixed for the holding of the meeting. Notice of a meeting may be given by
the Chairman, the Trustees requesting the meeting or the Secretary.
SECTION 10. ADJOURNED MEETINGS. A quorum of the Trustees may
adjourn any Trustees' meeting to meet again at a stated day and hour. In the
absence of a quorum a majority of the Trustees present may adjourn from time to
time to meet again at a stated day and hour prior to the time fixed for the next
regular meeting of the Trustees. The motion for adjournment shall be lodged with
the records of the Trust. Notice of the time and place of an adjourned meeting
need not be given to any Trustee if the time and place is fixed at the meeting
adjourned.
SECTION 11. WAIVER OF NOTICE. The transactions of any meeting
of the Trustees, however called and noticed or wherever held, shall be as valid
as though had at a meeting duly held after regular call and notice if a quorum
is present and if either before or after the meeting each of the Trustees not
present signs a written waiver of notice or a consent to the holding of such
meeting or an approval of the minutes thereof. All such waivers, consents, or
approvals shall be lodged with the Trust records or made a part of the minutes
of the meeting.
SECTION 12. ACTION WITHOUT MEETING. Any action required or
permitted to be taken by the Trustees may be taken without a meeting, if a
majority of the Trustees shall individually or collectively consent in writing
to such action. Such written consent or consents shall be lodged with the
records of the Trust. Such action by written consent shall have the same force
and effect as a vote of the Trustees adopted at a meeting duly called and held.
SECTION 13. POWERS AND DUTIES. The powers and duties of the
Trustees, in addition to the powers and duties set forth in the Declaration,
are:
(a) Selection and Removal of Officers, Agents and Employees.
To select all the other officers, agents and employees of the Trust, to
remove them at pleasure, either with or without cause, to prescribe for
them duties consistent with the Declaration and the Trustees'
Regulations, and to fix their compensation.
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(b) Authorization of Signatures. From time to time to
designate the person or persons authorized to sign or endorse checks,
drafts, or other orders for the payment of money, issued in the name of
or payable to the Trust.
(c) Fixing Principal Office and Place of Meetings. From time
to time to change the location of the principal office of the Trust and
from time to time to designate any place within or without the State of
Maryland as the place at which meetings of Trustees or of the
Shareholders shall be held.
(d) General Powers. Generally to exercise such other powers as
are usually vested in directors of corporations organized under the
laws of the State of Maryland.
SECTION 14. EXECUTIVE COMMITTEE. (a) The Board of Trustees may
appoint two or more trustees to constitute an Executive Committee. One of such
trustees shall be designated as Chairman of the Executive Committee. The
Executive Committee shall have and may exercise all of the rights, powers and
authority of the Board of Trustees, except as expressly limited by the Maryland
General Corporation Law as amended from time to time.
(b) The Executive Committee shall fix its own rules of
procedure and shall meet at such times and at such place or places as it may
determine. The Chairman of the Executive Committee or, in the absence of a
Chairman, a member of the Executive Committee chosen by a majority of the
members present, shall preside at meetings of the Executive Committee, and
another member thereof chosen by the Executive Committee shall act as secretary.
A majority of the Executive Committee shall constitute a quorum for the
transaction of business, and the affirmative vote of a majority of the members
present at a meeting shall be required for any action of the Executive
Committee.
SECTION 15. OTHER COMMITTEES. The Board of Trustees may
appoint such other commit tees as it shall deem advisable and with such
authority as the Board of Trustees shall from time to time determine.
SECTION 16. OTHER PROVISIONS REGARDING COMMITTEES. (a) The
Board of Trustees shall have the power at any time to fill vacancies in, change
the membership of, or discharge any committee.
(b) Members of any committee shall be entitled to such
compensation for their services as from time to time may be fixed by the Board
of Trustees. No committee member who receives compensation as a member of any
one or more committees shall be barred from serving the Trust in any other
capacity or from receiving compensation and reimbursement of reasonable expenses
for any or all such other services.
(c) Unless prohibited by law, the provisions of Sections 11,
12 and 17 of this Article I shall apply to all committees.
SECTION 17. MEETINGS BY TELEPHONE OR SIMILAR COMMUNICATIONS.
The Board of Trustees may participate in meetings by means of conference
telephone or similar communications equipment, whereby all trustees
participating in the meeting can hear each other at the same time, and
participation in any such meeting shall constitute presence in person at such
meeting. A written record shall be made of all actions taken at any meeting
conducted by a means of a conference telephone or similar communications
equipment.
SECTION 18. TRANSACTIONS WITH INTERESTED PERSONS. (a)
Notwithstanding anything to the contrary contained in these Trustees'
Regulations, in addition to any affirmative vote required either by law,
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the Partnership Agreement, the Declaration of Trust of the Trust or these
Trustees' Regulations, any Transaction involving the Trust or any of its
subsidiaries or the Realty Partnership shall require the affirmative vote of a
majority of the Trustees ("Disinterested Members") on the Board of Trustees of
the Trust who are not employees, officers, directors, Affiliates or Associates
of the Interested Person who or which is a party to the Transaction.
(b) As used in these Trustee's Regulations:
(i) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of
the General Rules and Regulations under the Securities
Exchange Act of 1934, as in effect on December 18, 1997 (the
"Exchange Act");
(ii) A Person shall "Beneficially Own" and be the
"Beneficial Owner" of any Paired Shares or Units:
(A) which such Person or any of its
Affiliates or Associates beneficially owns, directly
or indirectly, within the meaning of Rule 13d-3 under
the Exchange Act; or
(B) which such Person or any of its
Affiliates or Associates has (I) the right to acquire
(whether such right is exercisable immediately or
only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (II) the right
to vote pursuant to any agreement, arrangement or
understanding (but neither such Person nor any such
Affiliate or Associate shall be deemed to be the
Beneficial Owner of any Paired Shares or Units solely
by reason of a revocable proxy granted for a
particular meeting of shareholders, pursuant to a
public solicitation of proxies for such meeting, and
with respect to which Paired Shares or Units neither
such Person nor any such Affiliate or Associate is
otherwise deemed the Beneficial Owner); or
(C) which are beneficially owned, directly
or indirectly, within the meaning of the Rule 13d-3
under the Exchange Act, by any other Person with
which such Person or any of its Affiliates or
Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding,
voting (other than solely by reason of a revocable
proxy as described in subparagraph (B) above) or
disposing of any Paired Shares or Units.
(iii) "Corporation" shall mean Starwood Lodging
Corporation, a Maryland corporation.
(iv) "Interested Person" shall mean any Person who or
which is the Beneficial Owner, directly or indirectly, of 5%
or more of the outstanding Paired Shares or the outstanding
Units or who or which is an Affiliate or Associate of the
Trust, the Corporation or either of the Partnerships. For the
purposes of determining whether a Person is an Interested
Person, the number of Paired Shares or Units deemed to be
outstanding shall include Paired Shares or Units deemed owned
through application of paragraphs (A), (B) and (C) of
paragraph (ii) above but shall not include any other unissued
Paired Shares or Units
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which may be issuable pursuant to any agreement, arrangement
or understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
(v) "Paired Shares" shall mean the shares of common
stock of the Corporation and the shares of beneficial interest
of the Trust which are paired pursuant to the Pairing
Agreement dated June 25, 1980 between the Trust and the
Corporation, as it may be amended from time to time.
(vi) "Partnership Agreement" shall mean the Limited
Partnership Agreement of the Realty Partnership, as it may be
amended from time to time.
(vii) "Partnerships" shall mean the Realty
Partnership and SLC Operating Limited Partnership, a Delaware
limited partnership.
(viii) "Person" shall mean any individual, limited
partnership, general partnership, corporation, limited
liability company or any other firm or entity.
(ix) "Realty Partnership" shall mean SLT Realty
Limited Partnership, a Delaware limited partnership.
(x) "Shareholder" shall mean a Person that owns
Paired Shares.
(xi) "Transaction" shall mean any contract, sale,
lease, exchange, mortgage, transfer or disposition to or with,
or any other transaction with, any Interested Person,
including, without limitation, any election with respect to
the method of payment for an exchange of Units for Paired
Shares, or any action to be taken by the Trust, the
Corporation or the Partnership with respect to the senior debt
of the Realty Partnership.
(xii) "Units" shall have the meaning set forth in the
Partnership Agreement.
(c) A majority of the Disinterested Members shall have the
power and duty to determine, on the basis of information known to them
after reasonable inquiry, all facts necessary to determine compliance
with this Section 14, including, without limitation, (i) whether a
Person is an Interested Person, (ii) the number of Paired Shares or
Units that any Person Beneficially Owns, and (iii) whether a Person is
an Affiliate or Associate of another. A majority of the Disinterested
Members shall have the right to demand that any Person who is
reasonably believed to be an Interested Person (or who holds of record
Paired Shares or Units that any Interested Person Beneficially Owns)
supply the Trust with complete information as to (i) the record
owner(s) of all Paired Shares or Units that such Person who is
reasonably believed to be an Interested Person Beneficially Owns, (ii)
the number of, and class or series of, Paired Shares or Units that such
Person who is reasonably believed to be an Interested Person
Beneficially Owns and the number(s) of the certificate(s), if any,
evidencing such Paired Shares or Units, and (iii) any other factual
matter relating to the applicability or effect of this Section 14, as
may be reasonably requested of such Person, and such Person shall
furnish such information within 10 days after receipt of such demand.
(d) Nothing contained in this Section 14 shall be construed to
relieve any Interested Person from any fiduciary obligation imposed by
law.
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(e) Notwithstanding anything to the contrary contained in
these Trustees' Regulations this Section 14 may be amended or repealed
only by a majority of Trustees on the Board of Trustees of the Trust
who are not employees, officers, Affiliates or Associates of the Trust,
the Corporation, the Partnerships or any Interested Person.
SECTION 19. INDEPENDENT TRUSTEES. Notwithstanding anything to
the contrary contained in these Trustees' Regulations, not less than a majority
of the Board of Trustees of the Trust shall be composed of "Independent
Trustees." For purposes of this Section 15, an "Independent Trustee" is a
Trustee of the Trust who is not employed by or an affiliate (as defined in Rule
12b-2 of the General Rules and Regulations under the Exchange Act), of the
Trust, the Corporation or Starwood Capital Group, L.L.C.
ARTICLE II
OFFICERS
SECTION 1. ENUMERATION. The officers of the Trust shall be a
Chairman, a President, one or more Vice-Presidents, a Secretary, a Treasurer,
and such other officers as are elected by the Trustees. Officers shall be
elected by and shall hold office at the pleasure of the Trustees. Any two or
more offices, except those of Chairman and President, President and Secretary,
or President and Assistant Secretary, may be held by the same person.
SECTION 2. POWERS AND DUTIES OF THE CHAIRMAN. The Chairman
shall be the chief executive officer of the Trust and, subject to the control of
the Trustees, shall have general supervision, direction and control of the
business of the Trust and its employees and shall have such other powers and
duties as are usually vested in the office of chief executive officer of a
corporation. The Chairman shall, if present, preside at all meetings of the
Trustees and of the Shareholders and exercise and perform such other powers and
duties as may be from time to time assigned to him by the Trustees. The Chairman
shall have the power and authority to execute all written instruments on behalf
of the Trust of every nature whatsoever, and shall be, ex officio, a member of
all standing committees.
SECTION 3. POWERS AND DUTIES OF THE PRESIDENT. The President
shall have such duties and responsibilities for the supervision, direction and
control of the Trust as may be delegated to the President by the Board of
Trustees or the Chairman. The President shall have the power and authority to
execute all written instruments on behalf of the Trust of every nature
whatsoever. In the absence of the Chairman, the President shall preside at all
meetings of the Trustees and of the Shareholders, and shall be, ex officio, a
member of all standing committees.
SECTION 4. POWERS AND DUTIES OF THE VICE PRESIDENTS. In the
absence or disability of the President, the Vice-Presidents in order of their
rank as fixed by the Trustees or, if not ranked, the Vice- President designated
by the Trustees, shall perform all of the duties of the President and when so
acting shall have all the powers of and be subject to all of the restrictions
upon the President. The Vice-Presidents shall have the power and authority to
execute on behalf of the Trust all written instruments of every nature
whatsoever. The Vice-Presidents shall have such other powers and perform such
other duties as are prescribed for them from time to time by the Trustees.
SECTION 5. DUTIES OF THE SECRETARY. The Secretary shall keep
full and complete minutes of the meetings of the Trustees and of the meetings of
the Shareholders and give notice, as required, of all such
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meetings. The Secretary shall perform all other duties that pertain to such
office and which are required by the Trustees.
SECTION 6. DUTIES OF THE CHIEF FINANCIAL OFFICER. The Chief
Financial Officer shall (i) maintain custody of and keep the books of account of
the Trust; (ii) receive, deposit and disburse funds belonging to the Trust, and
(iii) perform all other duties that pertain to such office and which are
required by the Trustees.
ARTICLE III
SHAREHOLDERS
SECTION 1. QUORUM. The presence in person or by proxy of
Persons entitled to vote a majority of the voting shares at any meeting of
Shareholders shall constitute a quorum. The Shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment notwithstanding the withdrawal of enough Shareholders to leave
less than a quorum.
SECTION 2. PLACE OF MEETING. Meetings of the Shareholders
shall be held at the principal office of the Trust or at another convenient
location within or without the State of Maryland as is designated by the
Trustees or by the written consent of all Shareholders entitled to vote thereat,
given either before or after the meeting and filed with the Secretary of the
Trust.
SECTION 3. ANNUAL MEETING. A regular annual meeting of the
Shareholders shall be held on such date and at such time as may be fixed by the
Board of Trustees.
SECTION 4. SPECIAL MEETINGS. Special meetings of the
Shareholders may be held at any time for any purpose or purposes. Such special
meetings may be called at any time by the Chairman or by the Trustees or by any
two or more Trustees, or by one or more Shareholders holding not less than a
majority of the outstanding Shares of the Trust.
SECTION 5. NOMINATION OF TRUSTEES. Nominations of Persons for
election as Trustees at an annual meeting of the Shareholders may be made at
such meeting only by or at the direction of the Trustees, by any nominating
committee or person(s) appointed by the Trustees, or by any Shareholder entitled
to vote for the election of Trustees at the meeting who complies with the notice
procedures set forth in this Section 5.
Any Shareholder entitled to vote for the election of Trustees
may nominate one or more Persons for election as Trustee at a meeting of
Shareholders only if written notice of such Shareholder's intent to make such
nomination or nominations has been delivered personally to the Secretary at, or
been mailed to the Secretary and received at, the principal executive offices of
the Trust not less than 50 days nor more than 75 days prior to the meeting;
provided, however, that in the event that less than 60 days' notice or prior
public disclosure of the date of meeting is given or made to Shareholders,
notice by the Shareholder to be timely must be so delivered or received not
later than the 10th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made, whichever first
occurs. Such Shareholder's notice to the Secretary shall set forth: (i) the name
and address of the Shareholder who intends to make the nominations(s) and of the
Person or Persons to be nominated; (ii) the class and number of Shares that are
held of record, beneficially owned and represented by proxy by such Shareholder
as of the record date for the meeting (if such date then shall have been made
publicly available) and as of the date of such notice; (iii) a
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representation that such Shareholder intends to appear in person or by proxy at
the meeting to nominate the Person or Persons specified in the notice; (iv) a
description of any contract, arrangement or understanding between such
Shareholder and each nominee and any other Person or Persons (naming such Person
or Persons) pursuant to which the nomination or nominations are to be made by
such Shareholder; (v) such other information regarding each nominee proposed by
such Shareholder as would be required to be disclosed in a proxy statement used
in a solicitation of proxies for the election of directors which solicitation
was subject to the rules and regulations of the Securities and Exchange
Commission (the "SEC") under Section 14 of the Exchange Act, as from time to
time amended; and (vi) the consent of each nominee to serve as a Trustee if so
elected.
No Person shall be eligible for election as a Trustee unless
as nominated in accordance with the procedures set forth herein.
SECTION 6. ADJOURNED MEETINGS. Any meeting of Shareholders,
whether or not a quorum is present, may be adjourned from day to day or from
time to time by the vote of a majority of the Shares the holders of which are
either present at the meeting or represented by proxy. The motion for
adjournment shall be lodged with the records of the Trust.
SECTION 7. NOTICE OF REGULAR OR SPECIAL MEETINGS. Written
notice specifying the place, day and hour of any regular or special meeting, the
general nature of the business to be transacted thereof, to the extent required
by law, and all other matters required by law shall be given to each Shareholder
of record entitled to vote, either personally or by sending a copy thereof by
mail or telegraph to his or her address appearing on the books of the Trust or
theretofore given by him to the Trust for the purpose of notice or, if no
address appears or has been given, addressed to the place where the principal
office of the Trust is situated. It shall be the duty of the Secretary to give
notice of each Annual Meeting of the Shareholders at least ten (10) days and not
more than ninety (90) days before the date on which it is to be held. If notice
is not so given by the Secretary, it may be given by any other officer.
Within twenty (20) days after the Trust receives a Shareholder
request for the calling of a special meeting, the Trustees shall designate the
date on which such meeting is to be held and the Secretary shall inform the
Shareholders who make the request of the reasonably estimated costs of preparing
and mailing a notice of the meeting, and on payment of those costs to the Trust,
notify each Shareholder entitled to notice of the meeting. Any such special
meeting shall be held on a date not earlier than the twentieth (20th) day, and
not later than the ninetieth (90th) day, following the date on which such notice
is given. If the date of such special meeting is not so fixed and notice thereof
given within seven (7) days after the date such Shareholder request is received
by the Trust, the date of such meeting may be fixed by the Person or Persons
requesting the meeting, in which event notice of such meeting shall be given by
such Person or Persons not less than seven (7), nor more than sixty (60), days
before the date on which the meeting is to be held.
Notwithstanding the foregoing, if as of the date a Shareholder
request for a special meeting is received or within twenty (20) days thereafter,
the Trustees have called or call a meeting of Shareholders (whether annual or
special) for a purpose or purposes other than the purpose(s) stated in the
Shareholder request, the Trustees need not call, and the Secretary need not give
notice of, a separate and additional meeting of Shareholders for the purpose(s)
stated in the Shareholder request if (i) the Trustees determine in good faith
that calling such a separate and additional meeting would require the Trust to
incur undue cost and expense, and (ii) the Secretary notifies both the
requesting Shareholder(s) and all other Shareholders entitled to vote, within
twenty (20) days after the Trust receives the Shareholder request, that the
matter(s) proposed by the requesting Shareholder(s) to be considered at a
special meeting may be proposed and considered at the meeting otherwise called
by the Trustees. In addition, if not later than the thirtieth (30th) day prior
to the date on which
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any special meeting called by the Trustees pursuant to a Shareholder request is
to be held, the Trustees determine in good faith to present for consideration by
the Shareholders of the Trust one or more matters other than those proposed by
the requesting Shareholder(s) to be considered, the Trustees may postpone the
previously called special meeting for a period of up to sixty (60) days
following the date of which notice of such postponement is given. Notice of such
postponement and of the additional matter(s) to be considered at such meeting
shall be given by the Secretary to all Shareholders entitled to vote at the
meeting not later than the thirtieth (30th) day prior to the originally
scheduled meeting date.
For purposes of this Section 7, a Shareholder request shall be
deemed received by the Trust when delivered to an officer of the Trust in person
or on the date on which such request is mailed to the Trust, duly addressed to
its principal office.
SECTION 8. NOTICE OF ADJOURNED MEETINGS. It shall not be
necessary to give any notice of the time and place of any adjourned meeting or
of the business to be transacted thereat other than by announcement at the
meeting at which such adjournment is taken.
SECTION 9. PROXIES. The appointment of a proxy or proxies
shall be made by an instrument in writing executed by the Shareholder or his or
her duly authorized agent and filed with the Secretary of the Trust. No proxy
shall be valid after the expiration of eleven (11) months from the date of its
execution unless the Shareholder executing it specifies therein the length of
time for which it is to continue in force, which is no case shall exceed seven
(7) years from the date of its execution. At a meeting of Shareholders all
questions concerning the qualification of voters, the validity of proxies, and
the acceptance or rejection of votes, shall be decided by the secretary of the
meeting unless inspectors of election are appointed pursuant to Section 13 of
this Article III, in which event such inspectors shall pass upon all questions
and shall have all other duties specified in said section.
SECTION 10. CONSENT OF ABSENTEES. The transactions of any
meeting of Shareholders, either annual, special, or adjourned, however called
and noticed, shall be as valid as though had at a meeting duly held after the
regular call and notice if a quorum is present and, if either before or after
the meeting, each Shareholder entitled to vote, not present in person or by
proxy, signs a written waiver of notice or a consent to the holding of such
meeting or an approval of the minutes thereof. All such waivers, consents or
approvals shall be lodged with the Trust records or made a part of the minutes
of the meeting.
SECTION 11. VOTING RIGHTS. If no future date is fixed for the
determination of the Shareholders entitled to vote at any meeting of
Shareholders, only Persons in whose names Shares entitled to vote stand on the
stock records of the Trust on the day of any meeting of Shareholders shall be
entitled to vote at such meeting
SECTION 12. NO CUMULATIVE VOTING. Shareholders shall not be
entitled to cumulate votes in any elections of Trustees of the Trust.
SECTION 13. CONDUCT OF MEETINGS; INSPECTORS OF ELECTION. The
presiding officer at a meeting of the Shareholders shall have all power and
authority vested in a presiding officer by law or practice, including, without
limitation, the authority to determine whether the nomination of any person is
made in compliance with applicable provisions of these Trustees' Regulations
(and to refuse to acknowledge the nomination of any Person not made in such
compliance); to determine whether any item of business proposed to be brought
before the meeting has been properly brought (and to declare that any business
not so brought shall be disregarded and not transacted); to establish rules
pertaining to reasonable time limits and the amount of time that may be taken up
in remarks by any Shareholder or group of Shareholders and otherwise pertaining
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to the conduct of the meeting; and to otherwise decide all matters relating to
the conduct of the meeting. The presiding officer may appoint a parliamentarian
and one presiding officer may appoint a parliamentarian and one or more
sergeants-at-arms. The parliamentarian may advise the presiding officer upon
matters relating to the conduct of the meeting. The sergeant- or
sergeants-at-arms shall have authority to take any and all actions that such
Persons deem necessary or appropriate to assure that the meeting is conducted
with decorum and in an orderly manner, including, without limitation, authority
to expel or cause the explosion of any Person who the presiding officer
determines is failing to comply with the rules concerning the conduct of, or is
otherwise disrupting, the meeting.
In advance of any meeting of the Shareholders, the Trustees
may appoint any one or more Persons (other than nominees for office) to act as
inspectors of election at the meeting or any adjournment thereof. If no
inspector of election is so appointed, the presiding officer of the meeting may,
and on the request of any Shareholder or any Shareholder's proxy shall, appoint
one or more such inspectors of election. The number of inspectors shall be
either one (1) or three (3), as determined by the presiding officer; provided,
however, that if such inspector(s) is or are to be appointed at the meeting on
the request of one or more Shareholders or proxies, the holders of a majority of
Shares present (in person or by duly executed proxy) shall determine whether one
(1) or three (3) inspectors are to be appointed. If the Person appointed as
inspector or election fails to appear at the meeting or fails or refuses to act
as inspector, the presiding officer of the meeting may, and upon the request of
any Shareholder or any Shareholder's proxy shall, appoint a Person to fill that
vacancy. The inspectors of election shall:
(a) Determine the number of Shares outstanding and the voting
power of each, the Shares represented at the meeting, the existence of
a quorum, and the authenticity, validity and effect of proxies;
(b) Receive votes, ballots or consents;
(c) Count and tabulate all vote or consents;
(d) Determine and report to the Trust the results of the
voting; and
(e) Do any other acts that may be proper to conduct the
election or vote with fairness to all Shareholders.
On the request of the presiding officer of the meeting or of
any Shareholder or such Shareholder's proxy, the inspector(s) of election shall
make a report in writing of any question or other matter determined by him or
them and execute a certificate of any facts found by him or them.
If there are three (3) inspectors of election, the decision,
act, report or certificate of a majority shall be effective in all respects as
the decision, act, report or certificate of the inspectors."
SECTION 14. BUSINESS. Except as may be otherwise provided by
applicable law, the only business that shall be conducted at any meeting of the
Shareholders (other than matters incident to the conduct of the meeting) shall
be business brought before the meeting by or at the direction of the Trustees or
by a Shareholder who complies with the procedures set forth in this Section 14.
Except as otherwise provided by Section 5 of this Article III
or by applicable law, the only business that shall be conducted at any meeting
of the Shareholders shall (i) have been specified in the notice of the meeting
(or any supplement thereto) given by or at the direction of the Trustees, (ii)
otherwise be
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brought before such meeting by or at the direction of the Trustees or the
presiding officer of the meeting, or (iii) be otherwise properly brought before
the meeting by or on behalf of a Shareholder who shall have been a Shareholder
of record on the record date for such meeting, who shall continue to be entitled
to vote thereat, and who shall have complied with the procedures set forth in
the remainder of this Section 14. In addition to any and all other applicable
requirements, for business to be properly brought before a meeting of the
Shareholders by a Shareholder, the Shareholder must have given timely notice
thereof in writing to the Secretary. To be timely, a Shareholder's notice must
be delivered personally or mailed to and received at the principal executive
offices of the Trust within ten days of the earlier of (i) the date that notice
of the meeting was mailed in accordance with this Article III or prior public
disclosure of the date of the meeting was made or, (ii) the date that a request
for a special meeting was made by a Shareholder in accordance with Section 7 of
this Article III.
A Shareholder's notice to the Secretary shall set forth (i) a
description of each item of business the Shareholder proposes to bring before
the meeting and the wording of the proposal, if any, to be submitted for a vote
of the Shareholders with respect thereto; (ii) the name and address of the
Shareholder; (iii) the class and number of Shares held of record, owned
beneficially and represented by proxy by such Shareholder as of the record date
for the meeting (if such date shall then have been publicly disclosed) and as of
the date of such notice; and (iv) all other information that would be required
to be included in a proxy statement filed with the SEC if, with respect to any
such item of business, such Shareholder were a participant in a solicitation
subject to Section 14 of the Exchange Act.
SECTION 15. INFORMAL ACTION BY SHAREHOLDERS. Any action
required or permitted to be taken at a meeting of Shareholders may be taken
without a meeting if there is filed with the records of Shareholders meetings a
unanimous written consent which sets forth the action and is signed by each
Shareholder entitled to vote on the matter and a written waiver of any right to
dissent signed by each Shareholder entitled to notice of the meeting but not
entitled to vote at it.
ARTICLE IV
MISCELLANEOUS
SECTION 1. RECORD DATES AND CLOSING OF TRANSFER BOOKS. From
time to time the Trustees may fix a future date as the record date for the
purpose of making any proper determination with respect to Shareholders,
including which Shareholders are entitled to notice of a meeting, to vote at a
meeting, to receive a dividend or to be allocated other rights. Such record date
may not be prior to the close of business on the day the record date is fixed.
Except as may be otherwise set forth in the Section 2-511 of the Corporations
and Associations Article, Annotated Code of Maryland, as in effect from time to
time and as applicable to Maryland corporations, the record date for any
determination shall not be more than 90 days before the date on which the action
requiring the determination will be taken. If a record date is so fixed for a
meeting, to receive a dividend or to be allocated other rights, only
Shareholders of record on the date so fixed shall be entitled to notice of and
to vote at such meeting or to receive such dividend or allotment of rights, as
the case may be, notwithstanding any transfer of Shares on the books of the
Trust after the record date so fixed.
SECTION 2. INSPECTION OF TRUST RECORDS. The share register or
duplicate share register, the books of account, and the minutes of the
proceedings of the Shareholders and Trustees shall be open to inspection upon
the written demand of any Shareholder to the same extent as is permitted by the
laws of Maryland for the inspection of corporate records by corporate
shareholders. Such inspection may be made
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in person or by an agent or attorney and shall include the right to make
extracts. Demand of inspection shall be made in writing upon the President,
Secretary or Assistant Secretary of the Trust.
SECTION 3. INSPECTION OF TRUSTEES' REGULATIONS. The Trustees
shall keep at the principal office for the transaction of business of the Trust
the original or a copy of the Trustees' Regulations as amended or otherwise
altered to date, certified by the Secretary, which shall be open to inspection
by the Shareholders at all reasonable times during office hours.
SECTION 4. REPRESENTATION OF SHARES OF CORPORATIONS. The
Chairman, the President or any Vice-President and the Secretary or Assistant
Secretary of the Trust, acting either in person or by a proxy or proxies
designated in a written instrument duly executed by said officers, are
authorized to vote, represent, and exercise on behalf of the Trust all rights
incident to any shares of any corporation standing in the name of the Trust.
SECTION 5. EXEMPTION FROM CONTROL SHARE ACQUISITION STATUTE.
The provisions of Sections 3-701 to 3-709 of the Corporations and Associations
Article of the Annotated Code of Maryland shall not apply to any shares of
beneficial interest of the Trust now or hereafter held of record or beneficially
held by any person whatsoever, it being the intent of this provision that the
Trust opt out of the aforementioned sections in their entirety and that all
persons and shares of beneficial interest held by such persons be exempted from
such sections to the fullest extent permitted by Maryland law.
ARTICLE V
SEAL
The Trust may have a seal containing the name of the Trust and
the words "Maryland, 1969."
ARTICLE VI
AMENDMENTS
These Trustees' Regulations may be amended or repealed or new
or additional Trustees' Regulations may be adopted only by the vote or written
consent of the Trustees, and the Shareholders shall not have any power to amend
or repeal these Trustees' Regulations or to adopt new or additional Trustees'
Regulations.
ARTICLE VII
DEFINITIONS
All terms defined in the Amended and Restated Declaration of
Trust of Starwood Lodging Trust dated as of August 15, 1969, as amended from
time to time, shall have the same meaning when used in these Trustees'
Regulations.
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THIS IS TO CERTIFY: That I am the duly elected, qualified and
acting Secretary of Starwood Lodging Trust and that the foregoing Amended and
Restated Trustees' Regulations were adopted as the Trustees' Regulations of said
trust on December 18, 1997.
------------------------------------
Sherwin L. Samuels, Secretary
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Exhibit 3.4
AMENDED AND RESTATED
BYLAWS OF
STARWOOD LODGING CORPORATION
(AS AMENDED THROUGH DECEMBER 18, 1997)
ARTICLE I
OFFICES
In addition to the required principal office, the Corporation
may have such offices at such places, both within and without the State of
Maryland, as the Board of Directors from time to time determines or as the
business of the Corporation from time to time requires.
ARTICLE II
MEETINGS OF THE STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. Annual meetings of the
stockholders shall be held on such date and at such time and at such place in
the United States (within or without the State of Maryland) as is designated
from time to time by the Board of Directors and stated in the notice of the
meeting. At each annual meeting the stockholders shall elect Directors and shall
transact such other business as may properly be brought before the meeting.
SECTION 2. SPECIAL MEETINGS. Unless otherwise prescribed by
law, the Articles of Incorporation or these Bylaws, special meetings of the
stockholders for any purpose or purposes may be called by the Board of
Directors, the Chairman of the Board or any two or more Directors, or by the
Secretary upon the written request of stockholders owning not less than a
majority of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote at any such meeting. Special meetings shall be
held at such place in the United States (within or without the State of
Maryland) as is designated by the Board of Directors and stated in the notice of
the meeting. Requests for special meetings shall state the purpose or purposes
of the proposed meeting. Unless requested by stockholders entitled to cast a
majority of all votes entitled to be cast at the meeting, a special meeting need
not be called to consider any matter which is
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substantially the same as a matter voted on at any special meeting of the
stockholders held during the preceding twelve (12) months.
Within twenty (20) days after the Corporation receives a
stockholder request for the calling of a special meeting, the Board of Directors
shall designate the date on which such meeting is to be held and the Secretary
shall inform the stockholders who make the request of the reasonably estimated
costs of preparing and mailing a notice of the meeting, and on payment of those
costs to the Corporation, notify each stockholder entitled to notice of the
meeting. Any such special meeting shall be held on a date not earlier than the
twentieth (20th) day, and not later than the ninetieth (90th) day, following the
date on which such notice is given.
Notwithstanding the foregoing, if as of the date a stockholder
request for a special meeting is received or within twenty (20) days thereafter,
the Board of Directors has called or calls a meeting of stockholders (whether
annual or special) for a purpose or purposes other than the purpose(s) stated in
the stockholder request, the Board of Directors need not call, and the Secretary
need not give notice of, a separate and additional meeting of stockholders if
(i) the Board of Directors determines in good faith that calling such a separate
and additional meeting would require the Corporation to incur undue cost and
expense, and (ii) the Secretary notifies both the requesting stockholder(s) and
all other stockholders entitled to vote, within twenty (20) days after the
Corporation receives the stockholder request, that the matter(s) proposed by the
requesting stockholder(s) to be considered at a special meeting may be proposed
and considered at the meeting otherwise called by the Board of Directors. In
addition, if not later than the thirtieth (30th) day prior to the date on which
any special meeting called by the Board of Directors pursuant to a stockholder
request is to be held, the Board of Directors determines in good faith to
present for consideration by the stockholders of the Corporation one or more
matters other than those proposed by the requesting stockholder(s) to be so
considered, the Board of Directors may postpone the previously called special
meeting for a period of up to sixty (60) days following the date on which notice
of such postponement is given. Notice of such postponement and of the additional
matter(s) to be considered at such meeting shall be given by the Secretary not
later than the thirtieth (30th) day prior to the originally scheduled meeting
date.
SECTION 3. PRESIDING OFFICERS. Meetings of the stockholders
shall be presided over by the Chairman of the Board or by the President (as
determined by the Board of Directors) or, if the Chairman of the Board and the
President are not present, by a Vice President, or, if a Vice President is not
present, such person who is chosen by the Board of Directors, or, if none, by a
person to be chosen at the meeting by stockholders present in person or by proxy
who own a majority of the shares of capital stock of the Corporation entitled to
vote and be represented at such meeting. The secretary of meetings shall be the
Secretary of the Corporation, or, if the Secretary is not present, an Assistant
Secretary, or, if an Assistant Secretary is not present, such person as may be
chosen by the Board of Directors, or, if none, such person who is chosen by the
chairman of the meeting.
The presiding officer at a meeting of the stockholders shall
have all power and authority vested in a presiding officer by law or practice,
including, without limitation, the authority to determine whether the nomination
of any person is made in compliance with applicable provisions of these Bylaws
(and to refuse to acknowledge the nomination of any person not made in such
compliance); to determine whether any item of business proposed to be brought
before the meeting has been properly brought (and to declare that any business
not so brought shall be disregarded and not transacted); to establish rules
pertaining to reasonable time limits and the amount of time that may be taken up
in remarks by any stockholder or group of stockholders and otherwise pertaining
to the conduct of the meeting; and to otherwise decide all matters relating to
the conduct of the meeting. The presiding officer may appoint a parliamentarian
and one or more sergeants-at-arms. The parliamentarian may advise the presiding
officer upon matters relating to the conduct of the stockholders'
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meeting. The sergeant- or sergeants-at-arms shall have authority to take any and
all actions that such persons deem necessary or appropriate to assure that the
meeting is conducted with decorum and in an orderly manner, including, without
limitation, authority to expel or cause the expulsion of any person who the
presiding officer determines is failing to comply with the rules concerning the
conduct of, or is otherwise disrupting, the meeting.
SECTION 4. ADJOURNMENTS. Whether or not a quorum is present at
any meeting of the stockholders, the stockholders entitled to vote thereat
present in person or by proxy shall have the power to adjourn the meeting from
time to time, without notice of the adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. Any
business which might have been transacted at a meeting as originally called may
be transacted at any meeting held after adjournment as provided in this Section
4, if a quorum is present in person or by proxy at such reconvened meeting.
SECTION 5. PROXIES. Whenever the vote or consent of
stockholders is required or permitted, such vote or consent may be given by a
stockholder in person or by proxy. The appointment of a proxy or proxies shall
be made by an instrument in writing executed by the stockholder or the
stockholder's duly authorized agent and filed with the Secretary of the
Corporation. No proxy shall be valid after the expiration of eleven (11) months
from the date of its execution unless the stockholder executing it specifies
therein the length of time for which it is to continue in force. At a meeting of
stockholders all questions concerning the qualification of voters, the validity
of proxies, and the acceptance or rejection of votes, shall be decided by the
secretary of the meeting unless inspectors of election are appointed pursuant to
Section 6 of this Article II, in which event such inspectors shall pass upon all
questions and shall have all other duties specified in said section.
SECTION 6. INSPECTORS OF ELECTION. In advance of any meeting
of the stockholders, the Board of Directors may appoint any one or more persons
(other than nominees for office) to act as inspectors of election at the meeting
or any adjournment thereof. If no inspector of election is so appointed, the
presiding officer of the meeting may, and on the request of any stockholder or
any stockholder's proxy shall, appoint one or more such inspectors of election.
The number of inspectors shall be either one (1) or three (3), as determined by
the presiding officer; provided, however, that if such inspector(s) is or are to
be appointed at the meeting on the request of one or more stockholders or
proxies, the holders of a majority of the total number of shares represented at
the meeting (in person or by duly executed proxy) shall determine whether one
(1) or three (3) inspectors are to be appointed. If any person appointed as
inspector of election fails to appear at the meeting or fails or refuses to act
as inspector, the presiding officer of the meeting may, and upon the request of
any stockholder or any stockholder's proxy shall, appoint a person to fill that
vacancy. The inspectors of election shall:
(a) Determine the number of shares of capital stock
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, and the authenticity, validity and effect of proxies;
(b) Receive votes, ballots or consents;
(c) Count and tabulate all votes or consents;
(d) Determine and report to the Corporation the results of the
voting; and
(e) Do any other acts that may be proper to conduct the
election or vote with fairness to all stockholders.
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On request of the presiding officer of the meeting or of any
stockholder or any stockholder's proxy, the inspector(s) of election shall make
a report in writing of any question or other matter determined by him or them
and execute a certificate of any facts found by him or them.
If there are three (3) inspectors of election, the decision,
act, report or certificate of a majority shall be effective in all respects as
the decision, act, report or certificate of the inspectors.
SECTION 7. BUSINESS. Except as may be otherwise provided by
applicable law, the only business that shall be conducted at any meeting of the
stockholders (other than matters incident to the conduct of the meeting) shall
be business brought before the meeting by or at the direction of the Board of
Directors or by a stockholder who complies with the procedures set forth in this
Section 7.
Except as otherwise provided by Section 2 of this Article III
or by applicable law, the only business that shall be conducted at any meeting
of the stockholders shall (i) have been specified in the notice of the meeting
(or any supplement thereto) given by or at the direction of the Board of
Directors, (ii) otherwise be brought before such meeting by or at the direction
of the Board of Directors or the presiding officer of the meeting, or (iii) be
otherwise properly brought before the meeting by or on behalf of a stockholder
who shall have been a stockholder of record on the record date for such meeting,
who shall continue to be entitled to vote thereat, and who shall have complied
with the procedures set forth in the remainder of this Section 7. In addition to
any and all other applicable requirements, for business to be properly brought
before a meeting of the stockholders by a stockholder, the stockholder must have
given timely notice thereat in writing to the Secretary. To be timely, a
stockholder's notice must be delivered personally or mailed to and received at,
the principal executive offices of the Corporation within ten days of the
earlier of (i) the date that notice of the meeting was mailed in accordance with
Article II hereof or prior public disclosure of the date of the meeting was
made, or (ii) the date that a request for a special meeting was made by a
stockholder in accordance with Section 2 of Article II hereof.
A stockholder's notice to the Secretary shall set forth (i) a
description of each item of business the stockholder proposes to bring before
the meeting and the wording of the proposal, if any, to be submitted for a vote
of the stockholders with respect thereto; (ii) the name and address of the
stockholder; (iii) the class and number of shares of stock of the Corporation
held of record, owned beneficially and represented by proxy by such stockholder
as of the record date for the meeting (if such date shall then have been
publicly disclosed) and as of the date of such notice; and (iv) all other
information that would be required to be included in a proxy statement filed
with the Securities and Exchange Commission (the "SEC") if, with respect to any
such item of business, such stockholder were a participant in a solicitation
subject to Section 14 of the Securities Exchange Act of 1934 as in effect on
December 18, 1997 (the "Exchange Act"), as from time to time amended.
SECTION 8. INFORMAL ACTION BY STOCKHOLDERS. Any action
required or permitted to be taken at a meeting of stockholders may be taken
without a meeting if there is filed with the records of stockholders meetings a
unanimous written consent which sets forth the action and is signed by each
stockholder entitled to vote on the matter and a written waiver of any right to
dissent signed by each stockholder entitled to notice of the meeting but not
entitled to vote at it.
ARTICLE III
DIRECTORS
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SECTION 1. NUMBER; TENURE. The number of directors of the
Corporation shall be not less than three (3) nor more than fifteen (15), and,
within these limits, may be fixed, increased or decreased from time to time by a
majority of the entire Board of Directors, but no such action may affect the
tenure of office of any director.
The directors shall be divided, with respect to the time for
which they severally hold office, into three classes, as nearly equal in number
as reasonably possible, with the term of office of the first class to expire at
the 1995 annual meeting of stockholders, the term of office of the second class
to expire at the 1996 annual meeting of stockholders, and the term of office of
the third class to expire at the 1997 annual meeting of stockholders, with each
director to hold office until his or her successor shall have been duly elected
and qualified. At each annual meeting of stockholders, commencing with the 1995
annual meeting, (i) directors elected to succeed the class of directors whose
terms then expire shall be elected for a term of office to expire at the third
succeeding annual meeting of stockholders after their election, with each
director of the class to hold office until his or her successor shall have been
duly elected and qualified and (ii) except as otherwise required by law, if
authorized by a resolution of the Board of Directors, directors may be elected
to fill any vacancy on the Board of Directors, regardless of how such vacancy
shall have been created.
SECTION 2. NOMINATION OF DIRECTORS. Nominations of persons for
election to the Board of Directors at an annual meeting of the stockholders may
be made at such meeting only by or at the direction of the Board of Directors,
by any nominating committee or person(s) appointed by the Board of Directors, or
by any stockholder entitled to vote for the election of Directors at the meeting
who complies with the notice procedures set forth in this Section 2.
Any stockholder entitled to vote for the election of Directors
may nominate one or more persons for election to the Board of Directors at a
meeting only if written notice of such stockholder's intent to make such
nomination or nominations has been delivered personally to the Secretary at, or
been mailed to the Secretary and received at, the principal executive offices of
the Corporation not less than 50 days nor more than 75 days prior to the
meeting; provided, however, that in the event that less than 60 days' notice or
prior public disclosure of the date of meeting is given or made to stockholders,
notice by the stockholder to be timely must be so delivered or received not
later than the 10th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made, whichever first
occurs. Such stockholder's notice to the Secretary shall set forth: (i) the name
and address of the stockholder who intends to make the nomination(s) and of the
person or persons to be nominated; (ii) the class and number of shares of stock
of the Corporation that are held of record, beneficially owned and represented
by proxy by such stockholder as of the record date for the meeting (if such date
then shall have been made publicly available) and as of the date of such notice;
(iii) a representation that such stockholder intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the notice;
(iv) a description of any contract, arrangement or understanding between such
stockholder and each nominee and any other person or persons (naming such person
or person) pursuant to which the nomination or nominations are to be made by
such stockholder; (v) such other information regarding each nominee proposed by
such stockholder as would be required to be disclosed in a proxy statement used
in a solicitation of proxies for the election of directors which solicitation
was subject to the rules and regulations of the SEC under Section 14 of the
Exchange Act; and (vi) the consent of each nominee to serve as a Director of the
Corporation if so elected.
No person shall be eligible for election as a Director of the
Corporation unless nominated in accordance with the procedures set forth herein.
SECTION 3. CHAIRMAN OF THE BOARD. The Chairman of the Board
shall be chosen by the vote of a majority of the entire Board of Directors. The
Chairman of the Board, if present, shall preside at all
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meetings of the Board of Directors. The Chairman of the Board shall be, ex
officio, a member of all standing committees, but shall not in the capacity as
Chairman of the Board be deemed an officer of the Corporation.
SECTION 4. VACANCIES. Except as otherwise required by law,
unless the Board of Directors otherwise determines, newly created directorships
resulting from any increase in the authorized number of directors or any
vacancies on the Board of Directors resulting from any cause shall be filled
only by a majority vote of the directors then in office, though less than a
quorum, and directors so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which the term of office of the class to which
they have been elected expires and until such director's successor shall have
been duly elected and qualified. No decrease in the numbers of authorized
directors constituting the entire Board of Directors shall shorten the term of
any incumbent director.
SECTION 5. RESIGNATION. Any director may resign at any time by
giving written notice to the Board of Directors, the Chairman of the Board, the
Present, or the Secretary of the Corporation. Unless otherwise specified in such
written notice, a resignation shall take effect upon delivery thereof. A
resignation need not be accepted in order for it to be effective.
SECTION 6. PLACE OF MEETINGS. Each meeting of the Trustees
shall be held at such place within or without the State of Maryland as is fixed
from time to time by resolution of the Trustees (or, in the absence of such
resolution, as specified in the notice of such meeting).
SECTION 7. ANNUAL MEETING. Promptly following each Annual
Meeting of Shareholders, a meeting of the Trustees shall be held for the purpose
of electing officers and transacting other business. Notice of such meetings
need not be given.
SECTION 8. REGULAR MEETINGS. Regular meetings of the Board of
Directors need not be held.
SECTION 9. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called at any time by the Chairman of the Board, and the
Chairman of the Board shall call a special meeting at any time upon the written
request of two (2) directors. Written notice of the time and place of a special
meeting shall be given to each director, either personally or by sending a copy
thereof by mail or by telecopier to his or her address appearing on the books of
the Corporation or theretofore given by him or her to the Corporation for the
purpose of notice. In case of personal service or notice by telecopier, such
notice shall be so delivered at least twenty-four (24) hours prior to the time
fixed for the meeting. If such notice is mailed it shall be deposited in the
United States mail at least seventy-two (72) hours prior to the time fixed for
the holding of the meeting. Notice of a meeting may be given by the Chairman of
the Board, the Directors requesting the meeting or the Secretary.
SECTION 10. ADJOURNMENTS. A quorum of the directors may
adjourn any meeting of the Board of Directors to meet again at a stated day and
hour. In the absence of a quorum a majority of the directors present may adjourn
from time to time to meet again at a stated day and hour prior to the time fixed
for the next regular meeting of the Board of Directors. Notice of the time and
place of an adjourned meeting need not be given to any director of the time and
place is fixed at the meeting adjourned.
SECTION 11. COMPENSATION. Directors shall be entitled to such
compensation for their services as directors as from time to time may be fixed
by the Board of Directors. No director who receives compensation as a director
shall be barred from serving the Corporation in any other capacity or from
receiving compensation and reimbursement of reasonable expenses for any or all
such other services.
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SECTION 12. ACTION BY CONSENT. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting and without prior notice if a written consent in lieu of such
meeting which sets forth the action so taken is signed either before or after
such action by all directors. All written consents shall be filed with the
minutes of the Board's proceedings.
SECTION 13. MEETINGS BY TELEPHONE OR SIMILAR COMMUNICATIONS.
The Board of Directors may participate in meetings by means of conference
telephone or similar communications equipment, whereby all directors
participating in the meeting can hear each other at the same time, and
participation in any such meeting shall constitute presence in person at such
meeting. A written record shall be made of all actions taken at any meeting
conducted by a means of a conference telephone or similar communications
equipment.
SECTION 14. TRANSACTIONS WITH INTERESTED PERSONS. (a)
Notwithstanding anything to the contrary contained in these Bylaws, in addition
to any affirmative vote required either by law, the Partnership Agreement, the
Articles of Incorporation of the Corporation or these Bylaws, any Transaction
involving the Corporation or any of its subsidiaries or the Operating
Partnership shall require the affirmative vote of a majority of the directors
("Disinterested Members") on the Board of Directors of the Corporation who are
not employees, officers, directors, Affiliates or Associates of the Interested
Person who or which is a party to the Transaction.
(b) As used in this Section 14:
(i) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act.
(ii) A Person shall "Beneficially Own" and be the "Beneficial
Owner" of any Paired Shares or Units:
(A) which such Person or any of its Affiliates or
Associates or Associates beneficially owns, directly or
indirectly, within the meaning of Rule 13d-3 under the
Exchange Act; or
(B) which such Person or any of its Affiliates or
Associates has (I) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (II) the right to vote
pursuant to any agreement, arrangement or understanding (but
neither such Person nor any such Affiliate or Associate shall
be deemed to be the Beneficial Owner of any Paired Shares of
Units solely by reason of a revocable proxy granted for a
particular meeting of stockholders, pursuant to a public
solicitation of proxies for such meeting, and with respect to
which Paired Shares or Units neither such Person not any such
Affiliate or Associate is otherwise deemed the Beneficial
Owner); or
(C) which are beneficially owned, directly or
indirectly, within the meaning of the Rule 13d-3 under
Exchange Act, by any other Person with which such Person or
any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring,
holding, voting (other than solely by reason of a revocable
proxy as described in subparagraph (B) above) or disposing of
any Paired Shares or Units.
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(iii) "Interested Person" shall mean any Person who or which
is the Beneficial Owner, directly or indirectly, of 5% or more the
outstanding Paired Shares or the outstanding Units or who or which is
an Affiliate or Associate of the Trust, the Corporation or either of
the Partnerships. for the purposes of determining whether a Person is
an Interested Person, the number of Paired Shares or Units deemed to be
outstanding shall include Paired Shares or Units deemed owned through
application of paragraphs (A), (B) and (C) of paragraph (ii) above but
shall not include any other unissued Paired Shares or Units which may
be issuable pursuant to any agreement, arrangement or understanding, or
upon exercise of conversion rights, warrants or options, or otherwise.
(iv) "Operating Partnership" shall mean SLC Operating Limited
Partnership, a Delaware limited partnership.
(v) "Paired Shares" shall mean the shares of common stock of
the Corporation and the shares of beneficial interest of the Trust
which are paired pursuant to the Pairing Agreement dated June 25, 1980
between the Trust and the Corporation, as it may be amended from time
to time.
(vi) "Partnership Agreement" shall mean the Limited
Partnership Agreement of the Operating Partnership, as it may be
amended from time to time.
(vii) "Partnerships" shall mean the Operating Partnership and
SLT Realty Limited Partnership, a Delaware limited partnership.
(viii) "Person" shall mean any individual, limited
partnership, general partnership, corporation, limited liability
company or any other firm or entity.
(ix) "Transaction" shall mean any contract, sale, lease,
exchange, mortgage, transfer or disposition to or with, or any other
transaction with, any Interested Person, including, without limitation,
any election with respect to the method of payment for an exchange of
Units for Paired Shares or any action to be taken by the Corporation,
the Trust or the Partnerships with respect to the senior debt of SLT
Realty Limited Partnership.
(x) "Trust" shall mean Starwood Lodging Trust, a Maryland real
estate investment trust.
(xi) "Units" shall have the meaning set forth in the
Partnership Agreement.
(c) A majority of the Disinterested Members shall have the
power and duty to determine, on the basis of information known to them after
reasonable inquiry, all facts necessary to determine compliance with this
Section 14, including, without limitation, (i) whether a Person is an Interested
Person, (ii) the number of Paired Shares or Units that any Person Beneficially
Owns, and (iii) whether a Person is an Affiliate or Associate of another. A
majority of the Disinterested Members shall have the right to demand that any
Person who is reasonably believed to be an Interested Person (or who holds of
record Paired Shares or Units that any Interested Person Beneficially Owns)
supply the Corporation with complete information as to (i) the record owner(s)
of all Paired Shares or Units that such Person who is reasonably believed to be
an Interested Person Beneficially Owns, (ii) the number of, and class or series
of, Paired Shares or Units that such Person who is reasonably believed to be an
Interested Person Beneficially Owns and the number(s) of the certificate(s), if
any, evidencing such Paired Shares or Units and (iii) any other factual matter
relating to the applicability or effect of this Section 14, as may be reasonably
requested of such Person, and such Person shall furnish such information within
10 days after receipt of such demand.
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<PAGE> 9
(d) Nothing contained in this Section 14 shall be construed to
relieve any Interested Person from any fiduciary obligation imposed by law.
(e) Notwithstanding anything to the contrary contained in
these Bylaws, this Section 14 may be amended or repealed only by a majority of
directors on the Board of Directors of the Corporation who are not employees,
officers, Affiliates or Associates of the Trust, the Corporation, the
Partnerships or any Interested Person.
SECTION 15. WAIVER OF NOTICE. The transactions of any meeting
of the Directors, however called and noticed or wherever held, shall be as valid
as though had at a meeting duly held after regular call and notice if a quorum
is present and if either before or after the meeting each of the Directors not
present signs a written waiver of notice or a consent to the holding of such
meeting or an approval of the minutes thereof. All such waivers, consents, or
approvals shall be lodged with the Corporation records or made a part of the
minutes of the meeting.
SECTION 16. INDEPENDENT DIRECTORS. Notwithstanding anything to
the contrary contained in these Bylaws, not less than a majority of the Board of
Directors of the Corporation shall be composed of "Independent Directors." For
purposes of this Section 16, an "Independent Director" is a Director of the
Corporation who is not employed by or an affiliate (as defined in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act), of the Corporation,
the Trust or Starwood Capital Group, L.L.C.
ARTICLE IV
COMMITTEES
SECTION 1. EXECUTIVE COMMITTEE. (a) The Board of Directors may
appoint two or more directors to constitute an Executive Committee. One of such
directors shall be designated as Chairman of the Executive Committee. The
Executive Committee shall have and may exercise all of the rights, powers and
authority of the Board of Directors, except as expressly limited by the Maryland
General Corporation Law as amended from time to time.
(b) The Executive Committee shall fix its own rules of
procedure and shall meet at such times and at such place or places as it may
determine. The Chairman of the Executive Committee or, in the absence of a
Chairman, a member of the Executive Committee chosen by a majority of the
members present, shall preside at meetings of the Executive Committee, and
another member thereof chosen by the Executive Committee shall act as secretary.
A majority of the Executive Committee shall constitute a quorum for the
transaction of business, and the affirmative vote of a majority of the members
present at a meeting shall be required for any action of the Executive
Committee.
SECTION 2. OTHER COMMITTEES. The Board of Directors may
appoint such other committees as it shall deem advisable and with such authority
as the Board of Directors shall from time to time determine.
SECTION 3. OTHER PROVISIONS REGARDING COMMITTEES. (a) The
Board of Directors shall have the power at any time to fill vacancies in, change
the membership of, or discharge any committee.
(b) Members of any committee shall be entitled to such
compensation for their services as from time to time may be fixed by the Board
of Directors. No committee member who receives compensation as a member of any
one or more committees shall be barred from serving the Corporation in any other
123
<PAGE> 10
capacity or from receiving compensation and reimbursement of reasonable expenses
for any or all such other services.
(c) Unless prohibited by law, the provisions of Section 12, 13
and 15 of Article III shall apply to all committees.
ARTICLE V
OFFICERS
SECTION 1. POSITIONS. The officers of the Corporation shall be
chosen by the Board of Directors and shall consist of a President, one or more
Vice Presidents, a Secretary and a Treasurer. The Board of Directors also may
choose one or more Assistant Secretaries and Assistant Treasurers and such other
officers and agents at the Board from time to time deems necessary or
appropriate. The Board of Directors may delegate to the President of the
Corporation the authority to appoint any officer or agent of the Corporation and
to fill a vacancy other than the President, Secretary or Treasurer. The election
or appointment of any officer of the Corporation in itself shall not create
contract rights for any such officer. All officers of the Corporation shall
exercise such powers and perform such duties as from time to time shall be
determined by the Board of Directors. Any two or more offices may be held by the
same person except the offices of President and Vice President, President and
Secretary, or President and Assistant Secretary.
SECTION 2. TERM OF OFFICE; REMOVAL. Each officer of the
Corporation shall hold office at the pleasure of the Board of Directors and any
officer may be removed, with or without cause, at any time by the affirmative
vote of a majority of the directors then in office, provided that any officer
appointed by the President pursuant to authority delegated to the President by
the Board of Directors may be removed, with or without cause, at any time
whenever the President in his or her absolute discretion shall consider that the
best interests of the Corporation shall be served by such removal. Vacancies
(however caused) in any office may be filled for the unexpired portion of the
term by the Board of Directors (or by the President in the case of a vacancy
occurring in an office to which the President has been delegated the authority
to make appointments).
SECTION 3. COMPENSATION. The salaries of all officers of the
Corporation shall be fixed from time to time by the Board of Directors, and no
officer shall be prevented from receiving a salary by reason of the fact that
such officer also receives from the Corporation compensation in any other
capacity.
SECTION 4. PRESIDENT. The President shall be the chief
executive officer of the Corporation and, subject to the direction of the Board
of Directors, shall have general charge of the business, affairs and property of
the Corporation and general supervision over its other officers and agents. In
general, the President shall perform all duties incident to the office of
President of a stock corporation and shall see that all orders and resolutions
of the Board of Directors are carried into effect. The President shall have the
power and authority to execute all written instruments, of every nature, on
behalf of the Corporation, and shall be, ex officio, a member of all standing
committees. In the absence of the Chairman of the Board, the President shall
preside at all meetings of the Board of Directors and of the stockholders.
SECTION 5. VICE PRESIDENTS. In the absence or disability of
the President, the Vice President (or in the event there is more than one, the
Vice Presidents in order of their rank as fixed by the Board of Directors or, if
not ranked, the Vice-President designated by the Board of Directors), shall
perform the duties and exercise the powers of the President. The Vice Presidents
shall have the power and authority to execute on behalf of the Corporation all
written instruments of every nature. A Vice President also generally shall
124
<PAGE> 11
assist the President and shall perform such other duties and have such other
powers as from time to time may be prescribed by the Board of Directors.
SECTION 6. SECRETARY. The Secretary shall perform such duties
as from time to time may be prescribed by the Board of Directors, the Chairman
of the Board or the President. The Secretary shall have custody of the seal of
the Corporation, shall have authority (as shall any Assistant Secretary) to
affix the same to any instrument requiring it, and to attest the seal by his or
her signature. The Board of Directors may give general authority to officers
other than the Secretary or any Assistant Secretary to affix the seal of the
Corporation and to attest the affixing thereof by his or her signature.
SECTION 7. ASSISTANT SECRETARY. The Assistant Secretary, if
any (or in the event there is more than one, the Assistant Secretaries in the
order designated or, in the absence of any designation, the order of their
election or appointment), in the absence or disability of the Secretary, shall
perform the duties and exercise the powers of the Secretary. An Assistant
Secretary shall perform such other duties and have such other powers as from
time to time may be prescribed by the Board of Directors.
SECTION 8. TREASURER. The Treasurer shall have the custody of
the corporate funds, securities, other similar valuable effects, and evidences
of indebtedness, shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation. The
Treasurer shall disburse the funds of the Corporation in such manner as may be
ordered by the Board of Directors from time to time and shall render to the
Chairman of the Board, the President and the Board of Directors, at regular
meetings of the Board or whenever any of them may so require, an account of all
transactions and of the financial condition of the Corporation.
SECTION 9. ASSISTANT TREASURER. The Assistant Treasurer, if
any (or in the event there is more than one, the Assistant Treasurers in the
order designated or, in the absence of any designation, in the order of their
election or appointment), in the absence or disability of the Treasurer, shall
perform the duties and exercise the powers of the Treasurer. An Assistant
Treasurer shall perform such other duties and have such other powers as form
time to time may be prescribed by the Board of Directors.
ARTICLE VI
NOTICES
Except as otherwise specifically provided in these Bylaws, any
notice required or permitted to be given to any director, officer, stockholder
or committee member shall be given in writing, either personally, by telecopier
or by first-class mail with postage prepaid, in either case addressed to the
recipient at his or her address as it appears in the records of the Corporation.
Personally delivered or telecopied notices shall be deemed to be given at the
time they are delivered at the address of the named recipient as it appears in
the records of the Corporation, and mailed notices shall be deemed to be given
at the time they are deposited in the United States mail.
125
<PAGE> 12
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
President or any Vice President and the Secretary or Assistant Secretary of the
Corporation shall have full power and authority to attend, act and vote at any
meeting of security holders of other corporations in which the Corporation may
hold securities, and at any such meeting shall possess and may exercise any and
all rights and powers incident to the ownership of such securities which the
Corporation possesses and has the power to exercise.
SECTION 2. DIVIDENDS. Subject to the Maryland General
Corporation Law, dividends upon the outstanding capital stock of the Corporation
or other distributions may be declared by the Board of Directors at any annual,
regular or special meeting and may be paid in cash, in property or in shares of
the Corporation's capital stock. Stockholders shall have no right to any
dividend or distribution unless and until declared by the Board of Directors.
SECTION 3. REGISTERED STOCKHOLDERS. Except as otherwise
provided by law, the Corporation shall be entitled to recognize the exclusive
right of a person who is registered on its books as the owner of shares of its
capital stock to receive dividends or other distributions (to the extent
otherwise distributable or distributed) and to vote (in the case of voting
stock) as such owner. The Corporation shall not be bound to recognize any
equitable or legal claim to or interest in such shares on the part of any other
person. The Corporation (or its transfer agent) shall not be required to send
notices or dividends to a name or address other than the name or address of the
stockholders appearing on the stock ledger maintained by the Corporation (or by
the transfer agent or registrar, if any), unless any such stockholder shall have
notified the Corporation (or the transfer agent or registrar, if any), in
writing, of another name or address at least ten (10) days prior to the mailing
of such notice or dividend. Nothing in these Bylaws shall be deemed to preclude
the Corporation from inquiring as to the actual ownership of any shares of its
capital stock, nor impose upon the Corporation or its transfer agent a duty, nor
limit their rights to inquire into adverse claims.
SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATE. The Board of
Directors may direct a new certificate to be issued in place of any certificate
theretofore issued by the Corporation which is claimed to have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing such
issue of a new certificate, the Board of Directors, in its discretion, may
require as a condition precedent to issuance that the owner of such lost, stolen
or destroyed certificate, or his or her legal representative, advertise the same
in such manner as the Board of Directors shall require and to deliver to the
Corporation a bond in such sum, or other security in such form, as the Board of
Directors may direct, as indemnity against any claim that may be made against
the Corporation with respect to the certificate claimed to have been lost,
stolen or destroyed.
SECTION 5. RESERVES. The Board of Directors, in its sole
discretion, may fix a sum which may be set aside or reserved over and above the
paid-in capital of the Corporation as a reserve for any proper purpose, and from
time to time may increase, diminish or vary such reserves.
SECTION 6. FISCAL YEAR. The fiscal year of the Corporation
shall be as determined from time to time by the Board of Directors.
SECTION 7. SEAL. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its incorporation and the words
"Corporate Seal" and "State of Maryland."
126
<PAGE> 13
SECTION 8. EXEMPTION FROM CONTROL SHARE ACQUISITION STATUTE.
The provisions of Sections 3-701 to 3-709 of the Corporations and Associations
Article of the Annotated Code of Maryland shall not apply to any shares of
common stock of the Corporation now or hereafter held of record or beneficially
held by any person whatsoever, it being the intent of this provision that the
Corporation opt out of the aforementioned sections in their entirety and that
all persons and shares of beneficial interest held by such persons be exempted
from such sections to the fullest extent permitted by Maryland law.
ARTICLE VII
AMENDMENTS
These Bylaws may be amended or repealed or new or additional
Bylaws may be adopted only by the vote or written consent of the Directors, and
the stockholders shall not have any power to amend or repeal these Bylaws or to
adopt new or additional Bylaws.
THIS IS TO CERTIFY: That I am the duly elected, qualified and
acting Secretary of Starwood Lodging Corporation and that the foregoing Amended
and Restated Bylaws were adopted as the Bylaws of said corporation on December
18, 1997.
------------------------------------
Nir Margalit, Secretary
127
<PAGE> 1
Exhibit 4.3
AMENDMENT NO. 2 TO
PAIRING AGREEMENT
Amendment dated as of January 2, 1998 (this "Amendment") to the
Pairing Agreement dated as of June 25, 1980, as amended by Amendment No. 1
thereto dated as of February 1, 1995 (such Pairing Agreement, as so amended,
being referred to as the "Pairing Agreement") between Starwood Hotels & Resorts
Trust (formerly Starwood Lodging Trust), a Maryland real estate investment trust
(the "Trust"), and Starwood Hotels & Resorts Worldwide, Inc. (formerly Starwood
Lodging Corporation), a Maryland corporation (the "Company").
WHEREAS, on the date hereof, the Trust is issuing shares of two new
classes of beneficial interest, par value $.01 per share, to be designated as
"Class A Exchangeable Preferred Shares" ("Class A EPS") and "Class B
Exchangeable Preferred Shares" ("Class B EPS"), respectively, pursuant to the
Transaction Agreement dated as of September 8, 1997 (the "Transaction
Agreement"), among WHWE L.L.C., Woodstar Investor Partnership, Nomura Asset
Capital Corporation, Juergen Bartels, W&S Hotel L.L.C., Westin Hotels & Resorts
Worldwide, Inc., W&S Lauderdale Corp., W&S Seattle Corp., Westin St. John Hotel
Company, Inc., W&S Denver Corp., W&S Atlanta Corp., the Trust, SLT Realty
Limited Partnership, the Company and SLC Operating Limited Partnership;
WHEREAS, the Pairing Agreement currently provides that, among other
things, the Trust may not issue or transfer shares of beneficial interest of the
Trust unless provision is made for the issuance or transfer of the same number
of shares of, stock of the Company;
WHEREAS, pursuant to the Transaction Agreement, the Class A EPS and
the Class B EPS will be issued only by the Trust and not by the Company;
WHEREAS, in order to permit the issuance of the Class A EPS and the
Class B EPS pursuant to the Transaction Agreement, the Board of Trustees of the
Trust and the Board of Directors of the Company have adopted this Amendment and
directed that this Amendment be submitted to the shareholders of the Trust at
the 1997 Annual Meeting of Shareholders of the Trust (the "Trust Meeting") and
the stockholders of the Company at the 1997 Annual Meeting of Stockholders of
the Company (the "Company Meeting"); and
WHEREAS, this Amendment was duly approved by the shareholders of the
Trust at the Trust Meeting and the
<PAGE> 2
stockholders of the Company at the Company Meeting;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and set forth herein and in the Pairing Agreement, the parties hereto
agree as follows:
SECTION 1. AMENDMENT OF PAIRING AGREEMENT. The Pairing Agreement is
hereby amended by adding thereto a new Section 13, which new Section 13 shall
read in its entirety as follows:
13. Notwithstanding anything to the contrary contained in this
Agreement, no provision of this Agreement shall prohibit (a) the issuance
by the Trust of Class A Exchangeable Preferred Shares or Class B
Exchangeable Preferred Shares pursuant to the Transaction Agreement
(collectively, the "Trust Preferred Shares") or (b) any transfer of shares
of Trust Preferred Shares, including without limitation any such transfer
in which the transferee does not acquire shares of common stock of the
Company and in which effective provision is not made for the issuance or
transfer of shares of common stock of the Company, or (c) the issuance of
certificates representing shares of Trust Preferred Shares, including
without limitation any such issuance without the issuance of a certificate
or certificates of common stock of the Company. As used herein,
"Transaction Agreement" means the Transaction Agreement dated as of
September 8, 1997 among WHWE L.L.C., Woodstar Investor Partnership, Nomura
Asset Capital Corporation, Juergen Bartels, W&S Hotel L.L.C., Westin
Hotels & Resorts Worldwide, Inc., W&S Lauderdale Corp., W&S Seattle Corp.,
Westin St. John Hotel Company, Inc., W&S Denver Corp., W&S Atlanta Corp.,
the Trust, the Company, SLT Realty Limited Partnership and SLC Operating
Limited Partnership, as such Agreement may be amended from time to time.
SECTION 2. EFFECT OF AMENDMENT. Except as expressly set forth
herein, this Amendment shall not by implication alter, modify, amend or in any
way affect any of the terms, conditions, obligations, covenants or agreements
contained in the Pairing Agreement, all of which shall continue in full force
and effect.
SECTION 3. PARTIAL INVALIDITY. In case any one or more of the
provisions contained herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Amendment, but
this Amendment shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein.
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the day and year first above written.
STARWOOD HOTELS & RESORTS TRUST
By: /s/ Ronald C. Brown
Name: Ronald C. Brown
Title: Senior Vice President
and Chief Financial
Officer
STARWOOD HOTELS & RESORTS
WORLDWIDE, INC.
By: /s/ Alan M. Schnaid
Name: Alan M. Schnaid
Title: Vice President and
Corporate Controller
<PAGE> 1
Exhibit 10.1
------------------------------------------------------------------------
SECOND
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
SLT REALTY LIMITED PARTNERSHIP
------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1
Definitions..........................................................................3
1.1 Definitions...................................................................3
ARTICLE 2
Continuation and Business of the Partnership........................................15
2.1 Continuation.................................................................15
2.2 Name.........................................................................15
2.3 Character of the Business....................................................15
2.4 Location of Principal Place of Business......................................16
2.5 Registered Agent and Registered Office.......................................16
2.6 Restatement of Agreement.....................................................16
ARTICLE 3
Term................................................................................16
3.1 Commencement.................................................................16
3.2 Dissolution..................................................................16
ARTICLE 4
Capital Contributions...............................................................17
4.1 Capital Contributions; Units.................................................17
4.2 Redemption of Units Held by Limited Partner. ...............................19
4.3 Percentage Interests.........................................................19
4.4 Purchase Rights..............................................................19
4.5 Redemption of Units Held by the General Partner..............................19
4.6 No Third Party Beneficiaries.................................................20
4.7 No Interest on or Return of Capital Contribution.............................20
ARTICLE 5
Indemnification.....................................................................20
5.1 Indemnification of the General Partner.......................................20
5.2 Indemnification of Limited Partners..........................................21
5.3 Notice of Claims.............................................................22
5.4 Third Party Claims...........................................................23
5.5 Indemnification Pursuant to Formation Agreement..............................24
ARTICLE 6
Allocations, Distributions and Other Tax and Accounting Matters.....................24
6.1 Allocations..................................................................24
6.2 Distributions................................................................28
6.3 Books of Account.............................................................28
6.4 Reports......................................................................29
6.5 Tax Elections and Returns....................................................29
6.6 Tax Matters Partner..........................................................29
6.7 Withholding Payments Required By Law.........................................29
ARTICLE 7
Rights, Duties and Restrictions of the General Partner..............................31
7.1 Powers and Duties of the General Partner.....................................31
7.2 Reimbursement of the General Partner.........................................34
7.3 Outside Activities of the General Partner....................................35
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
7.4 Contracts with Affiliates....................................................35
7.5 Title to Partnership Assets..................................................36
7.6 Reliance by Third Parties....................................................36
7.7 Liability of the General Partner.............................................36
7.8 Other Matters Concerning the General Partner.................................37
7.9 Operation of SLT in Accordance with REIT Requirements........................38
7.10 Replacement of General Partner...............................................38
ARTICLE 8
Dissolution, Liquidation and Winding-Up.............................................38
8.1 Accounting...................................................................38
8.2 Distribution on Dissolution..................................................38
8.3 Documentation of Liquidation.................................................39
ARTICLE 9
Transfer............................................................................40
9.1 General Partner..............................................................40
9.2 Transfers by Limited Partners................................................40
9.3 Certain Restrictions on Transfer.............................................42
9.4 Effective Dates of Transfers.................................................42
9.5 Transfer.....................................................................43
ARTICLE 10
Rights and Obligations of the Limited Partners......................................43
10.1 No Participation in Management...............................................43
10.2 Bankruptcy of a Limited Partner..............................................43
10.3 No Withdrawal................................................................44
10.4 Conflicts....................................................................44
10.5 Provision of Information.....................................................44
10.6 Power of Attorney............................................................45
10.7 Ownership of Paired Shares...................................................46
10.8 Waiver of Fiduciary Duty.....................................................47
ARTICLE 11
Amendment of Partnership Agreement, Meetings........................................47
11.1 Amendments...................................................................47
11.2 Meetings of the Partners; Notices to Partners................................49
ARTICLE 12
General Provisions..................................................................50
12.1 No Liability of Directors and Others.........................................50
12.2 Notices......................................................................50
12.3 Controlling Law..............................................................50
12.4 Execution of Counterparts....................................................50
12.5 Severability.................................................................50
12.6 Entire Agreement.............................................................51
12.7 Paragraph Headings...........................................................51
12.8 Gender, Etc..................................................................51
12.9 Number of Days...............................................................51
12.10 Partners Not Agents..........................................................51
12.11 Assurances...................................................................51
12.12 Waiver of Partition..........................................................51
12.13 Starwood Lodging Trust.......................................................51
</TABLE>
<PAGE> 4
LIST OF EXHIBITS
Exhibit
- -------
A List of Partners, Percentage Interests and Units
B Notice Address of Partners
<PAGE> 5
THE LIMITED PARTNERSHIP INTERESTS REFERRED TO IN THIS AGREEMENT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS. REFERENCE IS MADE TO ARTICLE 9 OF THIS AGREEMENT
FOR PROVISIONS RELATING TO VARIOUS RESTRICTIONS ON THE SALE OR OTHER
TRANSFER OF THESE INTERESTS.
SECOND
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
SLT REALTY LIMITED PARTNERSHIP
THIS SECOND AMENDED AND RESTATED LIMITED PARTNERSHIP
AGREEMENT (this "Agreement") is made and entered into this 14th day of November,
1997, by and among Starwood Lodging Trust, a Maryland real estate investment
trust ("SLT"), as General Partner, and the persons whose names are set forth on
Exhibit A hereto, as such exhibit may be amended from time to time, as limited
partners, pursuant to the provisions of the Delaware Revised Uniform Limited
Partnership Act.
RECITALS
A. Starwood Lodging Trust, Berl Holdings, L.P., Starwood-Apollo Hotel
Partners VIII, L.P., Starwood-Apollo Hotel Partners IX, L.P., Starwood-Nomura
Hotel Investors, L.P., Starwood/Wichita Investors, L.P., Starwood-Huntington
Partners, L.P., and Woodstar Partners I, L.P., were the parties to that certain
Limited Partnership Agreement of SLT Realty Limited Partnership, dated as of
December 15, 1994 (hereinafter, the "Original Agreement" and the "Partnership",
respectively).
B. Firebird Consolidated Partners, L.P., was admitted as a limited
partner of the Partnership pursuant to that certain Admission of Limited
Partner, Consent and Amendment dated March 24, 1995.
C. The Original Agreement was restated by that certain Amended and
Restated Limited Partnership Agreement of SLT Realty Limited Partnership by and
between SLT, as General Partner, and the Limited Partners of the Partnership, as
such group was then constituted, and dated as of June 29, 1995 (the "Original
Restated Agreement").
D. The Original Restated Agreement was amended by that certain
<PAGE> 6
Amendment by and between SLT, as General Partner, and the Limited Partners of
the Partnership, as such group was then constituted, and dated as of May 14,
1996.
E. Philadelphia HSR Limited Partnership ("HSR") was admitted as a
limited partner of the Partnership pursuant to that certain Admission of Limited
Partner, Consent and Amendment (Realty Partnership) dated as of June 3, 1996.
F. Starwood/Wichita Investors, L.P., Berl Holdings, L.P.,
Starwood-Huntington, L.P., Woodstar Partners I, L.P., and Wichita Harvey
Partners, Ltd., transferred their respective interests in the Partnership to SRL
Holdings, Inc., Starwood Capital Group I, L.P., Starwood Opportunity Fund II,
L.P., Moonwood Investment Partners, L.P., Woodstar II, L.P., Hospitality
Partners, Bristol Hotel Management Corp., and Edward J. Rohling, and each such
Person was admitted as a limited partner of the Partnership pursuant to that
certain Admission of Limited Partners Agreement dated as of June 4, 1996.
G. Philadelphia HIR Limited Partnership ("HIR") was admitted as a
limited partner of the Partnership pursuant to that certain Admission of Limited
Partner, Consent and Amendment (Realty Partnership) dated as of July 1, 1996.
H. Starwood-Apollo Hotel Partners VIII, L.P., transferred its interest
in the Partnership to SAHI, Inc., Starwood Hotel Investors, L.P., and AP-GP
Midstar Hotels VIII, Inc.; Starwood-Apollo Hotel Partners IX, L.P., transferred
its interest in the Partnership to SAHI, Inc., Starwood Hotel Investors, L.P.,
and AP-GP Midstar Hotels IX, Inc.; Starwood Hotel Investors, L.P., transferred
its interest in the Partnership to Starwood Hotel Investors II, L.P., SAHI, Inc.
and AP-GP Master Midstar, L.P.; and AP-GP Midstar Hotels VIII, Inc., AP-GP
Midstar Hotels IX, Inc., and AP-GP Master Midstar, L.P., transferred their
respective interests in the Partnership to Apollo Real Estate Investment Fund,
L.P., and each of Starwood Hotel Investors II, L.P., SAHI, Inc. and Apollo Real
Estate Investment Fund was admitted as a limited partner of the Partnership
pursuant to that certain Admission of Limited Partners Agreement dated as of
December 12, 1996;
I. Starwood-Nomura Hotel Investors, L.P., SRL Holdings, Inc., Starwood
Capital Group, L.P., Moonwood Investment Partners, L.P., Woodstar Partners II,
L.P., Berl Holdings I, Inc., SAHI, Inc., and Harveywood Hotel Investors II,
L.P., transferred their interests in the Partnership to Burden Direct Investment
Fund I., L.P., Ziff Investors Partnership, L.P., II, Carly Simon, Lambster
Partners Limited Partners, Montrose Corporation, Star Investors G.P., Meridian
Investment Group, 1985 Trust f/b/o Clate Joseph Korsant, 1985 Trust f/b/o Justin
Frederick Korsant, Jack Nash, the Nash Family Partnership, Brainard Holdings,
Inc., Lowell D. Kraff, Max C. Chapman, Alan Schwartz, Geoffrey T. Boisi, Gregory
Beer, Charles E. Mueller, James A. Kleeman, Steve Goldman, Mike Mueller, James
R. Gates, John Z. Kukral, John F. Couture, Barry S. Sternlicht, the Barry S.
Sternlicht Family Spray Trust I, the Barry S. Sternlicht Family Spray Trust II,
the Barry S. Sternlicht Family Spray Trust III, James G. Babb, III, Madison F.
Grose, the Madison F. Grose Irrevocable Insurance Trust, Merrick R. Kleeman, JDE
Revocable Trust u/a dated December 31, 1996, Eugene A. Gorab, Jerome C. Silvey,
Geoffrey Beer, Jay Sugarman, Jennifer Albero, Steven Fiore, James
<PAGE> 7
Oldham, Jeff Dishner, Ellis F. Rinaldi, and J. Peter Paganelli and each such
Person was admitted as a limited partner of the Partnership pursuant to
forty-four (44) separate Admission of Limited Partner Agreements each dated as
of December 31, 1996.
J. The Prudential Insurance Company of America, on behalf of Prudential
Property Investment Separate Account II, Eleanor Mendell, as Trustee of the Gary
Mendell Family Trust, Gary Mendell, Ellen-Jo Mendell, Stephen Mendell, Judith K.
Rushmore, Murray Dow II, Westport Hospitality, Inc., Zapco Interest Holdings,
LP, Zapco Holdings, Inc., Zapco Holdings, Inc. Deferred Compensation Plan Trust,
Orna L. Shulman, Arthur Green, Michael Hall, Mark Rosinsky, Randi Rosinsky, John
Daily, Felix Cacciato, Thomas Clearwater, Harvey Moore, and Tracy Driscoll
(collectively, the "HEI Contributors") were each admitted as a limited partner
of the Partnership pursuant to that certain Admission of Limited Partners,
Consent and Amendment (Realty Partnership) dated as of February 14, 1997.
K. The Hermitage, L.P. was admitted as a limited partner of the
Partnership pursuant to that certain Admission of Limited Partners, Consent and
Amendment (Realty Partnership) dated as of March 11, 1997.
L. The parties hereto have agreed to amend and restate the Original
Restated Agreement, as previously amended, in its entirety to reflect the
foregoing and to make other necessary or appropriate changes.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as follows:
ARTICLE 1
Definitions
1.1 Definitions. Except as otherwise herein expressly provided,
the following terms and phrases shall have the meanings as set forth below:
"Accountants" shall mean the national firm or firms of
independent certified public accountants selected by the General Partner on
behalf of the Partnership to audit the books and records of the Partnership and
to prepare statements and reports in connection therewith.
"Act" shall mean the Delaware Revised Uniform Limited
Partnership Act, as the same may hereafter be amended from time to time.
"Adjusted Capital Account Deficit" shall mean, with
respect to any Partner or holder of Units other than the General Partner, the
deficit balance, if any, in such holder's Capital Account as of the end of any
relevant fiscal year and after giving effect to the following adjustments:
(a) credit to such Capital Account any amounts which
<PAGE> 8
such holder is obligated or treated as obligated to restore with respect to any
deficit balance in such Capital Account pursuant to Section 1.704-1(b)(2)(ii)(c)
of the Regulations, or is deemed to be obligated to restore with respect to any
deficit balance pursuant to the penultimate sentences of Sections 1.704-2(g)(1)
and 1.704-2(i)(5) of the Regulations; and
(b) debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the requirements of the alternate test for economic effect contained
in Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted
consistently therewith.
"Administrative Expenses" shall mean: (a) all
administrative and operating costs and expenses of the Partnership; (b) those
administrative costs and expenses of the General Partner, including, but not
limited to, salaries and other remunerations paid to trustees, officers and
employees of the General Partner and accounting and legal expenses undertaken by
the General Partner on behalf or for the benefit of the Partnership; and (c) to
the extent not included in clause (b) above, REIT Expenses.
"Affected Gain" shall have the meaning set forth in
Section 6.1(c)(ii) hereof.
"Affiliate" shall mean, with respect to any Partner (or as
to any other Person the Affiliates of whom are relevant for purposes of any of
the provisions of this Agreement): (a) any member of the Immediate Family of
such Partner or Person; (b) any trustee or beneficiary of a Partner which is a
trust; (c) any trust for the benefit of any Person referred to in the preceding
clauses (a) and (b); or (d) any Entity which directly or indirectly through one
or more intermediaries, Controls, is Controlled by, or is under common Control
with, any Partner or Person referred to in the preceding clauses (a) through
(c).
"Agreement" shall mean this Limited Partnership Agreement,
as amended, modified, supplemented or restated from time to time, as the context
requires.
"Audited Financial Statements" shall mean financial
statements (balance sheet, statement of income, statement of partners equity and
statement of cash flows) prepared in accordance with GAAP and accompanied by an
independent auditor's report containing an opinion thereon.
"Bankruptcy" shall mean, with respect to any Person: (a)
the commencement by such Person of any petition, case or proceeding seeking
relief under any provision or chapter of the federal Bankruptcy Code or any
other federal or state law relating to insolvency, bankruptcy or reorganization;
(b) an adjudication that such Person is insolvent or bankrupt; (c) the entry of
an order for relief under the federal Bankruptcy Code with respect to such
Person; (d) the filing of any such petition
<PAGE> 9
or the commencement of any such case or proceeding against such Person, unless
such petition and the case or proceeding initiated thereby are dismissed within
ninety (90) days from the date of such filing; or (e) the filing of an answer by
such Person admitting the allegations of any such petition.
"Business Day" shall mean any day that is not a Saturday,
Sunday or a day on which banking institutions in the State of California or the
State of New York are authorized or obligated by law or executive order to
close.
"Capital Account" shall mean, as to any Partner or holder
of Units, a book account maintained in accordance with the following provisions:
(a) to each Partner's or holder of Unit's Capital
Account there shall be credited the amount of cash contributed by the Partner or
holder, the initial Gross Asset value of any other asset contributed by such
Partner or holder to the capital of the Partnership (net of liabilities secured
by contributed property that the Partnership assumes or takes subject to), such
Partner's or holder's distributive share of Net Income and any other items of
income or gain allocated to such Partner or holder, the amount of any
Partnership liabilities assumed by the Partner or holder or secured by
distributed assets that such Partner or holder takes subject to and any other
items in the nature of income or gain that are allocated to such Partner or
holder pursuant to Section 6.1 hereof; and
(b) to each Partner's or holder of Unit's Capital
Account there shall be debited the amount of cash distributed to the Partner or
holder, the Gross Asset Value of any Partnership asset distributed to such
Partner or holder pursuant to any provision of this Agreement, such Partner's or
holder's distributive share of Net Losses and any other items in the nature of
expenses or losses that are allocated to such Partner pursuant to Section 6.1
hereof.
In the event that a Partner's Partnership Interest or a holder of Unit's Units
or portion thereof is transferred within the meaning of Section
1.704-1(b)(2)(iv)(f) of the Regulations, the transferee shall succeed to the
Capital Account of the transferor to the extent that it relates to the
Partnership Interest, Units or portion thereof so transferred. In the event that
the Gross Asset Values of Partnership assets are adjusted, as contemplated in
paragraph (b) or (c) of the definition of "Gross Asset Value," the Capital
Accounts of the Partners and holders of Units shall be adjusted to reflect the
aggregate net adjustments as if the Partnership sold all of its properties for
their fair market values and recognized gain or loss for federal income tax
purposes equal to the amount of such aggregate net adjustment. This definition
of Capital Accounts is intended to comply with the maintenance of capital
account provisions of Section 1.704-1(b) of the Regulations and shall be
interpreted and applied in a manner consistent therewith.
"Capital Contribution" shall mean, with respect to
any Partner, the amount of cash and the initial Gross Asset Value of any
Contributed Property (net of liabilities to which such property is subject).
"Certificate" shall mean the Certificate of Limited
Partnership
<PAGE> 10
establishing the Partnership, as filed with the office of the Delaware Secretary
of State, as amended from time to time in accordance with the terms of this
Agreement and the Act.
"Code" shall mean the Internal Revenue Code of 1986, as
amended and in effect from time to time, as interpreted by the applicable
regulations thereunder. Any reference herein to a specific section or sections
of the Code shall be deemed to include a reference to any corresponding
provision of future law.
"Consent of the Limited Partners" shall mean the written
consent of a Majority-In-Interest of the Limited Partners given in accordance
with Section 11.2 hereof, which Consent shall be obtained prior to the taking of
any action for which it is required by this Agreement and may be given or
withheld by a Majority-In-Interest of the Limited Partners, unless otherwise
expressly provided herein, in their sole and absolute discretion.
"Contributed Property" shall mean any property or other
asset in such form as may be permitted by the Act, but excluding cash,
contributed or deemed contributed to the Partnership with respect to the
Partnership Interest held by each Partner.
"Control" shall mean the ability, whether by the direct or
indirect ownership of shares or other equity interests, by contract or
otherwise, to elect a majority of the directors of a corporation, to select the
managing partner of a partnership, or otherwise to select, or have the power to
remove and then select, a majority of those persons exercising governing
authority over an Entity. In the case of a limited partnership, the sole general
partner, all of the general partners to the extent each has equal management
control and authority, or the managing general partner or managing general
partners thereof shall be deemed to have control of such partnership and, in the
case of a trust, any trustee thereof or any Person having the right to select
any such trustee shall be deemed to have control of such trust.
"Declaration of Trust" shall mean the Declaration of Trust
of the General Partner dated August 25, 1969, as amended and restated as of June
6, 1988, and as further amended as of February 1, 1995, as the same may be
amended, modified, supplemented, restated or superseded from time to time.
"Depreciation" shall mean, with respect to any asset of
the Partnership for any fiscal year or other period, the depreciation or
amortization, as the case may be, allowed or allowable for federal income tax
purposes in respect of such asset for such fiscal year or other period, except
that if the Gross Asset Value of an asset differs from its adjusted tax basis
for federal income tax purposes at the beginning of such fiscal year or other
period, Depreciation shall be an amount that bears the same ratio to such
beginning book value as the federal income tax depreciation, amortization or
other cost recovery deduction for such fiscal year or other period bears to such
beginning adjusted tax basis and if such adjusted tax basis is zero, the
Depreciation shall be based on the method of depreciation, amortization or other
cost recovery deduction utilized in preparing the financial statements of the
Partnership.
<PAGE> 11
"Entity" shall mean any general partnership, limited
partnership, limited liability company, corporation, joint venture, trust,
business trust, real estate investment trust or association.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time and as interpreted by the applicable
regulations thereunder (or any corresponding provisions of succeeding laws and
regulations).
"Exchange Rights Agreement" shall mean any Exchange Rights
Agreement by and among SLT and/or SLC and one or more Limited Partners which is
intended to provide for the rights of such Limited Partners to tender Units in
exchange for either Paired Shares, other securities, cash or a combination of
the foregoing.
"Formation Agreement" shall mean that certain Formation
Agreement by and among Starwood Lodging Trust, Starwood Lodging Corporation,
Starwood Capital Group, L.P., Berl Holdings, L.P., Woodstar Partners I, L.P.,
Starwood-Apollo Hotel Partners VIII, L.P., Starwood-Apollo Hotel Partners IX,
L.P., Starwood-Nomura Hotel Investors, L.P., Starwood/Wichita Investors, L.P.,
and Starwood-Huntington Partners, L.P., and dated as of November 11, 1994, and
any amendments or modifications thereof or side letters thereto.
"GAAP" shall mean generally accepted accounting principles
in effect from time to time.
"General Partner" shall mean Starwood Lodging Trust, a
Maryland real estate investment trust, its duly admitted successors and assigns
as general partner of the Partnership at the time of reference thereto.
"Gross Asset Value" shall mean, with respect to any asset
of the Partnership, such asset's adjusted basis for federal income tax purposes,
except as follows:
(a) the initial Gross Asset Value of any asset
contributed by a Partner to the Partnership shall be the gross fair market value
of such asset at the time of its contribution as reasonably determined by the
General Partner and the contributing Partner;
(b) the Gross Asset values of all Partnership
assets shall be adjusted to equal their respective gross fair market values, as
reasonably determined by the General Partner, immediately prior to the following
events:
(i) a Capital Contribution (other than a de
minimis Capital Contribution) to the Partnership by a new or existing Partner as
consideration for a Partnership Interest;
(ii) the distribution by the Partnership to
a Partner of more than a de minimis amount of Partnership property as
consideration for the
<PAGE> 12
redemption of a Partnership Interest;
(iii) the liquidation of the Partnership
within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations; and
(iv) any other event as to which the General
Partner reasonably determines that an adjustment is necessary or appropriate to
reflect the relative economic interests of the Partners;
(c) the Gross Asset Values of Partnership assets
distributed to any Partner shall be the gross fair market values of such assets
as reasonably determined by the General Partner as of the date of distribution;
and
(d) the Gross Asset Values of Partnership assets
shall be increased (or decreased) to reflect any adjustments to the adjusted
basis of such assets pursuant to Sections 734(b) or 743(b) of the Code, but only
to the extent that such adjustments are taken into account in determining
Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations;
provided, however, that Gross Asset Values shall not be adjusted pursuant to
this paragraph to the extent that the General Partner reasonably determines that
an adjustment pursuant to paragraph (b) above is necessary or appropriate in
connection with a transaction that would otherwise result in an adjustment
pursuant to this paragraph (d).
At all times, Gross Asset Values shall be adjusted by any Depreciation taken
into account with respect to the Partnership's assets for purposes of computing
Net Income and Net Loss. Any adjustment to the Gross Asset Values of Partnership
property shall require an adjustment to the Partner's Capital Accounts.
"HEI Contribution Agreement" shall mean that certain
Contribution Agreement dated January 15, 1997, by and among the HEI Property
Companies, SLC, the Partnership, SLT Financing Partnership, a Delaware general
partnership, SLT, the Operating Partnership, and certain other parties.
"HEI Contributors" shall have that meaning provided in
Recital J hereto.
"HEI Property Companies" shall mean Westport Norfolk
Associates Limited Partnership, a Delaware limited partnership, Pruwest Norfolk,
L.L.C., a Delaware limited liability company, Westport BWI, L.L.C., a Delaware
limited liability company, Pruwest Baltimore, L.L.C., a Delaware limited
liability company, Westport Raritan, L.L.C., a Delaware limited liability
company, Pruwest Edison, L.L.C., a Delaware limited liability company, Westport
Novi, L.L.C., a Delaware limited liability company, Pruwest Novi, L.L.C., a
Delaware limited liability company, Westport Park Ridge, L.P., a Delaware
limited partnership, Westport Park Ridge, L.L.C., a Delaware limited liability
company, Westport Long Beach, L.L.C., a Delaware limited liability company,
Westport Charleston, L.L.C., a Delaware limited liability company, Westport
Santa Rosa, L.L.C., a Delaware limited liability company, Westport Crystal City,
L.L.C., a Delaware limited liability company, Prudential, Atlanta Hotel
Associates, LP, a Connecticut limited partnership, Virginia Hotel Associates,
L.P., a Delaware limited
<PAGE> 13
partnership, BW Hotel Realty, L.P., a Maryland limited partnership, Edison Hotel
Associates, L.P., a New Jersey limited partnership, Novi Hotel Associates, L.P.,
a Delaware limited partnership, Park Ridge Hotel Associates, L.P., a Delaware
limited partnership, Long Beach Hotel Associates, L.L.C., a New Jersey limited
liability company, Charleston Hotel Associates, L.L.C., a New Jersey limited
liability company, Santa Rosa Hotel Associates, L.L.C., a New Jersey limited
liability company, Crystal City Hotel Associates, L.L.C., a New Jersey limited
liability company, and Prudential HEI Joint Venture, a joint venture.
"HEI Property Company Interests" shall have the meaning
set forth in the HEI Contribution Agreement.
"HIR" shall have that meaning provided in Recital G
hereto.
"HSR" shall have that meaning provided in Recital E
hereto.
"Immediate Family" shall mean, with respect to any Person,
such Person's spouse (then current or former), parents, parents-in-law,
descendants, brothers and sisters (whether by whole or half-blood), first
cousins, brothers-in-law and sisters-in-law (whether by whole or half-blood),
ancestors and lineal descendants.
"Indemnitee" shall mean any Person who is, or at any time
on or after December 15, 1994 was, a (i) General Partner, (ii) employee,
trustee, director, officer, stockholder or Liquidating Trustee of the
Partnership or the General Partner.
"Inns Bonds" means, collectively, the Philadelphia
Authority for Industrial Development Commercial Development Revenue Bonds
(Economy Inn Project), Series A and Series B, in the original aggregate
principal amounts of $9,725,000 and $1,700,000, respectively, as amended and
restated in that certain Inns Second Supplemental Indenture dated as of July 1,
1992, and as defined in that certain Bond Purchase Agreement by and between The
First National Bank of Boston, HSR, HIR, the Operating Partnership and the
Partnership and dated as of February 26, 1996.
"Issuance Percentage" shall mean the relative values of
SLT and SLC, each stated as a percentage of the sum of the values of SLT and
SLC, and as most recently determined by SLT and SLC.
"Lien" shall mean any liens, security interests,
mortgages, deeds of trust, pledges, options, rights of first offer or first
refusal and any other similar encumbrances of any nature whatsoever.
"Limited Partners" shall mean those Persons listed under
the heading "Limited Partners" on the signature page hereto in their respective
capacities as limited partners of the Partnership, their permitted successors or
assigns as limited partners hereof, and any Person who, at the time of reference
thereto, is a limited partner of the Partnership.
"Liquidating Trustee" shall mean such individual or Entity
which is
<PAGE> 14
selected as the Liquidating Trustee hereunder by the General Partner, which
individual or Entity may include the General Partner or an Affiliate of the
General Partner, provided that such Liquidating Trustee agrees in writing to be
bound by the terms of this Agreement. The Liquidating Trustee shall be empowered
to give and receive notices, reports and payments in connection with the
dissolution, liquidation and/or winding up of the Partnership and shall hold and
exercise such other rights and powers granted to the General Partner herein or
under the Act as are necessary or required to conduct the winding-up and
liquidation of the Partnership's affairs and to authorize all parties to deal
with the Liquidating Trustee in connection with the dissolution, liquidation
and/or winding-up of the Partnership.
"Majority-In-Interest of the Limited Partners" shall mean
Limited Partner(s) who hold in the aggregate more than fifty (50) percent of the
Percentage Interests then allocable to and held by the Limited Partners, as a
class (but excluding any Partnership Interests acquired by the General Partner,
or any Person holding as a nominee of a General Partner or any Person controlled
by a General Partner).
"Minimum Gain Attributable to Partner Nonrecourse Debt"
shall mean "partner nonrecourse debt minimum gain" as determined in accordance
with Section 1.704-2(i)(2) of the Regulations.
"Net Cash Flow" shall mean, with respect to any fiscal
period of the Partnership, the excess, if any, of "Receipts" over
"Expenditures." For purposes hereof, the term "Receipts" means the sum of all
cash receipts of the Partnership from all sources for such period and any
amounts held as reserves as of the last day of such period which the General
Partner reasonably deems to be in excess of reserves as determined below. The
term "Expenditures" means the sum of (a) all cash expenditures of the
Partnership for any purpose, including operating expenses and capital
expenditures for such period, (b) the amount of all payments of principal,
premium, if any, and interest on account of any indebtedness of the Partnership,
and (c) such additions to cash reserves as of the last day of such period as the
General Partner deems necessary or appropriate for any capital, operating or
other expenditure, including, without limitation, contingent liabilities; but
the term "Expenditures" shall not include amounts paid from cash reserves
previously established by the Partnership.
"Net Income" or "Net Loss" shall mean, for each fiscal
year or other applicable period, an amount equal to the Partnerships's net
income or loss for such year or period as determined for federal income tax
purposes by the Accountants, determined in accordance with Section 703(a) of the
Code (for this purpose, all items of income, gain, loss or deduction required to
be stated separately pursuant to Section 703(a) of the Code shall be included in
taxable income or loss), with the following adjustments: (a) by including as an
item of gross income any tax-exempt income received by the Partnership; (b) by
treating as a deductible expense any expenditure of the Partnership described in
Section 705(a)(2)(B) of the Code (including amounts paid or incurred to organize
the Partnership (unless an election is made pursuant to Section 709(b) of the
Code) or to promote the sale of interests in the Partnership and by treating
deductions for any losses incurred in connection with the sale or exchange of
Partnership property disallowed pursuant to Section 267(a)(1) or Section 707(b)
of the
<PAGE> 15
Code as expenditures described in Section 705(a)(2)(B) of the Code); (c)
in lieu of depreciation, depletion, amortization and other cost recovery
deductions taken into account in computing total income or loss, there shall be
taken into account Depreciation; (d) gain or loss resulting from any disposition
of Partnership property with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to the Gross Asset
Value of such property rather than its adjusted tax basis; (e) in the event of
an adjustment of the Gross Asset Value of any Partnership asset which requires
that the Capital Accounts of the Partnership be adjusted pursuant to Sections
1.704-1(b)(2)(iv)(e), (f) and (m) of the Regulations, the amount of such
adjustment is to be taken into account as additional Net Income or Net Loss
pursuant to Section 6.1 hereof; and (f) excluding any items specially allocated
pursuant to Section 6.1(b) hereof.
"Nonrecourse Deductions" shall have the meaning set forth
in Sections 1.704-2(b)(1) and (c) of the Regulations and shall be determined in
accordance with Section 1.704-2(c) of the Regulations.
"Nonrecourse Liabilities" shall have the meaning set forth
in Section 1.704-2(b)(3) of the Regulations.
"Operating Partnership" shall mean SLC Operating Limited
Partnership, a Delaware limited partnership.
"Original Agreement" shall have the meaning set forth in
Recital A hereof.
"Paired Share Closing Price" shall mean, with respect to a
particular date, the last reported sales price regular way on such date or, in
case no such reported sale takes place on such date, the average of the reported
closing bid and asked prices regular way on such date, in either case on the New
York Stock Exchange, or if the Paired Shares are not then listed or admitted to
trading on such Exchange, on the principal national securities exchange on which
the Paired Shares are then listed or admitted to trading or, if not then listed
or admitted to trading on any national securities exchange, the closing sale
price on such date of the Paired Shares or, in case no reported sale takes place
on such date then, the average of the closing bid and asked prices on such date,
on NASDAQ or any comparable system. If the Paired Shares are not then quoted on
NASDAQ or any comparable system, the Board of Trustees of SLT and the Board of
Directors of SLC shall in good faith determine the Paired Share Closing Price.
"Paired Shares" shall mean one Share and one common share
of SLC that are subject to a pairing agreement between the General Partner and
SLC.
"Partner Nonrecourse Debt" shall have the meaning set
forth in Section 1.704-2(b)(4) of the Regulations.
"Partner Nonrecourse Deductions" shall have the meaning
set forth in Section 1.704-2(i)(2) of the Regulations and the amount of Partner
Nonrecourse
<PAGE> 16
Deductions with respect to a Partner Nonrecourse Debt shall be determined in
accordance with the rules of Section 1.704-2(i) of the Regulations.
"Partners" shall mean the General Partner and the Limited
Partners, their duly admitted successors or assigns or any Person who is a
partner of the Partnership at the time of reference thereto.
"Partnership" shall mean the limited partnership formed
under the Act pursuant to the Original Agreement and as continued pursuant to
this Agreement and any successor thereto.
"Partnership Interest" shall mean the ownership interest
of a Partner in the Partnership from time to time, including each Partner's
Percentage Interest and such Partner's Units.
"Partnership Minimum Gain" shall have the meaning set
forth in Section 1.704-2(b)(2) of the Regulations and the amount of Partnership
Minimum Gain (and any net increase or decrease thereof) for a fiscal year or
other period shall be determined in accordance with the rules of Section
1.704-2(d) of the Regulations.
"Partnership Record Date" means the record date
established by the General Partner for distribution of Net Cash Flow pursuant to
Section 6.2 hereof, which record date shall be the same as the record date
established by the General Partner for distribution to its shareholders of some
or all of its portion of such distribution.
"Percentage Interest" shall mean, with respect to any
Partner, the percentage ownership interest of such Partner in such items of the
Partnership as to which the term "Percentage Interests" is applied in this
Agreement, as provided in Section 4.3 hereof.
"Person" shall mean any natural person or Entity.
"Property" shall mean any property acquired by or
contributed to the Partnership or any property owned by an Entity in which the
Partnership has an ownership interest.
"Purchase Rights" shall have the meaning set forth in
Section 4.4 hereof.
"Registration Rights Agreement" shall mean any
Registration Rights Agreement by and among SLT and/or SLC and one or more
Limited Partners, which is intended to set forth the rights of such Limited
Partner or Limited Partners or other holders of Units, and the obligations of
SLT and/or SLC, to cause the registration of certain securities pursuant to the
Securities Act of 1933, as amended.
"Regulations" shall mean the income tax regulations
promulgated under the Code, as such regulations may be amended from time to time
(including
<PAGE> 17
corresponding provisions of succeeding regulations), and may, in the sole
discretion of the General Partner, include temporary and/or proposed income tax
regulations.
"Regulatory Allocations" shall have the meaning set forth
in Section 6.1(b)(viii) hereof.
"REIT" shall mean a real estate investment trust as
defined in Section 856 of the Code.
"REIT Expenses" shall mean all expenses which the
Partnership hereby assumes and agrees to pay as incurred for the benefit of the
Partnership, including (a) costs and expenses relating to the formation and
continuation of the Partnership and continuity of existence of the General
Partner, including taxes (other than the General Partner's federal and state
income and franchise taxes, if any), fees and assessments associated therewith,
any and all costs, expenses or fees payable to any director or trustee of the
General Partner, (b) to the extent funded by the General Partner for payment by
the Partnership, costs and expenses relating to any offer or registration of
securities by the General Partner the net proceeds of which are to be
contributed or loaned to the Partnership and all statements, reports, fees and
expenses incidental thereto, including underwriting discounts and selling
commissions applicable to any such offer of securities, (c) costs and expenses
associated with the preparation and filing of any periodic reports by the
General Partner under federal, state or local laws or regulations, including
filings with the SEC, (d) costs and expenses associated with compliance by the
General Partner with laws, rules and regulations promulgated by any regulatory
body, including the SEC and (e) all other costs of the General Partner incurred
in the course of its business on behalf of the Partnership including, but not
limited to, any indemnification obligations of the General Partner (other than
indemnification obligations pursuant to Sections 9.1 and 9.2 of the Formation
Agreement).
"REIT Requirements" shall mean the requirements for the
General Partner to: (a) qualify as a REIT under the Code and Regulations; (b)
avoid any federal income or excise tax liability; (c) retain its status as
grandfathered pursuant to Section 136(c)(3) of the Deficit Reduction Act of
1984; and (d) retain the benefits of that certain private letter ruling issued
by the Internal Revenue Service to the General Partner dated as of January 4,
1980. "REIT Requirements" shall also include the ownership limitation provisions
set forth in Article VI of the Declaration of Trust.
"Restricted Entity" shall mean any "employee benefit plan"
as defined in and subject to ERISA, any "plan" as defined in and subject to
Section 4975 of the Code, or any entity any portion or all of the assets of
which are deemed pursuant to United States Department of Labor Regulation
Section 2510.3-101 or otherwise pursuant to ERISA or the Code to be, for any
purpose of ERISA or Section 4975 of the Code, assets of any such "employee
benefit plan" or "plan" which invests in such entity.
"Rights" shall mean the rights of a Limited Partner as set
forth in an Exchange Rights Agreement and/or a Registration Rights Agreement. No
provision of this Agreement shall be interpreted as granting any Partner or
holder of Units any
<PAGE> 18
Rights or any rights or interest in or to the Exchange Rights Agreement or the
Registration Rights Agreement.
"SEC" shall mean the United States Securities and Exchange
Commission.
"Section 704(c) Tax Items" shall have the meaning set
forth in Section 6.1(c)(iii) hereof.
"Senior Debt" shall mean the indebtedness issued pursuant
to that certain Credit Agreement among the General Partner and certain
institutional lenders, dated as of January 28, 1993, which indebtedness has been
assumed by the Partnership as such indebtedness may be amended, modified or
refinanced from time to time.
"Shares" shall mean the common shares of beneficial
interest, par value $0.01 per share, of the General Partner.
"SLC" shall mean Starwood Lodging Corporation, a Maryland
corporation.
"Suites Bonds" means the Philadelphia Authority for
Industrial Development Commercial Development Revenue Bonds (Suite Hotel
Project), Series A, in the original aggregate principal amount of $27,275,000,
as amended and restated in that certain Supplemental Mortgage and Trust
Indenture dated as of June 1, 1991, and as defined in that certain Bond Purchase
Agreement by and between The First National Bank of Boston, HSR, HIR, the
Operating Partnership and the Partnership and dated as of February 26, 1996.
"Tax Items" shall have the meaning set forth in Section
6.1(c)(i) hereof.
"Tax Payment Loan" shall have the meaning set forth in
Section 6.7(a) hereof.
"Units" shall have the meaning set forth in Section 4.1(c)
hereof.
"Withholding Tax Act" shall have the meaning set forth in
Section 6.7(a) hereof.
ARTICLE 2
Continuation and Business of the Partnership
2.1 Continuation. The parties hereto do hereby continue the
limited partnership formed pursuant to the Original Agreement and pursuant to
the provisions of the Act and upon the terms and conditions set forth herein.
The parties hereto agree
<PAGE> 19
that the rights and liabilities of the Partners shall be as provided herein. The
parties hereto shall immediately execute and deliver all certificates and other
documents and do all filings, recording and publishing and other acts as in the
judgment of the General Partner may be appropriate to comply with all of the
requirements for the continuation of the Partnership as a limited partnership
under the Act and the qualification of the Partnership in any jurisdiction in
which the Partnership owns property or conducts business.
2.2 Name. The name of the Partnership shall be SLT Realty Limited
Partnership, or such other name as shall be chosen from time to time by the
General Partner in its sole and absolute discretion; provided, however, that the
General Partner may not choose the name (or any derivative thereof) of any
Limited Partner without the prior written consent of such Limited Partner.
2.3 Character of the Business. The purpose of the Partnership
shall be to acquire, hold, own, develop, redevelop, construct, improve,
maintain, operate, manage, sell, lease, rent, transfer, encumber, mortgage,
convey, exchange and otherwise dispose of or deal with the Properties and any
other real and personal property of all kinds; to undertake such other
activities as may be necessary, desirable or appropriate to the business of the
Partnership; to engage in such other activities as shall be necessary, desirable
or appropriate to effectuate the foregoing purposes; and to otherwise engage in
any enterprise or business in which a limited partnership may engage or conduct
under the Act. The Partnership shall have all powers necessary, desirable or
appropriate to accomplish the purposes enumerated. In connection with the
foregoing, but subject to the terms and conditions of this Agreement, the
Partnership shall have full power and authority to enter into, perform and carry
out contracts of any kind, to borrow money and to issue evidences of
indebtedness, whether or not secured by Liens, and, directly or indirectly, to
acquire and construct additional Properties necessary or useful in connection
with its business.
2.4 Location of Principal Place of Business. The location of the
principal place of business of the Partnership shall be at 2231 East Camelback
Road, Suite 410, Phoenix, Arizona 85016, or such other location as shall be
selected from time to time by the General Partner in its sole and absolute
discretion; provided, however, that the General Partner shall notify the
Partners of any change in the location of the principal place of business of the
Partnership within thirty (30) days thereafter.
2.5 Registered Agent and Registered Office. The registered agent
of the Partnership shall be The Corporation Trust Company or such other Person
as the General Partner may select in its sole and absolute discretion. The
registered office of the Partnership in the State of Delaware shall be c/o The
Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801 or such other location as the
General Partner may from time to time select in its sole discretion; provided,
however, that the General Partner shall notify the Limited Partners of any
change in the registered office or registered agent of the Partnership within
thirty (30) days thereafter.
2.6 Restatement of Agreement. This Agreement amended and
<PAGE> 20
restates the Original Restated Agreement, including the amendments thereto, in
its entirety effective as of the date first above written and, effective as of
such date, the Original Restated Agreement and the amendment thereto shall be of
no further force or effect.
ARTICLE 3
Term
3.1 Commencement. The Partnership's term commenced upon the
filing of the Certificate with the Secretary of State of Delaware on December
15, 1994.
3.2 Dissolution. The Partnership shall continue until dissolved
and terminated upon the occurrence of the earliest of the following events:
(a) the death, dissolution, termination, withdrawal,
retirement, expulsion or Bankruptcy of the General Partner, unless the
Partnership's business is continued as provided in Section 9.1 hereof;
(b) the election to dissolve the Partnership made in
writing by the General Partner;
(c) the sale or other disposition of all or substantially
all of the assets of the Partnership unless the General Partner elects to
continue the Partnership business for the purpose of the receipt and the
collection of indebtedness or the collection of any other consideration to be
received in exchange for the assets of the Partnership (which activities shall
be deemed to be part of the winding up of the affairs of the Partnership);
(d) the entry of a decree of judicial dissolution of the
Partnership pursuant to the provisions of the Act, which decree is final and not
subject to appeal; or
(e) December 31, 2094.
ARTICLE 4
Capital Contributions
4.1 Capital Contributions; Units.
(a) As of the date first above written, the Partners have
the Percentage Interests in the Partnership as set forth in Exhibit A which
Percentage Interests shall be adjusted to the extent necessary to reflect
properly exchanges, redemptions or conversions of Partnership Interests, Capital
Contributions, the issuance of additional Partnership Interests or any other
event having an effect on a Partner's Percentage Interest, in each case to the
extent permitted by and in
<PAGE> 21
accordance with this Agreement. Except to the extent specifically set forth in
this Agreement with respect to the General Partner, the Partners shall have no
obligation to make any additional Capital Contributions or loans to the
Partnership, even if the failure to do so could result in the Bankruptcy or
insolvency of the Partnership or any other adverse consequence to the
Partnership.
(b) The General Partner shall, from time to time,
contribute cash or Property to the Partnership such that the Percentage Interest
of the General Partner shall at all times be at least one (1) percent and the
Capital Account balance of the General Partner shall be at least the lesser of
$500,000 or one (1) percent of the total positive Capital Account balances for
the Partnership.
(c) The interest of a Partner (or an assignee of a
Partner) in capital, allocations of Net Income, Net Loss and distributions shall
be evidenced by the issuance to such Partner (or assignee) of one or more
"Units." The aggregate total of all Units outstanding and the ownership of such
Units by each Partner are as set forth on Exhibit A hereto, which Exhibit shall
be updated by the General Partner to reflect changes in the holdings of Units by
the Partners.
(d) From time to time, the General Partner may cause the
Partnership to issue additional Partnership Interests to existing or
newly-admitted Partners in exchange for additional Capital Contributions
(including Capital Contributions pursuant to Section 4.1(b)). If the General
Partner contributes to the Partnership the net proceeds to the General Partner
from any offering or sale of Paired Shares (including, without limitation, any
issuance of Paired Shares pursuant to the exercise of options, warrants,
convertible securities, or similar rights to acquire Paired Shares), the
Partnership shall issue to the General Partner Units equal in number to the
number of Paired Shares issued in such offering or sale. If the General Partner
or SLT issues Paired Shares to any Person in exchange for services, the
Partnership shall issue an equal number of Units to the General Partner
effective no later than the date on which the value of the Paired Shares is
includable in the gross income of such Person.
(e) The General Partner is hereby authorized to cause the
Partnership to issue Partnership Interests in one or more classes or one or more
series of any of such classes, with such designations, preferences and relative,
participating, optional or other special rights, powers and duties, including
rights, powers and duties senior to the then-existing Partnership Interests and
Units, as shall be determined by the General Partner in its sole and absolute
discretion, including (i) the allocation of items of Partnership income, gain,
loss, deduction and credit to each such class or series of Partnership Interests
and (ii) the rights of each such class or series of Partnership Interests to
share in Partnership distributions (including liquidating distributions);
provided, however, that no such additional Partnership Interests shall be issued
to the General Partner unless (x) the additional Partnership Interests are
issued in connection with an issuance of shares of the General Partner, which
shares have designations, preferences and other rights, all such that the
economic interests of such shares are substantially similar to the designations,
preferences and other rights of the additional Partnership Interests issued to
the General Partner in accordance with this
<PAGE> 22
Section 4.1(e) and (y) the General Partner contributes to the Partnership an
amount equal to the net proceeds received by the General Partner in connection
with the issuance of such shares.
(f) In the event of any change in the outstanding number
of Paired Shares by reason of any share dividend, split, reverse split,
recapitalization, merger, consolidation or combination, the number of Units held
by each Partner (or assignee) shall be proportionately adjusted such that, to
the extent possible, one Unit remains the equivalent of one Share without
dilution. It is the intent of the Partners that, to the extent possible, the
number of Units held by the General Partner shall at all times equal the number
of issued and outstanding Shares.
(g) No fractional Units shall remain outstanding. In lieu
of issuing a fractional Unit to a holder of Units, the number of Units to be
held by such holder shall be rounded to the nearest whole Unit, or, at the
option of the General Partner, the holder shall be paid cash equal to the fair
market value of such fractional Unit.
4.2 Redemption of Units Held by Limited Partner. The General
Partner is hereby authorized to cause the Partnership to redeem all or any
portion of the Units held by any Limited Partner whenever the General Partner,
in its sole discretion, believes such redemption to be reasonably necessary or
appropriate in order to prevent the Partnership from being characterized as a
"publicly traded partnership" pursuant to Section 7704 of the Code and the
Regulations thereunder. Any redemption of Units pursuant to this Section 4.2
shall be made from the Limited Partners in reverse order of their respective
ownership of Units, that is, first from the Limited Partner or Limited Partners
with the fewest Units, and, second, if required, from the Limited Partner or
Limited Partners with the next fewest Units, et cetera. Notwithstanding the
previous sentence, the General Partner is hereby authorized to cause the
Partnership to redeem all of the Units held by a particular Limited Partner who,
because of the number of such Limited Partner's direct or indirect beneficial
owners or its structure, in the judgment of the General Partner in its sole
discretion, and whether or not in conjunction with any other Partner (whether
redeemed pursuant to this Section 4.2 or not), may cause the Partnership to be
characterized as a "publicly traded partnership" pursuant to Section 7704 of the
Code and the Regulations thereunder. The redemption price of any Unit redeemed
pursuant to this Section 4.2 shall be equal to the product of (a) 115% of the
average of the Paired Share Closing Price for the ten (10) trading day period
ending five (5) days prior to the date of such redemption, multiplied by (b) the
then Issuance Percentage of SLT. Any redemption of a Limited Partner shall be
effective upon the date specified in a Notice to such Limited Partner, or, if
later, five (5) days after such Notice. No redemption pursuant to this Section
4.2 shall be made unless the Operating Partnership concurrently effects a
comparable redemption.
4.3 Percentage Interests. The Percentage Interest of a Partner
shall be equal to the percentage obtained by dividing (a) the number of Units
held by such Partner (including Units held by assignees of such Partner who have
not been admitted as Partners) by (b) the total number of issued and outstanding
Units.
<PAGE> 23
4.4 Purchase Rights. If the General Partner grants, issues or
sells any options, convertible securities or rights to purchase shares,
warrants, or other property pro rata to the record holders of Shares
(collectively, "Purchase Rights"), then the Partners shall, to the extent
practicable and consistent with the other provisions of this Agreement, be
entitled to acquire from the Partnership interests in the Partnership that are
substantially similar in amount, tone and tenor to the Purchase Rights to which
such Partners would be entitled if such Partners had converted their Partnership
Interests into Paired Shares immediately prior to the grant, issue or sale of
the Purchase Rights.
4.5 Redemption of Units Held by the General Partner. If the
General Partner shall redeem any of its outstanding Shares (including the
issuance of cash in lieu of fractional Shares or in the event of the forfeiture
or cancellation of Shares issued in exchange for services), the Partnership
shall concurrently therewith redeem an equal number of Units held by the General
Partner for the same price as paid by the General Partner for the redemption,
forfeiture or cancellation of such Shares. Similar redemptions of interests of
the General Partner in the Partnership shall occur if any other outstanding
securities of the General Partner are redeemed or otherwise retired.
4.6 No Third Party Beneficiaries. No creditor or other third
party shall have the right to enforce any right or obligation of any Partner to
make Capital Contributions or loans or to pursue any other right or remedy
hereunder or at law or in equity, it being understood and agreed that the
provisions of this Agreement shall be solely for the benefit of, and may be
enforced solely by, the parties hereto and their respective successors and
assigns. None of the rights or obligations of the Partners herein set forth to
make Capital Contributions or loans to the Partnership shall be deemed an asset
of the Partnership for any purpose by any creditor or other third party, nor may
such rights or obligations be sold, transferred or assigned by the Partnership
or pledged or encumbered by the Partnership to secure any debt or other
obligation of the Partnership or of any of the Partners.
4.7 No Interest on or Return of Capital Contribution. No Partner
shall be entitled to interest on its Capital Contribution or Capital Account.
Except as provided herein or by law, no Partner shall have any right to demand
or receive the return of its Capital Contribution.
ARTICLE 5
Indemnification
5.1 Indemnification of the General Partner.
(a) To the fullest extent permitted by law, the Partnership shall
and does hereby indemnify an Indemnitee from and against any and all losses,
claims, damages, liabilities, joint or several, expenses (including reasonable
legal fees and expenses), judgments, fines, settlements, and other amounts
arising from any and all claims, demands, actions, suits or proceedings
(including arbitration and mediation proceedings), civil, criminal,
administrative or investigative, that relate, directly or
<PAGE> 24
indirectly, to the formation, business or operations of the Partnership in which
any Indemnitee may be involved, or is threatened to be involved, as a party,
witness or otherwise, by reason of the fact that such Person was an Indemnitee,
whether or not the same shall proceed to judgment or be settled or otherwise be
brought to a conclusion, except only if and to the extent that it is finally
adjudicated that the act or omission of the Indemnitee was material to the
matter giving rise to the proceeding and was committed with fraud, gross
negligence or willful misconduct. The termination of any proceeding by judgment,
order or settlement does not create a presumption that the Indemnitee did not
meet the requisite standard of conduct set forth in this Section 5.1(a). Any
indemnification pursuant to this Section 5.1 shall be made only out of the
assets of the Partnership and no Partner shall have any personal liability
therefor. The provisions of this Section 5.1 are for the benefit of the
Indemnitees, their heirs, successors, assigns, personal representatives and
administrators, and shall not be deemed to create any rights for the benefit of
any other Persons. The foregoing notwithstanding, the General Partner shall not
be entitled to indemnification from the Partnership with respect to matters
provided for in Sections 9.1 and 9.2 of the Formation Agreement.
(b) Reasonable expenses incurred by an Indemnitee who is a
party or witness in a proceeding shall be paid or reimbursed by the Partnership
in advance of the final disposition of the proceeding upon receipt by the
Partnership of (i) a written affirmation by the Indemnitee of the Indemnitee's
good faith belief that the standard of conduct necessary for indemnification by
the Partnership, as authorized in this Section 5.1, has been met, and (ii) a
written undertaking by or on behalf of the Indemnitee to repay the amount paid
or reimbursed if it shall ultimately be determined that such Indemnitee is not
entitled to be indemnified hereunder.
(c) The indemnification provided by this Section 5.1 shall
be in addition to any other rights to which an Indemnitee may be entitled under
any agreement, as a matter of law or otherwise, and shall continue as to an
Indemnitee who has ceased to serve in such capacity. The Partnership shall
purchase and maintain insurance, on behalf of the Indemnitees, against any
liability that may be asserted against or expenses that may be incurred by such
Person in connection with the Partnership's activities, regardless of whether
the Partnership would have the power to indemnify such Person against such
liability under the provisions of this Agreement. An Indemnitee shall not be
denied indemnification in whole or in part under this Section 5.1 solely because
the Indemnitee had an interest in the transaction with respect to which the
indemnification applies.
(d) For purposes of this Section 5.1, the Partnership
shall be deemed to have requested an Indemnitee to serve as fiduciary of an
employee benefit plan whenever the performance by it of its duties to the
Partnership also imposes duties on, or otherwise involves services by, it to the
plan or participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute fines within the meaning of this Section 5.1; and actions taken
or omitted by the Indemnitee with respect to an employee benefit plan in the
performance of its duties for a purpose reasonably believed by it to be in the
interest of the participants and beneficiaries of the plan shall be deemed to be
for a
<PAGE> 25
purpose which is not opposed to the best interests of the Partnership.
5.2 Indemnification of Limited Partners.
(a) From and after the date hereof, the Partnership shall
indemnify and hold harmless each Limited Partner, its Affiliates, employees,
officers, directors and agents against and from all liability, demands, claims,
actions or causes of action, assessments, losses, fines, penalties, costs,
damages and expenses (including, without limitation, reasonable attorneys' and
accountants' fees and expenses) sustained or incurred by such Limited Partner or
Affiliate or any assignee or successor thereof (including, without limitation,
any permitted assignee of a Limited Partner under Article 9 hereof) as a result
of or arising out of any action, suit or proceeding (including mediation and
arbitration proceedings) (i) arising out of or relating to the operation of the
Partnership's business or the Limited Partner being a Partner in the Partnership
(excluding, specifically, actions, suits or proceedings arising out of actual or
alleged breaches of a Partner's representations, warranties or covenants
hereunder or pursuant to the Formation Agreement or arising out of acts by a
Limited Partner other than in its capacity as such) and (ii) naming a Limited
Partner or any of its Affiliates as a party to such proceeding. Any
indemnification pursuant to this Section 5.2(a) shall be made only out of the
assets of the Partnership and no Partner shall have any personal liability
therefor. The provisions of this Section 5.2(a) are for the benefit of the
Limited Partners, their Affiliates, employees, officers, directors and agents,
and shall not be deemed to create any rights for the benefit of any other
Persons.
(b) Notwithstanding the foregoing, the Partnership shall
indemnify and hold harmless the HEI Contributors of and from liabilities of the
HEI Property Companies whose HEI Property Company Interests have been acquired
by the Partnership except for any undisclosed material liability of such
Property Company as of February 14, 1997 (collectively, the "Excluded
Liabilities"); provided, however, that the Excluded Liabilities shall not
include:
(i) any liability incurred in the ordinary course
of operating the applicable Hotel prior to February 14, 1997;
(ii) any liability disclosed by the Transaction
Documents, the Schedules or Exhibits thereto, any supplement to
such schedules or exhibits delivered to the Starwood Parties
prior to February 14, 1997, the agreements, reports or other
documents referred to in any of the foregoing, the Financial
Statements, the financial statements prepared in connection with
the Net Working Capital adjustment provided for in Article IV of
the Contribution Agreement;
(iii) any Liability of which the Starwood Parties
otherwise had Knowledge prior to February 14, 1997; or
(iv) any Liability incurred on or after February
14, 1997;
and the Partnership shall be obligated to hold the HEI Contributors harmless
from all
<PAGE> 26
such enumerated liabilities. The provisions of this Section 5.2(b) shall be in
addition to and not in limitation of the indemnifications provided to Limited
Partners pursuant to Section 5.2(a). Any capitalized term in this Section 5.2(b)
not otherwise defined in this Agreement shall have the meaning set forth in the
HEI Contribution Agreement.
5.3 Notice of Claims. If any Person believes that it is entitled
to indemnification under this Article 5, such Person shall so notify the
Partnership promptly in writing describing such claim for indemnification, the
amount thereof, if known, and the method of computation, all with reasonable
particularity and containing a reference to the provisions of this Agreement in
respect of which such claim shall have occurred; provided, however, that the
omission by such indemnified party to give notice as provided herein shall not
relieve the Partnership of its indemnification obligation under this Article 5
except to the extent that the Partnership is materially damaged as a result of
such failure to give notice. If any action at law or suit in equity is
instituted by or against a third party with respect to which any of the Persons
entitled to indemnification under this Article 5 intends to make a claim for
indemnification under this Article 5, any such Person shall promptly notify the
Partnership of such action or suit. Any Person entitled to indemnification
hereunder shall use reasonable efforts to minimize the amount of any claim for
indemnification hereunder.
5.4 Third Party Claims. In the event of any claim for
indemnification hereunder resulting from or in connection with any claim or
legal proceeding by a third party, the indemnified Person shall give such notice
thereof to the Partnership not later than twenty (20) Business Days prior to the
time any response to the asserted claim is required, if possible, and in any
event within fifteen (15) Business Days following the date such indemnified
Person has actual knowledge thereof; provided, however, that the omission by
such indemnified Person to give notice as provided herein shall not relieve the
Partnership of its indemnification obligation under this Article 5 except to the
extent that the Partnership is materially damaged as a result of such failure to
give notice. In the event of any such claim for indemnification resulting from
or in connection with a claim or legal proceeding by a third party, the
Partnership may, at its sole cost and expense, assume the defense thereof;
provided, however, that counsel for the Partnership, who shall conduct the
defense of such claim or legal proceeding, shall be reasonably satisfactory to
the indemnified Person; and provided, further, that if the defendants in any
such actions include both the indemnified Persons and the Partnership and the
indemnified Persons shall have reasonably concluded that there may be legal
defenses or rights available to them which have not been waived and are in
actual or potential conflict with those available to the Partnership, the
indemnified Persons shall have the right to select one law firm reasonably
acceptable to the Partnership to act as separate counsel, on behalf of such
indemnified Persons, at the expense of the Partnership. Unless the indemnified
Persons are represented by separate counsel pursuant to the second proviso of
the immediately preceding sentence, if the Partnership assumes the defense of
any such claim or legal proceeding, it shall not consent to entry of any
judgment, or enter into any settlement, that (a) is not subject to
indemnification in accordance with the provisions in this Article 5, (b)
provides for injunctive or other non-monetary relief affecting the indemnified
Persons or (c) does not include as an unconditional term thereof the giving by
each claimant or plaintiff to such indemnified Persons of a release from all
liability with
<PAGE> 27
respect to such claim or legal proceeding, without the prior written consent of
the indemnified Persons (which consent, in the case of clauses (b) and (c),
shall not be unreasonably withheld or delayed); and provided, further, that,
unless the indemnified Persons are represented by separate counsel pursuant to
the second proviso of the immediately preceding sentence, the indemnified
Persons may, at their own expense, participate in any such proceeding with the
counsel of their choice without any right of control thereof. So long as the
Partnership is in good faith defending such claim or proceeding, the indemnified
Persons shall not compromise or settle such claim or proceeding without the
prior written consent of the Partnership, which consent shall not be
unreasonably withheld or delayed. If the Partnership does not assume the defense
of any such claim or litigation in accordance with the terms hereof, the
indemnified Persons may defend against such claim or litigation in such manner
as they may deem appropriate, including, without limitation, settling such claim
or litigation (after giving prior written notice of the same to the Partnership
and obtaining the prior written consent of the Partnership, which consent shall
not be unreasonably withheld or delayed) on such terms as the indemnified
Persons may deem appropriate, and the Partnership will promptly indemnify the
indemnified Persons in accordance with the provisions of this Article 5.
5.5 Indemnification Pursuant to Formation Agreement. If any
obligation pursuant to the indemnification provisions of Article IX of the
Formation Agreement would otherwise require the indemnifying Person to make a
cash payment to the indemnified Person then, subject to Article 9 hereof, in
lieu of making all or any portion of such cash payment, the indemnifying Person
may transfer Units of equivalent value to the indemnified Person. For purposes
of the preceding sentence, the value of a Unit shall be treated as equal to
ninety-five (95) percent of the average closing price of a Paired Share for the
ten (10) trading day period commencing fifteen (15) trading days prior to the
date the indemnifying Person would otherwise be required to pay cash to the
indemnified Person. Indemnification through the transfer of Units pursuant to
this Section 5.5 may only made if (a) indemnification through the transfer of an
equal number of units of the Operating Partnership is being made pursuant to
Section 5.5 of the Second Amended and Restated Limited Partnership Agreement of
SLC Operating Limited Partnership or (b) the indemnifying Person otherwise makes
arrangements for the transfer to the indemnified Person (or its designee) of an
equal number of units of the Operating Partnership.
ARTICLE 6
Allocations, Distributions and Other Tax and Accounting Matters
6.1 Allocations. The Net Income, Net Loss and other Partnership
items shall be allocated pursuant to the provisions of this Section 6.1 hereto.
(a) Allocation of Net Income and Net Loss.
(i) Net Income. Except as otherwise provided
herein, Net Income for any fiscal year or other applicable period shall be
allocated in the
<PAGE> 28
following order and priority:
(A) first, to the General Partner, until the
cumulative Net Income allocated pursuant to this clause (i)(A) for the current
and all prior periods equals the cumulative Net Loss allocated pursuant to the
last sentence of clause (ii) hereof for all prior periods; and
(B) thereafter, the balance of Net Income,
if any, shall be allocated to the holders of Units in accordance with their
respective holdings of Units.
(ii) Net Loss. Except as otherwise provided herein,
Net Loss of the Partnership for each fiscal year or other applicable period
shall be allocated to the holders of Units in accordance with their respective
holdings of Units. The preceding sentence notwithstanding, to the extent any Net
Loss allocated to a holder would cause such a holder to have an Adjusted Capital
Account Deficit as of the end of the fiscal year to which such Net Loss relates,
such Net Loss shall not be allocated to such holder and instead shall be
allocated to the General Partner.
(b) Special Allocations. Notwithstanding any provisions of
Section 6.1(a) hereof, the following special allocations shall be made in the
following order:
(i) Minimum Gain Chargeback. Notwithstanding any
other provision of this Article 6, if there is a net decrease in Partnership
Minimum Gain for any Partnership fiscal year (except as a result of conversion
or refinancing of Partnership indebtedness, certain capital contributions or
revaluation of the Partnership property as further outlined in Section
1.704-2(f) of the Regulations), each holder of Units shall be specially
allocated items of Partnership income and gain for such year (and, if necessary,
subsequent years) in an amount equal to that holder's share of the net decrease
in Partnership Minimum Gain as determined under Section 1.704-2(g) of the
Regulations. The items to be so allocated shall be determined in accordance with
Section 1.704-2(f) of the Regulations. This clause (i) is intended to comply
with the minimum gain chargeback requirement in said section of the Regulations
and shall be interpreted consistently therewith. Allocations pursuant to this
clause (i) shall be made in proportion to the respective amounts required to be
allocated to each holder of Units pursuant hereto.
(ii) Minimum Gain Chargeback Attributable to
Partner Nonrecourse Debt. Notwithstanding any other provision of this Article 6,
if there is a net decrease in Minimum Gain Attributable to Partner Nonrecourse
Debt during any fiscal year (other than due to the conversion, refinancing or
other change in the debt instrument causing it to become partially or wholly
nonrecourse, certain capital contributions, or certain revaluations of
Partnership property (as further outlined in Section 1.704-2(i)(4) of the
Regulations), each holder of Units shall be specially allocated items of
Partnership income and gain for such year (and, if necessary, subsequent years)
in an amount equal to the holder's share of the net decrease in the Minimum Gain
Attributable to Partner Nonrecourse Debt as determined under Section
<PAGE> 29
1.704-2(i) of the Regulations. The items to be so allocated shall be determined
in accordance with Sections 1.704-2(i)(4) and (j)(2) of the Regulations. This
clause (ii) is intended to comply with the minimum gain chargeback requirement
with respect to Partner Nonrecourse Debt contained in said section of the
Regulations and shall be interpreted consistently therewith. Allocations
pursuant to this clause (ii) shall be made in proportion to the respective
amounts required to be allocated to each holder of Units.
(iii) Qualified Income Offset. In the event a
holder of Units unexpectedly receives any adjustments, allocations or
distributions described in Section 1.704-1(b)(2)(ii) (d)(4), (5), or (6) of the
Regulations, and such holder has an Adjusted Capital Account Deficit, items of
Partnership income and gain shall be specially allocated to such holder in an
amount and manner sufficient to eliminate the Adjusted Capital Account Deficit
as quickly as possible, provided that an allocation pursuant to this Section
6.1(b)(iii) shall be made only if and to the extent that such holder would have
Adjusted Capital Account Deficit after all other allocations provided for in
this Article VI have been tentatively made as if this Section 6.1(b)(iii) were
not in the Agreement. This clause (iii) is intended to constitute a "qualified
income offset" under Section 1.704-1(b)(2)(ii) (d) of the Regulations and shall
be interpreted consistently therewith.
(iv) Gross Income Allocation. In the event any
holder of Units has a deficit Capital Account at the end of any fiscal year
which is in excess of the sum of (x) the amount such holder is obligated to
restore pursuant to any provision of this Agreement, and (y) the amount such
holder is deemed to be obligated to restore pursuant to the penultimate
sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations, each
such holder shall be specially allocated items of Partnership income and gain in
the amount of such excess as quickly as possible, provided that an allocation
pursuant to this Section 6.1(b)(iv) shall be made only if and to the extent that
such holder would have a Capital Account Deficit in excess of such sum after all
other allocations provided for in this Article 6 have been made as if Section
6.1(b)(iii) hereof and this Section 6.1(b)(iv) were not in the Agreement.
(v) Nonrecourse Deductions. Nonrecourse Deductions
for any fiscal year or other applicable period shall be allocated to the holders
of Units in accordance with their respective holdings of Units. For purposes of
Section 1.752-3(a) (3) of the Regulations, "excess nonrecourse liabilities"
shall be allocated among the holders of Units in proportion to their respective
holdings of Units.
(vi) Partner Nonrecourse Deductions. Partner
Nonrecourse Deductions for any fiscal year or other applicable period shall be
specially allocated to the holder of Units that bears the economic risk of loss
with respect to the Partner Nonrecourse Debt in respect of which such Partner
Nonrecourse Deductions are attributable (as determined under Sections 1.704-2(b)
(4) and (i) (1) of the Regulations).
(vii) Section 754 Adjustments. To the extent an
adjustment to the adjusted tax basis of any Partnership asset pursuant to
Section 734(b) or Section 743(b) of the Code is required, pursuant to Section
1.704-1(b)(2)(iv)(m)(2) or Section 1.704-
<PAGE> 30
1(b)(2)(iv)(m)(4) of the Regulations, to be taken into account in determining
Capital Accounts, the amount of such adjustment to Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases such basis) and such gain or loss shall be
specially allocated to holders of Units in accordance with their interests in a
manner consistent with the manner in which their Capital Accounts are required
to be adjusted pursuant to such sections of the Regulations.
(viii) Curative Allocations. The Regulatory
Allocations shall be taken into account in allocating other items of income,
gain, loss, and deduction among the holders of Units so that, to the extent
possible, the cumulative net amount of allocations of Partnership items under
Sections 6.1(a) and (b) hereof shall be equal to the net amount that would have
been allocated to each holder of Units if the Regulatory Allocations had not
occurred. This subparagraph (viii) is intended to minimize to the extent
possible and to the extent necessary any economic distortions which may result
from application of the Regulatory Allocations and shall be interpreted in a
manner consistent therewith. For purposes hereof, "Regulatory Allocations" shall
mean the allocations provided under this Section 6.1(b) (other than this
subparagraph) and allocations pursuant to the last sentence of Section
6.1(a)(ii) hereof.
(ix) Varying Interests. In the event the number of
Units outstanding during a fiscal year changes, the allocations pursuant to this
Article 6 shall be made by the General Partner to take such varying interests
into account in any reasonable manner permitted under the Code and the
Regulations.
(c) Tax Allocations.
(i) Generally. Subject to clauses (ii) and (iii)
hereof, items of income, gain, loss, deduction and credit to be allocated for
income tax purposes (collectively, "Tax Items") shall be allocated among the
holders of Units on the same basis as their respective book items.
(ii) Sections 1245/1250 Recapture. If any portion
of gain from the sale of property is treated as gain which is ordinary income by
virtue of the application of Sections 1245 or 1250 of the Code ("Affected
Gain"), then (A) such Affected Gain shall be allocated among the holders of
Units in the same proportion that the depreciation and amortization deductions
giving rise to the Affected Gain were allocated and (B) other Tax Items of gain
of the same character that would have been recognized, but for the application
of Sections 1245 and/or 1250 of the Code, shall be allocated away from those
holders of Units who are allocated Affected Gain pursuant to clause (A) so that,
to the extent possible, the other holders of Units are allocated the same
amount, and type, of capital gain that would have been allocated to them had
Sections 1245 and/or 1250 of the Code not applied. For purposes hereof, in order
to determine the proportionate allocations of depreciation and amortization
deductions for each fiscal year or other applicable period, such deductions
shall be deemed allocated on the same basis as Net Income or Net Loss for such
respective period.
(iii) Allocations Respecting Section 704(c) of the
Code
<PAGE> 31
and Revaluations. Property contributed to the Partnership shall be subject to
Section 704(c) of the Code and the Regulations thereunder so that,
notwithstanding paragraph (b) hereof, taxable gain from disposition, taxable
loss from disposition and tax depreciation with respect to Partnership property
that is subject to Section 704(c) of the Code and/or Section 1.704-1(b) (2) (iv)
(f) of the Regulations (collectively "Section 704(c) Tax Items") shall be
allocated on a property by property basis in accordance with said Code Section
and/or the Regulations thereunder, as the case may be. The allocation of Section
704(c) Tax Items shall be made pursuant to any reasonable method selected by the
General Partner in its discretion authorized under Section 1.704-3 of the
Regulations. Allocations pursuant to this Section 6.1(c)(iii) are solely for
purposes of federal, state, and local taxes and shall not affect, or in any way
be taken into account in computing, the Capital Account or share of Net Income,
Net Loss, other items, or distributions of any holder of Units pursuant to any
provision of this Agreement.
(iv) Tax Credits and Other Items. Tax credits and
other items shall be allocated in accordance with the holdings of Units to the
extent permitted under Section 1.704-1(b)(4)(ii) of the Regulations or other
applicable provision of the Code and Regulations and otherwise in accordance
with such provisions.
(v) Senior Debt. Any income (including income from
discharge of indebtedness), gain, correlative adjustments, loss, deduction or
retirement or other premium relating to the assumption of the Senior Debt by the
Partnership, the repayment of or refinancing of the Senior Debt, the
contribution of any portion of the Senior Debt to the Partnership or the
defeasance of any portion of the Senior Debt as a result of the application of
Section 108(e)(4) of the Code and the Regulations thereunder shall be specially
allocated to the General Partner.
(vi) Bonds. Income, gain, loss or correlative
adjustments, if any, relating to the Suites Bonds or the disposition thereof
shall be specially allocated to HSR (or its assignees or
successors-in-interest). Income, gain, loss or correlative adjustments, if any,
relating to the Inns Bonds or the disposition thereof shall be specially
allocated to HSR (or its assignees or successors-in-interest).
6.2 Distributions. The General Partner shall cause the
Partnership to distribute all, or such portion as the General Partner may in its
reasonable discretion determine, of Net Cash Flow to the holders of Units who
are holders on the Partnership Record Date with respect to such distribution.
All such distributions shall be made pro rata in accordance with the holder's
ownership of Units. Notwithstanding the foregoing, the General Partner is
authorized to cause the Partnership to distribute sufficient amounts, pro rata
by ownership of Units, to enable the General Partner to pay shareholder
dividends that will satisfy the REIT Requirements.
6.3 Books of Account. At all times during the continuance of the
Partnership, the General Partner shall maintain or cause to be maintained full,
true, complete and correct books of account in accordance with GAAP, using the
calendar year as the fiscal and taxable year of the Partnership. In addition,
the Partnership shall keep all records required to be kept pursuant to the Act.
<PAGE> 32
6.4 Reports. The General Partner shall cause to be sent to
the Partners promptly after receipt of the same from the Accountants and in no
event later than 105 days after the close of each fiscal year of the
Partnership, copies of Audited Financial Statements for the Partnership, or of
the General Partner if such statements are prepared solely on a consolidated
basis with the General Partner, for the immediately preceding fiscal year of the
Partnership. The Partnership shall also cause to be prepared such reports and/or
information as are necessary for the General Partner to determine its
qualification as a REIT and its compliance with REIT Requirements.
6.5 Tax Elections and Returns. All elections required or
permitted to be made by the Partnership under any applicable tax law shall be
made by the General Partner in its sole and absolute discretion, except that the
General Partner shall, if requested by a Limited Partner, file an election on
behalf of the Partnership pursuant to Section 754 of the Code to adjust the
basis of the Partnership property in the case of a transfer of a Partnership
Interest or distribution from the Partnership, including transfers made in
connection with the exercise of the Rights, made in accordance with the
provisions of the Agreement. The General Partner shall be responsible for
preparing and filing all federal and state tax returns for the Partnership and
furnishing copies thereof to the Partners, together with required Partnership
schedules showing allocations of tax items, copies of all within the period of
time prescribed by law. The General Partner shall use reasonable efforts to make
available to the holders of Units final K-1's not later than September 15 of
each year.
6.6 Tax Matters Partner. The General Partner is hereby
designated as the Tax Matters Partner within the meaning of Section 6231(a)(7)
of the Code (and any corresponding provisions of state and local law) for the
Partnership; provided, however, that (a) in exercising its authority as Tax
Matters Partner, the General Partner shall be limited by the provisions of this
Agreement affecting tax aspects of the Partnership; and (b) the General Partner
shall give prompt notice to any notice partners under Section 6231 of the Code
of the receipt of any written notice that the Internal Revenue Service intends
to examine or audit Partnership income tax returns for any year, receipt of
written notice of the beginning of an administrative proceeding at the
Partnership level relating to the Partnership under Section 6223 of the Code,
receipt of written notice of the final Partnership administrative adjustment
relating to the Partnership pursuant to Section 6223 of the Code, and receipt of
any request from the Internal Revenue Service for waiver of any applicable
statute of limitations with respect to the filing of any tax return by the
Partnership.
6.7 Withholding Payments Required By Law.
(a) Unless treated as a Tax Payment Loan (as
hereinafter defined), any amount paid by the Partnership for or with respect to
any holder of Units on account of any withholding tax or other tax payable with
respect to the income, profits or distributions of the Partnership pursuant to
the Code, the Regulations, or any state or local statute, regulation, notice,
ruling or ordinance requiring such payment (a "Withholding Tax Act") shall be
treated as a distribution to such holder for all purposes
<PAGE> 33
of this Agreement, consistent with the character or source of the income,
profits or cash which gave rise to the payment or withholding obligation. To the
extent that the amount required to be remitted by the Partnership under the
Withholding Tax Act exceeds the amount then otherwise distributable to such
holder, unless and to the extent that funds shall have been provided by such
holder pursuant to the last sentence of this Section 6.7(a), the excess shall
constitute a loan from the Partnership to such holder (a "Tax Payment Loan")
which shall be payable upon demand and shall bear interest, from the date that
the Partnership makes the payment to the relevant taxing authority, at the rate
announced from time to time by Citibank, N.A. (or any successor thereto) as its
"prime rate", plus four (4) percent per annum, compounded monthly (but in no
event higher than the highest interest rate permitted by applicable law). So
long as any Tax Payment Loan to any holder of Units or the interest thereon
remains unpaid, the Partnership shall make future distributions due to such
holder under this Agreement by applying the amount of any such distributions
first to the payment of any unpaid interest on such Tax Payment Loan and then to
the repayment of the principal thereof, and no such future distributions shall
be paid to such holder until all of such principal and interest has been paid in
full. If the amount required to be remitted by the Partnership under the
Withholding Tax Act exceeds the amount then otherwise distributable to a holder
of Units, the Partnership shall notify such holder at least five (5) Business
Days in advance of the date upon which the Partnership would be required to make
a Tax Payment Loan under this Section 6.7(a) (the "Tax Payment Loan Date") and
provide such holder the opportunity to pay to the Partnership, on or before the
Tax Payment Loan Date, all or a portion of such deficit.
(b) The General Partner shall have the authority to take
all actions necessary to enable the Partnership to comply with the provisions of
any Withholding Tax Act applicable to the Partnership and to carry out the
provisions of this Section 6.7. Nothing in this Section 6.7 shall create any
obligation on the General Partner to advance funds to the Partnership or to
borrow funds from third parties in order to make any payments on account of any
liability of the Partnership under a Withholding Tax Act.
(c) In the event that a Tax Payment Loan is not paid by a
holder of Units within thirty (30) days after written demand therefor is made by
the General Partner, the General Partner may cause all distributions that would
otherwise be made to such holder to be retained by the Partnership, or sell such
holder's Units for sale proceeds, in each case up to the amount necessary to
repay such Tax Payment Loan, including all accrued and unpaid interest therein,
and such retained distributions or sale proceeds shall be applied against,
first, the accrued interest on and, second, the principal of, such Tax Payment
Loan.
ARTICLE 7
Rights, Duties and Restrictions of the General Partner
7.1 Powers and Duties of the General Partner.
<PAGE> 34
(a) The General Partner shall be responsible for the
management of the Partnership's business and affairs. Except as otherwise herein
expressly provided, the General Partner shall have, and is hereby granted, full
and complete power, authority and discretion to take such action for and on
behalf of the Partnership and in its name as the General Partner shall, in its
sole and absolute discretion, deem necessary or appropriate to carry out the
Partnership's business and the purposes for which the Partnership was organized.
Except as otherwise expressly provided herein, the General Partner shall, on
behalf of, and at the expense of, the Partnership, have the right, power and
authority:
(i) to manage, control, invest, reinvest, acquire
by purchase, lease or otherwise, sell, contract to purchase or sell, grant,
obtain, or exercise options to purchase, options to sell or conversion rights,
assign, transfer, convey, deliver, endorse, exchange, pledge, mortgage, abandon,
improve, repair, maintain, insure, lease for any term and otherwise deal with
any and all property of whatsoever kind and nature, and wheresoever situated, in
furtherance of the business or purposes of the Partnership;
(ii) to acquire, directly or indirectly, interests
in real estate of any kind and of any type, and any and all kinds of interests
therein (including, without limitation, Entities investing therein), and to
determine the manner in which title thereto is to be held; to manage (directly
or through property managers), insure against loss, protect and subdivide any of
the real estate, interests therein or parts thereof; to improve, develop or
redevelop any such real estate; to participate in the ownership and development
of any property; to dedicate for public use, to vacate any subdivisions or parts
thereof, to resubdivide, to contract to sell, to grant options to purchase or
lease, to sell on any terms; to convey, mortgage, pledge or otherwise encumber
said property, or any part thereof; to lease said property or any part thereof
from time to time, upon any terms and for any period of time, and to renew or
extend leases, to amend, change or modify the terms and provisions of any leases
and to grant options to lease and options to renew leases and options to
purchase; to partition or to exchange said real property, or any part thereof,
for other real or personal property; to grant easements or charges of any kind;
to release, convey or assign any right, title or interest in or about or
easement appurtenant to said property or any part thereof; to construct and
reconstruct, remodel, alter, repair, add to or take from buildings on any
property in which the Partnership owns an interest; to insure any Person having
an interest in or responsibility for the care, management or repair of such
property; to direct the trustee of any land trust to mortgage, lease, convey or
contract to convey the real estate held in such land trust or to execute and
deliver deeds, mortgages, notes and any and all documents pertaining to the
property subject to such land trust or in any matter regarding such trust; and
to execute assignments of all or any part of the beneficial interest in such
land trust;
(iii) to employ, engage, indemnify or contract with
or dismiss from employment or engagement Persons to the extent deemed necessary
or appropriate by the General Partner for the operation and management of the
Partnership business, including but not limited to contractors, subcontractors,
engineers, architects, surveyors, mechanics, consultants, accountants,
attorneys,
<PAGE> 35
insurance brokers, real estate brokers and others;
(iv) to enter into contracts on behalf of the
Partnership, and to cause all Administrative Expenses to be paid;
(v) to borrow or loan money, obtain or make loans
and advances from and to any Person for Partnership purposes and to apply for
and secure from or accept and grant to any Person credit or accommodations; to
contract liabilities and obligations (including interest rate swaps, caps and
hedges) of every kind and nature with or without security; and to repay,
collect, discharge, settle, adjust, compromise or liquidate any such loan,
advance, obligation or liability;
(vi) to grant security interests, mortgage, assign,
deposit, deliver, enter into sale and leaseback arrangements or otherwise give
as security or as additional or substitute security or for sale or other
disposition any and all Partnership property, tangible or intangible, including,
but not limited to, personal property and real estate and interests in land
trusts, and to make substitutions thereof, and to receive any proceeds thereof
upon the release or surrender thereof; to sign, execute and deliver any and all
assignments, deeds, bills of sale and contracts and instruments in writing; to
authorize, give, make, procure, accept and receive moneys, payments, property
notices, demands, protests and authorize and execute waivers of every kind and
nature; to enter into, make, execute, deliver and receive agreements,
undertakings and instruments of every kind and nature; and generally to do any
and all other acts and things incidental to any of the foregoing or with
reference to any dealings or transactions which the General Partner may deem
necessary, proper or advisable to effect or accomplish any of the foregoing or
to carry out the business and purposes of the Partnership;
(vii) to acquire and enter into any contract of
insurance (including, without limitation, general partner liability and
partnership reimbursement insurance policies) which the General Partner may deem
necessary or appropriate;
(viii) to conduct any and all banking transactions
on behalf of the Partnership; to adjust and settle checking, savings and other
accounts with such institutions as the General Partner shall deem appropriate;
to draw, sign, execute, accept, endorse, guarantee, deliver, receive and pay any
checks, drafts, bills of exchange, acceptances, notes, obligations, undertakings
and other instruments for or relating to the payment of money in, into or from
any account in the Partnership's name; to make deposits into and withdrawals
from the Partnership's bank accounts and to negotiate or discount commercial
paper, acceptances, negotiable instruments, bills of exchange and dollar drafts;
(ix) to demand, sue for, receive and otherwise take
steps to collect or recover all debts, rents, proceeds, interests, dividends,
goods, chattels, income from property, damages and all other property, to which
the Partnership may be entitled or which are or may become due the Partnership
from any Person; to commence, prosecute or enforce, or to defend, answer or
oppose, contest and abandon all legal proceedings in which the Partnership is or
may hereafter be
<PAGE> 36
interested; and to settle, compromise or submit to arbitration any accounts,
debts, claims, disputes and matters which may arise between the Partnership and
any other Person and to grant an extension of time for the payment or
satisfaction thereof on any terms, with or without security;
(x) to acquire interests in and contribute money or
property to any limited or general partnerships, joint ventures, subsidiaries or
other entities as the General Partner deems desirable;
(xi) to maintain or cause to be maintained the
Partnership's books and records;
(xii) to prepare and deliver, or cause to be
prepared and delivered, all financial and other reports with respect to the
operations of the Partnership, and preparation and filing of all tax returns and
reports;
(xiii) to do all things which are necessary or
advisable for the protection and preservation of the Partnership's business and
assets, and to execute and deliver such further instruments and undertake such
further acts as may be necessary or desirable to carry out the intent and
purposes of this Agreement and as are not inconsistent with the terms hereof;
(xiv) subject to Section 7.4 hereof, to lease any
or all of the Properties to SLC, the Operating Partnership or the Affiliates of
either or to any other Person on such terms and conditions as the General
Partner may from time to time agree; and
(xv) in general, to exercise all of the general
rights, privileges and powers permitted to be had and exercised under the Act.
To the extent the duties of the General Partner require expenditures of funds to
be paid to third parties, the General Partner shall not have any obligations
hereunder except to the extent that Partnership funds are reasonably available
to it for the performance of such duties, and nothing herein contained shall be
deemed to require the General Partner, in its capacity as such, to expend its
individual funds for payment to third parties or to undertake any specific
liability or litigation on behalf of the Partnership.
(b) Notwithstanding the provisions of Section 7.1(a)
hereof, the Partnership shall not take any action which (or fail to take any
action, the omission of which) the General Partner believes, in its sole and
absolute discretion, (i) could adversely affect the ability of the General
Partner to qualify or continue to qualify as a REIT, (ii) could subject SLT to
any additional taxes under Section 857 or Section 4981 of the Code or other
potentially adverse consequences under the Code, (iii) could otherwise cause the
General Partner to violate the REIT Requirements or (iv) could violate any law
or regulation of any governmental body or agency having jurisdiction over the
General Partner or its securities, unless such action (or inaction) shall have
been specifically consented to by the General Partner in writing.
<PAGE> 37
(c) Notwithstanding the provisions of Section 7.1(a)
hereof, the Partnership shall not commingle its funds with those of any
Affiliate or other entity; funds and other assets of the Partnership shall be
separately identified and segregated; all of the Partnership's assets shall at
all times be held by or on behalf of the Partnership, and, if held on behalf of
the Partnership by another entity, shall at all times be kept identifiable (in
accordance with customary usages) as assets owned by the Partnership; and the
Partnership shall maintain its own separate bank accounts, payroll and books of
account.
(d) Without the consent of the Limited Partners, the
General Partner shall have no power to do any act in contravention of this
Agreement or possess any Partnership property for other than a partnership
purpose.
7.2 Reimbursement of the General Partner.
(a) Except as provided in this Section 7.2 and elsewhere
in this Agreement (including the provisions of Articles 5, 6 and 8 hereof
regarding distributions, payments and allocations to which it may be entitled),
the General Partner shall not receive payments from or be compensated for its
services as general partner of the Partnership.
(b) The General Partner shall be reimbursed on a monthly
basis, or such other basis as the General Partner may determine in its sole and
absolute discretion, for all expenses it incurs relating to the ownership and
operation of, or for the benefit of, the Partnership, including, without
limitation, the Administrative Expenses. Such reimbursements shall be in
addition to any reimbursement to the General Partner as a result of
indemnification pursuant to Section 5.1 hereof.
(c) To the extent that any amount paid or credited to the
General Partner or its officers, directors, employees or agents pursuant to
Section 5.1 or Section 7.2(b) would constitute gross income to the General
Partner for purposes of Sections 856(c)(2) or 856(c)(3) of the Code (a "General
Partner Payment") then, notwithstanding any other provision of this Agreement,
the amount of such General Partner Payments for any fiscal year shall not exceed
the lesser of:
(i) an amount equal to the excess, if any, of (a) 4.95% of the
General Partner's total gross income (but not including
the amount of any General Partner Payments) for the fiscal
year which is described in subsections (A) through (H) of
Section 856(c)(2) of the Code over (b) the amount of gross
income (within the meaning of Section 856(c)(2) of the
Code) derived by a General Partner from sources other than
those described in subsections (A) through (H) of Section
856(c)(2) of the Code (but not including the amount of any
General Partner Payments): or
(ii) an amount equal to the excess, if any, of (a) 24.95% of
the General Partner's total gross income (but not
including the amount of any General Partner Payments) for
the fiscal year which is described in
<PAGE> 38
subsections (A) through (I) of Section 856(c)(3) of the
Code over (b) the amount of gross income (within the
meaning of Section 856(c)(3) of the Code) derived by the
General Partner from sources other than those described in
subsections (A) through (I) of Section 856(c)(3) of the
Code (but not including the amount of any General Partner
Payments);
provided, however, that General Partner Payments in excess of the amounts set
forth in subparagraphs (i) and (ii) above may be made if the General Partner, as
a condition precedent, obtains an opinion of tax counsel that the receipt of
such excess amounts would not adversely affect the General Partner's ability to
quality as a REIT. To the extent General Partner Payments may not be made in a
fiscal year due to the foregoing limitations, such General Partner Payments
shall carry over and be treated as arising in the following year, provided,
however, that such amounts shall not carry over for more than five years, and if
not paid within such five year period, shall expire; provided further, that (i)
as General Partner Payments are made, such payments shall be applied first to
carry over amounts outstanding, if any, and (ii) with respect to carry over
amounts for more than one fiscal year, such payments shall be applied to the
earliest fiscal year first.
7.3 Outside Activities of the General Partner. The General
Partner shall not directly or indirectly enter into or conduct any business
other than (a) the ownership, acquisition and disposition of Partnership
Interests as the General Partner or Limited Partner and the management of the
business of the Partnership, and (b) such activities as are incidental thereto,
including the General Partner's ownership directly or through a wholly-owned
subsidiary of an interest in a partnership or limited liability company in which
the Partnership is a partner or member. All future acquisitions of real estate
by the General Partner shall be made through and for the benefit of the
Partnership. The General Partner agrees that the net proceeds of all offerings
of securities by the General Partner shall be contributed to the Partnership (in
the case of equity offerings) or loaned to the Partnership (in the case of debt
offerings). The foregoing notwithstanding, this Section 7.3 shall not restrict
the activities or investments of the General Partner if the General Partner
makes such arrangements as are reasonably necessary to avoid such activities or
investments having a material adverse impact on the Limited Partners and to
assure that the Limited Partners share in the economic benefits of such
activities or investments in a fair and equitable manner.
7.4 Contracts with Affiliates. The Partnership may engage in
transactions, enter into contracts with Affiliates, and lend money to or borrow
money from Affiliates which are on terms fair and reasonable to the Partnership
and no less favorable to the Partnership than would be obtained from
unaffiliated third parties. The Partners hereby agree that the Partnership's
leases and loans with the Operating Partnership, SLC and its Affiliates, as in
effect on the date first above written, are on terms fair and reasonable to the
Partnership and such terms are no less favorable to the Partnership than would
be obtained from unaffiliated third parties.
7.5 Title to Partnership Assets. Title to Partnership assets,
whether real, personal or mixed and whether tangible or intangible, shall be
deemed to be
<PAGE> 39
owned by the Partnership as an entity, and no Partner, individually or
collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, the General Partner or one or more nominees, as
the General Partner may determine, including Affiliates of the General Partner.
The General Partner hereby acknowledges and confirms that any Partnership assets
for which legal title is held in the name of the General Partner or any nominee
or Affiliate of the General Partner shall be held by the General Partner for the
use and benefit of the Partnership in accordance with the provisions of this
Agreement; provided, however, that the General Partner shall use its best
efforts to cause beneficial and record title to such assets to be vested in the
Partnership as soon as reasonably practicable. All Partnership assets shall be
recorded as the property of the Partnership in its books and records,
irrespective of the name in which legal title to such Partnership assets is
held.
7.6 Reliance by Third Parties. Notwithstanding anything to the
contrary in this Agreement, any Person dealing with the Partnership shall be
entitled to assume that the General Partner has full power and authority to
encumber, sell or otherwise use in any manner any and all assets of the
Partnership and to enter into any contracts on behalf of the Partnership, and
such Person shall be entitled to deal with the General Partner as if it were the
Partnership's sole party in interest, both legally and beneficially. In no event
shall any Person dealing with the General Partner or its representatives be
obligated to ascertain that the terms of this Agreement have been complied with
or to inquire into the necessity or expedience of any act or action of the
General Partner or its representatives. Each and every certificate, document or
other instrument executed on behalf of the Partnership by the General Partner
shall be conclusive evidence in favor of any and every Person relying thereon or
claiming thereunder that (i) at the time of the execution and delivery of such
certificate, document or instrument, this Agreement was in full force and
effect, (ii) the Person executing and delivering such certificate, document or
instrument was duly authorized and empowered to do so for and on behalf of the
Partnership and (iii) such certificate, document or instrument was duly executed
and delivered in accordance with the terms and provisions of this Agreement and
is binding upon the Partnership.
7.7 Liability of the General Partner.
(a) Notwithstanding anything to the contrary set forth in
this Agreement, the General Partner shall not be liable for monetary or other
damages to the Partnership, any of the Partners or any assignee of any interest
of any Partner for losses sustained or liabilities incurred as a result of
errors in judgment or of any act or omission if the General Partner acted
without fraud, gross negligence or willful misconduct.
(b) The Limited Partners expressly acknowledge (i) that
the General Partner is acting on behalf of the Partnership and the General
Partner's shareholders collectively, (ii) that, subject to the terms and
conditions of this Agreement, the General Partner may, but is under no
obligation to, consider the separate interests of the Limited Partners
(including, without limitation, the tax consequences to Limited Partners or any
assignees thereof except as provided in this
<PAGE> 40
Agreement) in deciding whether to cause the Partnership to take (or decline to
take) any actions, and (iii) that the General Partner shall not be liable for
monetary damages for losses sustained, liabilities incurred, or benefits not
derived by Limited Partners in connection with such decisions, provided that the
General Partner acted without fraud, gross negligence or willful misconduct.
(c) Subject to its obligations and duties as General
Partner set forth in Section 7.1 hereof, the General Partner may exercise any of
the powers granted to it by this Agreement and perform any of the duties imposed
upon it hereunder either directly or by or through agents. The General Partner
shall not be responsible for any fraud, willful misconduct or gross negligence
on the part of any such agent appointed by it without fraud, gross negligence or
willful misconduct.
(d) Any amendment, modification or repeal of this Section
7.7 or any provision hereof shall be prospective only and shall not in any way
affect the limitations on the General Partner's liability to the Partnership and
the Limited Partners under this Section 7.7 as in effect immediately prior to
such amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may be asserted.
7.8 Other Matters Concerning the General Partner.
(a) The General Partner may rely and shall be protected in
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, or other document reasonably believed by it to be
genuine and to have been signed or presented by the proper party or parties.
(b) The General Partner may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants and advisers selected by it, and any act taken or omitted to be
taken in reliance upon the advice or opinion of such Persons as to matters which
the General Partner reasonably believes to be within such Person's professional
or expert competence and in accordance with such advice or opinion shall be
prima facie evidence that such actions have been done or omitted in good faith.
(c) The General Partner shall have the right, in respect
of any of its powers or obligations hereunder, to act through any of its duly
authorized officers and any attorney or attorneys-in-fact duly appointed by the
General Partner. Each such attorney shall, to the extent provided by the General
Partner in the power of attorney, have full power and authority to do and
perform all and every act and duty which is permitted or required to be done by
the General Partner hereunder.
7.9 Operation of SLT in Accordance with REIT Requirements.
(a) The Partners acknowledge and agree the General Partner
has the authority to cause the Partnership to be operated in a manner that will
enable the General Partner to (i) satisfy the REIT Requirements and (ii) avoid
the imposition of
<PAGE> 41
any federal income or excise tax liability on the General Partner. The General
Partner has the authority to cause the Partnership to avoid taking any action
which would result in the General Partner ceasing to satisfy the REIT
Requirements or would result in the imposition of any federal income or excise
tax liability on the General Partner.
(b) Without the prior consent of the General Partner, no
Limited Partner or holder of Units or any Affiliate shall take any action,
including acquiring, directly or indirectly, an interest in any tenant of a
Property (including, but not limited to, the Operating Partnership, SLC or the
Affiliates of either), which would have, through the actual or constructive
ownership of any tenant of any Property, the effect of causing the percentage of
the gross income of SLT that fails to be treated as "rents from real property"
within the meaning of Section 856(d)(2) of the Code to exceed such percentage on
the date hereof. Each Limited Partner and holder of Units shall use its best
efforts to notify the General Partner on a timely basis of any direct or
indirect acquisition or potential direct or indirect acquisition of Paired
Shares by such Limited Partner or holder or any Affiliate or direct or indirect
owner of an interest in such Limited Partner or holder that could reasonably be
expected to have such effect.
7.10 Replacement of General Partner. In the event the General
Partner is no longer a Partner (whether in accordance with the provisions of
this Agreement or otherwise), a successor General Partner shall be appointed by
a vote of a Majority-in-Interest of the Limited Partners.
ARTICLE 8
Dissolution, Liquidation and Winding-Up
8.1 Accounting. In the event of the dissolution, liquidation and
winding-up of the Partnership, a proper accounting shall be made of the Capital
Account of each holder of Units and of the Net Income or Net Loss of the
Partnership from the date of the last previous accounting to the date of
dissolution.
8.2 Distribution on Dissolution.
(a) In the event of the dissolution and liquidation of the
Partnership for any reason, the assets of the Partnership shall be liquidated
for distribution in the following rank and order:
(i) payment of creditors of the Partnership,
including creditors who are Partners or former Partners;
(ii) establishment of reserves as provided by the
Liquidating Trustee to provide for contingent liabilities, if any;
(iii) to the holders of Units in accordance with
the positive balances in their Capital Accounts after giving effect to all
contributions, distributions
<PAGE> 42
and allocations for all periods.
Whenever the Liquidating Trustee reasonably determines that any reserves
established pursuant to paragraph (ii) above are in excess of the reasonable
requirements of the Partnership, the amount determined to be excess shall be
distributed to the Partners in accordance with the provisions of this Section
8.2(a). No Partner or holder of Units shall be liable to any other Partner or
holder of Units for a deficit balance in its Capital Account.
(b) Notwithstanding the provisions of Section 8.2(a)
hereof which require liquidation of the assets of the Partnership, but subject
to the order of priorities set forth therein, if prior to or upon dissolution of
the Partnership the Liquidating Trustee determines that an immediate sale of
part or all of the Partnership's assets would be impractical or would cause
undue loss to the Partners, the Liquidating Trustee may, in its sole and
absolute discretion, defer for a reasonable time liquidation of any assets
except those necessary to satisfy liabilities of the Partnership (including to
those Partners which are creditors of the Partnership) and/or, with the Consent
of the Limited Partners, distribute to the Partners, in lieu of cash, as tenants
in common and in accordance with the provisions of Section 8.2(a) hereof,
undivided interests in such Partnership assets as the Liquidating Trustee deems
not suitable for liquidation. Any such distributions in kind shall be made only
if, in the good faith judgment of the Liquidating Trustee, such distributions in
kind are in the best interest of the Partners, and shall be subject to such
conditions relating to the disposition and management of such properties as the
Liquidating Trustee deems reasonable and equitable and to any agreements
governing the operation of such properties at such time. The Liquidating Trustee
shall determine the fair market value of any property distributed in kind using
such reasonable method of valuation as it may adopt.
8.3 Documentation of Liquidation. Upon the completion of the
dissolution and liquidation of the Partnership, the Partnership shall terminate
and the Liquidating Trustee shall have the authority to execute and record any
and all documents or instruments required to effect the dissolution, liquidation
and termination of the Partnership.
ARTICLE 9
Transfer
9.1 General Partner. Except to the extent permitted pursuant to
Section 4.5, the General Partner shall not withdraw from the Partnership and
shall not sell, assign, pledge, encumber or otherwise dispose of all or any
portion of its Partnership Interest or Units without the Consent of the Limited
Partners, which consent may be given or withheld in each Limited Partner's sole
and absolute discretion. Upon any transfer of a Partnership Interest in
accordance with the provisions of this Section 9.1, the transferee General
Partner shall become vested with the powers and rights of the transferor General
Partner, and shall be liable for all obligations and responsible for all duties
of the General Partner under this Agreement, once such transferee has
<PAGE> 43
executed such instruments as may be necessary to effectuate such admission and
to confirm the agreement of such transferee to be bound by all the terms and
provisions of this Agreement with respect to the Partnership interest so
acquired. It shall be a condition to any transfer permitted hereunder that the
transferee assumes by express agreement (or pursuant to a statutory merger or
consolidation wherein all obligations and liabilities of the General Partner are
assumed by a successor trust or corporation by operation of law) all of the
obligations of the transferor General Partner under this Agreement with respect
to such transferred Partnership Interest and no such transfer (other than
pursuant to a statutory merger or consolidation wherein all obligations and
liabilities of the transferor General Partner are assumed by a successor trust
or corporation by operation of law) shall relieve the transferor General Partner
of its obligations under this Agreement without the Consent of the Limited
Partners. In connection with any such permitted transfer, the successor General
Partner shall be deemed admitted as such immediately prior to the effective time
of the transfer from the transferor General Partner and shall continue the
business of the Partnership without dissolution. If the General Partner
withdraws or retires from the Partnership, in violation of this Agreement or
otherwise, or dissolves, terminates or upon the Bankruptcy of the General
Partner, within 90 days thereafter, at least a Majority-in-Interest of the
Limited Partners may elect to continue the Partnership business by selecting a
substitute General Partner, which substitute General Partner accepts such
election and agrees to serve as General Partner. Such successor General Partner
shall thereupon succeed to the rights and obligations of the General Partner as
provided in this Section 9.1.
9.2 Transfers by Limited Partners.
(a) No Limited Partner shall have the right, directly or
indirectly, to transfer all or any part of his Partnership Interest or Units to
any Person without the prior written consent of the General Partner, which
consent may be given or withheld by the General Partner in its sole and absolute
discretion. The foregoing notwithstanding, the General Partner hereby grants the
consents described in this Section 9.2 to transfers of Partnership Interests
pursuant to an exercise of Rights, provided that any such transfer otherwise
complies with all of the other provisions of this Article 9 (including, but not
limited to, any additional consents required hereunder);
(b) It shall be a condition to any transfer by a Limited
Partner (other than a pledge, encumbrance, hypothecation or mortgage) otherwise
permitted hereunder that the transferee assume by operation of law or express
agreement all of the obligations of the transferor under this Agreement
(including, without limitation, under Article 9 hereof) with respect to such
transferred Partnership Interest or Units and no such transfer (other than
pursuant to a statutory merger or consolidation wherein all obligations and
liabilities of the transferor are assumed by a successor corporation by
operation of law) shall relieve the transferor of its obligations under this
Agreement without the approval of the General Partner, in its reasonable
discretion (it being understood that a transferor shall be deemed relieved from
such obligations, without the necessity of any such approval, in respect of
Partnership Interests transferred to the General Partner or the Partnership
pursuant to an Exchange Rights Agreement). Upon such transfer, the transferee of
a Partnership Interest shall be admitted as a Limited Partner and shall succeed
to all of the rights of the transferor Limited Partner under this
<PAGE> 44
Agreement in the place and stead of such transferor Limited Partner (which
succession, in the event of a pledge, may be entered into and become effective
at the time of foreclosure or other realization of such pledge). The foregoing
notwithstanding, a transferee of a Unit shall not be admitted as a substituted
Limited Partner unless the General Partner consents, which consent may be given
or withheld by the General Partner in its sole and absolute discretion. Any
transferee, whether or not admitted as a substituted Limited Partner, shall
succeed to the obligations of the transferor hereunder (unless such transfer is
a pledge, encumbrance, hypothecation or mortgage or except as otherwise provided
herein).
(c) In addition to any other restrictions on transfer
provided herein, no Partnership Interest or Units shall be transferable unless
the transferor gives written notice of the proposed transfer which notice shall
state, to the best of its knowledge, that such transfer will not violate any of
the restrictions set forth in Section 9.3 hereof.
(d) Any permitted transferee under Section 9.2 who is not
admitted as a Limited Partner in accordance with this Article 9 or a transferee
who only holds Units shall be considered an assignee for purposes of this
Agreement. An assignee shall be deemed to have had assigned to it, and shall be
entitled to receive, distributions from the Partnership and the share of Net
Income, Net Loss, and any other items of income, gain, loss, deduction and
credit of the Partnership and rights attributable to the Partnership Interests
assigned to such transferee, but shall not be deemed to be a holder of
Partnership Interests for any other purpose under this Agreement, and shall not
be entitled to vote such Partnership Interests in any matter presented to the
Limited Partners for a vote. In the event any such transferee desires to make a
further assignment of any such Partnership Interests, such transferee shall be
subject to all the provisions of this Article 9 to the same extent and in the
same manner as any Limited Partner desiring to make an assignment of Partnership
Interests.
(e) The Limited Partners acknowledge that neither the
Partnership Interests nor the Units have been registered under any federal or
state securities laws and, as a result thereof, they may not be sold or
otherwise transferred, except in compliance with such laws. Notwithstanding
anything to the contrary contained in this Agreement, no Partnership Interest or
Units may be sold or otherwise transferred unless such transfer is exempt from
registration under any applicable securities laws or such transfer is registered
under such laws, it being acknowledged that the Partnership has no obligation to
take any action which would cause any such Partnership Interests or Units to be
registered.
9.3 Certain Restrictions on Transfer. In addition to any other
restrictions on transfer herein contained, except with the consent of the
General Partner, in no event may any transfer of a Partnership Interest or Units
by any Person be made (a) to any person or Entity that lacks the legal right,
power or capacity to own a Partnership Interest or Units; (b) in the event such
transfer would cause the General Partner to cease to comply with the REIT
Requirements; (c) if such transfer would cause a termination of the Partnership
for federal income tax purposes; (d) if such
<PAGE> 45
transfer would, in the opinion of counsel to the Partnership, cause the
Partnership to cease to be classified as a Partnership for federal income tax
purposes; (e) if such transfer would result in the Partnership being treated as
a "publicly traded partnership" or is effectuated through an "established
securities market" or a "secondary market (or the substantial equivalent
thereof)" within the meaning of Section 7704 of the Code and the Regulations
thereunder; (f) in violation of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976; (g) if the General Partner reasonably believes that such transfer may
(i) cause any portion or all of the assets of the Partnership to be deemed
pursuant to United States Department of Labor Regulation Section 2510.3-101 or
otherwise pursuant to ERISA or the Code to be for any purpose of ERISA or
Section 4975 of the Code assets of any Restricted Entity, or (ii) cause a
"prohibited transaction" (as defined in Section 4975(c) of the Code or within
the meaning of Section 406 of ERISA) to occur, or (iii) cause the Partnership to
become with respect to any Restricted Entity a "party in interest" (as defined
in Section 3(14) of ERISA) or a "disqualified person" (as defined in Section
4975(e) of the Code) or (iv) cause the Partnership to be jointly and severally
liable for any obligation arising under ERISA or the Code with respect to any
"employee benefit plan" as defined in and subject to ERISA or any "plan" as
defined in Section 4975 of the Code; or (h) if the intended transferee is a
Restricted Entity. Any purported transfer described in this Section 9.3 shall be
void ab initio.
9.4 Effective Dates of Transfers.
(a) Transfers pursuant to this Article 9 may be made on
any day, but for purposes of this Agreement, the effective date of any such
transfer shall be (i) the first day of the month in which such transfer occurred
if such transfer occurred on or prior to the fifteenth calendar day of a month,
or (ii) the first day of the month immediately following the month in which such
transfer occurred, if such transfer occurred after the fifteenth calendar day of
a month, or such other date determined by the General Partner pursuant to such
convention as may be administratively feasible and consistent with applicable
law.
(b) If any Partnership Interest or Unit is transferred or
assigned in compliance with the provisions of this Article 9, on any day other
than the first day of a calendar year, then Net Income, Net Loss, each item
thereof and all other items attributable to such Partnership Interest or Unit
for such year shall be allocated to the transferor, and, in the case of a
transfer or assignment other than a redemption, to the transferee, by taking
into account their varying interests during such year in accordance with Section
706(d) of the Code, using any method permitted thereunder. All distributions
pursuant to Section 6.2 hereof attributable to such transferred Partnership
Interests or Units (A) with respect to which the Partnership Record Date is
before the effective date of such transfer (other than a pledge, encumbrance,
hypothecation or mortgage) shall be made to the transferor, (B) with respect to
the first Partnership Record Date after the effective date of such transfer
(other than a pledge, encumbrance, hypothecation or mortgage) shall be paid to
the transferor and to the transferee, ratably in accordance with their
respective periods of ownership of the Partnership Interest or Units transferred
during the period with respect to which such distribution is made, and (C) all
distributions after those described in (A) and (B) shall be made to the
transferee.
<PAGE> 46
9.5 Transfer.
(a) The term "transfer," when used in this Article 9 with
respect to a Partnership Interest, shall be deemed to refer to a transaction by
which a Person purports to assign its Partnership Interest or any portion
thereof (including Units) to another Person, and includes a sale, assignment,
gift, pledge, encumbrance, hypothecation, mortgage, exchange or any other
disposition by law or otherwise.
(b) No Partnership Interest or Unit shall be transferred,
in whole or in part, except in accordance with the terms and conditions set
forth in this Article 9. Any transfer or purported transfer of a Partnership
Interest not made in accordance with this Article 9 shall be null and void.
ARTICLE 10
Rights and Obligations of the Limited Partners
10.1 No Participation in Management. No Limited Partner, in its
capacity as such, shall take part in the management of the Partnership's
business, transact any business in the Partnership's name or have the power to
sign documents for or otherwise bind the Partnership. Any rights expressly
granted to the Limited Partners in this Agreement shall not be deemed to be
rights relating to the management of the Partnership's business.
10.2 Bankruptcy of a Limited Partner. The Bankruptcy of any
Limited Partner shall not cause a dissolution of the Partnership, but the rights
of such Limited Partner to share in the Net Profits or Net Losses of the
Partnership and to receive distributions of Partnership funds shall, on the
happening of such event, devolve on its successors or assigns, subject to the
terms and conditions of this Agreement, and the Partnership shall continue as a
limited partnership. In no event, however, shall such assignee(s) become a
substituted Limited Partner except in accordance with Article 9 hereof.
10.3 No Withdrawal. No Limited Partner may withdraw from the
Partnership without the prior written consent of the General Partner, other than
as provided in Article 9 hereof.
10.4 Conflicts. The Partners recognize that the Limited Partners
and their Affiliates have or may have other business interests, activities and
investments, some of which may be in conflict or competition with the business
of the Partnership, and that such Persons are entitled to carry on such other
business interests, activities and investments. In deciding whether to take any
actions in such capacity, such Limited Partners and their Affiliates may, but
shall be under no obligation to, consider the separate interests of the
Partnership and shall have no fiduciary obligations to the Partnership and shall
not be liable for monetary damages for losses sustained, liabilities incurred or
benefits not derived by the other Partners in connection with such actions
<PAGE> 47
except for damages for losses sustained or liabilities incurred which result
from a Limited Partner breaching a representation, warranty or covenant
hereunder or to the extent provided in the Formation Agreement; nor shall the
Partnership or the General Partner be under any obligation to consider the
separate interests of the Limited Partners and their Affiliates in such capacity
or have any fiduciary obligations to the Limited Partners and their Affiliates
in such capacity or be liable for monetary damages for losses sustained,
liabilities incurred or benefits not derived by the Limited Partners and their
Affiliates in such capacity arising from actions or omissions taken by the
Partnership. The Limited Partners and their Affiliates may engage in or possess
an interest in any other business or venture of any kind, independently or with
others, on their own behalf or on behalf of other entities with which they are
affiliated or associated, and such persons may engage in any activities, whether
or not competitive with the Partnership, without any obligation to offer any
interest in such activities to the Partnership or to any Partner. Neither the
Partnership nor any Partner shall have any right, by virtue of this Agreement,
in or to such activities, or the income or profits derived therefrom, and the
pursuit of such activities, even if competitive with the business of the
Partnership, shall not be deemed wrongful or improper. Notwithstanding the
foregoing, the provisions of this Section 10.4 shall not negate or impair any
other written agreement between one or more of the Limited Partners and the
General Partner or the Partnership (including Section 6.6 of the Formation
Agreement) or any duties which a Limited Partner may have in such Limited
Partner's capacity as an officer or director of the General Partner.
10.5 Provision of Information.
(a) With respect to any information required to be
provided to the Limited Partners pursuant to Section 17-305 (or any successor
thereto) of the Act: (i) the cost of preparing or providing any such information
(including, without limitation, fees paid to any person or entity in connection
therewith) shall be paid by the requesting Partner and in no event shall such
information be required to be given to the requesting Partner until such payment
has been made to the Partnership; (ii) in no event shall any financial
statements of the Partnership be required to be provided except for such
statements as have already been prepared or are otherwise required to be
provided to the Limited Partners under this Agreement and in no event shall any
statements which have been prepared be required to be audited, reviewed or
otherwise examined by a certified public accountant, if the statements are not
otherwise required to be so audited, reviewed or examined pursuant to the
provisions of this Agreement; and (iii) in no event shall such information be
required to be furnished until forty-five (45) days after such request and
unless the information is already in the possession of the Partnership.
(b) In addition to other rights provided by this Agreement
or by the Act, each Limited Partner shall have the right, for a purpose
reasonably related to such Limited Partner's interest as a limited partner in
the Partnership, upon written demand with a statement of the purpose of such
demand and at such Limited Partner's own expense (excluding copying and
administrative expenses of the General Partner):
(i) to obtain a copy of the most recent annual and
<PAGE> 48
quarterly reports and current reports on Form 8-K filed with the SEC by the
General Partner pursuant to the Securities Exchange Act of 1934;
(ii) to obtain a copy of the Partnership's federal,
state and local income tax returns for each fiscal year of the Partnership;
(iii) to obtain a current list of the name and last
known business, residence or mailing address of each Partner; and
(iv) to obtain a copy of this Agreement and the
Certificate, together with executed copies of all powers of attorney pursuant to
which this Agreement and the Certificate have been executed.
(c) Notwithstanding any other provision of this Section
10.5, the General Partner may keep confidential from the Limited Partners, for
such period of time as the General Partner determines in its sole and absolute
discretion to be reasonable, any information that is not material to the Limited
Partners and that (i) the General Partner reasonably believes to be in the
nature of trade secrets or other information the disclosure of which the General
Partner in good faith believes is not in the best interests of the Partnership
or could damage the Partnership or its business or (ii) the Partnership is
required by law or by agreements with an unaffiliated third party to keep
confidential.
10.6 Power of Attorney.
(a) Each Limited Partner constitutes and appoints the
General Partner, any Liquidating Trustee and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each case with
full power of substitution, as its true and lawful agent and attorney-in-fact,
with full power and authority in its name, place and stead to: execute, swear
to, acknowledge, deliver, file and record in the appropriate public offices (i)
all certificates, documents and other instruments (including, without
limitation, this Agreement and the Certificate and all amendments or
restatements thereof) that the General Partner or the Liquidating Trustee deems
appropriate or necessary to form, qualify or continue the existence or
qualification of the Partnership as a limited partnership (or a partnership in
which the limited partners have limited liability) in the State of Delaware and
in all other jurisdictions in which the Partnership may conduct business or own
property; (ii) all instruments that the General Partner deems appropriate or
necessary to reflect any amendment, change, modification or restatement of this
Agreement in accordance with its terms; (iii) all conveyances and other
instruments or documents that the General Partner deems appropriate or necessary
to reflect the dissolution and liquidation of the Partnership pursuant to the
terms of this Agreement, including, without limitation, a certificate of
cancellation; and (iv) all instruments relating to the admission, withdrawal,
removal or substitution of any Partner pursuant to the provisions of this
Agreement or the Capital Contribution of any Partner.
(b) The foregoing power of attorney is irrevocable and a
power coupled with an interest, in recognition of the fact that each of the
Partners will be
<PAGE> 49
relying upon the power of the General Partner to act as contemplated by this
Agreement in any filing or other action by it on behalf of the Partnership, and
it shall survive the death or incompetency of a Limited Partner to the effect
and extent permitted by law, subsequent incapacity of any Limited Partner and
the transfer of all or any portion of such Limited Partner's Partnership
Interests and shall extend to such Limited Partner's heirs, successors, assigns
and personal representatives.
(c) Nothing contained in this Section 10.6 shall be
construed as authorizing the General Partner to amend this Agreement except in
accordance with Article 11 hereof.
10.7 Ownership of Paired Shares.
(a) Each Limited Partner and holder of Units hereby agrees
to provide the General Partner within fifteen (15) days of any written request
therefor, a statement, to the best of its knowledge, describing the number of
Paired Shares actually or constructively owned by such Limited Partner or holder
of Units and all direct and indirect owners of such Limited Partner or holder
for purposes of the REIT Requirements as determined under Section 318(a) of the
Code, as modified by Section 856(d)(5) of the Code, or Section 544 of the Code,
as modified by Section 856(h) of the Code.
(b) Each Limited Partner and holder of Units (i) hereby
covenants that, without the prior written consent of the General Partner (which
consent shall not be unreasonably withheld or delayed) it will not acquire and
it will use all reasonable efforts to cause its direct or indirect owners not to
acquire any Paired Shares or any rights to acquire Paired Shares and (ii) except
to the extent that the General Partner provides prior written consent, hereby
represents, warrants and covenants that (I) it is not and will not become a
Restricted Entity, (II) no "prohibited transaction" (as defined in Section
4975(c) of the Code or within the meaning of Section 406 of ERISA) has occurred
or will occur that would not have occurred or occur if the Limited Partner or
holder of Units and its Affiliates were not Limited Partners and were not
holders of Units, (III) the Partnership has not become and will not become with
respect to any Restricted Entity a "party in interest" (as defined in Section
3(14) of ERISA) or a "disqualified person" (as defined in Section 4975(e) of the
Code) which the Partnership would not have become or be if the Limited Partner
or holder of Units and its Affiliates were not Limited Partners and were not
holders of Units, and (IV) the Partnership has not and will not become jointly
and severally liable for any obligations arising under ERISA or the Code with
respect to any "employee benefit plan" as defined in and subject to ERISA or any
"plan" as defined in the Code for which the Partnership has not become or would
not be liable if the Limited Partner or holder of Units and its Affiliate were
not Limited Partners and were not holders of Units.
10.8 Waiver of Fiduciary Duty. Each Limited Partner and holder of
Units hereby waives, to the maximum extent permitted under law, any and all
fiduciary duties of the General Partner to each, all or any combination of them
and hereby agrees that the General Partner may, but is under no obligation to,
take their interests into account in performing or refraining from performing
any act permitted under this Agreement.
<PAGE> 50
ARTICLE 11
Amendment of Partnership Agreement, Meetings
11.1 Amendments.
(a) This Agreement may not be amended unless such
amendment is approved by the General Partner with the Consent of the Limited
Partners, except as provided below in this Section 11.1.
(b) Notwithstanding Section 11.1(a), the General Partner
shall have the power, without the Consent of the Limited Partners but after five
(5) Business Days notice to the Limited Partners, to amend this Agreement as may
be required to facilitate or implement any of the following purposes:
(1) to add to the obligations of the General
Partner for the benefit of the Limited Partners;
(2) to reflect the admission, substitution,
termination or withdrawal of Partners after the date hereof in accordance with
Section 4.1(d) or Article 9 of this Agreement, provided that the General Partner
shall not be required to give the notice referred to in the first paragraph of
this subsection (b) in respect of the transaction described in this Paragraph
(2);
(3) to set forth the rights, powers, duties, and
preferences of the holders of any additional Partnership Interests issued
pursuant to Article 4 hereof;
(4) to reflect a change that is of an
inconsequential nature and does not materially adversely affect the Limited
Partners, or to cure any ambiguity, correct or supplement any provision of this
Agreement not inconsistent with law or with other provisions, or make other
changes with respect to matters arising under this Agreement that will not be
inconsistent with law or with the provisions of this Agreement;
(5) to satisfy any requirements, conditions, or
guidelines contained in any order, directive, opinion, ruling or regulation of a
federal or state agency or contained in federal or state law;
(6) to prevent all or any portion of the assets of
the Partnership from being deemed pursuant to United States Department of Labor
Regulation Section 2510.3- 101 or otherwise pursuant to ERISA or the Code to be,
for any purpose of ERISA or Section 4975 of the Code, assets of any Restricted
Entity;
(7) to prevent the Partnership from being
characterized as a "publicly traded partnership" pursuant to Section 7704 of the
Code and Regulations;
<PAGE> 51
(8) to enable the General Partner to satisfy the
REIT Requirements; and
(9) to maintain the Partnership's characterization
as a partnership for tax purposes.
(c) Notwithstanding Sections 11.1(a) and (b) hereof, this
Agreement shall not be amended without the prior written consent of each Partner
adversely affected if such amendment would (i) convert a Limited Partner's
interest in the Partnership into a general partner's interest, (ii) modify the
limited liability of a Limited Partner, (iii) alter rights of the Partners to
receive allocations and distributions pursuant to Article 6 or Section 8.2
hereof (except as permitted pursuant to Article 4 and Sections 11.1(b)(3) and
11.1(d) hereof), (iv) alter or modify the Rights set forth in an Exchange Rights
Agreement or a Registration Rights Agreement except in compliance therewith, (v)
except in furtherance of Sections 11.1(b)(7), (8) or (9) hereof, alter such
Partner's rights to transfer its Partnership Interest; (vi) amend Section 7.7,
7.8 or 10.7 hereof or (vii) amend Section 11.1(c) or 11.1(d) hereof.
(d) Notwithstanding Section 11.1(c) hereof and subject to
(but not in limitation of) the rights granted to the General Partner pursuant to
Article 4 and this Article 11, this Agreement may be amended to (i) alter the
rights of any or all of the Partners to receive allocations and distributions
pursuant to Article 6 or Section 8.2 hereof or (ii) alter the rights of any or
all of the Partners to transfer their Partnership Interests if such amendment is
approved by the prior written consent of a majority of each class or group of
Partnership Interests that is treated in a uniform or pro rata basis by such
amendment.
11.2 Meetings of the Partners; Notices to Partners.
(a) Meetings of Partners may be called by the General
Partner or by Limited Partners holding at least 1% of the Partnership Interests
to act on any matter specified herein or in the Act to be voted on or consented
to by the Partners. The call shall state the nature of the business to be
transacted. Notice of any such meeting shall be given to all Partners not less
than seven (7) Business Days prior to the date of such meeting. Partners may
vote in person or by proxy at such meeting. Whenever the vote or Consent of the
Limited Partners is permitted or required under this Agreement, such vote or
consent may be given at a meeting of Partners or may be given in accordance with
the procedure prescribed in Section 11.2(b) hereof.
(b) Any action required or permitted to be taken at a
meeting of the Partners may be taken without a meeting if a written consent
setting forth the action so taken is signed by the General Partner and such
percentage or number of the Limited Partners as is expressly required by this
Agreement. Such consent may be in one instrument or in several instruments, and
shall have the same force and effect as a vote of the Partners. Such consent
shall be filed with the General Partner and copies thereof delivered to all
Partners. An action so taken shall be deemed to have been taken at a meeting
held on the effective date so certified.
<PAGE> 52
(c) Each Limited Partner may authorize any Person or
Persons to act for him by proxy on all matters in which a Limited Partner is
entitled to participate, including waiving notice of any meeting, or voting or
participating at a meeting. Every proxy must be signed by the Limited Partner or
his attorney-in-fact. No proxy shall be valid after the expiration of eleven
(11) months from the date thereof unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the Limited Partner executing it. No
such proxy and no such revocation shall be effective unless a copy thereof has
been delivered to the General Partner.
(d) Whenever the Consent of the Limited Partners is
required hereunder, the General Partner shall provide a notice to each Partner
who is a Limited Partner on the date the notice is given setting forth the
matter(s) as to which it proposes to seek such consent at least five (5)
Business Days in advance of the date upon which such consent is sought.
ARTICLE 12
General Provisions
12.1 No Liability of Directors and Others. Notwithstanding
anything to the contrary contained herein, no recourse shall be had by the
Partnership or any Partner against any trustee, director, shareholder, officer,
employee, agent or attorney of the General Partner for any act or omission of
the General Partner or any obligation or liability of the General Partner under
this Agreement, and none of the foregoing shall have any personal liability for
or with respect to any of the foregoing; provided that the foregoing shall not
relieve any trustee, officer or director of the General Partner of any liability
in his capacity as such.
12.2 Notices. All notices, offers or other communications
required or permitted to be given pursuant to this Agreement shall be in writing
and may be personally served, sent by United States mail, or sent via facsimile.
A notice shall be deemed to have been given when delivered in person or, if sent
by United States mail, three business days after deposit in United States mail,
registered or certified, postage prepaid, and properly addressed, by or to the
appropriate party, or, if sent via facsimile, upon receipt by the sending party
of verification of transmission. For purposes of this Section 12.2, the
addresses of the parties hereto shall be as set forth on Exhibit B hereto. The
address of any party hereto may be changed by a notice in writing given in
accordance with the provisions hereof.
12.3 Controlling Law. This Agreement and all questions relating
to its validity, interpretation, performance and enforcement (including, without
limitation, provisions concerning limitations of actions), shall be governed by
and construed in accordance with the laws of the State of Delaware,
notwithstanding any conflict-of-laws doctrines of such state or other
jurisdiction to the contrary. Each of the parties hereto irrevocably submits and
consents to the jurisdiction of the United States District Court for the
Southern District of New York and the United States District Court for the
District
<PAGE> 53
of Arizona in connection with any action or proceeding arising out of
or relating to this Agreement and irrevocably waives any immunity from
jurisdiction thereof and any claim of proper venue, forum non conveniens or any
similar basis to which it might otherwise be entitled in any such action or
proceeding.
12.4 Execution of Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories.
12.5 Severability. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
12.6 Entire Agreement. This Agreement (together with the Exhibits
hereto) and the Formation Agreement contain the entire understanding among the
parties hereto with respect to the subject matter hereof, and supersede all
prior and contemporaneous agreements and understandings, inducements or
conditions, express or implied, oral or written, except as herein contained. The
parties hereto intend that this Agreement be treated as a separate and distinct
agreement and as not being part of any other agreement (other than the Formation
Agreement), arrangement, partnership or joint venture. The express terms hereof
control and supersede any course of performance and/or usage of the trade
inconsistent with any of the terms hereof. This Agreement may not be modified or
amended other than by an agreement in writing.
12.7 Paragraph Headings. The paragraph headings in this Agreement
are for convenience and they form no part of this Agreement and shall not affect
its interpretation.
12.8 Gender, Etc. Words used herein, regardless of the number and
gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or neuter,
as the context indicates is appropriate. The term "including" shall mean
"including, but not limited to."
12.9 Number of Days. In computing the number of days (other than
Business Days and Trading Days) for purposes of this Agreement, all days shall
be counted, including Saturdays, Sundays and holidays; provided, however, that
if the final day of any time period falls on a Saturday, Sunday or holiday on
which national banks are or may elect to be closed, then the final day shall be
deemed to be the next day which is not a Saturday, Sunday or such holiday.
12.10 Partners Not Agents. Nothing contained herein shall be
construed to constitute any Partner the agent of another Partner, except as
specifically provided herein, or in any manner to limit the Limited Partners in
the carrying on of their own
<PAGE> 54
respective businesses or activities.
12.11 Assurances. Each of the Partners shall hereafter execute
and deliver such further instruments and do such further acts and things as may
be reasonably required or useful to carry out the intent and purpose of this
Agreement and as are not inconsistent with the terms hereof.
12.12 Waiver of Partition. Each Partner hereby waives any right
such Partner may have to partition its interest in the Partnership or any
property of the Partnership.
12.13 Starwood Lodging Trust. The name "Starwood Lodging Trust"
is a designation of Starwood Lodging Trust and its Trustees (as Trustees but not
personally) under the Declaration of Trust, and all persons dealing with
Starwood Lodging Trust shall look solely to Starwood Lodging Trust's assets for
the enforcement of any claims against Starwood Lodging Trust, as the Trustees,
officers, agents and security holders of Starwood Lodging Trust assume no
personal liability for obligations entered into on behalf of Starwood Lodging
Trust, and their respective individual assets shall not be subject to the claims
of any person relating to such obligations.
<PAGE> 55
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement or caused this Agreement to be executed on their behalf as of the date
first above written.
GENERAL PARTNER:
STARWOOD LODGING TRUST, a Maryland real
estate investment trust
By:
----------------------------------
Name:
Title:
LIMITED PARTNERS:
STARWOOD HOTEL INVESTORS II, L.P.
By: STARWOOD CAPITAL GROUP I, L.P.
By: BSS CAPITAL PARTNERS, L.P.,
General Partner
By: STERNLICHT HOLDINGS II, Inc.
General Partner
By:
----------------------------------
Name:
Title:
FIREBIRD CONSOLIDATED PARTNERS, L.P.
By:
----------------------------------
Name:
Title: General Partner
APPOLLO REAL ESTATE INVESTMENT
FUND, L.P.
By: APPOLLO REAL ESTATE ADVISORS, L.P.
By: APPOLLO REAL ESTATE MANAGEMENT,
INC.
By:
----------------------------------
Name:
<PAGE> 56
Title:
PHILADELPHIA HSR LIMITED PARTNERSHIP
By:
-----------------------------
Name:
Title: General Partner
STARWOOD OPPORTUNITY FUND II, L.P.
By: STARWOOD CAPITAL GROUP I, L.P.
General Partner
By: BSS CAPITAL PARTNERS, L.P.,
General Partner
By: STERNLICHT HOLDINGS II, Inc.
General Partner
By:
-----------------------------
Name:
Title:
-----------------------------
EDWARD J. ROHLING
ZIFF INVESTORS PARTNERSHIP, L.P. II
By:
-----------------------------
Name:
Title: General Partner
MONTROSE CORPORATION
By:
-----------------------------
Name:
Title:
HARVEYWOOD HOTEL INVESTORS, L.P.
By:
-----------------------------
Name:
Title: General Partner
<PAGE> 57
STAR INVESTORS, G.P.
By:
---------------------------
Name:
Title:
MERIDIAN INVESTMENT GROUP
By:
---------------------------
Name:
Title:
THE HERMITAGE, L.P.
By: HERMITAGE OF NASHVILLE, INC.
General Partner
By:
---------------------------
Name:
Title:
BURDEN DIRECT INVESTMENT FUND I, L.P.
By:
---------------------------
Name:
Title: General Partner
BRAINARD HOLDINGS, INC.
By:
---------------------------
Name:
Title:
KJJ REVOCABLE TRUST
By:
---------------------------
Name:
Title: Trustee
------------------------------
BARRY S. STERNLICHT
<PAGE> 58
THE BARRY S. STERNLICHT FAMILY SPRAY
TRUST I
By:
---------------------------
Name:
Title: Trustee
THE BARRY S. STERNLICHT FAMILY SPRAY
TRUST II
By:
---------------------------
Name:
Title: Trustee
THE BARRY S. STERNLICHT FAMILY SPRAY
TRUST III
By:
---------------------------
Name:
Title: Trustee
---------------------------
JACK NASH
THE NASH FAMILY PARTNERSHIP
By:
---------------------------
Name:
Title: General Partner
-------------------------------
MADISON F. GROSE
THE MADISON F. GROSE IRREVOCABLE
INSURANCE TRUST
By:
---------------------------
Name:
Title: Trustee
<PAGE> 59
-----------------------------
MAX C. CHAPMAN
-----------------------------
MERRICK R. KLEEMAN
-----------------------------
EUGENE A. GORAB
-----------------------------
JAMIE R. GATES
-----------------------------
CARLY SIMON
-----------------------------
STEVEN R. GOLDMAN
-----------------------------
ALAN SCHWARTZ
-----------------------------
JAY SUGARMAN
-----------------------------
JOHN Z. KUKRAL
-----------------------------
JEROME C. SILVEY
-----------------------------
GEOFFREY T. BOISI
-----------------------------
MICHAEL MUELLER
-----------------------------
<PAGE> 60
CLATE JOSEPH KORSANT
-----------------------------
JUSTIN FREDERICK KORSANT
-----------------------------
JAMES G. BABB, III
LAMBSTER PARTNERS LIMITED
PARTNERSHIP
By:
---------------------------
Name:
Title: General Partner
-----------------------------
JEFF DISHNER
-----------------------------
GEOFFREY BEER
-----------------------------
CHARLES E. MUELLER, M.D.
-----------------------------
LOWELL D. KRAFF
-----------------------------
STEPHEN FIORE
-----------------------------
JENNIFER ALBERO
-----------------------------
JAMES A. KLEEMAN, M.D., PC
-----------------------------
ELLIS F. RINALDI
<PAGE> 61
-----------------------------
J. PETER PAGANELLI
-----------------------------
JOHN F. COUTURE
-----------------------------
JAMES OLDHAM
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA, on behalf of Prudential Property
Investment Separate Account II
By:
-----------------------------
Name:
Title:
ELEANOR MENDELL, AS TRUSTEE OF THE
GARY MENDELL FAMILY TRUST
By:
-----------------------------
Name: Eleanor Mendell
Title: Trustee
----------------------------
GARY MENDELL
----------------------------
ELLEN-JO MENDELL
----------------------------
STEPHEN MENDELL
----------------------------
JUDITH K. RUSHMORE
----------------------------
MURRAY DOW II
<PAGE> 62
WESTPORT HOSPITALITY, INC.
By:
------------------------
Name:
Title:
ZAPCO HOLDINGS, INC.
By:
------------------------
Name:
Title:
ZAPCO HOLDINGS, INC. DEFERRED
COMPENSATION PLAN TRUST
By:
------------------------
Name:
Title: Trustee
--------------------------
ORNA L. SHULMAN
--------------------------
ARTHUR GREEN
--------------------------
MICHAEL HALL
--------------------------
MARK ROSINSKY
--------------------------
RANDI ROSINSKY
--------------------------
JOHN DAILY
--------------------------
FELIX CACCIATO
<PAGE> 63
--------------------------
THOMAS CLEARWATER
--------------------------
HARVEY MOORE
--------------------------
TRACY DRISCOLL
<PAGE> 64
EXHIBIT A
LIST OF PARTNERS, PERCENTAGE INTERESTS AND UNITS
Date: As of __________, 1997
<TABLE>
<CAPTION>
Name of Partner Percentage Interest Units
--------------- ------------------- -----
<S> <C> <C>
Starwood Lodging Trust 72.4510% 40,078,698
Ziff Investors Partnership, LP II 4.0850% 2,259,732
Firebird Consolidated Partners, LP 2.2069% 1,220,820
Starwood Opportunity Fund II, LP 1.7047% 943,000
Montrose Corporation 1.3435% 743,226
Harveywood Hotel Investors, LP 1.1756% 650,338
Star Investors, G.P. 1.0748% 594,582
Barry S. Sternlicht 0.6275% 347,104
Apollo Real Estate Investment Fund, LP 0.5334% 295,078
Starwood Hotel Investors II, LP 0.5212% 288,334
Meridian Investment Group 0.4798% 265,422
Burden Direct Investment Fund I, LP 0.3915% 216,564
Jack Nash 0.2150% 118,916
Brainard Holdings, Inc. 0.1578% 87,310
JDE Revocable Trust 0.1511% 83,596
Max C. Chapman 0.1382% 76,430
Rick Kleeman 0.0997% 55,170
Philadelphia HSR, LP 0.0985% 54,461
The Barry S. Sternlicht Family Spray Trust I 0.0970% 53,672
The Barry S. Sternlicht Family Spray Trust II 0.0970% 53,672
The Barry S. Sternlicht Family Spray Trust III 0.0970% 53,672
Eugene A. Gorab 0.0899% 49,746
</TABLE>
<PAGE> 65
<TABLE>
<S> <C> <C>
Madison F. Grose 0.0777% 43,004
Jamie R. Gates 0.0729% 40,328
Carly Simon 0.0568% 31,434
Hospitality Partners 0.0550% 30,414
The Nash Family Partnership 0.0537% 29,730
The Madison F. Grose
Irrevocable Insurance Trust 0.0501% 27,726
Steven R. Goldman 0.0409% 22,616
Alan Schwartz 0.0403% 22,298
Jay Sugarman 0.0383% 21,212
Philadelphia HIR, LP 0.0328% 18,140
John Z. Kukral 0.0317% 17,550
Jerome C. Silvey 0.0299% 16,516
Geoffrey T. Boisi 0.0274% 15,150
Michael Mueller 0.0270% 14,932
Clate Korsant 0.0269% 14,866
Justin Korsant 0.0269% 14,866
James G. Babb, III 0.0262% 14,508
Edward J. Rohling 0.0199% 11,011
Lambster Partners Limited Partnership 0.0153% 8,486
Gregory Beer 0.0134% 7,434
Jeff Dishner 0.0064% 3,542
Geoff Beer 0.0042% 2,306
Charles E. Mueller, MD 0.0025% 1,394
Lowell D. Kraff 0.0022% 1,190
Stephen Fiore 0.0016% 900
Jennifer Albero 0.0016% 882
James A. Kleeman, MD, PC 0.0014% 774
</TABLE>
<PAGE> 66
<TABLE>
<S> <C> <C>
Ellis F. Rinaldi 0.0011% 634
J. Peter Paganelli 0.0009% 494
John F. Couture 0.0007% 378
James Oldham 0.0004% 224
The Prudential Insurance Company of America,
on behalf of Prudential Property Investment
Separate Account II 8.1872% 4,529,007
Eleanor Mendell, as Trustee of the Gary Mendell
Family Trust 0.9143% 505,778
Gary Mendell 0.0652% 36,078
Ellen-Jo Mendell 0.9429% 521,617
Stephen Mendell 0.0366% 20,239
Judith K. Rushmore 0.4637% 256,511
Murray Dow II 0.0550% 30,415
Wesport Hospitality, Inc. 0.0193% 10,656
Zapco Holdings, Inc. 0.5989% 331,291
Zapco Holdings, Inc. Deferred Compensation
Plan Trust 0.0328% 18,126
Orna L. Shulman 0.0379% 20,962
Arthur Green 0.0045% 2,505
Michael Hall 0.0024% 1,321
Mark Rosinsky 0.0023% 1,253
Randi Rosinsky 0.0023% 1,252
John Daily 0.0039% 2,161
Felix Cacciato 0.0068% 3,767
Thomas Clearwater 0.0009% 497
Harvey Moore 0.0004% 224
Tracy Driscoll 0.0004% 224
--------- ---
TOTAL 100.0000% 55,318,336
</TABLE>
<PAGE> 67
EXHIBIT B
Notice Address of Partners
<TABLE>
<CAPTION>
Name of Partner Notice Address
- --------------- --------------
<S> <C>
Starwood Lodging Trust 2231 East Camelback Road
Suite 410
Phoenix, Arizona 85016
Attn: General Counsel
Ziff Investors Partnership, LP II 153 East 53rd Street
New York, NY 10022
Attn. Mr. Dan Stern
Firebird Consolidated Partners, LP c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, Connecticut 06830
Attention: Madison F. Grose, Esq.
Starwood Opportunity Fund II, LP c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, Connecticut 06830
Attention: Madison F. Grose, Esq.
Montrose Corporation c/o The Walt Disney Corporation
500 S. Buena Vista
Team Disney 301J
Burbank, CA 91521
Attn: Mr. Mark Rozells
Harveywood Hotel Investors, LP c/o Starwood Capital Group, General
Partner
Three Pickwick Plaza, Suite 250
Greenwich, Connecticut 06830
Attention: Jerome C. Silvey
Star Investors, G.P. c/o Penguin Group, L.P.
200 West Madison Avenue, 38th Floor
Chicago, IL 60606
Attn: Mr, Kevin Poorman
Barry S. Sternlicht c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Apollo Real Estate Investment Fund. LP c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
</TABLE>
<PAGE> 68
<TABLE>
<S> <C>
Attn: Madison F. Grose
Starwood Hotel Investors II, LP c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Attn: Madison F. Grose, Esq.
Meridian Investment Group c/o Penguin Group, L.P.
200 West Madison Avenue
Chicago, IL 60606
Attn: Mr, Kevin Poorman
Burden Direct Investment Fund I, LP 10 East 53rd Street
New York, NY 10022
Attn: Mr. Jeff Weber
Jack Nash c/o Odyssey Partners, L.P.
31 West 52nd Street
New York, NY 10019
Brainard Holdings, Inc. c/o Lake Asset Management, Inc.
499 Park Avenue, 24th Floor
New York, NY 10022
Attn: Mr. Nicholas Berggruen
JDE Revocable Trust c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Attn: Madison F. Grose
Max C. Chapman c/o Nomura Securities
2 World Financial Center, 22nd Floor
New York, NY 10281-1198
Rick Kleeman c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Philadelphia HSR, LP c/o The Beacon Companies
50 Rowes Wharf
Boston, MA 02110
Attn: Edward N. Sidman
The Barry S. Sternlicht Family Spray Trust I c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
The Barry S. Sternlicht Family Spray Trust II c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
</TABLE>
<PAGE> 69
<TABLE>
<S> <C>
Greenwich, CT 06830
The Barry S. Sternlicht Family Spray Trust III c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Eugene A. Gorab c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Madison F. Grose c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Jamie R. Gates c/o Texas Pacific Group
600 California Street
San Francisco, CA 94108
Carly Simon c/o Ms. Arlene Graff
Star & Co.
350 Park Avenue
New York, NY 10022
Hospitality Partners 7101 Wisconsin Avenue
Bethesda, MD 20814
The Nash Family Partnership c/o Odyssey Partners, L.P.
31 West 52nd Street
New York, NY 10019
Attn: Mr. Joshua Nash
The Madison F. Grose Irrevocable Insurance Trust c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Steven R. Goldman c/o Starwood Lodging Trust
2231 East Camelback Road
Phoenix, AZ 85016
Alan Schwartz c/o Bear Sterns
245 Park Avenue
New York, NY 10167
Jay Sugarman c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Philadelphia HIR, LP c/o The Beacon Companies
</TABLE>
<PAGE> 70
<TABLE>
<S> <C>
50 Rowes Wharf
Boston, MA 02110
Attn: Edward N. Sidman
John Z. Kukral c/o The Blackstone Group
345 Park Avenue
New York, NY 10154
Jerome C. Silvey c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Geoffrey T. Boisi c/o Beacon Group
375 Park Avenue
New York, NY 10152
Michael Mueller c/o Starwood Lodging Trust
2231 East Camelback Road
Phoenix, AZ 85016
Clate Korsant c/o Amelia Holdings
289 Greenwich Avenue
Greenwich, CT 06830
Attn: Ms. Dot Parker
Justin Korsant c/o Amelia Holdings
289 Greenwich Avenue
Greenwich, CT 06830
Attn: Ms. Dott Parker
James G Babb, III c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Edward J. Rohling c/o Bristol Hotel Management Operations
1428 Midway Road
Dallas, TX 75244
Attn: Jeff Mayer
Lambster Partners Limited Partnership c/o Walton Street Capital, L.L.C.
900 N. Michigan Avenue, 19th Floor
Chicago, IL 60611
Mr. Neil Bluhm
Gregory Beer c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
</TABLE>
<PAGE> 71
<TABLE>
<S> <C>
Jeff Dishner c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Geoff Beer c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Charles E. Mueller, MD 11306 Roosevelt Road
Saginaw, MI 48603
Lowell D. Kraff c/o Lexer Capital, Ltd.
333 West Wacker Drive, Suite 2070
Chicago, IL 60606
Stephen Fiore c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Jennifer Albero c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
James A. Kleeman, MD, PC c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Attn: Madison F. Grose
Ellis F. Rinaldi c/o Rinaldi & Associates
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
J. Peter Paganelli c/o Starwood Asset Management
Three Pickwick Plaza, 3rd Floor
Greenwich, CT 06830
John F. Couture c/o La Salle Partners
220 East 42nd Street, 27th Floor
New York, NY 10017
James Oldman c/o Starwood Asset Management
Three Pickwick Plaza, 3rd Floor
Greenwich, CT 06830
The Prudential Insurance Company of America, c/o Prudential Real Estate Investors
on behalf of Prudential Property Investment 8 Campus Drive
Separate Account II Parsippany, NJ 07054
</TABLE>
<PAGE> 72
<TABLE>
<S> <C>
Attn: Mr. Roger S. Pratt
Eleanor Mendell, as Trustee of the Gary Mendell c/o Eleanor Mendell, Trustee
Family Trust 4 The Circle
Easton, CT 06612
Gary Mendell 20 Morning Glory Drive
Easton, CT 06612
Ellen-Jo Mendell 25 Kent Lane
Trumbull, CT 06611
Stephen Mendell 25 Kent Lane
Trumbull, CT 06611
Judith K. Rushmore 22 Sheperd Lane
Roslyn Heights, NY 11577
Murray L. Dow II 49 Ridge Lane
Shelton, CT 06484
Westport Hospitality, Inc. 55 Greens Farms Road
Westport, CT 06880
Zapco Holdings, Inc. Deferred Compensation c/o Orna Shulman
Plan Trust Intertech Corporation
1301 Pennsylvania Avenue, N.W.
Suite 700
Washington, DC 20004
Orna L. Shulman 800 5th Avenue
New York, NY 10021
Arthur C. Green 57 Wilton Crest
Wilton, CT 06484
Michael D. Hall 326 Roycroft Street
Long Beach, CA 90814
Mark J. Rosinsky 34 Shadow Lane
Great Neck, NY 11021
Randi L. Rosinsky 34 Shadow Lane
Great Neck, NY 11021
John Daily 10 Cahill Road
Monroe, CT 06468
</TABLE>
<PAGE> 73
<TABLE>
<S> <C>
Felix J. Caccioto, Jr. 53 Mimosa Court
Ridgefield, CT 06877
Thomas Clearwater 39 Southwood Drive
New Canaan, CT 06840
Harvey Moore 615 Stockley Garden
Norfolk, VA 23507
Tracy Driscoll 23 Todd Hill Road
Poughkeepsie, NY 12603
</TABLE>
<PAGE> 74
FIRST AMENDMENT TO SECOND AMENDED
AND RESTATED LIMITED PARTNERSHIP AGREEMENT
OF SLT REALTY LIMITED PARTNERSHIP
THIS FIRST AMENDMENT TO SECOND AMENDED AND RESTATED LIMITED
PARTNERSHIP AGREEMENT OF SLT REALTY LIMITED PARTNERSHIP ("Amendment") is made
and entered into effective as of January 1, 1998, by and among Starwood Lodging
Trust, a Maryland real estate investment trust, as the General Partner, and the
Limited Partners of SLT Realty Limited Partnership, a Delaware limited
partnership ("Realty Partnership"), which was formed pursuant to the provisions
of that certain Limited Partnership Agreement of the Realty Partnership dated as
of December 15, 1994, and amended and restated as of June 29, 1995 and again as
of November 14, 1997 ("Realty Partnership Agreement"). All capitalized terms not
defined herein shall have the same meaning set forth in the Realty Partnership
Agreement.
R E C I T A L S
WHEREAS, as of September 8, 1997, that certain Transaction
Agreement ("Transaction Agreement") was entered into among the General Partner,
the Realty Partnership, SLC, the Operating Partnership, Westin Hotels & Resorts
Worldwide, Inc. ("Westin Worldwide"), a Delaware corporation, and others;
WHEREAS, pursuant to the Transaction Agreement, it is
contemplated that, among other things, Westin Worldwide will be merged into the
General Partner and, thereafter, that the General Partner will directly hold
certain of the assets previously held by Westin Worldwide, which include, among
other things, the stock of certain affiliates;
WHEREAS, the General Partner believes that it may enter into
transactions in the future that may also result in it owning material assets or
entering into or conducting a business ("Non-Realty Partnership Business") other
than the ownership, acquisition and disposition of Partnership Interests as the
General Partner or Limited Partner and the management of the business of the
Partnership;
WHEREAS, Section 7.3 of the Realty Partnership Agreement
provides that if the General Partner directly or indirectly enters into or
conducts Non-Realty Partnership Businesses, the General Partner shall make
arrangements that are reasonably necessary to prevent such Non-Realty
Partnership Businesses from having a material adverse impact on the Limited
Partners and that assure that the Limited Partners share in the economic
benefits of such Non-Realty Partnership Businesses in a fair and equitable
manner;
WHEREAS, the General Partner desires to amend the Realty
Partnership Agreement
<PAGE> 75
as set forth in this Amendment to ensure that any and all Non-Realty Partnership
Businesses it conducts will not have a material adverse impact on the Limited
Partners and that any economic benefits related to such Non-Realty Partnership
Businesses will be shared with Limited Partners in a fair and equitable manner;
and
WHEREAS, the Limited Partners have been informed and do hereby
unconditionally consent to such amendments;
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt, adequacy and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:
SECTION 1. Effective as of the date first above written, Section 6.1(a)
is hereby amended and restated in its entirety as follows:
6.1 Allocations. The Net Income, Net Loss and other
Partnership items shall be allocated pursuant to the provisions of this
Section 6.1 hereto.
(a) Allocation of Net Income and Net Loss.
(i) Net Income. Except as
otherwise provided herein, Net Income for any fiscal year or other
applicable period shall be allocated in the following order and
priority:
(A) first, to the
General Partner, to the extent of Net Loss previously allocated to the
General Partner pursuant to Section 6.1(a)(ii)(C) for all prior
periods;
(B) second, to the
Partners, to the extent of, in proportion to Net Loss previously
allocated to the Partners pursuant to Section 6.1(a)(ii)(B), until the
cumulative Net Income allocated pursuant to this Section 6.1(a)(i)(B)
for the current and all prior periods equals the cumulative Net Loss
allocated pursuant to Section 6.1(a)(ii)(B) for all prior periods;
(C) third, to the
extent the Partnership has made distributions pursuant to Section
6.2(b), to the holders of Units in accordance with and in proportion to
distributions made under Section 6.2(b); and
(D) thereafter, to the
holders of Units in accordance with and in proportion to their
respective holdings of Units.
(ii) Net Loss. Except as
otherwise provided herein, Net Loss of the Partnership for each fiscal
year or other applicable period shall be
- 2 -
<PAGE> 76
allocated in the following order and priority:
(A) first, to the
Partners, to the extent of, in proportion to, and in the reverse order
of, Net Income previously allocated to the Partners pursuant to Section
6.1(a)(i)(C), until the cumulative Net Loss allocated pursuant to this
Section 6.1(a)(ii)(A) for the current and all prior periods equals the
cumulative Net Income allocated pursuant to Section 6.1(a)(i)(C) for
all prior periods;
(B) second, to the
holders of Units in accordance with their respective holdings of Units,
provided that Net Losses shall not be allocated pursuant to this
Section 6.1(a)(ii)(B) to the extent such allocations would cause any
Limited Partner to have an Adjusted Capital Account Deficit as of the
end of the fiscal year to which such Net Loss relates; and
(C) the balance, if any, to
the General Partner.
SECTION 2. Effective as of the date first above written, Section 6.2 is
hereby amended and restated in its entirety as follows:
6.2 Distributions.
(a) Except as otherwise provided in
Sections 6.2(b), the General Partner shall cause the Partnership to
distribute all, or such portion as the General Partner may in its
reasonable discretion determine, of Net Cash Flow to the holders of
Units who are holders on the Partnership Record Date with respect to
such distribution. All such distributions shall be made pro rata in
accordance with the holder's ownership of Units. Notwithstanding the
foregoing, the General Partner is authorized to cause the Partnership
to distribute sufficient amounts, pro rata by ownership of Units, to
enable the General Partner to pay shareholder dividends that will
satisfy the REIT Requirements.
(b) When the General Partner declares a
distribution to holders of Shares and the amount otherwise determined
to be distributable to each holder of a Unit under Section 6.2(a)
results in an amount that is less than the amount distributable to each
holder of a Share (on a per Share to per Unit basis), the General
Partner shall cause the Partnership to distribute sufficient amounts to
holders of Units as of the Partnership Record Date so that such holders
of Units will receive an amount per Unit equal to the related
distributions to holders of Shares (on a per Share to per Unit basis).
The General Partner shall accomplish this by reducing the amounts
otherwise distributable to it under Section 6.2(a) and increasing the
amount otherwise distributable to holders of Units under Section 6.2(a)
and, to the extent necessary, by contributing additional capital to the
Partnership.
- 3 -
<PAGE> 77
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement or caused this Agreement to be executed on their behalf as of the date
first above written.
GENERAL PARTNER:
STARWOOD LODGING TRUST, a Maryland real
estate investment trust
By: /s/ Steven R. Goldman
--------------------------------------
Name: Steven R. Goldman
Title: Senior Vice President
LIMITED PARTNERS:
STARWOOD HOTEL INVESTORS II, L.P.
By: STARWOOD CAPITAL GROUP I, L.P.
By: BSS CAPITAL PARTNERS, L.P.,
General Partner
By: STERNLICHT HOLDINGS II, Inc.
General Partner
By: /s/ Madison F. Grose
--------------------------------------
Name: Madison F. Grose
Title: EVP
FIREBIRD CONSOLIDATED PARTNERS, L.P.
By: /s/ Madison F. Grose
--------------------------------------
Name: Madison F. Grose
Title: Authorized Signatory for
General Partner
APPOLLO REAL ESTATE INVESTMENT
FUND, L.P.
By: APPOLLO REAL ESTATE ADVISORS, L.P.
- 4 -
<PAGE> 78
By: APPOLLO REAL ESTATE MANAGEMENT,
INC.
By:
-----------------------------------
Name:
Title:
PHILADELPHIA HSR LIMITED PARTNERSHIP
By:
-----------------------------------
Name:
Title: General Partner
STARWOOD OPPORTUNITY FUND II, L.P.
By: STARWOOD CAPITAL GROUP I, L.P.
General Partner
By: BSS CAPITAL PARTNERS, L.P.,
General Partner
By: STERNLICHT HOLDINGS II, Inc.
General Partner
By: /s/ Madison F. Grose
-----------------------------------
Name: Madison F. Grose
Title: EVP
/s/ Edward J. Rohling
-----------------------------------
EDWARD J. ROHLING
ZIFF INVESTORS PARTNERSHIP, L.P. II
By: /s/ Philip B. Korsant
-----------------------------------
Name: PBK Holdings, Inc.
Title: General Partner
By: Philip B. Korsant--President
MONTROSE CORPORATION
- 5 -
<PAGE> 79
By:
---------------------------------------
Name:
Title:
HARVEYWOOD HOTEL INVESTORS, L.P.
By: /s/ Madison F. Grose
---------------------------------------
Name: Madison F. Grose
Title: Authorized Signatory for
General Partner
STAR INVESTORS, G.P.
By:
---------------------------------------
Name:
Title:
MERIDIAN INVESTMENT GROUP
By:
---------------------------------------
Name:
Title:
THE HERMITAGE, L.P.
By: HERMITAGE OF NASHVILLE, INC.
General Partner
By:
---------------------------------------
Name:
Title:
BURDEN DIRECT INVESTMENT FUND I,
By: /s/ Jeffrey A. Weber
---------------------------------------
Name: Jeffrey A. Weber
Title: President & CEO
Burden Brothers, Inc.
General Partner
William A.M. Burden & Co., L.P.,
General Partner
BRAINARD HOLDINGS, INC.
- 6 -
<PAGE> 80
By:
---------------------------------------
Name:
Title:
KJJ REVOCABLE TRUST
By: /s/ Hekmatollah Eilian
---------------------------------------
Name: Hekmatollah Eilian
Title: Trustee
--------------------------------------------
BARRY S. STERNLICHT
THE BARRY S. STERNLICHT FAMILY SPRAY
TRUST I
By:
---------------------------------------
Name:
Title: Trustee
THE BARRY S. STERNLICHT FAMILY SPRAY
TRUST II
By:
---------------------------------------
Name:
Title: Trustee
THE BARRY S. STERNLICHT FAMILY SPRAY
TRUST III
By:
---------------------------------------
Name:
Title: Trustee
/s/ Jack Nash
---------------------------------------
JACK NASH
- 7 -
<PAGE> 81
THE NASH FAMILY PARTNERSHIP
By: /s/ Joshua Nash
---------------------------------------
Name: Joshua Nash
Title: General Partner
/s/ Madison F. Grose
-------------------------------------------
MADISON F. GROSE
THE MADISON F. GROSE IRREVOCABLE
INSURANCE TRUST
By: /s/ Ellis F. Rinaldi
---------------------------------------
Name: Ellis F. Rinaldi
Title: Trustee
---------------------------------------
MAX C. CHAPMAN
/s/ Merrick R. Kleeman
---------------------------------------
MERRICK R. KLEEMAN
---------------------------------------
EUGENE A. GORAB
- 8 -
<PAGE> 82
/s/ Jamie R. Gates
---------------------------------------
JAMIE R. GATES
/s/ Carly Simon
---------------------------------------
CARLY SIMON
---------------------------------------
STEVEN R. GOLDMAN
/s/ Alan Schwartz
---------------------------------------
ALAN SCHWARTZ
/s/ Jay Sugarman
---------------------------------------
JAY SUGARMAN
/s/ John Z. Kukral
---------------------------------------
JOHN Z. KUKRAL
/s/ Jerome C. Silvey
---------------------------------------
JEROME C. SILVEY
/s/ Geoffrey T. Boisi
---------------------------------------
GEOFFREY T. BOISI
---------------------------------------
MICHAEL MUELLER
/s/ Donna Mitchell
---------------------------------------
CLATE JOSEPH KORSANT TRUST
By: /s/ Donna Mitchell
-----------------------------------
Name: Donna Mitchell
Title: Trustee
By: /s/ Dirk Ziff
-----------------------------------
Name: Dirk Ziff
Title: Trustee
- 9 -
<PAGE> 83
/s/ Donna Mitchell
---------------------------------------
JUSTIN FREDERICK KORSANT TRUST
By: /s/ Donna Mitchell
-----------------------------------
Name: Donna Mitchell
Title: Trustee
By: /s/ Dirk Ziff
-----------------------------------
Name: Dirk Ziff
Title: Trustee
/s/ James G. Babb, III
---------------------------------------
JAMES G. BABB, III
LAMBSTER PARTNERS LIMITED
PARTNERSHIP
By:
-----------------------------------
Name:
Title: General Partner
/s/ Jeff Dishner
---------------------------------------
JEFF DISHNER
---------------------------------------
GEOFFREY BEER
---------------------------------------
CHARLES E. MUELLER, M.D.
---------------------------------------
LOWELL D. KRAFF
/s/ Stephen Fiore
---------------------------------------
STEPHEN FIORE
/s/ Jennifer Albero
---------------------------------------
JENNIFER ALBERO
---------------------------------------
JAMES A. KLEEMAN, M.D., PC
- 10 -
<PAGE> 84
/s/ Ellis F. Rinaldi
---------------------------------------
ELLIS F. RINALDI
/s/ J. Peter Paganelli
---------------------------------------
J. PETER PAGANELLI
---------------------------------------
JOHN F. COUTURE
/s/ James Oldham
---------------------------------------
JAMES OLDHAM
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA, on behalf of Prudential Property
Investment Separate Account II
By: /s/ Roger S. Pratt
------------------------------------
Name: Roger S. Pratt
Title: Vice President/Managing Director
ELEANOR MENDELL, AS TRUSTEE OF THE
GARY MENDELL FAMILY TRUST
By: /s/ Eleanor Mendell
------------------------------------
Name: Eleanor Mendell
Title: Trustee
/s/ Gary Mendell
---------------------------------------
GARY MENDELL
/s/ Ellen-Jo Mendell
---------------------------------------
ELLEN-JO MENDELL
/s/ Stephen Mendell
---------------------------------------
STEPHEN MENDELL
- 11 -
<PAGE> 85
---------------------------------------
JUDITH K. RUSHMORE
/s/ Murray Dow II
---------------------------------------
MURRAY DOW II
WESTPORT HOSPITALITY, INC.
By: /s/ Gary Mendell
---------------------------------------
Name: Gary Mendell
Title: President
ZAPCO HOLDINGS, INC.
By: /s/ Orna L. Shulman
---------------------------------------
Name: Orna L. Shulman
Title: Executive Vice President
ZAPCO HOLDINGS, INC. DEFERRED
COMPENSATION PLAN TRUST
By: /s/ Nancy Heinrich
---------------------------------------
Name: Nancy Heinrich
Title: Trustee
/s/ Orna L. Shulman
---------------------------------------
ORNA L. SHULMAN
---------------------------------------
ARTHUR GREEN
---------------------------------------
MICHAEL HALL
- 12 -
<PAGE> 86
---------------------------------------
MARK ROSINSKY
- 13 -
<PAGE> 87
---------------------------------------
RANDI ROSINSKY
/s/ John Daily
---------------------------------------
JOHN DAILY
---------------------------------------
FELIX CACCIATO
/s/ Thomas Clearwater
---------------------------------------
THOMAS CLEARWATER
---------------------------------------
HARVEY MOORE
---------------------------------------
TRACY DRISCOLL
- 14 -
<PAGE> 88
CERTIFICATE OF ADMISSION
OF SLT REALTY LIMITED PARTNERSHIP
THIS CERTIFICATE OF ADMISSION OF SLT REALTY LIMITED
PARTNERSHIP ("Certificate of Admission") is made effective January 2, 1998, by
Starwood Lodging Trust, a Maryland real estate investment trust, as the General
Partner of SLT Realty Limited Partnership, a Delaware limited partnership
("Partnership"), which was formed pursuant to the provisions of that certain
Limited Partnership Agreement of the Partnership dated as of December 15, 1994
and amended and restated as of June 29, 1995 and again as of November 14, 1997
and subsequently amended as of January 1, 1998 (as such agreement may be
hereafter amended from time to time, "Partnership Agreement"). All capitalized
terms not defined herein shall have the same meaning set forth in the
Partnership Agreement.
R E C I T A L S
WHEREAS, as of September 8, 1997, that certain Transaction
Agreement ("Transaction Agreement") was entered into among the General Partner,
the Partnership, SLC, the Operating Partnership, Westin Hotels & Resorts
Worldwide, Inc. ("Westin Worldwide"), a Delaware corporation, W&S Seattle Corp.
("Seattle"), a Delaware corporation, W&S Lauderdale Corp. ("Lauderdale"), a
Delaware corporation, W&S Denver Corp. ("Denver"), a Delaware corporation, and
the other parties thereto;
WHEREAS, pursuant to the Transaction Agreement, it is
contemplated that, among other things, the Persons whose names appear below the
General Partner's name on the signature pages of this Certificate of Admission
(each a "Contributing Party" and, collectively, the "Contributing Parties") will
contribute to the Partnership certain of the outstanding shares of capital stock
of Seattle, Lauderdale and Denver in exchange for Class A Units described below;
WHEREAS, pursuant to Section 4.1(e) of the Partnership
Agreement, the General Partner is authorized to cause the Partnership to issue
additional Partnership Interests in one or more classes or one or more series of
any of such classes, with such designations, preferences and relative,
participating, optional or other special rights, powers and duties, including
rights, powers and duties senior to the then-existing Partnership Interests and
Units, as shall be determined by the General Partner in its sole and absolute
discretion; and
WHEREAS, pursuant to Section 11.1(b)(3) and (4) of the
Partnership Agreement, the General Partner is authorized to amend the
Partnership Agreement without the Consent of the Limited Partners, and in
accordance with Section 11.1(b) of the Partnership Agreement, the Limited
Partners have received five Business Days' notice of this Certificate of
Admission.
NOW THEREFORE, the undersigned certifies that all appropriate
actions have been
- 1 -
<PAGE> 89
taken to admit the Contributing Parties to the Partnership upon the terms and
conditions set forth below:
SECTION 1. Each Contributing Party is hereby admitted as a Limited
Partner of the Partnership and shall receive, inter alia, its share of a maximum
total of 597,844 Class A Units(1) to be issued pursuant to the Transaction
Agreement. The number of Class A Units received by each Contributing Party is
set forth next to each such Contributing Party's signature block below. The
General Partner hereby consents to each such admission. If the number of Class A
Units to be received by any Contributing Party shall be adjusted after the date
hereof in accordance with the terms of or in connection with the Transaction
Agreement, the General Partner shall amend this Certificate of Admission to
reflect such adjustment.
SECTION 2. Each Contributing Party has agreed to comply with and to be
bound by the terms and conditions of the Partnership Agreement. Each
Contributing Party has represented that, to the best of its knowledge, its
admission as a Limited Partner does not violate any of the restrictions set
forth in Section 9.3 of the Partnership Agreement.
SECTION 3. The Partnership Agreement is hereby amended such that each
and every reference to the "Limited Partners" or to a "Limited Partner" includes
each Contributing Party.
SECTION 4. Exhibit A to the Partnership Agreement is hereby amended to
reflect this Certificate of Admission.
SECTION 5. Exhibit B to the Partnership Agreement is hereby amended to
reflect this Certificate of Admission. The notice address of each Contributing
Party is set forth on Exhibit A to this Certificate of Admission.
SECTION 6. Section 1.1 of the Partnership Agreement is hereby amended
by the addition of the following defined terms:
"Class A Certificate of Admission" shall mean the
Certificate of Admission of SLT Realty Limited Partnership, dated as of
January 2, 1998, that authorizes the issuance of the Class A Units.
"Class A Limited Partners" shall mean those Persons
admitted to the Partnership pursuant to the Class A Certificate of
Admission, and any Person who, at the time of reference thereto, is a
Class A Limited Partner of the Partnership.
"Class A Liquidation Preference Distribution" shall
mean, with respect to a Class A Unit, an amount equal to the "fair
market value" of one OP Ordinary Unit,
- --------
(1) The exact number of Class A Units to be issued to each Contributing Party
will be determined on or about December 29, 1997 in a manner consistent with the
Transaction Agreement.
- 2 -
<PAGE> 90
which shall be payable only in the event of the dissolution and
liquidation of the Partnership not preceded or accompanied by a
liquidation and dissolution of the Operating Partnership. Such fair
market value shall be determined in good faith by the General Partner
as of the effective date of such liquidation and dissolution or, if no
such effective date applies, as of the date of the first liquidating
distribution pursuant to Section 8.2. In the event of any change in (i)
the nature or amount of securities constituting a unit of Paired Shares
under the pairing agreement between the General Partner and SLC, (ii)
the correspondence of the number of non-preferred Units in the
Partnership to the number of Paired Shares outstanding or (iii) the
correspondence of the number of OP Ordinary Units to the number of
Paired Shares outstanding, the amount of the Class A Liquidation
Preference that shall accrue with respect to each Class A Unit as a
function of the fair market of each OP Ordinary Unit shall be equitably
adjusted.
"Class A RP Special Distribution" shall mean, with
respect to a Class A Unit, an amount equal to the sum, in cash, of the
fair market value of all operating and liquidating distributions by the
Operating Partnership with respect to OP Ordinary Units on or after
January 2, 1998 (whether pursuant to Section 6.2 or 8.2 of the
Operating Partnership Agreement) in an amount per Class A Unit equal to
the amount so distributed in respect of each OP Ordinary Unit. In the
event of any change in (i) the nature or amount of securities
constituting a unit of Paired Shares under the pairing agreement
between the General Partner and SLC, (ii) the correspondence of the
number of non- preferred Units in the Partnership to the number of
Paired Shares outstanding or (iii) the correspondence of the number of
OP Ordinary Units to the number of Paired Shares outstanding, the
amount of the Class A Special Distribution that shall accrue with
respect to each Class A Unit as a function of the amount of the
corresponding distribution on the OP Ordinary Units shall be equitably
adjusted. Class A RP Special Distributions may only be made with
respect to Class A Units and shall be due at the same time as such
operating or liquidating distributions are made by the Realty
Partnership.
"Class A Units" shall mean, collectively, the
interests of Class A Limited Partners in capital, allocations of Net
Income, Net Loss and distributions, including Class A RP Special
Distributions and Class A Liquidation Preference Distributions, if any.
The number of Class A Units owned by each Class A Limited Partner is
set forth on Exhibit A hereto.
"OP Ordinary Units" shall mean units of the Operating
Partnership other than units entitled to receive priority distributions
under the Operating Partnership Agreement such as the Class A Units and
Class B Units (as those terms are defined in the Operating Partnership
Agreement).
"Operating Partnership Agreement" shall mean that
certain Limited Partnership Agreement of the Operating Partnership
dated as of December 15, 1994 and amended and restated as of June 29,
1995 and again as of November 14, 1997 and
- 3 -
<PAGE> 91
subsequently amended as of January 1, 1998 pursuant to the First
Amendment to Second Amended and Restated Limited Partnership Agreement
of SLC Operating Limited Partnership Agreement and as of January 2,
1998 pursuant to the Certificate of Admission of SLC Operating Limited
Partnership, and as may hereafter be further amended, supplemented or
restated from time to time.
"Units" shall have the meaning set forth in Section
4.1(c) hereof, and such term shall include Class A Units except where
the context otherwise requires.
SECTION 7. Section 6.1(a) of the Partnership Agreement is hereby
amended and restated in its entirety as follows:
(a) Allocation of Net Income and Net Loss.
(i) Net Income. Except as
otherwise provided herein, Net Income for any fiscal year or other
applicable period shall be allocated in the following order and
priority:
(A) first, to the
General Partner, until the cumulative Net Income allocated pursuant to
this Section 6.1(a)(i)(A) for the current and all prior periods equals
the cumulative Net Loss allocated pursuant to Section 6.1(a)(ii)(D) for
all prior periods;
(B) second, to the
holders of Units, including Class A Units, to the extent of, in
proportion to and in reverse order of their prior allocations of Net
Loss pursuant to Section 6.1(a)(ii)(C) until the cumulative Net Income
allocated pursuant to this Section 6.1(a)(i)(B) for the current and all
prior periods equals the cumulative Net Loss allocated to such holders
pursuant to Section 6.1(a)(ii)(C) for all prior periods;
(C) third, to the holders
of Class A Units until each holder of Class A Units has been allocated
Net Income pursuant to this Section 6.1(a)(i)(C) in an amount equal to
its accrued Class A Special Distributions, if any;
(D) fourth, to the holders
of Class A Units until each holder of Class A Units has been allocated
Net Income pursuant to this Section 6.1(a)(i)(D) in an amount equal to
the excess of its accrued Class A Liquidation Preference Distributions,
if any, over the portion of such holder's initial Capital Account
balance allocable to the Class A Liquidation Preference;
(E) fifth, to the extent
the Partnership has made distributions pursuant to Section 6.2(c) to
the holders of Units, including Class A Units, in accordance with and
in proportion to distributions made under Section 6.2(c); and
- 4 -
<PAGE> 92
(F) thereafter, to the
holders of Units, including Class A Units, in accordance with and in
proportion to their respective holdings of Units.
(ii) Net Loss. Except as
otherwise provided herein, Net Loss of the Partnership for each fiscal
year or other applicable period shall be allocated in the following
order and priority;
(A) first, to the
holders of Units, including Class A Units, to the extent of, in
proportion to, and in the reverse order of, Net Income previously
allocated to the Partners pursuant to Section 6.1(a)(i)(F), until the
cumulative Net Loss allocated pursuant to this Section 6.1(a)(ii)(A)
for the current and all prior periods equals the cumulative Net Income
allocated pursuant to Section 6.1(a)(i)(F) for all prior periods;
(B) second, to the
holders of Class A Units to the extent of and in proportion to their
prior allocations of Net Income pursuant to Section 6.1(a)(i)(C) and
(D) until the cumulative Net Loss allocated pursuant to this Section
6.1(a)(ii)(B) for the current and all prior periods equals the
cumulative Net Income allocated to such holders pursuant to Section
6.1(a)(i)(C) and (D) for all prior periods;
(C) third, to the
holders of Units, including Class A Units, in accordance with their
respective holdings of Units, provided that Net Losses shall not be
allocated pursuant to this Section 6.1(a)(ii)(C) to the extent such
allocations would cause any Limited Partner to have an Adjusted Capital
Account Deficit as of the end of the fiscal year to which such Net Loss
relates; and
(D) the balance, if
any, to the General Partner.
SECTION 8. Section 6.2 of the Partnership Agreement is hereby amended
and restated in its entirety as follows:
6.2 Distributions. The General Partner shall cause
the Partnership to distribute all, or such portion as the General
Partner may in its reasonable discretion determine, of Net Cash Flow in
accordance with the distribution rules described below to the holders
of applicable Units who are holders on the Record Date with respect to
such distribution; provided that the General Partner shall be at all
times authorized to cause the Partnership to distribute to the holders
of Units pro rata in accordance with the holders' ownership of Units,
sufficient amounts to enable the General Partner to pay shareholder
dividends that will satisfy the REIT Requirements. For such purposes,
Net Cash Flow shall be distributed:
- 5 -
<PAGE> 93
(a) first, to the holders of Class A
Units, pro rata in accordance with the holders' ownership of Class A
Units, in an amount equal to the excess, if any, of (i) the total of
all Class A RP Special Distributions that have accrued as of the date
of payment of such distribution, less (ii) the total of all previous
distributions to the holders of Class A Units in respect of such Class
A RP Special Distributions pursuant to Section 8.2(a)(iv), if any, and
this Section 6.2(a);
(b) except as otherwise provided in
Sections 6.2(c), to the holders of Units, including Class A Units, who
are holders on the Partnership Record Date with respect to such
distribution pro rata in accordance with the holders' ownership of
Units, including Class A Units; and
(c) when the General Partner declares
a distribution to holders of Shares and the amount otherwise determined
to be distributable to each holder of a Unit, including Class A Units,
under Section 6.2(b) results in an amount that is less than the amount
distributable to each holder of a Share (on a per Share to per Unit
basis), the General Partner shall cause the Partnership to distribute
sufficient amounts to holders of Units, including Class A Units, as of
the Partnership Record Date so that such holders of Units, including
Class A Units, will receive an amount per Unit equal to the related
distributions to holders of Shares (on a per Share to per Unit basis).
The General Partner shall accomplish this by reducing the amounts
otherwise distributable to it under Section 6.2(b) and increasing the
amount otherwise distributable to holders of Units, including Class A
Units, under Section 6.2(b) and, to the extent necessary, by
contributing additional capital to the Partnership.
SECTION 9. Section 8.2(a) of the Partnership Agreement is hereby
amended and restated in its entirety as follows:
8.2 Distributions on Dissolution.
(a) In the event of the dissolution and liquidation
of the Partnership for any reason, the assets of the Partnership shall
be liquidated for distribution in the following rank and order:
(i) payment of creditors of the Partnership,
including creditors who are Partners or former Partners;
(ii) establishment of reserves as provided by the
Liquidating Trustee to provide for contingent liabilities, if any;
(iii) to the holders of Class A Units, pro rata in
accordance with the holders' ownership of Class A Units, in an amount
equal to the excess, if any, of (x) the Class A Liquidation Preference
Distribution, over (y) the sum of all prior distributions to
- 6 -
<PAGE> 94
holders of Class A Units pursuant to this Section 8.2(a)(iii);
(iv) to the holders of Class A Units, pro rata in
accordance with the holders' ownership of Class A Units, in an amount
equal to the excess, if any, of (x) the total of all Class A RP Special
Distributions that have accrued as of the date of payment of such
liquidating distribution, less (y) the total of all previous
distributions to the holders of Class A Units in respect of such Class
A RP Special Distributions pursuant to Section 6.2(a) and this Section
8.2(a)(iv); and
(v) to the holders of Units, including Class A Units,
in accordance with the positive balances in their Capital Accounts
after giving effect to all contributions, distributions and allocations
for all periods.
Whenever the Liquidating Trustee reasonably determines that any
reserves established pursuant to paragraph (ii) above are in excess of
the reasonable requirements of the Partnership, the amount determined
to be excess shall be distributed to the Partners in accordance with
the provisions of this Section 8.2(a). No Partner or holder of Units
shall be liable to any other Partner or holder of Units for a deficit
balance in its Capital Account.
SECTION 10. Notwithstanding Section 6.16(d) of the Transaction
Agreement, no restrictions on the transfer of the shares of Denver, Seattle or
Lauderdale shall be enforced if and only to the extent that such restriction
would cause Denver, Seattle or Lauderdale to fail to meet the requirements of
Section 856(a)(2) of the Code.
SECTION 11. As provided for in this Certificate of Admission and as
otherwise necessary or appropriate to reflect the admission of the Contributing
Parties to the Partnership, the Partnership Agreement is hereby amended
effective as of the date first written above. Except as otherwise provided in
this Certificate of Admission, each and every provision of the Partnership
Agreement remains in full force and effect.
IN WITNESS WHEREOF, the party hereto has executed this
Certificate of Admission or caused this Certificate of Admission to be executed
on its behalf as of the date first above written.
STARWOOD LODGING TRUST, a Maryland real
estate investment trust
By: /s/ Ronald C. Brown
__________________________________
Name: Ronald C. Brown
Title: Senior Vice President and
Chief Financial Officer
- 7 -
<PAGE> 95
IN WITNESS WHEREOF, the Contributing Parties hereby agree to
and acknowledge the terms of this Certificate of Admission.
117,036 Units WHWE L.L.C.
By: Whitehall Street Real Estate
Limited Partnership V,
Member and Manager
By:
By:
By: /s/ Jonathan Langer
___________________________
Name: Jonathan Langer
Title: Attorney-in-fact for
Whitehall Street Real
Estate Limited
Partnership V
221,081 Units Woodstar Investor Partnership
By: Marswood Investors, L.P.,
General Partner
By: Starwood Capital Group, L.P.,
General Partner
By: BSS Capital Partners, L.P.,
General Partner
By: Sternlicht Holdings II, Inc.,
General Partner
By: /s/ Ronald C. Brown
_________________________
Name: Ronald C. Brown
Title: Attorney-in-fact
- 8 -
<PAGE> 96
132,192 Units Nomura Asset Capital Corporation
By: /s/ Daniel S. Abrams
_________________________
Name: Daniel S. Abrams
Title: Managing Director
- 9 -
<PAGE> 97
EXHIBIT A
1) If to WHWE L.L.C., to:
85 Broad Street
New York, New York 10004
Attention: Stuart M. Rothenberg
Telecopier: (212) 357-5505
2) If to Woodstar Investor Partnership, to:
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Attention: Barry S. Sternlicht
Telecopier: (203) 861-2101
3) If to Nomura Asset Capital Corporation, to:
Two World Financial Center, Building B
New York, NY 10281
Attention: Daniel S. Abrams
Telecopier: (212) 667-1666
- 10 -
<PAGE> 1
Exhibit 10.2
----------------------------------------------------------------------
SECOND
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
SLC OPERATING LIMITED PARTNERSHIP
----------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
ARTICLE 1
Definitions..........................................................4
1.1 Definitions.................................................4
ARTICLE 2
Continuation and Business of the Partnership........................16
2.1 Continuation...............................................16
2.2 Name.......................................................17
2.3 Character of the Business..................................17
2.4 Location of Principal Place of Business....................17
2.5 Registered Agent and Registered Office.....................17
2.6 Restatement of Agreement...................................18
ARTICLE 3
Term................................................................18
3.1 Commencement...............................................18
3.2 Dissolution................................................18
ARTICLE 4
Capital Contributions...............................................18
4.1 Capital Contributions; Units...............................18
4.2 Redemption of Units Held by Limited Partner................20
4.3 Percentage Interests.......................................21
4.4 Purchase Rights............................................21
4.5 Redemption of Units Held by the General Partner............21
4.6 No Third Party Beneficiaries...............................21
4.7 No Interest on or Return of Capital Contribution...........22
ARTICLE 5
Indemnification.....................................................22
5.1 Indemnification of the General Partner.....................22
5.2 Indemnification of Limited Partners........................23
5.3 Notice of Claims...........................................25
5.4 Third Party Claims.........................................25
5.5 Indemnification Pursuant to Formation Agreement............26
<PAGE> 3
ARTICLE 6
Allocations, Distributions and Other Tax and Accounting Matters.....26
6.1 Allocations................................................26
6.2 Distributions..............................................31
6.3 Books of Account...........................................32
6.4 Reports....................................................32
6.5 Tax Elections and Returns..................................32
6.6 Tax Matters Partner........................................32
6.7 Withholding Payments Required By Law.......................33
ARTICLE 7
Rights, Duties and Restrictions of the General Partner..............34
7.1 Powers and Duties of the General Partner...................34
7.2 Reimbursement of the General Partner.......................37
7.3 Outside Activities of the General Partner..................38
7.4 Contracts with Affiliates..................................38
7.5 Title to Partnership Assets................................38
7.6 Reliance by Third Parties..................................39
7.7 Liability of the General Partner...........................39
7.8 Other Matters Concerning the General Partner...............40
7.9 Operation of SLT in Accordance with REIT Requirements......40
7.10 Replacement of General Partner.............................41
ARTICLE 8
Dissolution, Liquidation and Winding-Up.............................41
8.1 Accounting.................................................41
8.2 Distribution on Dissolution................................41
8.3 Documentation of Liquidation...............................42
ARTICLE 9
Transfer............................................................43
9.1 General Partner............................................43
9.2 Transfers by Limited Partners..............................43
9.3 Certain Restrictions on Transfer...........................45
9.4 Effective Dates of Transfers...............................45
9.5 Transfer...................................................46
9.6 Nevada Gaming Control Act..................................46
ARTICLE 10
Rights and Obligations of the Limited Partners......................47
10.1 No Participation in Management.............................47
10.2 Bankruptcy of a Limited Partner............................47
10.3 No Withdrawal..............................................47
10.4 Conflicts..................................................47
10.5 Provision of Information...................................48
<PAGE> 4
10.6 Power of Attorney..........................................49
10.7 Ownership of Paired Shares.................................50
10.8 Waiver of Fiduciary Duty...................................51
ARTICLE 11
Amendment of Partnership Agreement, Meetings........................51
11.1 Amendments.................................................51
11.2 Meetings of the Partners; Notices to Partners..............52
ARTICLE 12
General Provisions..................................................53
12.1 No Liability of Directors and Others.......................53
12.2 Notices....................................................53
12.3 Controlling Law............................................54
12.4 Execution of Counterparts..................................54
12.5 Severability...............................................54
12.6 Entire Agreement...........................................54
12.7 Paragraph Headings.........................................54
12.8 Gender, Etc................................................54
12.9 Number of Days.............................................55
12.10 Partners Not Agents........................................55
12.11 Assurances.................................................55
12.12 Waiver of Partition........................................55
<PAGE> 5
LIST OF EXHIBITS
Exhibit
A List of Partners, Percentage Interests and Units
A-1 List of Class A Partners, Percentage Interests and Units
B Notice Address of Partners
<PAGE> 6
THE LIMITED PARTNERSHIP INTERESTS REFERRED TO IN THIS AGREEMENT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS. REFERENCE IS MADE TO ARTICLE 9 OF THIS
AGREEMENT FOR PROVISIONS RELATING TO VARIOUS RESTRICTIONS ON THE SALE
OR OTHER TRANSFER OF THESE INTERESTS.
SECOND
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
SLC OPERATING LIMITED PARTNERSHIP
THIS SECOND AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
(this "Agreement") is made and entered into this 14th day of November, 1997, by
and among Starwood Lodging Corporation, a Maryland corporation ("SLC"), as
General Partner, and the persons whose names are set forth on Exhibit A hereto
and Exhibit A-1 hereto, as each such exhibit may be amended from time to time,
as limited partners, pursuant to the provisions of the Delaware Revised Uniform
Limited Partnership Act.
RECITALS
A. Starwood Lodging Corporation, Columbus Operators, Inc., Hotel Investors of
Arizona, Inc., Hotel Investors of Michigan, Inc., Hotel Investors of Virginia,
Inc., Western Host, Inc., Hotel Investors Corporation of Nevada, Inc., Hotel
Investors of Nebraska, Inc., Berl Holdings, L.P., Starwood-Apollo Hotel Partners
VIII, L.P., Starwood-Apollo Hotel Partners IX, L.P., Starwood-Nomura Hotel
Investors, L.P., Starwood/Wichita Investors, L.P., Starwood-Huntington Partners,
L.P., and Woodstar Partners I, L.P., were the parties to that certain Limited
Partnership Agreement of SLC Operating Limited Partnership, dated as of December
15, 1994 (hereinafter, the "Original Agreement" and the "Partnership",
respectively).
B. Firebird Consolidated Partners, L.P., was admitted as a limited
partner of the Partnership pursuant to that certain Admission of Limited
Partner, Consent and Amendment dated March 24, 1995.
C. The Original Agreement was restated by that certain Amended and
Restated Limited Partnership Agreement of SLC Operating Limited Partnership by
and between SLC,
<PAGE> 7
as General Partner, and the General Partners and the Limited Partners of the
Partnership, as such groups were then constituted, and dated as of June 29, 1995
(the "Original Restated Agreement").
D. The Original Restated Agreement was amended by that certain
Amendment by and between SLC, as General Partner, and the General Partners and
the Limited Partners of the Partnership, as such groups were then constituted,
and dated as of May 14, 1996.
E. Philadelphia HSR Limited Partnership ("HSR") was admitted as a
limited partner of the Partnership pursuant to that certain Admission of Limited
Partner, Consent and Amendment (Operating Partnership) dated as of June 3, 1996.
F. Starwood/Wichita Investors, L.P., Berl Holdings, L.P.,
Starwood-Huntington, L.P., Woodstar Partners I, L.P., and Wichita Harvey
Partners, Ltd., transferred their respective interests in the Partnership to SRL
Holdings, Inc., Starwood Capital Group I, L.P., Starwood Opportunity Fund II,
L.P., Moonwood Investment Partners, L.P., Woodstar II, L.P., Hospitality
Partners, Bristol Hotel Management Corp., and Edward J. Rohling, and each such
Person was admitted as a limited partner of the Partnership pursuant to that
certain Admission of Limited Partners Agreement dated as of June 4, 1996.
G. Philadelphia HIR Limited Partnership ("HIR") was admitted as a
limited partner of the Partnership pursuant to that certain Admission of Limited
Partner, Consent and Amendment (Operating Partnership) dated as of July 1, 1996.
H. Starwood-Apollo Hotel Partners VIII, L.P., transferred its interest
in the Partnership to SAHI, Inc., Starwood Hotel Investors, L.P., and AP-GP
Midstar Hotels VIII, Inc.; Starwood-Apollo Hotel Partners IX, L.P., transferred
its interest in the Partnership to SAHI, Inc., Starwood Hotel Investors, L.P.,
and AP-GP Midstar Hotels IX, Inc.; Starwood Hotel Investors, L.P., transferred
its interest in the Partnership to Starwood Hotel Investors II, L.P., SAHI, Inc.
and AP-GP Master Midstar, L.P.; and AP-GP Midstar Hotels VIII, Inc., AP-GP
Midstar Hotels IX, Inc., and AP-GP Master Midstar, L.P., transferred their
respective interests in the Partnership to Apollo Real Estate Investment Fund,
L.P., and each of Starwood Hotel Investors II, L.P., SAHI, Inc. and Apollo Real
Estate Investment Fund was admitted as a limited partner of the Partnership
pursuant to that certain Admission of Limited Partners Agreement dated as of
December 12, 1996;
I. Starwood-Nomura Hotel Investors, L.P., SRL Holdings, Inc., Starwood
Capital Group, L.P., Moonwood Investment Partners, L.P., Woodstar Partners II,
L.P., Berl Holdings I, Inc., SAHI, Inc., and Harveywood Hotel Investors II,
L.P., transferred their interests in the Partnership to Burden Direct Investment
Fund I., L.P., Ziff Investors Partnership, L.P., II, Carly Simon, Lambster
Partners Limited Partners, Montrose Corporation, Star Investors G.P., Meridian
Investment Group, 1985 Trust f/b/o Clate Joseph Korsant, 1985 Trust f/b/o Justin
Frederick Korsant, Jack Nash, the Nash Family Partnership, Brainard Holdings,
Inc., Lowell D. Kraff, Max C. Chapman, Alan Schwartz, Geoffrey T. Boisi, Gregory
Beer, Charles E. Mueller, James A. Kleeman, Steve Goldman, Mike Mueller, James
R. Gates, John Z. Kukral, John F. Couture, Barry S. Sternlicht, the Barry S.
Sternlicht
<PAGE> 8
Family Spray Trust I, the Barry S. Sternlicht Family Spray Trust II, the Barry
S. Sternlicht Family Spray Trust III, James G. Babb, III, Madison F. Grose, the
Madison F. Grose Irrevocable Insurance Trust, Merrick R. Kleeman, JDE Revocable
Trust u/a dated December 31, 1996, Eugene A. Gorab, Jerome C. Silvey, Geoffrey
Beer, Jay Sugarman, Jennifer Albero, Steven Fiore, James Oldham, Jeff Dishner,
Ellis F. Rinaldi, and J. Peter Paganelli and each such Person was admitted as a
limited partner of the Partnership pursuant to forty-four (44) separate
Admission of Limited Partner Agreements each dated as of December 31, 1996.
J. The Prudential Insurance Company of America, on behalf of Prudential
Property Investment Separate Account II, Eleanor Mendell, as Trustee of the Gary
Mendell Family Trust, Gary Mendell, Ellen-Jo Mendell, Stephen Mendell, Judith K.
Rushmore, Murray Dow II, Westport Hospitality, Inc., Zapco Interest Holdings,
LP, Zapco Holdings, Inc., Zapco Holdings, Inc. Deferred Compensation Plan Trust,
Orna L. Shulman, Arthur Green, Michael Hall, Mark Rosinsky, Randi Rosinsky, John
Daily, Felix Cacciato, Thomas Clearwater, Harvey Moore, and Tracy Driscoll
(collectively, the "HEI Contributors") were each admitted as a limited partner
of the Partnership pursuant to that certain Admission of Limited Partners,
Consent and Amendment (Operating Partnership) dated as of February 14, 1997.
K. Gary Mendell, Stephen Mendell, Judith K. Rushmore, Murray Dow II,
and Westport Hospitality, Inc. (collectively with the HEI Contributors, the "HEI
Parties"), were each admitted as a Class A Limited Partner pursuant to that
certain Admission of Class A Limited Partners, Consent and Amendment (Operating
Partnership) dated as of February 14, 1997.
L. The Hermitage, L.P. was admitted as a limited partner of the
Partnership pursuant to that certain Admission of Limited Partners, Consent and
Amendment (Operating Partnership) dated as of March 11, 1997.
M. Effective as of the date first written above, each of Columbus
Operators, Inc., Hotel Investors of Arizona, Inc., Hotel Investors of Michigan,
Inc., Hotel Investors of Virginia, Inc., Western Host, Inc., Hotel Investors
Corporation of Nevada, Inc., Hotel Investors of Nebraska, Inc. has transferred
its respective interest in the Partnership to SLC and has thereby withdrawn as a
General Partner of the Partnership, and by its signature below, each of the
Limited Partners has consented thereto.
N. The parties hereto have agreed to amend and restate the Original
Restated Agreement, as previously amended, in its entirety to reflect the
foregoing and to make other necessary or appropriate changes.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as follows:
<PAGE> 9
ARTICLE 1
Definitions
1.1 Definitions. Except as otherwise herein expressly
provided, the following terms and phrases shall have the meanings as set forth
below:
"Accountants" shall mean the national firm or firms
of independent certified public accountants selected by the General Partner on
behalf of the Partnership to audit the books and records of the Partnership and
to prepare statements and reports in connection therewith.
"Act" shall mean the Delaware Revised Uniform Limited
Partnership Act, as the same may hereafter be amended from time to time.
"Adjusted Capital Account Deficit" shall mean, with
respect to any Partner or holder of Units other than the General Partner, the
deficit balance, if any, in such holder's Capital Account as of the end of any
relevant fiscal year and after giving effect to the following adjustments:
(a) credit to such Capital Account any
amounts which such holder is obligated or treated as obligated to restore with
respect to any deficit balance in such Capital Account pursuant to Section
1.704-1(b)(2)(ii)(c) of the Regulations, or is deemed to be obligated to restore
with respect to any deficit balance pursuant to the penultimate sentences of
Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and
(b) debit to such Capital Account the items
described in Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the requirements of the alternate test for economic effect contained
in Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted
consistently therewith.
"Administrative Expenses" shall mean: (a) all
administrative and operating costs and expenses of the Partnership; (b) those
administrative costs and expenses of the General Partner, including, but not
limited to, salaries and other remunerations paid to trustees, officers and
employees of the General Partner and accounting and legal expenses undertaken by
the General Partner on behalf or for the benefit of the Partnership; and (c) all
expenses which the Partnership hereby assumes and agrees to pay as incurred for
the benefit of the Partnership, including (i) costs and expenses relating to the
formation and continuation of the Partnership and continuity of existence of the
General Partner, including taxes (other than the General Partner's federal and
state income and franchise taxes, if any), fees and assessments associated
therewith, any and all costs, expenses or fees payable to any director or
trustee of the General Partner, (ii) to the extent funded by the General Partner
for payment by the Partnership, costs and expenses relating to any offer or
registration of securities by the General Partner the net proceeds of which are
to be contributed or loaned to the Partnership and all statements, reports, fees
and expenses incidental thereto, including underwriting
<PAGE> 10
discounts and selling commissions applicable to any such offer of securities,
(iii) costs and expenses associated with the preparation and filing of any
periodic reports by the General Partner under federal, state or local laws or
regulations, including filings with the SEC, (iv) costs and expenses associated
with compliance by the General Partner with laws, rules and regulations
promulgated by any regulatory body, including the SEC, and (v) all other costs
of the General Partner incurred in the course of its business on behalf of the
Partnership including, but not limited to, any indemnification obligations of
the General Partner (other than indemnification pursuant to Section 9.1 and 9.2
of the Formation Agreement).
"Affected Gain" shall have the meaning set forth in
Section 6.1(c)(ii) hereof.
"Affiliate" shall mean, with respect to any Partner
(or as to any other Person the Affiliates of whom are relevant for purposes of
any of the provisions of this Agreement): (a) any member of the Immediate Family
of such Partner or Person; (b) any trustee or beneficiary of a Partner which is
a trust; (c) any trust for the benefit of any Person referred to in the
preceding clauses (a) and (b); or (d) any Entity which directly or indirectly
through one or more intermediaries, Controls, is Controlled by, or is under
common Control with, any Partner or Person referred to in the preceding clauses
(a) through (c).
"Agreement" shall mean this Limited Partnership
Agreement, as amended, modified, supplemented or restated from time to time, as
the context requires.
"Articles of Incorporation" shall mean the Amended
and Restated Articles of Incorporation of the General Partner, as the same may
be amended, modified, supplemented, restated or superseded from time to time.
"Audited Financial Statements" shall mean financial
statements (balance sheet, statement of income, statement of partners equity and
statement of cash flows) prepared in accordance with GAAP and accompanied by an
independent auditor's report containing an opinion thereon.
"Bankruptcy" shall mean, with respect to any Person:
(a) the commencement by such Person of any petition, case or proceeding seeking
relief under any provision or chapter of the federal Bankruptcy Code or any
other federal or state law relating to insolvency, bankruptcy or reorganization;
(b) an adjudication that such Person is insolvent or bankrupt; (c) the entry of
an order for relief under the federal Bankruptcy Code with respect to such
Person; (d) the filing of any such petition or the commencement of any such case
or proceeding against such Person, unless such petition and the case or
proceeding initiated thereby are dismissed within ninety (90) days from the date
of such filing; or (e) the filing of an answer by such Person admitting the
allegations of any such petition.
"Business Day" shall mean any day that is not a
Saturday, Sunday or a day on which banking institutions in the State of
California or the State of New York are authorized or obligated by law or
executive order to close.
<PAGE> 11
"Capital Account" shall mean, as to any Partner or
holder of Units, a book account maintained in accordance with the following
provisions:
(a) to each Partner's or holder of Unit's
Capital Account there shall be credited the amount of cash contributed by the
Partner or holder, the initial Gross Asset value of any other asset contributed
by such Partner or holder to the capital of the Partnership (net of liabilities
secured by contributed property that the Partnership assumes or takes subject
to), such Partner's or holder's distributive share of Net Income and any other
items of income or gain allocated to such Partner or holder, the amount of any
Partnership liabilities assumed by the Partner or holder or secured by
distributed assets that such Partner or holder takes subject to and any other
items in the nature of income or gain that are allocated to such Partner or
holder pursuant to Section 6.1 hereof; and
(b) to each Partner's or holder of Unit's
Capital Account there shall be debited the amount of cash distributed to the
Partner or holder, the Gross Asset Value of any Partnership asset distributed to
such Partner or holder pursuant to any provision of this Agreement, such
Partner's or holder's distributive share of Net Losses and any other items in
the nature of expenses or losses that are allocated to such Partner pursuant to
Section 6.1 hereof.
In the event that a Partner's Partnership Interest or a holder of Unit's Units
or portion thereof is transferred within the meaning of Section
1.704-1(b)(2)(iv)(f) of the Regulations, the transferee shall succeed to the
Capital Account of the transferor to the extent that it relates to the
Partnership Interest, Units or portion thereof so transferred. In the event that
the Gross Asset Values of Partnership assets are adjusted, as contemplated in
paragraph (b) or (c) of the definition of "Gross Asset Value," the Capital
Accounts of the Partners and holders of Units shall be adjusted to reflect the
aggregate net adjustments as if the Partnership sold all of its properties for
their fair market values and recognized gain or loss for federal income tax
purposes equal to the amount of such aggregate net adjustment. This definition
of Capital Accounts is intended to comply with the maintenance of capital
account provisions of Section 1.704-1(b) of the Regulations and shall be
interpreted and applied in a manner consistent therewith.
"Capital Contribution" shall mean, with respect to
any Partner, the amount of cash and the initial Gross Asset Value of any
Contributed Property (net of liabilities to which such property is subject).
"Certificate" shall mean the Certificate of Limited
Partnership establishing the Partnership, as filed with the office of the
Delaware Secretary of State, as amended from time to time in accordance with the
terms of this Agreement and the Act.
"Class A Limited Partners" shall mean those Persons
listed under the heading "Class A Limited Partners" on Exhibit A-1 hereto in
their respective capacities as Class A Limited Partners hereof, and any Person
who, at the time of reference thereto, is a Class A Limited Partner of the
Partnership.
<PAGE> 12
"Class A Preferred Return" shall mean, with respect
to any Special Class A Distribution that is not paid within five (5) Business
Days of when due, an amount calculated as interest equal to the rate of interest
most recently announced by Citibank, N.A. (or any successor to substantially all
of its assets and business), as its prime rate, plus eight (8) percent,
compounded annually.
"Class A Units" shall have the meaning set forth in
Section 4.1(c) hereof.
"Code" shall mean the Internal Revenue Code of 1986,
as amended and in effect from time to time, as interpreted by the applicable
regulations thereunder. Any reference herein to a specific section or sections
of the Code shall be deemed to include a reference to any corresponding
provision of future law.
"Commission" shall mean the Nevada Gaming Commission.
"Consent of the Class A Limited Partners" shall mean
the written consent of a Majority-In-Interest of the Class A Limited Partners
given in accordance with Section 11.2 hereof, which Consent shall be obtained
prior to the taking of any action for which it is required by this Agreement and
which shall not be unreasonably withheld or delayed provided all distributions
to the Class A Limited Partners under Section 6.2 hereof are then current.
"Consent of the Limited Partners" shall mean the
written consent of a Majority-In-Interest of the Limited Partners given in
accordance with Section 11.2 hereof, which Consent shall be obtained prior to
the taking of any action for which it is required by this Agreement and may be
given or withheld by a Majority-In-Interest of the Limited Partners, unless
otherwise expressly provided herein, in their sole and absolute discretion.
"Contributed Property" shall mean any property or
other asset in such form as may be permitted by the Act, but excluding cash,
contributed or deemed contributed to the Partnership with respect to the
Partnership Interest held by each Partner.
"Control" shall mean the ability, whether by the
direct or indirect ownership of shares or other equity interests, by contract or
otherwise, to elect a majority of the directors of a corporation, to select the
managing partner of a partnership, or otherwise to select, or have the power to
remove and then select, a majority of those persons exercising governing
authority over an Entity. In the case of a limited partnership, the sole general
partner, all of the general partners to the extent each has equal management
control and authority, or the managing general partner or managing general
partners thereof shall be deemed to have control of such partnership and, in the
case of a trust, any trustee thereof or any Person having the right to select
any such trustee shall be deemed to have control of such trust.
"Depreciation" shall mean, with respect to any asset
of the Partnership for any fiscal year or other period, the depreciation or
amortization, as the case may be,
<PAGE> 13
allowed or allowable for federal income tax purposes in respect of such asset
for such fiscal year or other period, except that if the Gross Asset Value of an
asset differs from its adjusted tax basis for federal income tax purposes at the
beginning of such fiscal year or other period, Depreciation shall be an amount
that bears the same ratio to such beginning book value as the federal income tax
depreciation, amortization or other cost recovery deduction for such fiscal year
or other period bears to such beginning adjusted tax basis and if such adjusted
tax basis is zero, the Depreciation shall be based on the method of
depreciation, amortization or other cost recovery deduction utilized in
preparing the financial statements of the Partnership.
"Entity" shall mean any general partnership, limited
partnership, limited liability company, corporation, joint venture, trust,
business trust, real estate investment trust or association.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time and as interpreted by the
applicable regulations thereunder (or any corresponding provisions of succeeding
laws and regulations).
"Exchange Rights Agreement" shall mean any Exchange
Rights Agreement by and among SLT and/or SLC and one or more Limited Partners
which is intended to provide for the rights of such Limited Partners to tender
Units in exchange for either Paired Shares, other securities, cash or a
combination of the foregoing.
"Formation Agreement" shall mean that certain
Formation Agreement by and among Starwood Lodging Trust, Starwood Lodging
Corporation, Starwood Capital Group, L.P., Berl Holdings, L.P., Woodstar
Partners I, L.P., Starwood-Apollo Hotel Partners VIII, L.P., Starwood-Apollo
Hotel Partners IX, L.P., Starwood-Nomura Hotel Investors, L.P., Starwood/Wichita
Investors, L.P., and Starwood-Huntington Partners, L.P., and dated as of
November 11, 1994, and any amendments or modifications thereof or side letters
thereto.
"GAAP" shall mean generally accepted accounting
principles in effect from time to time.
"General Partner" shall mean Starwood Lodging
Corporation, a Maryland corporation, its duly admitted successors and assigns as
general partner of the Partnership at the time of reference thereto.
"Gross Asset Value" shall mean, with respect to any
asset of the Partnership, such asset's adjusted basis for federal income tax
purposes, except as follows:
(a) the initial Gross Asset Value of any
asset contributed by a Partner to the Partnership shall be the gross fair market
value of such asset at the time of its contribution as reasonably determined by
the General Partner and the contributing Partner;
(b) the Gross Asset values of all
Partnership assets shall be adjusted to equal their respective gross fair market
values, as reasonably determined by the General Partner, immediately prior to
the following events:
<PAGE> 14
(i) a Capital Contribution (other
than a de minimis Capital Contribution) to the Partnership by a new or existing
Partner as consideration for a Partnership Interest;
(ii) the distribution by the
Partnership to a Partner of more than a de minimis amount of Partnership
property as consideration for the redemption of a Partnership Interest;
(iii) the liquidation of the
Partnership within the meaning of Section 1.704-1(b)(2)(ii)(g) of the
Regulations; and
(iv) any other event as to which
the General Partner reasonably determines that an adjustment is necessary or
appropriate to reflect the relative economic interests of the Partners;
(c) the Gross Asset Values of Partnership
assets distributed to any Partner shall be the gross fair market values of such
assets as reasonably determined by the General Partner as of the date of
distribution; and
(d) the Gross Asset Values of Partnership
assets shall be increased (or decreased) to reflect any adjustments to the
adjusted basis of such assets pursuant to Sections 734(b) or 743(b) of the Code,
but only to the extent that such adjustments are taken into account in
determining Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the
Regulations; provided, however, that Gross Asset Values shall not be adjusted
pursuant to this paragraph to the extent that the General Partner reasonably
determines that an adjustment pursuant to paragraph (b) above is necessary or
appropriate in connection with a transaction that would otherwise result in an
adjustment pursuant to this paragraph (d).
At all times, Gross Asset Values shall be adjusted by any Depreciation taken
into account with respect to the Partnership's assets for purposes of computing
Net Income and Net Loss. Any adjustment to the Gross Asset Values of Partnership
property shall require an adjustment to the Partner's Capital Accounts.
"HEI Contribution Agreement" shall mean that certain
Contribution Agreement dated January 15, 1997, by and among the HEI Property
Companies, SLC, the Partnership, SLT Financing Partnership, a Delaware general
partnership, SLT, the Realty Partnership, and certain other parties.
"HEI Contributors" shall have that meaning provided
in Recital J hereto.
"HEI Parties" shall have that meaning provided in
Recital K hereto.
"HEI Property Companies" shall mean Westport Norfolk
Associates Limited Partnership, a Delaware limited partnership, Pruwest Norfolk,
L.L.C., a Delaware limited liability company, Westport BWI, L.L.C., a Delaware
limited liability company,
<PAGE> 15
Pruwest Baltimore, L.L.C., a Delaware limited liability company, Westport
Raritan, L.L.C., a Delaware limited liability company, Pruwest Edison, L.L.C., a
Delaware limited liability company, Westport Novi, L.L.C., a Delaware limited
liability company, Pruwest Novi, L.L.C., a Delaware limited liability company,
Westport Park Ridge, L.P., a Delaware limited partnership, Westport Park Ridge,
L.L.C., a Delaware limited liability company, Westport Long Beach, L.L.C., a
Delaware limited liability company, Westport Charleston, L.L.C., a Delaware
limited liability company, Westport Santa Rosa, L.L.C., a Delaware limited
liability company, Westport Crystal City, L.L.C., a Delaware limited liability
company, Prudential, Atlanta Hotel Associates, LP, a Connecticut limited
partnership, Virginia Hotel Associates, L.P., a Delaware limited partnership, BW
Hotel Realty, L.P., a Maryland limited partnership, Edison Hotel Associates,
L.P., a New Jersey limited partnership, Novi Hotel Associates, L.P., a Delaware
limited partnership, Park Ridge Hotel Associates, L.P., a Delaware limited
partnership, Long Beach Hotel Associates, L.L.C., a New Jersey limited liability
company, Charleston Hotel Associates, L.L.C., a New Jersey limited liability
company, Santa Rosa Hotel Associates, L.L.C., a New Jersey limited liability
company, Crystal City Hotel Associates, L.L.C., a New Jersey limited liability
company, and Prudential HEI Joint Venture, a joint venture.
"HEI Property Company Interests" shall have the
meaning set forth in the HEI Contribution Agreement.
"HICN" shall mean Hotel Investors Corporation of
Nevada, a Nevada corporation.
"HICN Partnership" shall have the meaning provided in
Section 4.1(f) hereof.
"HIR" shall have that meaning provided in Recital G
hereto.
"HSR" shall have that meaning provided in Recital E
hereto.
"Immediate Family" shall mean, with respect to any
Person, such Person's spouse (then current or former), parents, parents-in-law,
descendants, brothers and sisters (whether by whole or half-blood), first
cousins, brothers-in-law and sisters-in-law (whether by whole or half-blood),
ancestors and lineal descendants.
"Indemnitee" shall mean any Person who is, or at any
time on or after December 15, 1994 was, a (i) General Partner, (ii) employee,
trustee, director, officer, stockholder or Liquidating Trustee of the
Partnership or the General Partner or (iii) member of the Management Committee.
"Inns Ancillary Notes" shall have the meaning
provided in Paragraph 2(f) of that certain Bond Purchase Agreement by and among
The First National Bank of Boston, HSR, HIR, the Realty Partnership and the
Partnership and dated February 26, 1996.
"Issuance Percentage" shall mean the relative values
of SLT and SLC,
<PAGE> 16
each stated as a percentage of the sum of the values of SLT and SLC, and as most
recently determined by SLT and SLC.
"Lien" shall mean any liens, security interests,
mortgages, deeds of trust, pledges, options, rights of first offer or first
refusal and any other similar encumbrances of any nature whatsoever.
"Limited Partners" shall mean those Persons listed
under the heading "Limited Partners" on the signature page hereto in their
respective capacities as limited partners of the Partnership, their permitted
successors or assigns as limited partners hereof, and any Person who, at the
time of reference thereto, is a limited partner of the Partnership. Such terms
shall include Class A Limited Partners except where the context otherwise
requires.
"Liquidating Trustee" shall mean such individual or
Entity which is selected as the Liquidating Trustee hereunder by the General
Partner, which individual or Entity may include the General Partner or an
Affiliate of the General Partner, provided that such Liquidating Trustee agrees
in writing to be bound by the terms of this Agreement. The Liquidating Trustee
shall be empowered to give and receive notices, reports and payments in
connection with the dissolution, liquidation and/or winding up of the
Partnership and shall hold and exercise such other rights and powers granted to
the General Partner herein or under the Act as are necessary or required to
conduct the winding-up and liquidation of the Partnership's affairs and to
authorize all parties to deal with the Liquidating Trustee in connection with
the dissolution, liquidation and/or winding-up of the Partnership.
"Majority-In-Interest of the Class A Limited
Partners" shall mean Class A Limited Partner(s) who hold in the aggregate more
than fifty (50) percent of the Percentage Interests then allocable to and held
by the Class A Limited Partners, as a class (but excluding any Partnership
Interest acquired by the General Partner, or any Person holding as a nominee of
a General Partner or any Person controlled by a General Partner).
"Majority-In-Interest of the Limited Partners" shall
mean Limited Partner(s) who hold in the aggregate more than fifty (50) percent
of the Percentage Interests then allocable to and held by the Limited Partners,
as a class (but excluding any Partnership Interests acquired by the General
Partner, or any Person holding as a nominee of a General Partner or any Person
controlled by a General Partner).
"Minimum Gain Attributable to Partner Nonrecourse
Debt" shall mean "partner nonrecourse debt minimum gain" as determined in
accordance with Section 1.704-2(i)(2) of the Regulations.
"Net Cash Flow" shall mean, with respect to any
fiscal period of the Partnership, the excess, if any, of "Receipts" over
"Expenditures." For purposes hereof, the term "Receipts" means the sum of all
cash receipts of the Partnership from all sources for such period and any
amounts held as reserves as of the last day of such period which the General
Partner reasonably deems to be in excess of reserves as determined below. The
term
<PAGE> 17
"Expenditures" means the sum of (a) all cash expenditures of the Partnership for
any purpose, including operating expenses and capital expenditures for such
period, (b) the amount of all payments of principal, premium, if any, and
interest on account of any indebtedness of the Partnership, and (c) such
additions to cash reserves as of the last day of such period as the General
Partner deems necessary or appropriate for any capital, operating or other
expenditure, including, without limitation, contingent liabilities; but the term
"Expenditures" shall not include amounts paid from cash reserves previously
established by the Partnership.
"Net Income" or "Net Loss" shall mean, for each
fiscal year or other applicable period, an amount equal to the Partnerships'
net income or loss for such year or period as determined for federal income tax
purposes by the Accountants, determined in accordance with Section 703(a) of the
Code (for this purpose, all items of income, gain, loss or deduction required to
be stated separately pursuant to Section 703(a) of the Code shall be included in
taxable income or loss), with the following adjustments: (a) by including as an
item of gross income any tax-exempt income received by the Partnership; (b) by
treating as a deductible expense any expenditure of the Partnership described in
Section 705(a)(2)(B) of the Code (including amounts paid or incurred to organize
the Partnership (unless an election is made pursuant to Section 709(b) of the
Code) or to promote the sale of interests in the Partnership and by treating
deductions for any losses incurred in connection with the sale or exchange of
Partnership property disallowed pursuant to Section 267(a)(1) or Section 707(b)
of the Code as expenditures described in Section 705(a)(2)(B) of the Code); (c)
in lieu of depreciation, depletion, amortization and other cost recovery
deductions taken into account in computing total income or loss, there shall be
taken into account Depreciation; (d) gain or loss resulting from any disposition
of Partnership property with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to the Gross Asset
Value of such property rather than its adjusted tax basis; (e) in the event of
an adjustment of the Gross Asset Value of any Partnership asset which requires
that the Capital Accounts of the Partnership be adjusted pursuant to Sections
1.704-1(b)(2)(iv)(e), (f) and (m) of the Regulations, the amount of such
adjustment is to be taken into account as additional Net Income or Net Loss
pursuant to Section 6.1 hereof; and (f) excluding any items specially allocated
pursuant to Section 6.1(b) hereof.
"Nonrecourse Deductions" shall have the meaning set
forth in Sections 1.704-2(b)(1) and (c) of the Regulations and shall be
determined in accordance with Section 1.704-2(c) of the Regulations.
"Nonrecourse Liabilities" shall have the meaning set
forth in Section 1.704-2(b)(3) of the Regulations.
"Original Agreement" shall have the meaning set forth
in Recital A hereof.
"Paired Share Closing Price" shall mean, with respect
to a particular date, the last reported sales price regular way on such date or,
in case no such reported sale takes place on such date, the average of the
reported closing bid and asked prices regular way on such date, in either case
on the New York Stock Exchange, or if the Paired Shares are not
<PAGE> 18
then listed or admitted to trading on such Exchange, on the principal national
securities exchange on which the Paired Shares are then listed or admitted to
trading or, if not then listed or admitted to trading on any national securities
exchange, the closing sale price on such date of the Paired Shares or, in case
no reported sale takes place on such date then, the average of the closing bid
and asked prices on such date, on NASDAQ or any comparable system. If the Paired
Shares are not then quoted on NASDAQ or any comparable system, the Board of
Trustees of SLT and the Board of Directors of SLC shall in good faith determine
the Paired Share Closing Price.
"Paired Shares" shall mean one Share and one common
share of beneficial interest of SLT that are subject to a pairing agreement
between the General Partner and SLT.
"Partner Nonrecourse Debt" shall have the meaning set
forth in Section 1.704-2(b)(4) of the Regulations.
"Partner Nonrecourse Deductions" shall have the
meaning set forth in Section 1.704-2(i)(2) of the Regulations and the amount of
Partner Nonrecourse Deductions with respect to a Partner Nonrecourse Debt shall
be determined in accordance with the rules of Section 1.704-2(i) of the
Regulations.
"Partners" shall mean the General Partner and the
Limited Partners, their duly admitted successors or assigns or any Person who is
a partner of the Partnership at the time of reference thereto.
"Partnership" shall mean the limited partnership
formed under the Act pursuant to the Original Agreement and as continued
pursuant to this Agreement and any successor thereto.
"Partnership Interest" shall mean the ownership
interest of a Partner in the Partnership from time to time, including each
Partner's Percentage Interest and such Partner's Units.
"Partnership Minimum Gain" shall have the meaning set
forth in Section 1.704-2(b)(2) of the Regulations and the amount of Partnership
Minimum Gain (and any net increase or decrease thereof) for a fiscal year or
other period shall be determined in accordance with the rules of Section
1.704-2(d) of the Regulations.
"Partnership Record Date" means the record date
established by the General Partner for distribution of Net Cash Flow pursuant to
Section 6.2 hereof, which record date shall be the same as the record date
established by the General Partner for distribution to its shareholders of some
or all of its portion of such distribution.
"Percentage Interest" shall mean, with respect to any
Partner, the percentage ownership interest of such Partner in such items of the
Partnership as to which the term "Percentage Interests" is applied in this
Agreement, as provided in Section 4.3 hereof.
<PAGE> 19
"Person" shall mean any natural person or Entity.
"Property" shall mean any property acquired by or
contributed to the Partnership or any property owned by an Entity in which the
Partnership has an ownership interest.
"Purchase Rights" shall have the meaning set forth in
Section 4.4 hereof.
"Realty Agreement" shall mean the Second Amended and
Restated Limited Partnership Agreement of the Realty Partnership, as the same
may be amended from time to time.
"Realty Partnership" shall mean SLT Realty Limited
Partnership, a Delaware limited partnership.
"Registration Rights Agreement" shall mean any
Registration Rights Agreement by and among SLT and/or SLC and one or more
Limited Partners, which is intended to set forth the rights of such Limited
Partner or Limited Partners or other holders of Units, and the obligations of
SLT and/or SLC, to cause the registration of certain securities pursuant to the
Securities Act of 1933, as amended.
"Regulations" shall mean the income tax regulations
promulgated under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations), and may, in the
sole discretion of the General Partner, include temporary and/or proposed income
tax regulations.
"Regulatory Allocations" shall have the meaning set
forth in Section 6.1(b)(viii) hereof.
"REIT" shall mean a real estate investment trust as
defined in Section 856 of the Code.
"REIT Requirements" shall mean the requirements for
SLT to: (a) qualify as a REIT under the Code and Regulations; (b) avoid any
federal income or excise tax liability; (c) retain its status as grandfathered
pursuant to Section 136(c)(3) of the Deficit Reduction Act of 1984; and (d)
retain the benefits of that certain private letter ruling issued by the Internal
Revenue Service to SLT dated as of January 4, 1980. "REIT Requirements" shall
also include the ownership limitation provisions set forth in Article VI of the
Declaration of Trust of SLT, dated August 25, 1969, as amended and restated as
of June 6, 1988, and as the same may be further amended, modified, supplemented,
restated or superseded from time to time, and in TENTH Article of the Articles
of Incorporation.
"Restricted Entity" shall mean any "employee benefit
plan" as defined in and subject to ERISA, any "plan" as defined in and subject
to Section 4975 of the Code, or any entity any portion or all of the assets of
which are deemed pursuant to United States Department of Labor Regulation
Section 2510.3-101 or otherwise pursuant to ERISA or the
<PAGE> 20
Code to be, for any purpose of ERISA or Section 4975 of the Code, assets of any
such "employee benefit plan" or "plan" which invests in such entity.
"Rights" shall mean the rights of a Limited Partner
as set forth in an Exchange Rights Agreement and/or a Registration Rights
Agreement. No provision of this Agreement shall be interpreted as granting any
Partner or holder of Units any Rights or any rights or interest in or to the
Exchange Rights Agreement or the Registration Rights Agreement.
"SEC" shall mean the United States Securities and
Exchange Commission.
"Section 704(c) Tax Items" shall have the meaning set
forth in Section 6.1(c)(iii) hereof.
"Shares" shall mean the common stock, par value $0.01
per share, of the General Partner.
"SLT" shall mean Starwood Lodging Trust, a Maryland
real estate investment trust.
"Special Class A Distribution" shall mean, with
respect to a Class A Unit, the fair market value, in cash, of any operating or
liquidating distribution in cash or other property made by the Realty
Partnership with respect to a Unit of the Realty Partnership. Special Class A
Distributions may only be made with respect to Class A Units and shall be due at
the same time as such operating or liquidating distributions are made by the
Realty Partnership.
"Suites Ancillary Notes" shall have the meaning
provided in Paragraph 2(f) of that certain Bond Purchase Agreement by and among
the First National Bank of Boston, HSR, HIR, the Realty Partnership and the
Partnership and dated February 26, 1996.
"Tax Items" shall have the meaning set forth in
Section 6.1(c)(i) hereof.
"Tax Payment Loan" shall have the meaning set forth
in Section 6.7(a) hereof.
"Units" shall have the meaning set forth in Section
4.1(c) hereof, and such term shall include Class A Units except where the
context otherwise requires.
"Withholding Tax Act" shall have the meaning set
forth in Section 6.7(a) hereof.
ARTICLE 2
<PAGE> 21
Continuation and Business of the Partnership
2.1 Continuation. The parties hereto do hereby continue the
limited partnership formed pursuant to the Original Agreement and pursuant to
the provisions of the Act and upon the terms and conditions set forth herein.
The parties hereto agree that the rights and liabilities of the Partners shall
be as provided herein. The parties hereto shall immediately execute and deliver
all certificates and other documents and do all filings, recording and
publishing and other acts as in the judgment of the General Partner may be
appropriate to comply with all of the requirements for the continuation of the
Partnership as a limited partnership under the Act and the qualification of the
Partnership in any jurisdiction in which the Partnership owns property or
conducts business.
2.2 Name. The name of the Partnership shall be SLC Operating
Limited Partnership, or such other name as shall be chosen from time to time by
the General Partner in its sole and absolute discretion; provided, however, that
the General Partner may not choose the name (or any derivative thereof) of any
Limited Partner without the prior written consent of such Limited Partner.
2.3 Character of the Business. The purpose of the Partnership
shall be to acquire, hold, own, develop, redevelop, construct, improve,
maintain, operate, manage, sell, lease, rent, transfer, encumber, mortgage,
convey, exchange and otherwise dispose of or deal with the Properties and any
other real and personal property of all kinds; to undertake such other
activities as may be necessary, desirable or appropriate to the business of the
Partnership; to engage in such other activities as shall be necessary, desirable
or appropriate to effectuate the foregoing purposes; and to otherwise engage in
any enterprise or business in which a limited partnership may engage or conduct
under the Act. The Partnership shall have all powers necessary, desirable or
appropriate to accomplish the purposes enumerated. In connection with the
foregoing, but subject to the terms and conditions of this Agreement, the
Partnership shall have full power and authority to enter into, perform and carry
out contracts of any kind, to borrow money and to issue evidences of
indebtedness, whether or not secured by Liens, and, directly or indirectly, to
acquire and construct additional Properties necessary or useful in connection
with its business.
2.4 Location of Principal Place of Business. The location of
the principal place of business of the Partnership shall be at 2231 East
Camelback Road, Suite 400, Phoenix, Arizona 85016, or such other location as
shall be selected from time to time by the General Partner in its sole and
absolute discretion; provided, however, that the General Partner shall notify
the Partners of any change in the location of the principal place of business of
the Partnership within thirty (30) days thereafter.
2.5 Registered Agent and Registered Office. The registered
agent of the Partnership shall be The Corporation Trust Company or such other
Person as the General Partner may select in its sole and absolute discretion.
The registered office of the Partnership in the State of Delaware shall be c/o
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801 or such other location as the
General Partner may from time to time select in its sole discretion; provided,
<PAGE> 22
however, that the General Partner shall notify the Limited Partners of any
change in the registered office or registered agent of the Partnership within
thirty (30) days thereafter.
2.6 Restatement of Agreement. This Agreement amended and
restates the Original Restated Agreement, including the amendments thereto, in
its entirety effective as of the date first above written and, effective as of
such date, the Original Restated Agreement and the amendment thereto shall be of
no further force or effect.
ARTICLE 3
Term
3.1 Commencement. The Partnership's term commenced upon the
filing of the Certificate with the Secretary of State of Delaware on December
15, 1994.
3.2 Dissolution. The Partnership shall continue until
dissolved and terminated upon the occurrence of the earliest of the following
events:
(a) the death, dissolution, termination, withdrawal,
retirement, expulsion or Bankruptcy of the General Partner, unless the
Partnership's business is continued as provided in Section 9.1 hereof;
(b) the election to dissolve the Partnership made in
writing by the General Partner;
(c) the sale or other disposition of all or
substantially all of the assets of the Partnership unless the General Partner
elects to continue the Partnership business for the purpose of the receipt and
the collection of indebtedness or the collection of any other consideration to
be received in exchange for the assets of the Partnership (which activities
shall be deemed to be part of the winding up of the affairs of the Partnership);
(d) the entry of a decree of judicial dissolution of
the Partnership pursuant to the provisions of the Act, which decree is final and
not subject to appeal; or
(e) December 31, 2094.
ARTICLE 4
Capital Contributions
4.1 Capital Contributions; Units.
(a) As of the date first above written, the Partners
have the Percentage Interests in the Partnership as set forth in Exhibit A which
Percentage Interests
<PAGE> 23
shall be adjusted to the extent necessary to reflect properly exchanges,
redemptions or conversions of Partnership Interests, Capital Contributions, the
issuance of additional Partnership Interests or any other event having an effect
on a Partner's Percentage Interest, in each case to the extent permitted by and
in accordance with this Agreement. Except to the extent specifically set forth
in this Agreement with respect to the General Partner, the Partners shall have
no obligation to make any additional Capital Contributions or loans to the
Partnership, even if the failure to do so could result in the Bankruptcy or
insolvency of the Partnership or any other adverse consequence to the
Partnership.
(b) The General Partner shall, from time to time,
contribute cash or Property to the Partnership such that the Percentage Interest
of the General Partner shall at all times be at least one (1) percent and the
Capital Account balance of the General Partner shall be at least the lesser of
$500,000 or one (1) percent of the total positive Capital Account balances for
the Partnership.
(c) The interest of a Partner (or an assignee of a
Partner) in capital, allocations of Net Income, Net Loss and distributions shall
be evidenced by the issuance to such Partner (or assignee) of one or more
"Units." Notwithstanding the foregoing, the interest of a Class A Limited
Partner (or an assignee of a Class A Limited Partner) in capital, allocations of
Net Income, Net Loss and distributions, including Special Class A Distributions,
and Class A Preferred Return, if any, shall be evidenced by the issuance to such
Class A Limited Partner (or assignee) of one or more "Class A Units." The
aggregate total of all Units and Class A Units outstanding and the ownership of
such Units and Class A Units by each Partner and Class A Limited Partner are as
set forth on Exhibit A and Exhibit A-1 hereto, respectively, which Exhibits
shall be updated by the General Partner to reflect changes in the holdings of
Units and Class A Units by the Partners.
(d) From time to time, the General Partner may cause
the Partnership to issue additional Partnership Interests to existing or
newly-admitted Partners in exchange for additional Capital Contributions
(including Capital Contributions pursuant to Section 4.1(b)). If the General
Partner contributes to the Partnership the net proceeds to the General Partner
from any offering or sale of Paired Shares (including, without limitation, any
issuance of Paired Shares pursuant to the exercise of options, warrants,
convertible securities, or similar rights to acquire Paired Shares), the
Partnership shall issue to the General Partner Units equal in number to the
number of Paired Shares issued in such offering or sale. If the General Partner
or SLT issues Paired Shares to any Person in exchange for services, the
Partnership shall issue an equal number of Units to the General Partner
effective no later than the date on which the value of the Paired Shares is
includable in the gross income of such Person.
(e) The General Partner is hereby authorized to cause
the Partnership to issue Partnership Interests in one or more classes or one or
more series of any of such classes, with such designations, preferences and
relative, participating, optional or other special rights, powers and duties,
including rights, powers and duties senior to the then-existing Partnership
Interests and Units, as shall be determined by the General Partner in its sole
and absolute discretion, including (i) the allocation of items of Partnership
income, gain, loss, deduction and credit to each such class or series of
Partnership Interests and (ii) the
<PAGE> 24
rights of each such class or series of Partnership Interests to share in
Partnership distributions (including liquidating distributions); provided,
however, that no such additional Partnership Interests shall be issued to the
General Partner unless (x) the additional Partnership Interests are issued in
connection with an issuance of shares of the General Partner, which shares have
designations, preferences and other rights, all such that the economic interests
of such shares are substantially similar to the designations, preferences and
other rights of the additional Partnership Interests issued to the General
Partner in accordance with this Section 4.1(e) and (y) the General Partner
contributes to the Partnership an amount equal to the net proceeds received by
the General Partner in connection with the issuance of such shares.
(f) As of the date first above written, HICN shall be
issued the number of Units set forth on Exhibit A hereto. On or before December
31, 1998, HICN or the General Partner, as appropriate, shall make contributions
to the Partnership described in Section 6.3 of the Formation Agreement.
(g) In the event of any change in the outstanding
number of Paired Shares by reason of any share dividend, split, reverse split,
recapitalization, merger, consolidation or combination, the number of Units held
by each Partner (or assignee) shall be proportionately adjusted such that, to
the extent possible, one Unit remains the equivalent of one Share without
dilution. It is the intent of the Partners that, to the extent possible, the
number of Units held by the General Partner shall at all times equal the number
of issued and outstanding Paired Shares.
(h) No fractional Units shall remain outstanding. In
lieu of issuing a fractional Unit to a holder of Units, the number of Units to
be held by such holder shall be rounded to the nearest whole Unit, or, at the
option of the General Partner, the holder shall be paid cash equal to the fair
market value of such fractional Unit.
4.2 Redemption of Units Held by Limited Partner. The General
Partner is hereby authorized to cause the Partnership to redeem all or any
portion of the Units held by any Limited Partner whenever the General Partner,
in its sole discretion, believes such redemption to be reasonably necessary or
appropriate in order to prevent the Partnership from being characterized as a
"publicly traded partnership" pursuant to Section 7704 of the Code and the
Regulations thereunder. Any redemption of Units pursuant to this Section 4.2
shall be made from the Limited Partners in reverse order of their respective
ownership of Units, that is, first from the Limited Partner or Limited Partners
with the fewest Units, and, second, if required, from the Limited Partner or
Limited Partners with the next fewest Units, et cetera. Notwithstanding the
previous sentence, the General Partner is hereby authorized to cause the
Partnership to redeem all of the Units held by a particular Limited Partner,
including a Class A Limited Partner, who, because of the number of such Limited
Partner's direct or indirect beneficial owners or its structure, in the judgment
of the General Partner in its sole discretion, and whether or not in conjunction
with any other Partner (whether redeemed pursuant to this Section 4.2 or not),
may cause the Partnership to be characterized as a "publicly traded partnership"
pursuant to Section 7704 of the Code and the Regulations thereunder. The
redemption price of any Unit redeemed pursuant to this Section 4.2 shall be
equal to the product of (a) 115% of the average of the Paired Share Closing
Price for the ten (10) trading
<PAGE> 25
day period ending five (5) days prior to the date of such redemption, multiplied
by (b) the then Issuance Percentage of SLC. Any redemption of a Limited Partner
shall be effective upon the date specified in a Notice to such Limited Partner,
or, if later, five (5) days after such Notice. No redemption pursuant to this
Section 4.2 shall be made unless the Realty Partnership concurrently effects a
comparable redemption.
4.3 Percentage Interests. The Percentage Interest of a Partner
shall be equal to the percentage obtained by dividing (a) the number of Units
held by such Partner (including Units held by assignees of such Partner who have
not been admitted as Partners) by (b) the total number of issued and outstanding
Units.
4.4 Purchase Rights. If the General Partner grants, issues or
sells any options, convertible securities or rights to purchase shares,
warrants, or other property pro rata to the record holders of Shares
(collectively, "Purchase Rights"), then the Partners shall, to the extent
practicable and consistent with the other provisions of this Agreement, be
entitled to acquire from the Partnership interests in the Partnership that are
substantially similar in amount, tone and tenor to the Purchase Rights to which
such Partners would be entitled if such Partners had converted their Partnership
Interests into Paired Shares immediately prior to the grant, issue or sale of
the Purchase Rights.
4.5 Redemption of Units Held by the General Partner. If the
General Partner shall redeem any of its outstanding Shares (including the
issuance of cash in lieu of fractional Shares or in the event of the forfeiture
or cancellation of Shares issued in exchange for services), the Partnership
shall concurrently therewith redeem an equal number of Units held by the General
Partner for the same price as paid by the General Partner for the redemption,
forfeiture or cancellation of such Shares. Similar redemptions of interests of
the General Partner in the Partnership shall occur if any other outstanding
securities of the General Partner are redeemed or otherwise retired.
4.6 No Third Party Beneficiaries. No creditor or other third
party shall have the right to enforce any right or obligation of any Partner to
make Capital Contributions or loans or to pursue any other right or remedy
hereunder or at law or in equity, it being understood and agreed that the
provisions of this Agreement shall be solely for the benefit of, and may be
enforced solely by, the parties hereto and their respective successors and
assigns. None of the rights or obligations of the Partners herein set forth to
make Capital Contributions or loans to the Partnership shall be deemed an asset
of the Partnership for any purpose by any creditor or other third party, nor may
such rights or obligations be sold, transferred or assigned by the Partnership
or pledged or encumbered by the Partnership to secure any debt or other
obligation of the Partnership or of any of the Partners.
4.7 No Interest on or Return of Capital Contribution. No
Partner shall be entitled to interest on its Capital Contribution or Capital
Account. Except as provided herein or by law, no Partner shall have any right to
demand or receive the return of its Capital Contribution.
<PAGE> 26
ARTICLE 5
Indemnification
5.1 Indemnification of the General Partner.
(a) To the fullest extent permitted by law, the
Partnership shall and does hereby indemnify an Indemnitee from and against any
and all losses, claims, damages, liabilities, joint or several, expenses
(including reasonable legal fees and expenses), judgments, fines, settlements,
and other amounts arising from any and all claims, demands, actions, suits or
proceedings (including arbitration and mediation proceedings), civil, criminal,
administrative or investigative, that relate, directly or indirectly, to the
formation, business or operations of the Partnership in which any Indemnitee may
be involved, or is threatened to be involved, as a party, witness or otherwise,
by reason of the fact that such Person was an Indemnitee, whether or not the
same shall proceed to judgment or be settled or otherwise be brought to a
conclusion, except only if and to the extent that it is finally adjudicated that
the act or omission of the Indemnitee was material to the matter giving rise to
the proceeding and was committed with fraud, gross negligence or willful
misconduct. The termination of any proceeding by judgment, order or settlement
does not create a presumption that the Indemnitee did not meet the requisite
standard of conduct set forth in this Section 5.1(a). Any indemnification
pursuant to this Section 5.1 shall be made only out of the assets of the
Partnership and no Partner shall have any personal liability therefor. The
provisions of this Section 5.1 are for the benefit of the Indemnitees, their
heirs, successors, assigns, personal representatives and administrators, and
shall not be deemed to create any rights for the benefit of any other Persons.
The foregoing notwithstanding, the General Partner (or any former General
Partner) shall not be entitled to indemnification from the Partnership with
respect to matters provided for in Sections 9.1 and 9.2 of the Formation
Agreement.
(b) Reasonable expenses incurred by an Indemnitee who
is a party or witness in a proceeding shall be paid or reimbursed by the
Partnership in advance of the final disposition of the proceeding upon receipt
by the Partnership of (i) a written affirmation by the Indemnitee of the
Indemnitee's good faith belief that the standard of conduct necessary for
indemnification by the Partnership, as authorized in this Section 5.1, has been
met, and (ii) a written undertaking by or on behalf of the Indemnitee to repay
the amount paid or reimbursed if it shall ultimately be determined that such
Indemnitee is not entitled to be indemnified hereunder.
(c) The indemnification provided by this Section 5.1
shall be in addition to any other rights to which an Indemnitee may be entitled
under any agreement, as a matter of law or otherwise, and shall continue as to
an Indemnitee who has ceased to serve in such capacity. The Partnership shall
purchase and maintain insurance, on behalf of the Indemnitees, against any
liability that may be asserted against or expenses that may be incurred by such
Person in connection with the Partnership's activities, regardless of whether
the Partnership would have the power to indemnify such Person against such
liability under the provisions of this Agreement. An Indemnitee shall not be
denied indemnification in whole or in part under this Section 5.1 solely because
the Indemnitee had an interest in the transaction with
<PAGE> 27
respect to which the indemnification applies.
(d) For purposes of this Section 5.1, the Partnership
shall be deemed to have requested an Indemnitee to serve as fiduciary of an
employee benefit plan whenever the performance by it of its duties to the
Partnership also imposes duties on, or otherwise involves services by, it to the
plan or participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute fines within the meaning of this Section 5.1; and actions taken
or omitted by the Indemnitee with respect to an employee benefit plan in the
performance of its duties for a purpose reasonably believed by it to be in the
interest of the participants and beneficiaries of the plan shall be deemed to be
for a purpose which is not opposed to the best interests of the Partnership.
5.2 Indemnification of Limited Partners.
(a) From and after the date hereof, the Partnership
shall indemnify and hold harmless each Limited Partner, its Affiliates,
employees, officers, directors and agents against and from all liability,
demands, claims, actions or causes of action, assessments, losses, fines,
penalties, costs, damages and expenses (including, without limitation,
reasonable attorneys' and accountants' fees and expenses) sustained or incurred
by such Limited Partner or Affiliate or any assignee or successor thereof
(including, without limitation, any permitted assignee of a Limited Partner
under Article 9 hereof) as a result of or arising out of any action, suit or
proceeding (including mediation and arbitration proceedings) (i) arising out of
or relating to the operation of the Partnership's business or the Limited
Partner being a Partner in the Partnership (excluding, specifically, actions,
suits or proceedings arising out of actual or alleged breaches of a Partner's
representations, warranties or covenants hereunder or pursuant to the Formation
Agreement or arising out of acts by a Limited Partner other than in its capacity
as such) and (ii) naming a Limited Partner or any of its Affiliates as a party
to such proceeding. Any indemnification pursuant to this Section 5.2(a) shall be
made only out of the assets of the Partnership and no Partner shall have any
personal liability therefor. The provisions of this Section 5.2(a) are for the
benefit of the Limited Partners, their Affiliates, employees, officers,
directors and agents, and shall not be deemed to create any rights for the
benefit of any other Persons.
(b) The foregoing notwithstanding, the Partnership
shall indemnify the Class A Limited Partners in respect of all federal or state
income tax consequences to them arising from the Special Class A Distributions
and the distribution described in Section 8.2(a)(iii) hereof being subject to
federal or state income tax in a manner that is less favorable than comparable
distributions with respect to Units in the Realty Partnership. Any
indemnification pursuant to the preceding sentence shall be computed on a
cumulative basis from and after February 14, 1997, and shall be grossed up for
any income tax consequences of such indemnification so as to put the Class A
Limited Partners in the same after-tax position they would have been in had they
been Partners in the Realty Partnership as to such distributions. All
calculations of the indemnification payments shall be computed as if the Class A
Limited Partners had no sources of income, loss or gain other than from the
comparable distributions with respect to Units in the Realty Partnership and pay
tax at the
<PAGE> 28
highest applicable federal and state tax rates. The provisions of this Section
5.2(b) shall be in addition to and not in limitation of the indemnification
provided to Limited Partners pursuant to Section 5.2(a) above.
(c) Also notwithstanding the foregoing, the
Partnership shall indemnify and hold harmless the HEI Parties of and from
liabilities of the HEI Property Companies whose HEI Property Company Interests
have been acquired by the Partnership except for any undisclosed material
liability of such Property Company as of February 14, 1997 (collectively, the
"Excluded Liabilities"); provided, however, that the Excluded Liabilities shall
not include:
(i) any liability incurred in the ordinary
course of operating the applicable Hotel prior to February 14,
1997;
(ii) any liability disclosed by the
Transaction Documents, the Schedules or Exhibits thereto, any
supplement to such schedules or exhibits delivered to the
Starwood Parties prior to February 14, 1997, the agreements,
reports or other documents referred to in any of the
foregoing, the Financial Statements, the financial statements
prepared in connection with the Net Working Capital adjustment
provided for in Article IV of the Contribution Agreement;
(iii) any Liability of which the Starwood
Parties otherwise had Knowledge prior to February 14, 1997; or
(iv) any Liability incurred on or after
February 14, 1997;
and the Partnership shall be obligated to hold the HEI Parties harmless from all
such enumerated liabilities. The provisions of this Section 5.2(c) shall be in
addition to and not in limitation of the indemnifications provided to Limited
Partners pursuant to Section 5.2(a) and 5.2(b) above. Any capitalized term in
this Section 5.2(c) not otherwise defined in this Agreement shall have the
meaning set forth in the HEI Contribution Agreement.
5.3 Notice of Claims. If any Person believes that it is
entitled to indemnification under this Article 5, such Person shall so notify
the Partnership promptly in writing describing such claim for indemnification,
the amount thereof, if known, and the method of computation, all with reasonable
particularity and containing a reference to the provisions of this Agreement in
respect of which such claim shall have occurred; provided, however, that the
omission by such indemnified party to give notice as provided herein shall not
relieve the Partnership of its indemnification obligation under this Article 5
except to the extent that the Partnership is materially damaged as a result of
such failure to give notice. If any action at law or suit in equity is
instituted by or against a third party with respect to which any of the Persons
entitled to indemnification under this Article 5 intends to make a claim for
indemnification under this Article 5, any such Person shall promptly notify the
Partnership of such action or suit. Any Person entitled to indemnification
hereunder shall use reasonable efforts to minimize the amount of any claim for
indemnification hereunder.
<PAGE> 29
5.4 Third Party Claims. In the event of any claim for
indemnification hereunder resulting from or in connection with any claim or
legal proceeding by a third party, the indemnified Person shall give such notice
thereof to the Partnership not later than twenty (20) Business Days prior to the
time any response to the asserted claim is required, if possible, and in any
event within fifteen (15) Business Days following the date such indemnified
Person has actual knowledge thereof; provided, however, that the omission by
such indemnified Person to give notice as provided herein shall not relieve the
Partnership of its indemnification obligation under this Article 5 except to the
extent that the Partnership is materially damaged as a result of such failure to
give notice. In the event of any such claim for indemnification resulting from
or in connection with a claim or legal proceeding by a third party, the
Partnership may, at its sole cost and expense, assume the defense thereof;
provided, however, that counsel for the Partnership, who shall conduct the
defense of such claim or legal proceeding, shall be reasonably satisfactory to
the indemnified Person; and provided, further, that if the defendants in any
such actions include both the indemnified Persons and the Partnership and the
indemnified Persons shall have reasonably concluded that there may be legal
defenses or rights available to them which have not been waived and are in
actual or potential conflict with those available to the Partnership, the
indemnified Persons shall have the right to select one law firm reasonably
acceptable to the Partnership to act as separate counsel, on behalf of such
indemnified Persons, at the expense of the Partnership. Unless the indemnified
Persons are represented by separate counsel pursuant to the second proviso of
the immediately preceding sentence, if the Partnership assumes the defense of
any such claim or legal proceeding, it shall not consent to entry of any
judgment, or enter into any settlement, that (a) is not subject to
indemnification in accordance with the provisions in this Article 5, (b)
provides for injunctive or other non-monetary relief affecting the indemnified
Persons or (c) does not include as an unconditional term thereof the giving by
each claimant or plaintiff to such indemnified Persons of a release from all
liability with respect to such claim or legal proceeding, without the prior
written consent of the indemnified Persons (which consent, in the case of
clauses (b) and (c), shall not be unreasonably withheld or delayed); and
provided, further, that, unless the indemnified Persons are represented by
separate counsel pursuant to the second proviso of the immediately preceding
sentence, the indemnified Persons may, at their own expense, participate in any
such proceeding with the counsel of their choice without any right of control
thereof. So long as the Partnership is in good faith defending such claim or
proceeding, the indemnified Persons shall not compromise or settle such claim or
proceeding without the prior written consent of the Partnership, which consent
shall not be unreasonably withheld or delayed. If the Partnership does not
assume the defense of any such claim or litigation in accordance with the terms
hereof, the indemnified Persons may defend against such claim or litigation in
such manner as they may deem appropriate, including, without limitation,
settling such claim or litigation (after giving prior written notice of the same
to the Partnership and obtaining the prior written consent of the Partnership,
which consent shall not be unreasonably withheld or delayed) on such terms as
the indemnified Persons may deem appropriate, and the Partnership will promptly
indemnify the indemnified Persons in accordance with the provisions of this
Article 5.
5.5 Indemnification Pursuant to Formation Agreement. If any
obligation pursuant to the indemnification provisions of Article IX of the
Formation Agreement would otherwise require the indemnifying Person to make a
cash payment to the indemnified Person
<PAGE> 30
then, subject to Article 9 hereof, in lieu of making all or any portion of such
cash payment, the indemnifying Person may transfer Units of equivalent value to
the indemnified Person. For purposes of the preceding sentence, the value of a
Unit shall be treated as equal to five (5) percent of the average closing price
of a Paired Share for the ten (10) trading day period commencing fifteen (15)
trading days prior to the date the indemnifying Person would otherwise be
required to pay cash to the indemnified Person. Indemnification through the
transfer of Units pursuant to this Section 5.5 may only made if (a)
indemnification through the transfer of an equal number of units of the Realty
Partnership is being made pursuant to Section 5.5 of the Second Amended and
Restated Limited Partnership Agreement of SLT Realty Limited Partnership or (b)
the indemnifying Person otherwise makes arrangements for the transfer to the
indemnified Person (or its designee) of an equal number of units of the Realty
Partnership.
ARTICLE 6
Allocations, Distributions and Other Tax and Accounting Matters
6.1 Allocations. The Net Income, Net Loss and other
Partnership items shall be allocated pursuant to the provisions of this Section
6.1 hereto.
(a) Allocation of Net Income and Net Loss.
(i) Net Income. Except as otherwise provided
herein, Net Income for any fiscal year or other applicable period shall be
allocated in the following order and priority:
(A) first, to the General Partner,
until the cumulative Net Income allocated pursuant to this clause (i)(A) for the
current and all prior periods equals the cumulative Net Loss allocated pursuant
to the last sentence of clause (ii) hereof for all prior periods; and
(B) second, to the holders of
Units, including Class A Units, in proportion to and in reverse order of their
prior allocations of Net Loss (other than pursuant to the last sentence of
clause (ii) hereof) until the cumulative Net Income allocated pursuant to this
clause (i)(B) for the current and all prior periods equals the cumulative Net
Loss allocated to such holders (other than pursuant to the last sentence of
clause (ii) hereof) for all prior periods;
(C) third, to the holders of Class
A Units until each holder of Class A Units has been allocated Net Income
pursuant to this clause (i)(C) in an amount equal to its Class A Preferred
Return for the current and all prior periods;
(D) fourth, to the holders of Class
A Units until each holder of Class A Units has been allocated Net Income
pursuant to this clause (i)(D) in an amount equal to the Net Income (as defined
in Article I of the Realty Agreement) allocated to a
<PAGE> 31
Unit of the Realty Partnership for all prior periods (or portions thereof) from
and after February 14, 1997 pursuant to Section 6.1(a)(i)(B) of the Realty
Agreement, multiplied by the number of Class A Units held by such holder; and
(E) thereafter, the balance of Net
Income, if any, shall be allocated to the holders of Units, including Class A
Units, in accordance with their respective holdings of Units.
(ii) Net Loss. Except as otherwise provided
herein, Net Loss of the Partnership for each fiscal year or other applicable
period shall be allocated in the following order and priority;
(A) first, to the holders of Units,
including Class A Units, in proportion to their prior allocations of Net Income
pursuant to clause (i)(E) until the cumulative Net Loss allocated pursuant to
this clause (ii)(A) for the current and all prior periods equals the cumulative
Net Income allocated to such holders pursuant to clause (i)(E) for all prior
periods;
(B) second, to the holders of Class
A Units in proportion to their prior allocations of Net Income pursuant to
clause (i)(D) until the cumulative Net Loss allocated pursuant to this clause
(ii)(B) for the current and all prior periods equals the cumulative Net Income
allocated to such holders pursuant to clause (i)(D) for all prior periods; and
(C) thereafter, to the holders of
Units, including Class A Units, in accordance with their respective holdings of
Units.
Clause (ii)(C) notwithstanding, to the extent any Net Loss allocated to a holder
would cause such a holder to have an Adjusted Capital Account Deficit as of the
end of the fiscal year to which such Net Loss relates, such Net Loss shall not
be allocated to such holder and instead shall be allocated to the General
Partner.
(b) Special Allocations. Notwithstanding any
provisions of Section 6.1(a) hereof, the following special allocations shall be
made in the following order:
(i) Minimum Gain Chargeback. Notwithstanding
any other provision of this Article 6, if there is a net decrease in Partnership
Minimum Gain for any Partnership fiscal year (except as a result of conversion
or refinancing of Partnership indebtedness, certain capital contributions or
revaluation of the Partnership property as further outlined in Section
1.704-2(f) of the Regulations), each holder of Units shall be specially
allocated items of Partnership income and gain for such year (and, if necessary,
subsequent years) in an amount equal to that holder's share of the net decrease
in Partnership Minimum Gain as determined under Section 1.704-2(g) of the
Regulations. The items to be so allocated shall be determined in accordance with
Section 1.704-2(f) of the Regulations. This clause (i) is intended to comply
with the minimum gain chargeback requirement in said section of the Regulations
and shall be interpreted consistently therewith. Allocations pursuant to this
clause
<PAGE> 32
(i) shall be made in proportion to the respective amounts required to be
allocated to each holder of Units pursuant hereto.
(ii) Minimum Gain Chargeback Attributable to
Partner Nonrecourse Debt. Notwithstanding any other provision of this Article 6,
if there is a net decrease in Minimum Gain Attributable to Partner Nonrecourse
Debt during any fiscal year (other than due to the conversion, refinancing or
other change in the debt instrument causing it to become partially or wholly
nonrecourse, certain capital contributions, or certain revaluations of
Partnership property (as further outlined in Section 1.704-2(i)(4) of the
Regulations), each holder of Units shall be specially allocated items of
Partnership income and gain for such year (and, if necessary, subsequent years)
in an amount equal to the holder's share of the net decrease in the Minimum Gain
Attributable to Partner Nonrecourse Debt as determined under Section 1.704-2(i)
of the Regulations. The items to be so allocated shall be determined in
accordance with Sections 1.704-2(i)(4) and (j)(2) of the Regulations. This
clause (ii) is intended to comply with the minimum gain chargeback requirement
with respect to Partner Nonrecourse Debt contained in said section of the
Regulations and shall be interpreted consistently therewith. Allocations
pursuant to this clause (ii) shall be made in proportion to the respective
amounts required to be allocated to each holder of Units.
(iii) Qualified Income Offset. In the event
a holder of Units unexpectedly receives any adjustments, allocations or
distributions described in Section 1.704-1(b)(2)(ii) (d)(4), (5), or (6) of the
Regulations, and such holder has an Adjusted Capital Account Deficit, items of
Partnership income and gain shall be specially allocated to such holder in an
amount and manner sufficient to eliminate the Adjusted Capital Account Deficit
as quickly as possible, provided that an allocation pursuant to this Section
6.1(b)(iii) shall be made only if and to the extent that such holder would have
Adjusted Capital Account Deficit after all other allocations provided for in
this Article VI have been tentatively made as if this Section 6.1(b)(iii) were
not in the Agreement. This clause (iii) is intended to constitute a "qualified
income offset" under Section 1.704-1(b)(2)(ii) (d) of the Regulations and shall
be interpreted consistently therewith.
(iv) Gross Income Allocation. In the event
any holder of Units has a deficit Capital Account at the end of any fiscal year
which is in excess of the sum of (x) the amount such holder is obligated to
restore pursuant to any provision of this Agreement, and (y) the amount such
holder is deemed to be obligated to restore pursuant to the penultimate
sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations, each
such holder shall be specially allocated items of Partnership income and gain in
the amount of such excess as quickly as possible, provided that an allocation
pursuant to this Section 6.1(b)(iv) shall be made only if and to the extent that
such holder would have a Capital Account Deficit in excess of such sum after all
other allocations provided for in this Article 6 have been made as if Section
6.1(b)(iii) hereof and this Section 6.1(b)(iv) were not in the Agreement.
(v) Nonrecourse Deductions. Nonrecourse
Deductions for any fiscal year or other applicable period shall be allocated to
the holders of Units in accordance with their respective holdings of Units. For
purposes of Section 1.752-3(a) (3) of the Regulations, "excess nonrecourse
liabilities" shall be allocated among the holders of Units
<PAGE> 33
in proportion to their respective holdings of Units.
(vi) Partner Nonrecourse Deductions. Partner
Nonrecourse Deductions for any fiscal year or other applicable period shall be
specially allocated to the holder of Units that bears the economic risk of loss
with respect to the Partner Nonrecourse Debt in respect of which such Partner
Nonrecourse Deductions are attributable (as determined under Sections
1.704-2(b)(4) and (i) (1) of the Regulations).
(vii) Section 754 Adjustments. To the extent
an adjustment to the adjusted tax basis of any Partnership asset pursuant to
Section 734(b) or Section 743(b) of the Code is required, pursuant to Section
1.704-1(b)(2)(iv)(m)(2) or Section 1.704-1(b)(2)(iv)(m)(4) of the Regulations,
to be taken into account in determining Capital Accounts, the amount of such
adjustment to Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to
holders of Units in accordance with their interests in a manner consistent with
the manner in which their Capital Accounts are required to be adjusted pursuant
to such sections of the Regulations.
(viii) Curative Allocations. The Regulatory
Allocations shall be taken into account in allocating other items of income,
gain, loss, and deduction among the holders of Units so that, to the extent
possible, the cumulative net amount of allocations of Partnership items under
Sections 6.1(a) and (b) hereof shall be equal to the net amount that would have
been allocated to each holder of Units if the Regulatory Allocations had not
occurred. This subparagraph (viii) is intended to minimize to the extent
possible and to the extent necessary any economic distortions which may result
from application of the Regulatory Allocations and shall be interpreted in a
manner consistent therewith. For purposes hereof, "Regulatory Allocations" shall
mean the allocations provided under this Section 6.1(b) (other than this
subparagraph) and allocations pursuant to the last sentence of Section
6.1(a)(ii) hereof.
(ix) Varying Interests. In the event the
number of Units outstanding during a fiscal year changes, the allocations
pursuant to this Article 6 shall be made by the General Partner to take such
varying interests into account in any reasonable manner permitted under the Code
and the Regulations.
(c) Tax Allocations.
(i) Generally. Subject to clauses (ii) and
(iii) hereof, items of income, gain, loss, deduction and credit to be allocated
for income tax purposes (collectively, "Tax Items") shall be allocated among the
holders of Units on the same basis as their respective book items.
(ii) Sections 1245/1250 Recapture. If any
portion of gain from the sale of property is treated as gain which is ordinary
income by virtue of the application of Sections 1245 or 1250 of the Code
("Affected Gain"), then (A) such Affected Gain shall be allocated among the
holders of Units in the same proportion that the depreciation
<PAGE> 34
and amortization deductions giving rise to the Affected Gain were allocated and
(B) other Tax Items of gain of the same character that would have been
recognized, but for the application of Sections 1245 and/or 1250 of the Code,
shall be allocated away from those holders of Units who are allocated Affected
Gain pursuant to clause (A) so that, to the extent possible, the other holders
of Units are allocated the same amount, and type, of capital gain that would
have been allocated to them had Sections 1245 and/or 1250 of the Code not
applied. For purposes hereof, in order to determine the proportionate
allocations of depreciation and amortization deductions for each fiscal year or
other applicable period, such deductions shall be deemed allocated on the same
basis as Net Income or Net Loss for such respective period.
(iii) Allocations Respecting Section 704(c)
of the Code and Revaluations. Property contributed to the Partnership shall be
subject to Section 704(c) of the Code and the Regulations thereunder so that,
notwithstanding paragraph (b) hereof, taxable gain from disposition, taxable
loss from disposition and tax depreciation with respect to Partnership property
that is subject to Section 704(c) of the Code and/or Section
1.704-1(b)(2)(iv)(f) of the Regulations (collectively "Section 704(c) Tax
Items") shall be allocated on a property by property basis in accordance with
said Code Section and/or the Regulations thereunder, as the case may be. The
allocation of Section 704(c) Tax Items shall be made pursuant to any reasonable
method selected by the General Partner in its discretion authorized under
Section 1.704-3 of the Regulations. Allocations pursuant to this Section
6.1(c)(iii) are solely for purposes of federal, state, and local taxes and shall
not affect, or in any way be taken into account in computing, the Capital
Account or share of Net Income, Net Loss, other items, or distributions of any
holder of Units pursuant to any provision of this Agreement.
(iv) Tax Credits and Other Items. Tax
credits and other items shall be allocated in accordance with the holdings of
Units to the extent permitted under Section 1.704-1(b)(4)(ii) of the Regulations
or other applicable provision of the Code and Regulations and otherwise in
accordance with such provisions.
(v) Ancillary Notes. Income, gain, loss or
correlative adjustments, if any, relating to the Suites Ancillary Notes or the
disposition thereof shall be specially allocated to HSR (or its assignees or
successors-in-interest). Income, gain, loss or correlative adjustments, if any,
relating to the Inns Ancillary Notes or the disposition thereof shall be
specially allocated to HSR (or its assignees or successors-in-interest).
(vi) Allocations on Liquidation. If the
distributions to holders of Units pursuant to Section 8.2(a) hereof would
otherwise not be in accordance with the positive balances in their Capital
Accounts (after taking into account all adjustments to such Capital Accounts for
all periods), then items of gross income and gross deduction for the fiscal year
with respect to which such distributions are being made (and, if necessary, for
prior fiscal years for which amended tax returns can and shall be filed) shall
be reallocated among the holders of Units such that the distributions to holders
of Units pursuant to Section 8.2(a) hereof are in accordance with the positive
balances in their Capital Accounts (after taking into account all adjustments to
such Capital Accounts for all periods).
6.2 Distributions. The General Partner shall cause the
Partnership to
<PAGE> 35
distribute all, or such portion as the General Partner may in its reasonable
discretion determine, of Net Cash Flow to the holders of Units, including Class
A Units, who are holders on the Partnership Record Date with respect to such
distribution. Distributions of Net Cash Flow shall be made in the following
priority:
(a) first, to the holders of Class A Units, pro rata
in an amount equal to the excess, if any, of (i)(x) the cumulative Class A
Preferred Return from February 14, 1997 to the end of such fiscal year or other
applicable period ending on the Partnership Record Date, over (y) the sum of all
prior distributions to the holders of Class A Units pursuant to this Section
6.2(a)(i), and then (ii)(x) the cumulative Special Class A Distributions from
February 14, 1997 to the end of such fiscal year or other applicable period
ending on the Partnership Record Date, over (y) the sum of all prior
distributions to the holders of Class A Units pursuant to this Section
6.2(a)(ii), treating the distributed amounts as paying the oldest amounts due
first; and
(b) thereafter, to the holders of Units, including
Class A Units, pro rata in accordance with the holders' ownership of Units,
including Class A Units.
6.3 Books of Account. At all times during the continuance of
the Partnership, the General Partner shall maintain or cause to be maintained
full, true, complete and correct books of account in accordance with GAAP, using
the calendar year as the fiscal and taxable year of the Partnership. In
addition, the Partnership shall keep all records required to be kept pursuant to
the Act.
6.4 Reports. The General Partner shall cause to be sent to the
Partners promptly after receipt of the same from the Accountants and in no event
later than 105 days after the close of each fiscal year of the Partnership,
copies of Audited Financial Statements for the Partnership, or of the General
Partner if such statements are prepared solely on a consolidated basis with the
General Partner, for the immediately preceding fiscal year of the Partnership.
The Partnership shall also cause to be prepared such reports and/or information
as are necessary for SLT to determine its qualification as a REIT and its
compliance with REIT Requirements.
6.5 Tax Elections and Returns. All elections required or
permitted to be made by the Partnership under any applicable tax law shall be
made by the General Partner in its sole and absolute discretion, except that the
General Partner shall, if requested by a Limited Partner, file an election on
behalf of the Partnership pursuant to Section 754 of the Code to adjust the
basis of the Partnership property in the case of a transfer of a Partnership
Interest or distribution from the Partnership, including transfers made in
connection with the exercise of the Rights, made in accordance with the
provisions of the Agreement. The General Partner shall be responsible for
preparing and filing all federal and state tax returns for the Partnership and
furnishing copies thereof to the Partners, together with required Partnership
schedules showing allocations of tax items, copies of all within the period of
time prescribed by law. The General Partner shall use reasonable efforts to make
available to the holders of Units final K-1's not later than September 15 of
each year.
6.6 Tax Matters Partner. The General Partner is hereby
designated as the
<PAGE> 36
Tax Matters Partner within the meaning of Section 6231(a)(7) of the Code (and
any corresponding provisions of state and local law) for the Partnership;
provided, however, that (a) in exercising its authority as Tax Matters Partner,
the General Partner shall be limited by the provisions of this Agreement
affecting tax aspects of the Partnership; and (b) the General Partner shall give
prompt notice to any notice partners under Section 6231 of the Code of the
receipt of any written notice that the Internal Revenue Service intends to
examine or audit Partnership income tax returns for any year, receipt of written
notice of the beginning of an administrative proceeding at the Partnership level
relating to the Partnership under Section 6223 of the Code, receipt of written
notice of the final Partnership administrative adjustment relating to the
Partnership pursuant to Section 6223 of the Code, and receipt of any request
from the Internal Revenue Service for waiver of any applicable statute of
limitations with respect to the filing of any tax return by the Partnership.
6.7 Withholding Payments Required By Law.
(a) Unless treated as a Tax Payment Loan (as
hereinafter defined), any amount paid by the Partnership for or with respect to
any holder of Units on account of any withholding tax or other tax payable with
respect to the income, profits or distributions of the Partnership pursuant to
the Code, the Regulations, or any state or local statute, regulation, notice,
ruling or ordinance requiring such payment (a "Withholding Tax Act") shall be
treated as a distribution to such holder for all purposes of this Agreement,
consistent with the character or source of the income, profits or cash which
gave rise to the payment or withholding obligation. To the extent that the
amount required to be remitted by the Partnership under the Withholding Tax Act
exceeds the amount then otherwise distributable to such holder, unless and to
the extent that funds shall have been provided by such holder pursuant to the
last sentence of this Section 6.7(a), the excess shall constitute a loan from
the Partnership to such holder (a "Tax Payment Loan") which shall be payable
upon demand and shall bear interest, from the date that the Partnership makes
the payment to the relevant taxing authority, at the rate announced from time to
time by Citibank, N.A. (or any successor thereto) as its "prime rate", plus four
(4) percent per annum, compounded monthly (but in no event higher than the
highest interest rate permitted by applicable law). So long as any Tax Payment
Loan to any holder of Units or the interest thereon remains unpaid, the
Partnership shall make future distributions due to such holder under this
Agreement by applying the amount of any such distributions first to the payment
of any unpaid interest on such Tax Payment Loan and then to the repayment of the
principal thereof, and no such future distributions shall be paid to such holder
until all of such principal and interest has been paid in full. If the amount
required to be remitted by the Partnership under the Withholding Tax Act exceeds
the amount then otherwise distributable to a holder of Units, the Partnership
shall notify such holder at least five (5) Business Days in advance of the date
upon which the Partnership would be required to make a Tax Payment Loan under
this Section 6.7(a) (the "Tax Payment Loan Date") and provide such holder the
opportunity to pay to the Partnership, on or before the Tax Payment Loan Date,
all or a portion of such deficit.
(b) The General Partner shall have the authority to
take all actions necessary to enable the Partnership to comply with the
provisions of any Withholding Tax Act applicable to the Partnership and to carry
out the provisions of this Section 6.7. Nothing in this Section 6.7 shall create
any obligation on the General Partner to advance funds to the
<PAGE> 37
Partnership or to borrow funds from third parties in order to make any payments
on account of any liability of the Partnership under a Withholding Tax Act.
(c) In the event that a Tax Payment Loan is not paid
by a holder of Units within thirty (30) days after written demand therefor is
made by the General Partner, the General Partner may cause all distributions
that would otherwise be made to such holder to be retained by the Partnership,
or sell such holder's Units for sale proceeds, in each case up to the amount
necessary to repay such Tax Payment Loan, including all accrued and unpaid
interest therein, and such retained distributions or sale proceeds shall be
applied against, first, the accrued interest on and, second, the principal of,
such Tax Payment Loan.
ARTICLE 7
Rights, Duties and Restrictions of the General Partner
7.1 Powers and Duties of the General Partner.
(a) Subject to Section 7.11 hereof, the General
Partner shall be responsible for the management of the Partnership's business
and affairs. Except as otherwise herein expressly provided, the General Partner
shall have, and is hereby granted, full and complete power, authority and
discretion to take such action for and on behalf of the Partnership and in its
name as the General Partner shall, in its sole and absolute discretion, deem
necessary or appropriate to carry out the Partnership's business and the
purposes for which the Partnership was organized. Except as otherwise expressly
provided herein, the General Partner shall, on behalf of, and at the expense of,
the Partnership, have the right, power and authority:
(i) to manage, control, invest, reinvest,
acquire by purchase, lease or otherwise, sell, contract to purchase or sell,
grant, obtain, or exercise options to purchase, options to sell or conversion
rights, assign, transfer, convey, deliver, endorse, exchange, pledge, mortgage,
abandon, improve, repair, maintain, insure, lease for any term and otherwise
deal with any and all property of whatsoever kind and nature, and wheresoever
situated, in furtherance of the business or purposes of the Partnership;
(ii) to acquire, directly or indirectly,
interests in real estate of any kind and of any type, and any and all kinds of
interests therein (including, without limitation, Entities investing therein),
and to determine the manner in which title thereto is to be held; to manage
(directly or through property managers), insure against loss, protect and
subdivide any of the real estate, interests therein or parts thereof; to
improve, develop or redevelop any such real estate; to participate in the
ownership and development of any property; to dedicate for public use, to vacate
any subdivisions or parts thereof, to resubdivide, to contract to sell, to grant
options to purchase or lease, to sell on any terms; to convey, mortgage, pledge
or otherwise encumber said property, or any part thereof; to lease said property
or any part thereof from time to time, upon any terms and for any period of
time, and to renew or extend leases, to amend, change or modify the terms and
provisions of any leases and to grant options to lease and options to renew
leases and options to purchase; to partition
<PAGE> 38
or to exchange said real property, or any part thereof, for other real or
personal property; to grant easements or charges of any kind; to release, convey
or assign any right, title or interest in or about or easement appurtenant to
said property or any part thereof; to construct and reconstruct, remodel, alter,
repair, add to or take from buildings on any property in which the Partnership
owns an interest; to insure any Person having an interest in or responsibility
for the care, management or repair of such property; to direct the trustee of
any land trust to mortgage, lease, convey or contract to convey the real estate
held in such land trust or to execute and deliver deeds, mortgages, notes and
any and all documents pertaining to the property subject to such land trust or
in any matter regarding such trust; and to execute assignments of all or any
part of the beneficial interest in such land trust;
(iii) to employ, engage, indemnify or
contract with or dismiss from employment or engagement Persons to the extent
deemed necessary or appropriate by the General Partner for the operation and
management of the Partnership business, including but not limited to
contractors, subcontractors, engineers, architects, surveyors, mechanics,
consultants, accountants, attorneys, insurance brokers, real estate brokers and
others;
(iv) to enter into contracts on behalf of
the Partnership, and to cause all Administrative Expenses to be paid;
(v) to borrow or loan money, obtain or make
loans and advances from and to any Person for Partnership purposes and to apply
for and secure from or accept and grant to any Person credit or accommodations;
to contract liabilities and obligations (including interest rate swaps, caps and
hedges) of every kind and nature with or without security; and to repay,
collect, discharge, settle, adjust, compromise or liquidate any such loan,
advance, obligation or liability; provided, however, without the Consent of a
Majority-In-Interest of the Class A Limited Partners, the Partnership shall not
borrow from the Realty Partnership or SLT such that neither the Realty
Partnership nor SLT has lending capacity under Section 856(c)(5)(B) of the Code
to lend an amount to the Partnership to allow the Partnership to discharge its
and the General Partner's obligations to the Class A Limited Partners under this
Agreement and under that certain Class A Exchange Rights Agreement dated
February 14, 1997, by and among SLC, the Partnership, and the Class A Limited
Partners;
(vi) to grant security interests, mortgage,
assign, deposit, deliver, enter into sale and leaseback arrangements or
otherwise give as security or as additional or substitute security or for sale
or other disposition any and all Partnership property, tangible or intangible,
including, but not limited to, personal property and real estate and interests
in land trusts, and to make substitutions thereof, and to receive any proceeds
thereof upon the release or surrender thereof; to sign, execute and deliver any
and all assignments, deeds, bills of sale and contracts and instruments in
writing; to authorize, give, make, procure, accept and receive moneys, payments,
property notices, demands, protests and authorize and execute waivers of every
kind and nature; to enter into, make, execute, deliver and receive agreements,
undertakings and instruments of every kind and nature; and generally to do any
and all other acts and things incidental to any of the foregoing or with
reference to any dealings or transactions which the General Partner may deem
necessary, proper or
<PAGE> 39
advisable to effect or accomplish any of the foregoing or to carry out the
business and purposes of the Partnership;
(vii) to acquire and enter into any contract
of insurance (including, without limitation, general partner liability and
partnership reimbursement insurance policies) which the General Partner may deem
necessary or appropriate;
(viii) to conduct any and all banking
transactions on behalf of the Partnership; to adjust and settle checking,
savings and other accounts with such institutions as the General Partner shall
deem appropriate; to draw, sign, execute, accept, endorse, guarantee, deliver,
receive and pay any checks, drafts, bills of exchange, acceptances, notes,
obligations, undertakings and other instruments for or relating to the payment
of money in, into or from any account in the Partnership's name; to make
deposits into and withdrawals from the Partnership's bank accounts and to
negotiate or discount commercial paper, acceptances, negotiable instruments,
bills of exchange and dollar drafts;
(ix) to demand, sue for, receive and
otherwise take steps to collect or recover all debts, rents, proceeds,
interests, dividends, goods, chattels, income from property, damages and all
other property, to which the Partnership may be entitled or which are or may
become due the Partnership from any Person; to commence, prosecute or enforce,
or to defend, answer or oppose, contest and abandon all legal proceedings in
which the Partnership is or may hereafter be interested; and to settle,
compromise or submit to arbitration any accounts, debts, claims, disputes and
matters which may arise between the Partnership and any other Person and to
grant an extension of time for the payment or satisfaction thereof on any terms,
with or without security;
(x) to acquire interests in and contribute
money or property to any limited or general partnerships, joint ventures,
subsidiaries or other entities as the General Partner deems desirable;
(xi) to maintain or cause to be maintained
the Partnership's books and records;
(xii) to prepare and deliver, or cause to be
prepared and delivered, all financial and other reports with respect to the
operations of the Partnership, and preparation and filing of all tax returns and
reports;
(xiii) to do all things which are necessary
or advisable for the protection and preservation of the Partnership's business
and assets, and to execute and deliver such further instruments and undertake
such further acts as may be necessary or desirable to carry out the intent and
purposes of this Agreement and as are not inconsistent with the terms hereof;
(xiv) subject to Section 7.4 hereof, to
lease real or personal property from the Realty Partnership or its Affiliates or
to any other Person on such terms and conditions as the General Partner may from
time to time determine; and
<PAGE> 40
(xv) in general, to exercise all of the
general rights, privileges and powers permitted to be had and exercised under
the Act.
To the extent the duties of the General Partner require expenditures of funds to
be paid to third parties, the General Partner shall not have any obligations
hereunder except to the extent that Partnership funds are reasonably available
to it for the performance of such duties, and nothing herein contained shall be
deemed to require the General Partner, in its capacity as such, to expend its
individual funds for payment to third parties or to undertake any specific
liability or litigation on behalf of the Partnership.
(b) Notwithstanding the provisions of Section 7.1(a)
hereof, the Partnership shall not take any action which (or fail to take any
action, the omission of which) the General Partner believes, in its sole and
absolute discretion, (i) could adversely affect the ability of SLT to qualify or
continue to qualify as a REIT, (ii) could subject SLT to any additional taxes
under Section 857 or Section 4981 of the Code or other potentially adverse
consequences under the Code, (iii) could otherwise cause SLT to violate the REIT
Requirements or (iv) could violate any law or regulation of any governmental
body or agency having jurisdiction over the General Partner or its securities,
unless such action (or inaction) shall have been specifically consented to by
the General Partner in writing.
(c) Notwithstanding the provisions of Section 7.1(a)
hereof, the Partnership shall not commingle its funds with those of any
Affiliate or other entity; funds and other assets of the Partnership shall be
separately identified and segregated; all of the Partnership's assets shall at
all times be held by or on behalf of the Partnership, and, if held on behalf of
the Partnership by another entity, shall at all times be kept identifiable (in
accordance with customary usages) as assets owned by the Partnership; and the
Partnership shall maintain its own separate bank accounts, payroll and books of
account.
(d) Without the consent of the Limited Partners, the
General Partner shall have no power to do any act in contravention of this
Agreement or possess any Partnership property for other than a partnership
purpose.
7.2 Reimbursement of the General Partner.
(a) Except as provided in this Section 7.2 and
elsewhere in this Agreement (including the provisions of Articles 5, 6 and 8
hereof regarding distributions, payments and allocations to which it may be
entitled), the General Partner shall not receive payments from or be compensated
for its services as general partner of the Partnership.
(b) The General Partner shall be reimbursed on a
monthly basis, or such other basis as the General Partner may determine in its
sole and absolute discretion, for all expenses it incurs relating to the
ownership and operation of, or for the benefit of, the Partnership, including,
without limitation, the Administrative Expenses. Such reimbursements shall be in
addition to any reimbursement to the General Partner as a result of
indemnification pursuant to Section 5.1 hereof.
<PAGE> 41
(c) The General Partner shall also be reimbursed for
all expenses incurred relating to the organization and formation of the
Partnership, the General Partner's share of public offerings of Paired Shares by
the General Partner and SLT to the extent included in Administrative Expenses,
and any other issuance of additional Partnership Interests.
7.3 Outside Activities of the General Partner. The General
Partner shall not directly or indirectly enter into or conduct any business
other than (a) the ownership, acquisition and disposition of Partnership
Interests as the General Partner or Limited Partner and the management of the
business of the Partnership, and (b) such activities as are incidental thereto,
including the General Partner's ownership directly or through a wholly-owned
subsidiary of an interest in a partnership or limited liability company in which
the Partnership is a partner or member. All future acquisitions of real estate
or of leasehold interests in hotels or management of hotels by the General
Partner shall be made through and for the benefit of the Partnership. The
General Partner agrees that the net proceeds of all offerings of securities by
the General Partner shall be contributed to the Partnership (in the case of
equity offerings) or loaned to the Partnership (in the case of debt offerings).
This Section 7.3 shall not apply to HICN or the General Partner's activities
with respect to HICN prior to the earlier of the date it contributes its assets
to the Partnership or January 1, 1999. The foregoing notwithstanding, this
Section 7.3 shall not restrict the activities or investments of the General
Partner if the General Partner makes such arrangements as are reasonably
necessary to avoid such activities or investments having a material adverse
impact on the Limited Partners and to assure that the Limited Partners share in
the economic benefits of such activities or investments in a fair and equitable
manner.
7.4 Contracts with Affiliates. The Partnership may engage in
transactions, enter into contracts with Affiliates, and lend money to or borrow
money from Affiliates which are on terms fair and reasonable to the Partnership
and no less favorable to the Partnership than would be obtained from
unaffiliated third parties. The Partners hereby agree that the Partnership's
leases and loans with the Realty Partnership, as in effect on the date first
above written, are on terms fair and reasonable to the Partnership and such
terms are no less favorable to the Partnership than would be obtained from
unaffiliated third parties.
7.5 Title to Partnership Assets. Title to Partnership assets,
whether real, personal or mixed and whether tangible or intangible, shall be
deemed to be owned by the Partnership as an entity, and no Partner, individually
or collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, the General Partner or one or more nominees, as
the General Partner may determine, including Affiliates of the General Partner.
The General Partner hereby acknowledges and confirms that any Partnership assets
for which legal title is held in the name of the General Partner or any nominee
or Affiliate of the General Partner shall be held by the General Partner for the
use and benefit of the Partnership in accordance with the provisions of this
Agreement; provided, however, that the General Partner shall use its best
efforts to cause beneficial and record title to such assets to be vested in the
Partnership as soon as reasonably practicable. All Partnership assets shall be
recorded as the property of the Partnership in its books and records,
irrespective of the name in which legal
<PAGE> 42
title to such Partnership assets is held.
7.6 Reliance by Third Parties. Notwithstanding anything to the
contrary in this Agreement, any Person dealing with the Partnership shall be
entitled to assume that the General Partner has full power and authority to
encumber, sell or otherwise use in any manner any and all assets of the
Partnership and to enter into any contracts on behalf of the Partnership, and
such Person shall be entitled to deal with the General Partner as if it were the
Partnership's sole party in interest, both legally and beneficially. In no event
shall any Person dealing with the General Partner or its representatives be
obligated to ascertain that the terms of this Agreement have been complied with
or to inquire into the necessity or expedience of any act or action of the
General Partner or its representatives. Each and every certificate, document or
other instrument executed on behalf of the Partnership by the General Partner
shall be conclusive evidence in favor of any and every Person relying thereon or
claiming thereunder that (i) at the time of the execution and delivery of such
certificate, document or instrument, this Agreement was in full force and
effect, (ii) the Person executing and delivering such certificate, document or
instrument was duly authorized and empowered to do so for and on behalf of the
Partnership and (iii) such certificate, document or instrument was duly executed
and delivered in accordance with the terms and provisions of this Agreement and
is binding upon the Partnership.
7.7 Liability of the General Partner.
(a) Notwithstanding anything to the contrary set
forth in this Agreement, the General Partner shall not be liable for monetary or
other damages to the Partnership, any of the Partners or any assignee of any
interest of any Partner for losses sustained or liabilities incurred as a result
of errors in judgment or of any act or omission if the General Partner acted
without fraud, gross negligence or willful misconduct.
(b) The Limited Partners expressly acknowledge (i)
that the General Partner is acting on behalf of the Partnership and the General
Partner's shareholders collectively, (ii) that, subject to the terms and
conditions of this Agreement, the General Partner may, but is under no
obligation to, consider the separate interests of the Limited Partners
(including, without limitation, the tax consequences to Limited Partners or any
assignees thereof except as provided in this Agreement) in deciding whether to
cause the Partnership to take (or decline to take) any actions, and (iii) that
the General Partner shall not be liable for monetary damages for losses
sustained, liabilities incurred, or benefits not derived by Limited Partners in
connection with such decisions, provided that the General Partner acted without
fraud, gross negligence or willful misconduct.
(c) Subject to its obligations and duties as General
Partner set forth in Section 7.1 hereof, the General Partner may exercise any of
the powers granted to it by this Agreement and perform any of the duties imposed
upon it hereunder either directly or by or through agents. The General Partner
shall not be responsible for any fraud, willful misconduct or gross negligence
on the part of any such agent appointed by it without fraud, gross negligence or
willful misconduct.
<PAGE> 43
(d) Any amendment, modification or repeal of this
Section 7.7 or any provision hereof shall be prospective only and shall not in
any way affect the limitations on the General Partner's liability to the
Partnership and the Partners under this Section 7.7 as in effect immediately
prior to such amendment, modification or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may be
asserted.
7.8 Other Matters Concerning the General Partner.
(a) The General Partner may rely and shall be
protected in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, or other document reasonably believed by
it to be genuine and to have been signed or presented by the proper party or
parties.
(b) The General Partner may consult with legal
counsel, accountants, appraisers, management consultants, investment bankers and
other consultants and advisers selected by it, and any act taken or omitted to
be taken in reliance upon the advice or opinion of such Persons as to matters
which the General Partner reasonably believes to be within such Person's
professional or expert competence and in accordance with such advice or opinion
shall be prima facie evidence that such actions have been done or omitted in
good faith.
(c) The General Partner shall have the right, in
respect of any of its powers or obligations hereunder, to act through any of its
duly authorized officers and any attorney or attorneys-in-fact duly appointed by
the General Partner. Each such attorney shall, to the extent provided by the
General Partner in the power of attorney, have full power and authority to do
and perform all and every act and duty which is permitted or required to be done
by the General Partner hereunder.
7.9 Operation of SLT in Accordance with REIT Requirements.
(a) The Partners acknowledge and agree that the
ability of SLT to satisfy the REIT Requirements is a material inducement for the
Realty Partnership to lease its real and personal property to the Partnership
and that the failure of SLT to satisfy the REIT Requirements is likely to have a
material adverse effect on the Partnership. The Partners therefore acknowledge
and agree that, in addition to the other provisions of this Agreement, so long
as SLT desires to elect to be taxed as a REIT, the Partnership shall be operated
in a manner that will enable SLT to (i) satisfy the REIT Requirements and (ii)
avoid the imposition of any federal income or excise tax liability on SLT. So
long as SLT desires to elect to be taxed as a REIT, the Partnership shall avoid
taking any action which would result in SLT ceasing to satisfy the REIT
Requirements or would result in the imposition of any federal income or excise
tax liability on SLT.
(b) Without the prior consent of the General Partner,
no Limited Partner or holder of Units or any Affiliate shall take any action,
including acquiring, directly or indirectly, an interest in any tenant of a
property owned by the Realty Partnership or by an Entity owned by the Realty
Partnership (including, but not limited to, the Operating
<PAGE> 44
Partnership, SLC or the Affiliates of either), which would have, through the
actual or constructive ownership of any tenant of any property, the effect of
causing the percentage of the gross income of SLT that fails to be treated as
"rents from real property" within the meaning of Section 856(d)(2) of the Code
to exceed such percentage on the date hereof. Each Limited Partner and holder of
Units shall use its best efforts to notify the General Partner on a timely basis
of any direct or indirect acquisition or potential direct or indirect
acquisition of Paired Shares by such Limited Partner or holder or any Affiliate
or direct or indirect owner of an interest in such Limited Partner or holder
that could reasonably be expected to have such effect.
7.10 Replacement of General Partner. In the event the General
Partner is no longer a Partner (whether in accordance with the provisions of
this Agreement or otherwise), a successor General Partner shall be appointed by
a vote of a Majority-in-Interest of the Limited Partners.
ARTICLE 8
Dissolution, Liquidation and Winding-Up
8.1 Accounting. In the event of the dissolution, liquidation
and winding-up of the Partnership, a proper accounting shall be made of the
Capital Account of each holder of Units and of the Net Income or Net Loss of the
Partnership from the date of the last previous accounting to the date of
dissolution.
8.2 Distribution on Dissolution.
(a) In the event of the dissolution and liquidation
of the Partnership for any reason, the assets of the Partnership shall be
liquidated for distribution in the following rank and order:
(i) payment of creditors of the Partnership,
including creditors who are Partners or former Partners;
(ii) establishment of reserves as provided
by the Liquidating Trustee to provide for contingent liabilities, if any;
(iii) to the holders of Class A Units in an
amount equal to the excess, if any, of (x) the cumulative distributions under
Section 8.2(a) of the Realty Agreement for an equivalent number of Units in the
Realty Partnership from February 14, 1997 to the date on which a distribution
under this Section 8.2(a) is made, over (y) the sum of all prior distributions
to the holders of Class A Units pursuant to this Section 8.2(a)(iii); and
(iv) to the holders of Units, including
Class A Units, in accordance with their respective holdings of Units.
<PAGE> 45
Whenever the Liquidating Trustee reasonably determines that any reserves
established pursuant to paragraph (ii) above are in excess of the reasonable
requirements of the Partnership, the amount determined to be excess shall be
distributed to the Partners in accordance with the provisions of this Section
8.2(a). No Partner or holder of Units shall be liable to any other Partner or
holder of Units for a deficit balance in its Capital Account.
(b) Notwithstanding the provisions of Section 8.2(a)
hereof which require liquidation of the assets of the Partnership, but subject
to the order of priorities set forth therein, if prior to or upon dissolution of
the Partnership the Liquidating Trustee determines that an immediate sale of
part or all of the Partnership's assets would be impractical or would cause
undue loss to the Partners, the Liquidating Trustee may, in its sole and
absolute discretion, defer for a reasonable time liquidation of any assets
except those necessary to satisfy liabilities of the Partnership (including to
those Partners which are creditors of the Partnership) and/or, with the Consent
of the Limited Partners, distribute to the Partners, in lieu of cash, as tenants
in common and in accordance with the provisions of Section 8.2(a) hereof,
undivided interests in such Partnership assets as the Liquidating Trustee deems
not suitable for liquidation. Any such distributions in kind shall be made only
if, in the good faith judgment of the Liquidating Trustee, such distributions in
kind are in the best interest of the Partners, and shall be subject to such
conditions relating to the disposition and management of such properties as the
Liquidating Trustee deems reasonable and equitable and to any agreements
governing the operation of such properties at such time. The Liquidating Trustee
shall determine the fair market value of any property distributed in kind using
such reasonable method of valuation as it may adopt.
8.3 Documentation of Liquidation. Upon the completion of the
dissolution and liquidation of the Partnership, the Partnership shall terminate
and the Liquidating Trustee shall have the authority to execute and record any
and all documents or instruments required to effect the dissolution, liquidation
and termination of the Partnership.
ARTICLE 9
Transfer
9.1 General Partner. Except to the extent permitted pursuant
to Section 4.5, the General Partner shall not withdraw from the Partnership and
shall not sell, assign, pledge, encumber or otherwise dispose of all or any
portion of its Partnership Interest or Units without the Consent of the Limited
Partners, which consent may be given or withheld in each Limited Partner's sole
and absolute discretion. Upon any transfer of a Partnership Interest in
accordance with the provisions of this Section 9.1, the transferee General
Partner shall become vested with the powers and rights of the transferor General
Partner, and shall be liable for all obligations and responsible for all duties
of the General Partner under this Agreement, once such transferee has executed
such instruments as may be necessary to effectuate such admission and to confirm
the agreement of such transferee to be bound by all the terms and provisions of
this Agreement with respect to the Partnership interest so acquired. It shall be
a condition to any transfer permitted hereunder that the transferee assumes by
express agreement (or pursuant
<PAGE> 46
to a statutory merger or consolidation wherein all obligations and liabilities
of the General Partner are assumed by a successor trust or corporation by
operation of law) all of the obligations of the transferor General Partner under
this Agreement with respect to such transferred Partnership Interest and no such
transfer (other than pursuant to a statutory merger or consolidation wherein all
obligations and liabilities of the transferor General Partner are assumed by a
successor trust or corporation by operation of law) shall relieve the transferor
General Partner of its obligations under this Agreement without the Consent of
the Limited Partners. In connection with any such permitted transfer, the
successor General Partner shall be deemed admitted as such immediately prior to
the effective time of the transfer from the transferor General Partner and shall
continue the business of the Partnership without dissolution. If the General
Partner withdraws or retires from the Partnership, in violation of this
Agreement or otherwise, or dissolves, terminates or upon the Bankruptcy of the
General Partner, within 90 days thereafter, at least a Majority-in-Interest of
the Limited Partners may elect to continue the Partnership business by selecting
a substitute General Partner, which substitute General Partner accepts such
election and agrees to serve as General Partner. Such successor General Partner
shall thereupon succeed to the rights and obligations of the General Partner as
provided in this Section 9.1.
9.2 Transfers by Limited Partners.
(a) No Limited Partner shall have the right, directly
or indirectly, to transfer all or any part of his Partnership Interest or Units
to any Person without the prior written consent of the General Partner, which
consent may be given or withheld by the General Partner in its sole and absolute
discretion. The foregoing notwithstanding, the General Partner hereby grants the
consents described in this Section 9.2 to transfers of Partnership Interests
pursuant to an exercise of Rights, provided that any such transfer otherwise
complies with all of the other provisions of this Article 9 (including, but not
limited to, any additional consents required hereunder).
(b) It shall be a condition to any transfer by a
Limited Partner (other than a pledge, encumbrance, hypothecation or mortgage)
otherwise permitted hereunder that the transferee assume by operation of law or
express agreement all of the obligations of the transferor under this Agreement
(including, without limitation, under Article 9 hereof) with respect to such
transferred Partnership Interest or Units and no such transfer (other than
pursuant to a statutory merger or consolidation wherein all obligations and
liabilities of the transferor are assumed by a successor corporation by
operation of law) shall relieve the transferor of its obligations under this
Agreement without the approval of the General Partner, in its reasonable
discretion (it being understood that a transferor shall be deemed relieved from
such obligations, without the necessity of any such approval, in respect of
Partnership Interests transferred to the General Partner or the Partnership
pursuant to an Exchange Rights Agreement). Upon such transfer, the transferee of
a Partnership Interest shall be admitted as a Limited Partner and shall succeed
to all of the rights of the transferor Limited Partner under this Agreement in
the place and stead of such transferor Limited Partner (which succession, in the
event of a pledge, may be entered into and become effective at the time of
foreclosure or other realization of such pledge). The foregoing notwithstanding,
a transferee of a Unit shall not be admitted as a substituted Limited Partner
unless the General Partner consents, which consent may be given or withheld by
the General Partner in its sole and absolute discretion.
<PAGE> 47
Any transferee, whether or not admitted as a substituted Limited Partner, shall
succeed to the obligations of the transferor hereunder (unless such transfer is
a pledge, encumbrance, hypothecation or mortgage or except as otherwise provided
herein).
(c) In addition to any other restrictions on transfer
provided herein, no Partnership Interest or Units shall be transferable by a
Limited Partner unless the transferor gives written notice of the proposed
transfer which notice shall state to the best of its knowledge that such
transfer will not violate any of the restrictions set forth in Section 9.3
hereof.
(d) Any permitted transferee under Section 9.2 who is
not admitted as a Limited Partner in accordance with this Article 9 or a
transferee who only holds Units shall be considered an assignee for purposes of
this Agreement. An assignee shall be deemed to have had assigned to it, and
shall be entitled to receive, distributions from the Partnership and the share
of Net Income, Net Loss, and any other items of income, gain, loss, deduction
and credit of the Partnership and rights attributable to the Partnership
Interests assigned to such transferee, but shall not be deemed to be a holder of
Partnership Interests for any other purpose under this Agreement, and shall not
be entitled to vote such Partnership Interests in any matter presented to the
Limited Partners for a vote. In the event any such transferee desires to make a
further assignment of any such Partnership Interests, such transferee shall be
subject to all the provisions of this Article 9 to the same extent and in the
same manner as any Limited Partner desiring to make an assignment of Partnership
Interests.
(e) The Limited Partners acknowledge that neither the
Partnership Interests nor the Units have been registered under any federal or
state securities laws and, as a result thereof, they may not be sold or
otherwise transferred, except in compliance with such laws. Notwithstanding
anything to the contrary contained in this Agreement, no Partnership Interest or
Units may be sold or otherwise transferred unless such transfer is exempt from
registration under any applicable securities laws or such transfer is registered
under such laws, it being acknowledged that the Partnership has no obligation to
take any action which would cause any such Partnership Interests or Units to be
registered.
9.3 Certain Restrictions on Transfer. In addition to any other
restrictions on transfer herein contained, except with the consent of the
General Partner, in no event may any transfer of a Partnership Interest or Units
by any Person be made (a) to any person or Entity that lacks the legal right,
power or capacity to own a Partnership Interest or Units; (b) in the event such
transfer would cause SLT to cease to comply with the REIT Requirements; (c) if
such transfer would cause a termination of the Partnership for federal income
tax purposes; (d) if such transfer would, in the opinion of counsel to the
Partnership, cause the Partnership to cease to be classified as a Partnership
for federal income tax purposes; (e) if such transfer would result in the
Partnership being treated as a "publicly traded partnership" or is effectuated
through an "established securities market" or a "secondary market (or the
substantial equivalent thereof)" within the meaning of Section 7704 of the Code
and the Regulations thereunder; (f) in violation of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976; (g) if the General Partner reasonably
believes that such transfer may (i) cause any portion or all of the assets of
the Partnership to be deemed pursuant to United States Department of Labor
<PAGE> 48
Regulation Section 2510.3-101 or otherwise pursuant to ERISA or the Code to be
for any purpose of ERISA or Section 4975 of the Code assets of any Restricted
Entity, or (ii) cause a "prohibited transaction" (as defined in Section 4975(c)
of the Code or within the meaning of Section 406 of ERISA) to occur, or (iii)
cause the Partnership to become with respect to any Restricted Entity a "party
in interest" (as defined in Section 3(14) of ERISA) or a "disqualified person"
(as defined in Section 4975(e) of the Code) or (iv) cause the Partnership to be
jointly and severally liable for any obligation arising under ERISA or the Code
with respect to any "employee benefit plan" as defined in and subject to ERISA
or any "plan" as defined in Section 4975 of the Code; or (h) if the intended
transferee is a Restricted Entity. Any purported transfer described in this
Section 9.3 shall be void ab initio.
9.4 Effective Dates of Transfers.
(a) Transfers pursuant to this Article 9 may be made
on any day, but for purposes of this Agreement, the effective date of any such
transfer shall be (i) the first day of the month in which such transfer occurred
if such transfer occurred on or prior to the fifteenth calendar day of a month,
or (ii) the first day of the month immediately following the month in which such
transfer occurred, if such transfer occurred after the fifteenth calendar day of
a month, or such other date determined by the General Partner pursuant to such
convention as may be administratively feasible and consistent with applicable
law.
(b) If any Partnership Interest or Unit is
transferred or assigned in compliance with the provisions of this Article 9, on
any day other than the first day of a calendar year, then Net Income, Net Loss,
each item thereof and all other items attributable to such Partnership Interest
or Unit for such year shall be allocated to the transferor, and, in the case of
a transfer or assignment other than a redemption, to the transferee, by taking
into account their varying interests during such year in accordance with Section
706(d) of the Code, using any method permitted thereunder. All distributions
pursuant to Section 6.2 hereof attributable to such transferred Partnership
Interests or Units (A) with respect to which the Partnership Record Date is
before the effective date of such transfer (other than a pledge, encumbrance,
hypothecation or mortgage) shall be made to the transferor, (B) with respect to
the first Partnership Record Date after the effective date of such transfer
(other than a pledge, encumbrance, hypothecation or mortgage) shall be paid to
the transferor and to the transferee, ratably in accordance with their
respective periods of ownership of the Partnership Interest or Units transferred
during the period with respect to which such distribution is made, and (C) all
distributions after those described in (A) and (B) shall be made to the
transferee.
9.5 Transfer.
(a) The term "transfer," when used in this Article 9
with respect to a Partnership Interest, shall be deemed to refer to a
transaction by which a Person purports to assign its Partnership Interest or any
portion thereof (including Units) to another Person, and includes a sale,
assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any
other disposition by law or otherwise.
(b) No Partnership Interest or Unit shall be
transferred, in whole or
<PAGE> 49
in part, except in accordance with the terms and conditions set forth in this
Article 9. Any transfer or purported transfer of a Partnership Interest not made
in accordance with this Article 9 shall be null and void.
9.6 Nevada Gaming Control Act.
(a) Notwithstanding anything to the contrary
expressed or implied in this Agreement, the sale, assignment, transfer, pledge
or other disposition of any interest in the Partnership is void unless approved
in advance by the Commission. If at any time the commission finds that an
individual owner of any interest in the Partnership is unsuitable to hold that
interest, the Commission shall immediately notify the Partnership of that fact.
The Partnership shall, within ten (10) days from the date that it receives the
notice from the Commission, return to the unsuitable owner the amount of his
capital account as reflected on the books of the Partnership. Beginning on the
date when the Commission serves notice of a determination of unsuitability,
pursuant to the preceding sentence, on the Partnership, it is unlawful for the
unsuitable owner: (i) to receive any share of the profits or distributions of
any cash or other property other than a return of capital as described above;
(ii) to exercise, directly or through any trust or nominee, any voting right
conferred by such interest; or (iii) to receive any remuneration in any form
from the Partnership for services rendered or otherwise.
(b) Any Limited Partner granted a delayed licensing
by the Commission which Limited Partner is later found unsuitable by the
Commission shall return all evidence of any ownership in the Partnership to the
Partnership, at which time the Partnership shall refund to the unsuitable
Limited Partner no more than the amount that such Limited Partner paid for his
ownership interest in the Partnership, and the unsuitable Limited Partner shall
no longer have any direct or indirect interest in the Partnership.
(c) This Section 9.6 shall apply only if the
Partnership applies for and obtains a Nevada state gaming license and only while
such license is in effect. No such license shall be applied for or obtained by
the Partnership without the Consent of the Limited Partners.
ARTICLE 10
Rights and Obligations of the Limited Partners
10.1 No Participation in Management. No Limited Partner, in
its capacity as such, shall take part in the management of the Partnership's
business, transact any business in the Partnership's name or have the power to
sign documents for or otherwise bind the Partnership. Any rights expressly
granted to the Limited Partners in this Agreement shall not be deemed to be
rights relating to the management of the Partnership's business.
10.2 Bankruptcy of a Limited Partner. The Bankruptcy of any
Limited Partner shall not cause a dissolution of the Partnership, but the rights
of such Limited Partner to share in the Net Profits or Net Losses of the
Partnership and to receive distributions of
<PAGE> 50
Partnership funds shall, on the happening of such event, devolve on its
successors or assigns, subject to the terms and conditions of this Agreement,
and the Partnership shall continue as a limited partnership. In no event,
however, shall such assignee(s) become a substituted Limited Partner except in
accordance with Article 9 hereof.
10.3 No Withdrawal. No Limited Partner may withdraw from the
Partnership without the prior written consent of the General Partner, other than
as provided in Article 9 hereof.
10.4 Conflicts. The Partners recognize that the Limited
Partners and their Affiliates have or may have other business interests,
activities and investments, some of which may be in conflict or competition with
the business of the Partnership, and that such Persons are entitled to carry on
such other business interests, activities and investments. In deciding whether
to take any actions in such capacity, such Limited Partners and their Affiliates
may, but shall be under no obligation to, consider the separate interests of the
Partnership and shall have no fiduciary obligations to the Partnership and shall
not be liable for monetary damages for losses sustained, liabilities incurred or
benefits not derived by the other Partners in connection with such actions
except for damages for losses sustained or liabilities incurred which result
from a Limited Partner breaching a representation, warranty or covenant
hereunder or to the extent provided in the Formation Agreement; nor shall the
Partnership or the General Partner be under any obligation to consider the
separate interests of the Limited Partners and their Affiliates in such capacity
or have any fiduciary obligations to the Limited Partners and their Affiliates
in such capacity or be liable for monetary damages for losses sustained,
liabilities incurred or benefits not derived by the Limited Partners and their
Affiliates in such capacity arising from actions or omissions taken by the
Partnership. The Limited Partners and their Affiliates may engage in or possess
an interest in any other business or venture of any kind, independently or with
others, on their own behalf or on behalf of other entities with which they are
affiliated or associated, and such persons may engage in any activities, whether
or not competitive with the Partnership, without any obligation to offer any
interest in such activities to the Partnership or to any Partner. Neither the
Partnership nor any Partner shall have any right, by virtue of this Agreement,
in or to such activities, or the income or profits derived therefrom, and the
pursuit of such activities, even if competitive with the business of the
Partnership, shall not be deemed wrongful or improper. Notwithstanding the
foregoing, the provisions of this Section 10.4 shall not negate or impair any
other written agreement between one or more of the Limited Partners and the
General Partner or the Partnership (including Section 6.6 of the Formation
Agreement) or any duties which a Limited Partner may have in such Limited
Partner's capacity as an officer or director of the General Partner.
10.5 Provision of Information.
(a) With respect to any information required to be
provided to the Limited Partners pursuant to Section 17-305 (or any successor
thereto) of the Act: (i) the cost of preparing or providing any such information
(including, without limitation, fees paid to any person or entity in connection
therewith) shall be paid by the requesting Partner and in no event shall such
information be required to be given to the requesting Partner until such
<PAGE> 51
payment has been made to the Partnership; (ii) in no event shall any financial
statements of the Partnership be required to be provided except for such
statements as have already been prepared or are otherwise required to be
provided to the Limited Partners under this Agreement and in no event shall any
statements which have been prepared be required to be audited, reviewed or
otherwise examined by a certified public accountant, if the statements are not
otherwise required to be so audited, reviewed or examined pursuant to the
provisions of this Agreement; and (iii) in no event shall such information be
required to be furnished until forty-five (45) days after such request and
unless the information is already in the possession of the Partnership.
(b) In addition to other rights provided by this
Agreement or by the Act, each Limited Partner shall have the right, for a
purpose reasonably related to such Limited Partner's interest as a limited
partner in the Partnership, upon written demand with a statement of the purpose
of such demand and at such Limited Partner's own expense (excluding copying and
administrative expenses of the General Partner):
(i) to obtain a copy of the most recent
annual and quarterly reports and current reports on Form 8-K filed with the SEC
by the General Partner pursuant to the Securities Exchange Act of 1934;
(ii) to obtain a copy of the Partnership's
federal, state and local income tax returns for each fiscal year of the
Partnership;
(iii) to obtain a current list of the name
and last known business, residence or mailing address of each Partner; and
(iv) to obtain a copy of this Agreement and
the Certificate, together with executed copies of all powers of attorney
pursuant to which this Agreement and the Certificate have been executed.
(c) Notwithstanding any other provision of this
Section 10.5, the General Partner may keep confidential from the Limited
Partners, for such period of time as the General Partner determines in its sole
and absolute discretion to be reasonable, any information that is not material
to the Limited Partners and that (i) the General Partner reasonably believes to
be in the nature of trade secrets or other information the disclosure of which
the General Partner in good faith believes is not in the best interests of the
Partnership or could damage the Partnership or its business or (ii) the
Partnership is required by law or by agreements with an unaffiliated third party
to keep confidential.
10.6 Power of Attorney.
(a) Each Limited Partner constitutes and appoints the
General Partner, any Liquidating Trustee and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each case with
full power of substitution, as its true and lawful agent and attorney-in-fact,
with full power and authority in its name, place and stead to: execute, swear
to, acknowledge, deliver, file and record in the appropriate public offices (i)
all
<PAGE> 52
certificates, documents and other instruments (including, without limitation,
this Agreement and the Certificate and all amendments or restatements thereof)
that the General Partner or the Liquidating Trustee deems appropriate or
necessary to form, qualify or continue the existence or qualification of the
Partnership as a limited partnership (or a partnership in which the limited
partners have limited liability) in the State of Delaware and in all other
jurisdictions in which the Partnership may conduct business or own property;
(ii) all instruments that the General Partner deems appropriate or necessary to
reflect any amendment, change, modification or restatement of this Agreement in
accordance with its terms; (iii) all conveyances and other instruments or
documents that the General Partner deems appropriate or necessary to reflect the
dissolution and liquidation of the Partnership pursuant to the terms of this
Agreement, including, without limitation, a certificate of cancellation; and
(iv) all instruments relating to the admission, withdrawal, removal or
substitution of any Partner pursuant to the provisions of this Agreement or the
Capital Contribution of any Partner.
(b) The foregoing power of attorney is irrevocable
and a power coupled with an interest, in recognition of the fact that each of
the Limited Partners will be relying upon the power of the General Partner to
act as contemplated by this Agreement in any filing or other action by it on
behalf of the Partnership, and it shall survive the death or incompetency of a
Limited Partner to the effect and extent permitted by law, subsequent incapacity
of any Limited Partner and the transfer of all or any portion of such Partner's
Partnership Interests and shall extend to such Limited Partner's heirs,
successors, assigns and personal representatives.
(c) Nothing contained in this Section 10.6 shall be
construed as authorizing the General Partner to amend this Agreement except in
accordance with Article 11 hereof.
10.7 Ownership of Paired Shares.
(a) Each Limited Partner and holder of Units hereby
agrees to provide the General Partner within fifteen (15) days of any written
request therefor, a statement, to the best of its knowledge, describing the
number of Paired Shares actually or constructively owned by such Limited Partner
or holder of Units and all direct and indirect owners of such Limited Partner or
holder for purposes of the REIT Requirements as determined under Section 318(a)
of the Code, as modified by Section 856(d)(5) of the Code, or Section 544 of the
Code, as modified by Section 856(h) of the Code.
(b) Each Limited Partner and holder of Units (i)
hereby covenants that, without the prior written consent of the General Partner
(which consent shall not be unreasonably withheld or delayed) it will not
acquire and it will use all reasonable efforts to cause its direct or indirect
owners not to acquire any Paired Shares or any rights to acquire Paired Shares
and (ii) except to the extent that the General Partner provides prior written
consent, hereby represents, warrants and covenants that (I) it is not and will
not become a Restricted Entity, (II) no "prohibited transaction" (as defined in
Section 4975(c) of the Code or within the meaning of Section 406 of ERISA) has
occurred or will occur that would not have occurred or occur if the Limited
Partner or holder of Units and its Affiliates were not Limited
<PAGE> 53
Partners and were not holders of Units, (III) the Partnership has not become and
will not become with respect to any Restricted Entity a "party in interest" (as
defined in Section 3(14) of ERISA) or a "disqualified person" (as defined in
Section 4975(e) of the Code) which the Partnership would not have become or be
if the Limited Partner or holder of Units and its Affiliates were not Limited
Partners and were not holders of Units, and (IV) the Partnership has not and
will not become jointly and severally liable for any obligations arising under
ERISA or the Code with respect to any "employee benefit plan" as defined in and
subject to ERISA or any "plan" as defined in the Code for which the Partnership
has not become or would not be liable if the Limited Partner or holder of Units
and its Affiliate were not Limited Partners and were not holders of Units.
10.8 Waiver of Fiduciary Duty. Each Limited Partner and holder
of Units hereby waives, to the maximum extent permitted under law, any and all
fiduciary duties of the General Partner to each, all or any combination of them
and hereby agrees that the General Partner may, but is under no obligation to,
take their interests into account in performing or refraining from performing
any act permitted under this Agreement.
ARTICLE 11
Amendment of Partnership Agreement, Meetings
11.1 Amendments.
(a) This Agreement may not be amended unless such
amendment is approved by the General Partner with the Consent of the Limited
Partners, except as provided below in this Section 11.1.
(b) Notwithstanding Section 11.1(a), the General
Partner shall have the power, without the Consent of the Limited Partners but
after five (5) Business Days notice to the Limited Partners, to amend this
Agreement as may be required to facilitate or implement any of the following
purposes:
(1) to add to the obligations of the General
Partner for the benefit of the Limited Partners;
(2) to reflect the admission, substitution,
termination or withdrawal of Partners after the date hereof in accordance with
Section 4.1(d) or Article 9 of this Agreement, provided that the General Partner
shall not be required to give the notice referred to in the first paragraph of
this subsection (b) in respect of the transactions described in this Paragraph
(2);
(3) to set forth the rights, powers, duties,
and preferences of the holders of any additional Partnership Interests issued
pursuant to Article 4 hereof;
(4) to reflect a change that is of an
inconsequential nature and
<PAGE> 54
does not materially adversely affect the Limited Partners, or to cure any
ambiguity, correct or supplement any provision of this Agreement not
inconsistent with law or with other provisions, or make other changes with
respect to matters arising under this Agreement that will not be inconsistent
with law or with the provisions of this Agreement;
(5) to satisfy any requirements, conditions,
or guidelines contained in any order, directive, opinion, ruling or regulation
of a federal or state agency or contained in federal or state law;
(6) to prevent all or any portion of the
assets of the Partnership from being deemed pursuant to United States Department
of Labor Regulation Section 2510.3-101 or otherwise pursuant to ERISA or the
Code to be, for any purpose of ERISA or Section 4975 of the Code, assets of any
Restricted Entity;
(7) to prevent the Partnership from being
characterized as a "publicly traded partnership" pursuant to Section 7704 of the
Code and Regulations;
(8) to enable SLT to satisfy the REIT
Requirements; and
(9) to maintain the Partnership's
characterization as a partnership for tax purposes.
(c) Notwithstanding Sections 11.1(a) and (b) hereof,
this Agreement shall not be amended without the prior written consent of each
Partner adversely affected if such amendment would (i) convert a Limited
Partner's interest in the Partnership into a general partner's interest, (ii)
modify the limited liability of a Limited Partner, (iii) alter rights of the
Partners to receive allocations and distributions pursuant to Article 6 or
Section 8.2 hereof (except as permitted pursuant to Article 4 and Sections
11.1(b)(3) and 11.1(d) hereof), (iv) alter or modify the Rights set forth in an
Exchange Rights Agreement or a Registration Rights Agreement except in
compliance therewith, (v) except in furtherance of Sections 11.1(b)(7), (8) or
(9) hereof, alter such Partner's rights to transfer its Partnership Interest;
(vi) amend Section 7.7, 7.8 or 10.7 hereof or (vii) amend Section 11.1(c) or
11.1(d) hereof.
(d) Notwithstanding Section 11.1(c) hereof and
subject to (but not in limitation of) the rights granted to the General Partner
pursuant to Article 4 and this Article 11, this Agreement may be amended to (i)
alter the rights of any or all of the Partners to receive allocations and
distributions pursuant to Article 6 or Section 8.2 hereof or (ii) alter the
rights of any or all of the Partners to transfer their Partnership Interests if
such amendment is approved by the prior written consent of a majority of each
class or group of Partnership Interests that is treated in a uniform or pro rata
basis by such amendment.
11.2 Meetings of the Partners; Notices to Partners.
(a) Meetings of Partners may be called by the General
Partner or by Limited Partners holding at least 1% of the Percentage Interests
to act on any matter specified herein or in the Act to be voted on or consented
to by the Partners. The call shall state the
<PAGE> 55
nature of the business to be transacted. Notice of any such meeting shall be
given to all Partners not less than seven (7) Business Days prior to the date of
such meeting. Partners may vote in person or by proxy at such meeting. Whenever
the vote or Consent of the Limited Partners is permitted or required under this
Agreement, such vote or consent may be given at a meeting of Limited Partners or
may be given in accordance with the procedure prescribed in Section 11.2(b)
hereof.
(b) Any action required or permitted to be taken at a
meeting of the Partners may be taken without a meeting if a written consent
setting forth the action so taken is signed by the General Partner and such
percentage or number of the Limited Partners as is expressly required by this
Agreement. Such consent may be in one instrument or in several instruments, and
shall have the same force and effect as a vote of the Partners. Such consent
shall be filed with the General Partner and copies thereof delivered to all
Partners. An action so taken shall be deemed to have been taken at a meeting
held on the effective date so certified.
(c) Each Limited Partner may authorize any Person or
Persons to act for him by proxy on all matters in which a Limited Partner is
entitled to participate, including waiving notice of any meeting, or voting or
participating at a meeting. Every proxy must be signed by the Limited Partner or
his attorney-in-fact. No proxy shall be valid after the expiration of eleven
(11) months from the date thereof unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the Limited Partner executing it. No
such proxy and no such revocation shall be effective unless a copy thereof has
been delivered to the General Partner.
(d) Whenever the Consent of the Limited Partners is
required hereunder, the General Partner shall provide a notice to each Partner
who is a Limited Partner on the date the notice is given setting forth the
matter(s) as to which it proposes to seek such consent at least five (5)
Business Days in advance of the date upon which such consent is sought.
ARTICLE 12
General Provisions
12.1 No Liability of Directors and Others. Notwithstanding
anything to the contrary contained herein, no recourse shall be had by the
Partnership or any Partner against any trustee, director, shareholder, officer,
employee, agent or attorney of the General Partner for any act or omission of
the General Partner or any obligation or liability of the General Partner under
this Agreement, and none of the foregoing shall have any personal liability for
or with respect to any of the foregoing; provided that the foregoing shall not
relieve any trustee, officer or director of the General Partner of any liability
in his capacity as such.
12.2 Notices. All notices, offers or other communications
required or permitted to be given pursuant to this Agreement shall be in writing
and may be personally served, sent by United States mail, or sent via facsimile.
A notice shall be deemed to have
<PAGE> 56
been given when delivered in person or, if sent by United States mail, three
business days after deposit in United States mail, registered or certified,
postage prepaid, and properly addressed, by or to the appropriate party, or, if
sent via facsimile, upon receipt by the sending party of verification of
transmission. For purposes of this Section 12.2, the addresses of the parties
hereto shall be as set forth on Exhibit B hereto. The address of any party
hereto may be changed by a notice in writing given in accordance with the
provisions hereof.
12.3 Controlling Law. This Agreement and all questions
relating to its validity, interpretation, performance and enforcement
(including, without limitation, provisions concerning limitations of actions),
shall be governed by and construed in accordance with the laws of the State of
Delaware, notwithstanding any conflict-of-laws doctrines of such state or other
jurisdiction to the contrary. Each of the parties hereto irrevocably submits and
consents to the jurisdiction of the United States District Court for the
Southern District of New York and the United States District Court for the
District of Arizona in connection with any action or proceeding arising out of
or relating to this Agreement and irrevocably waives any immunity from
jurisdiction thereof and any claim of proper venue, forum non conveniens or any
similar basis to which it might otherwise be entitled in any such action or
proceeding.
12.4 Execution of Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an original
as against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories.
12.5 Severability. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
12.6 Entire Agreement. This Agreement (together with the
Exhibits hereto) and the Formation Agreement contain the entire understanding
among the parties hereto with respect to the subject matter hereof, and
supersede all prior and contemporaneous agreements and understandings,
inducements or conditions, express or implied, oral or written, except as herein
contained. The parties hereto intend that this Agreement be treated as a
separate and distinct agreement and as not being part of any other agreement
(other than the Formation Agreement), arrangement, partnership or joint venture.
The express terms hereof control and supersede any course of performance and/or
usage of the trade inconsistent with any of the terms hereof. This Agreement may
not be modified or amended other than by an agreement in writing.
12.7 Paragraph Headings. The paragraph headings in this
Agreement are for convenience and they form no part of this Agreement and shall
not affect its interpretation.
12.8 Gender, Etc. Words used herein, regardless of the number
and gender specifically used, shall be deemed and construed to include any other
number, singular or
<PAGE> 57
plural, and any other gender, masculine, feminine or neuter, as the context
indicates is appropriate. The term "including" shall mean "including, but not
limited to."
12.9 Number of Days. In computing the number of days (other
than Business Days and Trading Days) for purposes of this Agreement, all days
shall be counted, including Saturdays, Sundays and holidays; provided, however,
that if the final day of any time period falls on a Saturday, Sunday or holiday
on which national banks are or may elect to be closed, then the final day shall
be deemed to be the next day which is not a Saturday, Sunday or such holiday.
12.10 Partners Not Agents. Nothing contained herein shall be
construed to constitute any Partner the agent of another Partner, except as
specifically provided herein, or in any manner to limit the Limited Partners in
the carrying on of their own respective businesses or activities.
12.11 Assurances. Each of the Partners shall hereafter execute
and deliver such further instruments and do such further acts and things as may
be reasonably required or useful to carry out the intent and purpose of this
Agreement and as are not inconsistent with the terms hereof.
12.12 Waiver of Partition. Each Partner hereby waives any
right such Partner may have to partition its interest in the Partnership or any
property of the Partnership.
<PAGE> 58
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement or caused this Agreement to be executed on their behalf as of the date
first above written.
GENERAL PARTNER:
STARWOOD LODGING CORPORATION, a
Maryland corporation
By: ____________________________________
Name:
Title:
LIMITED PARTNERS:
STARWOOD HOTEL INVESTORS II, L.P.
By: STARWOOD CAPITAL GROUP I, L.P.
By: BSS CAPITAL PARTNERS, L.P.,
General Partner
By: STERNLICHT HOLDINGS II, Inc.
General Partner
By: ____________________________________
Name:
Title:
FIREBIRD CONSOLIDATED PARTNERS, L.P.
By: ____________________________________
Name:
Title: General Partner
APPOLLO REAL ESTATE INVESTMENT
FUND, L.P.
By: APPOLLO REAL ESTATE ADVISORS,
L.P.
By: APPOLLO REAL ESTATE
MANAGEMENT, INC.
<PAGE> 59
By: ____________________________________
Name:
Title:
PHILADELPHIA HSR LIMITED
PARTNERSHIP
By: ____________________________________
Name:
Title: General Partner
STARWOOD OPPORTUNITY FUND II, L.P.
By: STARWOOD CAPITAL GROUP I, L.P.
General Partner
By: BSS CAPITAL PARTNERS, L.P.,
General Partner
By: STERNLICHT HOLDINGS II, Inc.
General Partner
By: ____________________________________
Name:
Title:
________________________________________
EDWARD J. ROHLING
ZIFF INVESTORS PARTNERSHIP, L.P. II
By: ____________________________________
Name:
Title: General Partner
MONTROSE CORPORATION
By: ____________________________________
Name:
Title:
<PAGE> 60
HARVEYWOOD HOTEL INVESTORS, L.P.
By: ____________________________________
Name:
Title: General Partner
STAR INVESTORS, G.P.
By: ____________________________________
Name:
Title:
MERIDIAN INVESTMENT GROUP
By: ____________________________________
Name:
Title:
THE HERMITAGE, L.P.
By: HERMITAGE OF NASHVILLE, INC.
General Partner
By: ____________________________________
Name:
Title:
BURDEN DIRECT INVESTMENT FUND I,
L.P.
By: ____________________________________
Name:
Title: General Partner
BRAINARD HOLDINGS, INC.
By: ____________________________________
Name:
Title:
KJJ REVOCABLE TRUST
<PAGE> 61
By: ____________________________________
Name:
Title: Trustee
________________________________________
BARRY S. STERNLICHT
THE BARRY S. STERNLICHT FAMILY
SPRAY TRUST I
By: ____________________________________
Name:
Title: Trustee
THE BARRY S. STERNLICHT FAMILY
SPRAY TRUST II
By: ____________________________________
Name:
Title: Trustee
THE BARRY S. STERNLICHT FAMILY
SPRAY TRUST III
By: ____________________________________
Name:
Title: Trustee
________________________________________
JACK NASH
THE NASH FAMILY PARTNERSHIP
By: ____________________________________
Name:
Title: General Partner
________________________________________
MADISON F. GROSE
<PAGE> 62
THE MADISON F. GROSE IRREVOCABLE
INSURANCE TRUST
By: ____________________________________
Name:
Title: Trustee
________________________________________
MAX C. CHAPMAN
________________________________________
MERRICK R. KLEEMAN
________________________________________
EUGENE A. GORAB
________________________________________
JAMIE R. GATES
________________________________________
CARLY SIMON
________________________________________
STEVEN R. GOLDMAN
________________________________________
ALAN SCHWARTZ
________________________________________
JAY SUGARMAN
________________________________________
JOHN Z. KUKRAL
________________________________________
JEROME C. SILVEY
<PAGE> 63
________________________________________
GEOFFREY T. BOISI
________________________________________
MICHAEL MUELLER
________________________________________
CLATE JOSEPH KORSANT
________________________________________
JUSTIN FREDERICK KORSANT
________________________________________
JAMES G. BABB, III
LAMBSTER PARTNERS LIMITED
PARTNERSHIP
By: ____________________________________
Name:
Title: General Partner
________________________________________
JEFF DISHNER
________________________________________
GEOFFREY BEER
________________________________________
CHARLES E. MUELLER, M.D.
________________________________________
LOWELL D. KRAFF
________________________________________
<PAGE> 64
STEPHEN FIORE
________________________________________
JENNIFER ALBERO
________________________________________
JAMES A. KLEEMAN, M.D., PC
________________________________________
ELLIS F. RINALDI
________________________________________
J. PETER PAGANELLI
________________________________________
JOHN F. COUTURE
________________________________________
JAMES OLDHAM
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA, on behalf of Prudential
Property Investment Separate Account II
By: ____________________________________
Name:
Title:
ELEANOR MENDELL, AS TRUSTEE OF THE
GARY MENDELL FAMILY TRUST
By: ____________________________________
Name: Eleanor Mendell
Title: Trustee
________________________________________
GARY MENDELL
<PAGE> 65
________________________________________
ELLEN-JO MENDELL
________________________________________
STEPHEN MENDELL
________________________________________
JUDITH K. RUSHMORE
________________________________________
MURRAY DOW II
WESTPORT HOSPITALITY, INC.
By: ____________________________________
Name:
Title:
ZAPCO HOLDINGS, INC.
By: ____________________________________
Name:
Title:
ZAPCO HOLDINGS, INC. DEFERRED
COMPENSATION PLAN TRUST
By: ____________________________________
Name:
Title: Trustee
________________________________________
ORNA L. SHULMAN
________________________________________
ARTHUR GREEN
<PAGE> 66
________________________________________
MICHAEL HALL
________________________________________
MARK ROSINSKY
________________________________________
RANDI ROSINSKY
________________________________________
JOHN DAILY
________________________________________
FELIX CACCIATO
________________________________________
THOMAS CLEARWATER
________________________________________
HARVEY MOORE
________________________________________
TRACY DRISCOLL
CLASS "A" PARTNERS
Signature Blocks
________________________________________
GARY MENDELL
________________________________________
STEPHEN MENDELL
________________________________________
JUDITH K. RUSHMORE
<PAGE> 67
________________________________________
MURRAY DOW II
WESTPORT HOSPITALITY, INC.
By: ____________________________________
Name:
Title:
<PAGE> 68
EXHIBIT A
LIST OF PARTNERS, PERCENTAGE INTERESTS AND UNITS
Date: As of __________, 1997
<TABLE>
<CAPTION>
Name of Partner Percentage Interest Units
--------------- ------------------- -----
<S> <C> <C>
Starwood Lodging Corporation 72.4510% 40,078,698
Ziff Investors Partnership, LP II 4.0850% 2,259,732
Firebird Consolidated Partners, LP 2.2069% 1,220,820
Starwood Opportunity Fund II, LP 1.7047% 943,000
Montrose Corporation 1.3435% 743,226
Harveywood Hotel Investors, LP 1.1756% 650,338
Star Investors, G.P. 1.0748% 594,582
Barry S. Sternlicht 0.6275% 347,104
Apollo Real Estate Investment Fund, LP 0.5334% 295,078
Starwood Hotel Investors II, LP 0.5212% 288,334
Meridian Investment Group 0.4798% 265,422
Burden Direct Investment Fund I, LP 0.3915% 216,564
Jack Nash 0.2150% 118,916
Brainard Holdings, Inc. 0.1578% 87,310
JDE Revocable Trust 0.1511% 83,596
Max C. Chapman 0.1382% 76,430
Rick Kleeman 0.0997% 55,170
Philadelphia HSR, LP 0.0985% 54,461
The Barry S. Sternlicht Family Spray Trust I 0.0970% 53,672
The Barry S. Sternlicht Family Spray Trust II 0.0970% 53,672
The Barry S. Sternlicht Family Spray Trust III 0.0970% 53,672
Eugene A. Gorab 0.0899% 49,746
</TABLE>
<PAGE> 69
<TABLE>
<S> <C> <C>
Madison F. Grose 0.0777% 43,004
Jamie R. Gates 0.0729% 40,328
Carly Simon 0.0568% 31,434
Hospitality Partners 0.0550% 30,414
The Nash Family Partnership 0.0537% 29,730
The Madison F. Grose
Irrevocable Insurance Trust 0.0501% 27,726
Steven R. Goldman 0.0409% 22,616
Alan Schwartz 0.0403% 22,298
Jay Sugarman 0.0383% 21,212
Philadelphia HIR, LP 0.0328% 18,140
John Z. Kukral 0.0317% 17,550
Jerome C. Silvey 0.0299% 16,516
Geoffrey T. Boisi 0.0274% 15,150
Michael Mueller 0.0270% 14,932
Clate Korsant 0.0269% 14,866
Justin Korsant 0.0269% 14,866
James G. Babb, III 0.0262% 14,508
Edward J. Rohling 0.0199% 11,011
Lambster Partners Limited Partnership 0.0153% 8,486
Gregory Beer 0.0134% 7,434
Jeff Dishner 0.0064% 3,542
Geoff Beer 0.0042% 2,306
Charles E. Mueller, MD 0.0025% 1,394
Lowell D. Kraff 0.0022% 1,190
Stephen Fiore 0.0016% 900
Jennifer Albero 0.0016% 882
James A. Kleeman, MD, PC 0.0014% 774
</TABLE>
<PAGE> 70
<TABLE>
<S> <C> <C>
Ellis F. Rinaldi 0.0011% 634
J. Peter Paganelli 0.0009% 494
John F. Couture 0.0007% 378
James Oldham 0.0004% 224
The Prudential Insurance Company of America,
on behalf of Prudential Property Investment
Separate Account II 8.1872% 4,529,007
Eleanor Mendell, as Trustee of the Gary Mendell
Family Trust 0.9143% 505,778
Gary Mendell 0.0652% 36,078
Ellen-Jo Mendell 0.9429% 521,617
Stephen Mendell 0.0366% 20,239
Judith K. Rushmore 0.4637% 256,511
Murray Dow II 0.0550% 30,415
Wesport Hospitality, Inc. 0.0193% 10,656
Zapco Holdings, Inc. 0.5989% 331,291
Zapco Holdings, Inc. Deferred Compensation
Plan Trust 0.0328% 18,126
Orna L. Shulman 0.0379% 20,962
Arthur Green 0.0045% 2,505
Michael Hall 0.0024% 1,321
Mark Rosinsky 0.0023% 1,253
Randi Rosinsky 0.0023% 1,252
John Daily 0.0039% 2,161
Felix Cacciato 0.0068% 3,767
Thomas Clearwater 0.0009% 497
Harvey Moore 0.0004% 224
Tracy Driscoll 0.0004% 224
--------- ----------
TOTAL 100.0000% 55,318,336
</TABLE>
<PAGE> 71
EXHIBIT A-1
LIST OF CLASS A LIMITED PARTNERS, PERCENTAGE INTEREST AND UNITS
Date: As of __________, 1997
<TABLE>
<CAPTION>
Name of Partner Percentage Interest Units
--------------- ------------------- -----
<S> <C> <C>
Gary Mendell 36.8623% 93,756
Stephen Mendell 36.8623% 93,756
Judith K. Rushmore 16.5746% 42,156
Murray Dow II 1.3753% 3,498
Westport Hospitality, Inc. 8.3254% 21,175
-------- -------
TOTAL 100.0000% 254,341
</TABLE>
<PAGE> 72
EXHIBIT B
Notice Address of Partners
<TABLE>
<CAPTION>
Name of Partner Notice Address
- --------------- --------------
<S> <C>
Starwood Lodging Corporation 2231 East Camelback Road
Suite 400
Phoenix, Arizona 85016
Attn: General Counsel
Ziff Investors Partnership, LP II 153 East 53rd Street
New York, NY 10022
Attn. Mr. Dan Stern
Firebird Consolidated Partners, LP c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, Connecticut 06830
Attention: Madison F. Grose, Esq.
Starwood Opportunity Fund II, LP c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, Connecticut 06830
Attention: Madison F. Grose, Esq.
Montrose Corporation c/o The Walt Disney Corporation
500 S. Buena Vista
Team Disney 301J
Burbank, CA 91521
Attn: Mr. Mark Rozells
Harveywood Hotel Investors, LP c/o Starwood Capital Group, General
Partner
Three Pickwick Plaza, Suite 250
Greenwich, Connecticut 06830
Attention: Jerome C. Silvey
Star Investors, G.P. c/o Penguin Group, L.P.
200 West Madison Avenue, 38th Floor
Chicago, IL 60606
Attn: Mr, Kevin Poorman
Barry S. Sternlicht c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
</TABLE>
<PAGE> 73
<TABLE>
<S> <C>
Apollo Real Estate Investment Fund. LP c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Attn: Madison F. Grose
Starwood Hotel Investors II, LP c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Attn: Madison F. Grose, Esq.
Meridian Investment Group c/o Penguin Group, L.P.
200 West Madison Avenue
Chicago, IL 60606
Attn: Mr, Kevin Poorman
Burden Direct Investment Fund I, LP 10 East 53rd Street
New York, NY 10022
Attn: Mr. Jeff Weber
Jack Nash c/o Odyssey Partners, L.P.
31 West 52nd Street
New York, NY 10019
Brainard Holdings, Inc. c/o Lake Asset Management, Inc.
499 Park Avenue, 24th Floor
New York, NY 10022
Attn: Mr. Nicholas Berggruen
JDE Revocable Trust c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Attn: Madison F. Grose
Max C. Chapman c/o Normura Securities
2 World Financial Center, 22nd Floor
New York, NY 10281-1198
Rick Kleeman c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Philadelphia HSR, LP c/o The Beacon Companies
50 Rowes Wharf
Boston, MA 02110
Attn: Edward N. Sidman
</TABLE>
<PAGE> 74
<TABLE>
<S> <C>
The Barry S. Sternlicht Family Spray Trust I c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
The Barry S. Sternlicht Family Spray Trust II c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
The Barry S. Sternlicht Family Spray Trust III c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Eugene A. Gorab c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Madison F. Grose c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Jamie R. Gates c/o Texas Pacific Group
600 California Street
San Francisco, CA 94108
Carly Simon c/o Ms. Arlene Graff
Star & Co.
350 Park Avenue
New York, NY 10022
Hospitality Partners 7101 Wisconsin Avenue
Bethesda, MD 20814
The Nash Family Partnership c/o Odyssey Partners, L.P.
31 West 52nd Street
New York, NY 10019
Attn: Mr. Joshua Nash
The Madison F. Grose Irrevocable Insurance Trust c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Steven R. Goldman c/o Starwood Lodging Trust
2231 East Camelback Road
Phoenix, AZ 85016
Alan Schwartz c/o Bear Sterns
245 Park Avenue
New York, NY 10167
</TABLE>
<PAGE> 75
<TABLE>
<S> <C>
Jay Sugarman c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Philadelphia HIR, LP c/o The Beacon Companies
50 Rowes Wharf
Boston, MA 02110
Attn: Edward N. Sidman
John Z. Kukral c/o The Blackstone Group
345 Park Avenue
New York, NY 10154
Jerome C. Silvey c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Geoffrey T. Boisi c/o Beacon Group
375 Park Avenue
New York, NY 10152
Michael Mueller c/o Starwood Lodging Trust
2231 East Camelback Road
Phoenix, AZ 85016
Clate Korsant c/o Amelia Holdings
289 Greenwich Avenue
Greenwich, CT 06830
Attn: Ms. Dot Parker
Justin Korsant c/o Amelia Holdings
289 Greenwich Avenue
Greenwich, CT 06830
Attn: Ms. Dott Parker
James G Babb, III c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Edward J. Rohling c/o Bristol Hotel Management Operations
1428 Midway Road
Dallas, TX 75244
Attn: Jeff Mayer
</TABLE>
<PAGE> 76
<TABLE>
<S> <C>
Lambster Partners Limited Partnership c/o Walton Street Capital, L.L.C.
900 N. Michigan Avenue, 19th Floor
Chicago, IL 60611
Mr. Neil Bluhm
Gregory Beer c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Jeff Dishner c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Geoff Beer c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Charles E. Mueller, MD 11306 Roosevelt Road
Saginaw, MI 48603
Lowell D. Kraff c/o Lexer Capital, Ltd.
333 West Wacker Drive, Suite 2070
Chicago, IL 60606
Stephen Fiore c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Jennifer Albero c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
James A. Kleeman, MD, PC c/o Starwood Capital Group
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Attn: Madison F. Grose
Ellis F. Rinaldi c/o Rinaldi & Associates
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
J. Peter Paganelli c/o Starwood Asset Management
Three Pickwick Plaza, 3rd Floor
Greenwich, CT 06830
</TABLE>
<PAGE> 77
<TABLE>
<S> <C>
John F. Couture c/o La Salle Partners
220 East 42nd Street, 27th Floor
New York, NY 10017
James Oldman c/o Starwood Asset Management
Three Pickwick Plaza, 3rd Floor
Greenwich, CT 06830
The Prudential Insurance Company of America, c/o Prudential Real Estate Investors
on behalf of Prudential Property Investment 8 Campus Drive
Separate Account II Parsippany, NJ 07054
Attn: Mr. Roger S. Pratt
Eleanor Mendell, as Trustee of the Gary Mendell c/o Eleanor Mendell, Trustee
Family Trust 4 The Circle
Easton, CT 06612
Gary Mendell 20 Morning Glory Drive
Easton, CT 06612
Ellen-Jo Mendell 25 Kent Lane
Trumbull, CT 06611
Stephen Mendell 25 Kent Lane
Trumbull, CT 06611
Judith K. Rushmore 22 Sheperd Lane
Roslyn Heights, NY 11577
Murray L. Dow II 49 Ridge Lane
Shelton, CT 06484
Westport Hospitality, Inc. 55 Greens Farms Road
Westport, CT 06880
Zapco Holdings, Inc. Deferred Compensation c/o Orna Shulman
Plan Trust Intertech Corporation
1301 Pennsylvania Avenue, N.W.
Suite 700
Washington, DC 20004
Orna L. Shulman 800 5th Avenue
New York, NY 10021
Arthur C. Green 57 Wilton Crest
Wilton, CT 06484
</TABLE>
<PAGE> 78
<TABLE>
<S> <C>
Michael D. Hall 326 Roycroft Street
Long Beach, CA 90814
Mark J. Rosinsky 34 Shadow Lane
Great Neck, NY 11021
Randi L. Rosinsky 34 Shadow Lane
Great Neck, NY 11021
John Daily 10 Cahill Road
Monroe, CT 06468
Felix J. Caccioto, Jr. 53 Mimosa Court
Ridgefield, CT 06877
Thomas Clearwater 39 Southwood Drive
New Canaan, CT 06840
Harvey Moore 615 Stockley Garden
Norfolk, VA 23507
Tracy Driscoll 23 Todd Hill Road
Poughkeepsie, NY 12603
</TABLE>
<PAGE> 79
EXHIBIT B
Notice Addresses of Class A Partners
Name of Partner Notice Address
- --------------- --------------
Gary Mendell 20 Morning Glory Drive
Easton, CT 06612
Stephen Mendell 25 Kent Lane
Trumbull, CT 06611
Judith K. Rushmore 22 Sheperd Lane
Roslyn Heights, NY 11577
Murray L. Dow II 49 Ridge Lane
Shelton, CT 06484
Westport Hospitality, Inc. 55 Greens Farms Road
Westport, CT 06880
<PAGE> 80
CERTIFICATE OF ADMISSION
OF SLC OPERATING LIMITED PARTNERSHIP
THIS CERTIFICATE OF ADMISSION OF SLC OPERATING LIMITED
PARTNERSHIP ("Certificate of Admission") is made effective January 2, 1998, by
Starwood Lodging Corporation, a Maryland corporation, as the General Partner of
SLC Operating Limited Partnership, a Delaware limited partnership
("Partnership"), which was formed pursuant to the provisions of that certain
Limited Partnership Agreement of the Partnership dated as of December 15, 1994
and amended and restated as of June 29, 1995 and again as of November 14, 1997
and subsequently amended as of January 1, 1998 (as such agreement may hereafter
be amended from time to time, "Partnership Agreement"). All capitalized terms
not defined herein shall have the same meaning set forth in the Partnership
Agreement.
R E C I T A L S
WHEREAS, as of September 8, 1997, that certain Transaction
Agreement ("Transaction Agreement") was entered into among the General Partner,
the Partnership, SLT, the Realty Partnership, Westin Hotels & Resorts Worldwide,
Inc. ("Westin Worldwide"), a Delaware corporation, W&S Atlanta Corp.
("Atlanta"), a Delaware corporation, Westin St. John Hotel Company, Inc. ("St.
John"), a U.S. Virgin Islands corporation, and the other parties thereto;
WHEREAS, pursuant to the Transaction Agreement, it is
contemplated that, among other things, the Persons whose names appear below the
General Partner's name on the signature pages of this Certificate of Admission
(each a "Contributing Party" and, collectively, the "Contributing Parties") will
contribute to the Partnership certain of the outstanding shares of capital stock
of Atlanta and St. John in exchange for Class B Units described below;
WHEREAS, pursuant to Section 4.1(e) of the Partnership
Agreement, the General Partner is authorized to cause the Partnership to issue
additional Partnership Interests in one or more classes or one or more series of
any of such classes, with such designations, preferences and relative,
participating, optional or other special rights, powers and duties, including
rights, powers and duties senior to the then-existing Partnership Interests and
Units, as shall be determined by the General Partner in its sole and absolute
discretion; and
WHEREAS, pursuant to Section 11.1(b)(3) and (4) of the
Partnership Agreement, the General Partner is authorized to amend the
Partnership Agreement without the Consent of the Limited Partners, and in
accordance with Section 11.1(b) of the Partnership Agreement, the Limited
Partners have received five Business Days' notice of this Certificate of
Admission.
NOW THEREFORE, the undersigned certifies that all appropriate
actions have been
- 1 -
<PAGE> 81
taken to admit the Contributing Parties to the Partnership upon the terms and
conditions set forth below:
SECTION 1. Each Contributing Party is hereby admitted as a Limited
Partner of the Partnership and shall receive, inter alia, its share of a maximum
total of 393,156 Class B Units(1) to be issued pursuant to the Transaction
Agreement. The number of Class B Units received by each Contributing Party is
set forth next to each such Contributing Party's signature block below. The
General Partner hereby consents to each such admission. If the number of Class B
Units to be received by any Contributing Party shall be adjusted after the date
hereof in accordance with the terms of or in connection with the Transaction
Agreement, the General Partner shall amend this Certificate of Admission to
reflect such adjustment.
SECTION 2. Each Contributing Party has agreed to comply with and to be
bound by the terms and conditions of the Partnership Agreement. Each
Contributing Party has represented that, to the best of its knowledge, its
admission as a Limited Partner does not violate any of the restrictions set
forth in Section 9.3 of the Partnership Agreement.
SECTION 3. The Partnership Agreement is hereby amended such that each
and every reference to the "Limited Partners" or to a "Limited Partner" includes
each Contributing Party.
SECTION 4. Exhibit A to the Partnership Agreement is hereby amended to
reflect this Certificate of Admission.
SECTION 5. Exhibit B to the Partnership Agreement is hereby amended to
reflect this Certificate of Admission. The notice address of each Contributing
Party is set forth on Exhibit A to this Certificate of Admission.
SECTION 6. Section 1.1 of the Partnership Agreement is hereby amended
by the addition of the following defined terms:
"Class B Certificate of Admission" shall mean the
Certificate of Admission of SLC Operating Limited Partnership dated as
of January 2, 1998 that authorizes the issuance of Class B Units.
"Class B Limited Partners" shall mean those Persons
admitted to the Partnership pursuant to the Class B Certificate of
Admission, and any Person who, at the time of reference thereto, is a
Class B Limited Partner of the Partnership.
"Class B Liquidation Preference Distribution" shall
mean, with respect to a Class B Unit, an amount equal to the "fair
market value" of one RP Ordinary Unit,
- --------
(1) The exact number of Class B Units to be issued to each Contributing Party
will be determined on or about December 29, 1997 in a manner consistent with the
Transaction Agreement.
- 2 -
<PAGE> 82
which shall be payable only in the event of the dissolution and
liquidation of the Partnership not preceded or accompanied by a
liquidation and dissolution of the Realty Partnership. Such fair market
value shall be determined in good faith by the General Partner as of
the effective date of such liquidation and dissolution or, if no such
effective date applies, as of the date of the first liquidating
distribution pursuant to Section 8.2. In the event of any change in (i)
the nature or amount of securities constituting a unit of Paired Shares
under the pairing agreement between the General Partner and SLT, (ii)
the correspondence of the number of non-preferred Units in the
Partnership to the number of Paired Shares outstanding or (iii) the
correspondence of the number of RP Ordinary Units to the number of
Paired Shares outstanding, the amount of the Class B Liquidation
Preference that shall accrue with respect to each Class B Unit as a
function of the fair market of each RP Ordinary Unit shall be equitably
adjusted.
"Class B OP Special Distribution" shall mean, with
respect to a Class B Unit, an amount equal to the sum, in cash, of the
fair market value of all operating and liquidating distributions by the
Realty Partnership with respect to RP Ordinary Units on or after
January 2, 1998 (whether pursuant to Section 6.2 or 8.2 of the Realty
Agreement) in an amount per Class B Unit equal to the amount so
distributed in respect of each RP Ordinary Unit. In the event of any
change in (i) the nature or amount of securities constituting a unit of
Paired Shares under the pairing agreement between the General Partner
and SLT, (ii) the correspondence of the number of non-preferred Units
in the Partnership to the number of Paired Shares outstanding or (iii)
the correspondence of the number of RP Ordinary Units to the number of
Paired Shares outstanding, the amount of the Class B OP Special
Distribution that shall accrue with respect to each Class B Unit as a
function of the amount of the corresponding distribution on the RP
Ordinary Units shall be equitably adjusted. Class B OP Special
Distributions may only be made with respect to Class B Units and shall
be due at the same time as such operating or liquidating distributions
are made by the Realty Partnership.
"Class B Units" shall mean, collectively, the
interests of the Class B Limited Partners in capital, allocations of
Net Income, Net Loss and distributions, including Class B OP Special
Distributions and Class B Liquidation Preference Distributions, if any.
The number of Class B Units owned by each Class B Limited Partner is
set forth on Exhibit A hereto.
"RP Ordinary Units" shall mean units of the Realty
Partnership other than units entitled to receive priority distributions
under the Realty Agreement such as the Class A Units (as such term is
defined in the Realty Agreement).
"Units" shall have the meaning set forth in Section
4.1(c) hereof, and such terms shall include Class A Units and Class B
Units except where the context otherwise requires.
- 3 -
<PAGE> 83
SECTION 7. The definition of "Special Class A Distribution" in Section
1.1 of the Partnership Agreement is hereby amended and restated in its entirety
as follows:
"Special Class A Distribution" shall mean, with respect to a
Class A Unit, the fair market value, in cash, of any operating or
liquidating distribution in cash or other property made by the Realty
Partnership with respect to an RP Ordinary Unit. Special Class A
Distributions may only be made with respect to Class A Units and shall
be due at the same time as such operating or liquidating distributions
are made by the Realty Partnership.
SECTION 8. Section 6.1(a) of the Partnership Agreement is hereby
amended and restated in its entirety as follows:
(a) Allocation of Net Income and Net Loss.
(i) Net Income. Except as
otherwise provided herein, Net Income for any fiscal year or other
applicable period shall be allocated in the following order and
priority:
(A) first, to the
General Partner, until the cumulative Net Income allocated pursuant to
this Section 6.1(a)(i)(A) for the current and all prior periods equals
the cumulative Net Loss allocated pursuant to Section 6.1(a)(ii)(E) for
all prior periods;
(B) second, to the
holders of Units, including Class A Units and Class B Units, to the
extent of, in proportion to and in reverse order of their prior
allocations of Net Loss pursuant to Section 6.1(a)(ii)(D) until the
cumulative Net Income allocated pursuant to this Section 6.1(a)(i)(B)
for the current and all prior periods equals the cumulative Net Loss
allocated to such holders pursuant to Section 6.1(a)(ii)(D) for all
prior periods;
(C) third, to the holders
of Class A Units until each holder of Class A Units has been allocated
Net Income pursuant to this Section 6.1(a)(i)(C) in an amount equal to
its Class A Preferred Return for the current and all prior periods;
(D) fourth, to the holders
of Class A Units until each holder of Class A Units has been allocated
Net Income pursuant to this Section 6.1(a)(i)(D) in an amount equal to
the Net Income (as defined in Section 1.1 of the Realty Agreement)
allocated to an RP Ordinary Unit for all prior periods (or portions
thereof) from and after February 14, 1997 pursuant to Section
6.1(a)(i)(E) and (F) of the Realty Agreement, multiplied by the number
of Class A Units held by such holder;
- 4 -
<PAGE> 84
(E) fifth, to the holders
of Class B Units until each holder of Class B Units has been allocated
Net Income pursuant to this Section 6.1(a)(i)(E) in an amount equal to
its accrued Class B OP Special Distributions, if any;
(F) sixth, to the holders
of Class B Units until each holder of Class B Units has been allocated
Net Income pursuant to this Section 6.1(a)(i)(F) in an amount equal to
the excess of its accrued Class B Liquidation Preference Distribution,
if any, over the portion of such holder's initial Capital Account
balance allocable to the Class B Liquidation Preference;
(G) seventh, to the extent
the Partnership has made distributions pursuant to Section 6.2(d) to
the holders of Units, including Class A Units and Class B Units, in
accordance with and in proportion to distributions made under Section
6.2(d); and
(H) thereafter, to the
holders of Units, including Class A Units and Class B Units, in
accordance with and in proportion to their respective holdings of
Units.
(ii) Net Loss. Except as
otherwise provided herein, Net Loss of the Partnership for each fiscal
year or other applicable period shall be allocated in the following
order and priority;
(A) first, to the holders
of Units, including Class A Units and Class B Units, to the extent of,
in proportion to, and in the reverse order of, Net Income previously
allocated to the Partners pursuant to Section 6.1(a)(i)(H), until the
cumulative Net Loss allocated pursuant to this Section 6.1(a)(ii)(A)
for the current and all prior periods equals the cumulative Net Income
allocated pursuant to Section 6.1(a)(i)(H) for all prior periods;
(B) second, to the holders
of Class B Units to the extent of and in proportion to their prior
allocations of Net Income pursuant to Section 6.1(a)(i)(E) and (F)
until the cumulative Net Loss allocated pursuant to this Section
6.1(a)(ii)(B) for the current and all prior periods equals the
cumulative Net Income allocated to such holders pursuant to Section
6.1(a)(i)(E) and (F) for all prior periods;
(C) third, to the holders
of Class A Units to the extent of and in proportion to their prior
allocations of Net Income pursuant to Section 6.1(a)(i)(C) and (D)
until the cumulative Net Loss allocated pursuant to this Section
6.1(a)(ii)(C) for the current and all prior periods equals the
cumulative Net Income allocated to such holders pursuant to Section
6.1(a)(i)(C) and (D) for all prior periods;
- 5 -
<PAGE> 85
(D) fourth, to the holders
of Units, including Class A Units and Class B Units, in accordance with
their respective holdings of Units, provided that Net Losses shall not
be allocated pursuant to this Section 6.1(a)(ii)(C) to the extent such
allocations would cause any Limited Partner to have an Adjusted Capital
Account Deficit as of the end of the fiscal year to which such Net Loss
relates; and
(E) the balance, if any, to
the General Partner.
SECTION 9. Section 6.2 of the Partnership Agreement is hereby amended
and restated in its entirety as follows:
6.2 Distributions. The General Partner shall cause
the Partnership to distribute all, or such portion as the General
Partner may in its reasonable discretion determine, of Net Cash Flow to
the holders of applicable Units, including Class A Units and Class B
Units, who are holders on the Record Date with respect to such
distribution. Distributions of Net Cash Flow shall be made in the
following priority:
(a) first, to the holders of Class A
Units, pro rata in accordance with holders' ownership of Class A Units,
in an amount equal to the excess, if any, of (i)(x) the cumulative
Class A Preferred Return from February 14, 1997 to the end of such
fiscal year or other applicable period ending on the Partnership Record
Date, over (y) the sum of all prior distributions to the holders of
Class A Units pursuant to this Section 6.2(a)(i), and then (ii)(x) the
cumulative Special Class A Distributions from February 14, 1997 to the
end of such fiscal year or other applicable period ending on the
Partnership Record Date, over (y) the sum of all prior distributions to
the holders of Class A Units pursuant to this Section 6.2(a)(ii),
treating the distributed amounts as paying the oldest amounts due
first;
(b) second, to the holders of Class B
Units, pro rata in accordance with holders' ownership of Class B Units,
in an amount equal to the excess, if any, of (i) the total of all Class
B OP Special Distributions that have accrued as of the date of payment
of such distribution, less (ii) the total of all previous distributions
to the holders of Class B Units in respect of such Class B OP Special
Distributions pursuant to Section 8.2(a)(v), if any, and this Section
6.2(b);
(c) third, except as otherwise provided
in Sections 6.2(d), to the holders of Units, including Class A Units
and Class B Units, who are holders on the Partnership Record Date with
respect to such distribution pro rata in accordance with the holders'
ownership of Units, including Class A Units and Class B Units; and
(d) when the General Partner declares a
distribution to holders of Shares and the amount otherwise determined
to be distributable to each holder of a Unit, including Class A Units
and Class B Units, under Section 6.2(c) results in an
- 6 -
<PAGE> 86
amount that is less than the amount distributable to each holder of a
Share (on a per Share to per Unit basis), the General Partner shall
cause the Partnership to distribute sufficient amounts to holders of
Units, including Class A Units and Class B Units, as of the Partnership
Record Date so that such holders of Units, including Class A Units and
Class B Units, will receive an amount per Unit equal to the related
distributions to holders of Shares (on a per Share to per Unit basis).
The General Partner shall accomplish this by reducing the amounts
otherwise distributable to it under Section 6.2(c) and increasing the
amount otherwise distributable to holders of Units, including Class A
Units and Class B Units, under Section 6.2(c) and, to the extent
necessary, by contributing additional capital to the Partnership.
SECTION 10. Section 8.2(a) of the Partnership Agreement is hereby
amended and restated in its entirety as follows:
8.2 Distributions on Dissolution.
(a) In the event of the dissolution and liquidation
of the Partnership for any reason, the assets of the Partnership shall
be liquidated for distribution in the following rank and order:
(i) payment of creditors of the Partnership,
including creditors who are Partners or former Partners;
(ii) establishment of reserves as provided by the
Liquidating Trustee to provide for contingent liabilities, if any;
(iii) to the holders of Class A Units, pro rata in
accordance with the holders' ownership of Class A Units, in an amount
equal to the excess, if any, of (x) the cumulative distributions under
Section 8.2(a) of the Realty Agreement for an equivalent number of RP
Ordinary Units in the Realty Partnership from February 14, 1997 to the
date on which a distribution under this Section 8.2(a) is made, over
(y) the sum of all prior distributions to the holders of Class A Units
pursuant to this Section 8.2(a)(iii);
(iv) to the holders of Class B Units, pro rata in
accordance with the holders' ownership of Class B Units, in an amount
equal to the excess, if any, of (x) the Class B Liquidation Preference
Distribution, over (y) the sum of all prior distributions to holders of
Class B Units pursuant to this Section 8.2(a)(iv);
(v) to the holders of Class B Units, pro rata in
accordance with the holders' ownership of Class B Units, in an amount
equal to the excess, if any, of (x) the total of all Class B OP Special
Distributions that have accrued as of the date of payment of such
liquidating distribution, less (y) the total of all previous
distributions to the holders of Class B Units in respect of such Class
B OP Special Distributions pursuant to Section 6.2(a) and this Section
8.2(a)(iv); and
- 7 -
<PAGE> 87
(vi) to the holders of Units, including Class A Units
and Class B Units, in accordance with their respective holdings of
Units.
Whenever the Liquidating Trustee reasonably determines that any
reserves established pursuant to paragraph (ii) above are in excess of
the reasonable requirements of the Partnership, the amount determined
to be excess shall be distributed to the Partners in accordance with
the provisions of this Section 8.2(a). No Partner or holder of Units
shall be liable to any other Partner or holder of Units for a deficit
balance in its Capital Account.
SECTION 11. As provided for in this Certificate of Admission and as
otherwise necessary or appropriate to reflect the admission of the Contributing
Parties to the Partnership, the Partnership Agreement is hereby amended
effective as of the date first written above. Except as otherwise provided in
this Certificate of Admission, each and every provision of the Partnership
Agreement remains in full force and effect.
IN WITNESS WHEREOF, the party hereto has executed this
Certificate of Admission or caused this Certificate of Admission to be executed
on its behalf as of the date first above written.
STARWOOD LODGING CORPORATION, a
Maryland corporation
By: /s/ Alan M. Schnaid
---------------------------
Name: Alan M. Schnaid
Title: Vice President and
Corporate Controller
IN WITNESS WHEREOF, the Contributing Parties hereby agree to
and acknowledge the terms of this Certificate of Admission.
77,825 Units WHWE L.L.C.
By: Whitehall Street Real Estate
Limited Partnership V,
Member and Manager
By:
- 8 -
<PAGE> 88
By:
By: /s/ Jonathan Langer
---------------------------------
Name: Jonathan Langer
Title: Attorney-in-fact
147,012 Units Woodstar Investor Partnership
By: Marswood Investors, L.P.,
General Partner
By: Starwood Capital Group, L.P.,
General Partner
By: BSS Capital Partners, L.P.,
General Partner
By: Sternlicht Holdings II, Inc.,
General Partner
By: /s/ Ronald C. Brown
----------------------------------
Name: Ronald C. Brown
Title: Attorney-in-fact
87,904 Units Nomura Asset Capital Corporation
By: /s/ Daniel S. Abrams
----------------------------------
Name: Daniel S. Abrams
Title: Managing Director
- 9 -
<PAGE> 89
- 10 -
<PAGE> 90
EXHIBIT A
1) If to WHWE L.L.C., to:
85 Broad Street
New York, New York 10004
Attention: Stuart M. Rothenberg
Telecopier: (212) 357-5505
2) If to Woodstar Investor Partnership, to:
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Attention: Barry S. Sternlicht
Telecopier: (203) 861-2101
3) If to Nomura Asset Capital Corporation, to:
Two World Financial Center, Building B
New York, NY 10281
Attention: Daniel S. Abrams
Telecopier: (212) 667-1666
- 11 -
<PAGE> 91
FIRST AMENDMENT TO SECOND AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT OF
SLC OPERATING LIMITED PARTNERSHIP
THIS FIRST AMENDMENT TO THE SECOND AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT OF SLC OPERATING LIMITED PARTNERSHIP ("Amendment")
is made and entered into effective as of January 1, 1998, by and among Starwood
Lodging Corporation, a Maryland corporation, as the General Partner, and the
Limited Partners of SLC Operating Limited Partnership, a Delaware limited
partnership ("Operating Partnership"), which was formed pursuant to the
provisions of that certain Limited Partnership Agreement of the Operating
Partnership dated as of December 15, 1994, and amended and restated as of June
29, 1995 and again as of November 14, 1997 ("Operating Partnership Agreement").
All capitalized terms not defined herein shall have the same meaning set forth
in the Operating Partnership Agreement.
R E C I T A L S
WHEREAS, as of September 8, 1997, that certain Transaction
Agreement ("Transaction Agreement") was entered into by and among the General
Partner, the Realty Partnership, SLT, the Operating Partnership, Westin Hotels &
Resorts Worldwide, Inc. ("Westin Worldwide"), a Delaware corporation, and
others;
WHEREAS, as of November 12, 1997, the Amended and Restated
Agreement and Plan of Merger ("Merger Agreement") was entered into by and among
the General Partner, Chess Acquisition Corp., a Nevada corporation,, SLT and ITT
Corporation ("ITT"), a Nevada corporation;
WHEREAS, pursuant to the Transaction Agreement and Merger
Agreement, it is contemplated that, among other things, the General Partner will
directly hold certain assets previously held by Westin Worldwide and the stock
of ITT;
WHEREAS, the General Partner believes that it may enter into
transactions in the future that may also result in it owning material assets or
entering into or conducting a business ("Non-Operating Partnership Business")
other than the ownership, acquisition and disposition of Partnership Interests
as the General Partner or Limited Partner and the management of the business of
the Partnership;
WHEREAS, Section 7.3 of the Operating Partnership Agreement
provides that if the General Partner directly or indirectly enters into or
conducts Non-Operating Partnership Businesses, the General Partner shall make
arrangements that are reasonably necessary to prevent such Non-Operating
Partnership Businesses from having a material adverse impact on the Limited
Partners and that assure that the Limited Partners share in the economic
benefits of such Non- Operating Partnership Businesses in a fair and equitable
manner;
<PAGE> 92
WHEREAS, the General Partner desires to amend the Operating
Partnership Agreement as set forth in this Amendment to ensure that any and all
Non-Operating Partnership Businesses it conducts will not have a material
adverse impact on the Limited Partners and that any economic benefits related to
such Non-Operating Partnership Businesses will be shared with Limited Partners
in a fair and equitable manner; and
WHEREAS, the Limited Partners have been informed and do hereby
unconditionally consent to such amendments;
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt, adequacy and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:
SECTION 1. Effective as of the date first above written, Section 6.1(a)
is hereby amended and restated in its entirety as follows:
6.1 Allocations. The Net Income, Net Loss and other
Partnership items shall be allocated pursuant to the provisions of this
Section 6.1 hereto.
(a) Allocation of Net Income and Net
Loss.
(i) Net Income. Except as
otherwise provided herein, Net Income for any fiscal year or other
applicable period shall be allocated in the following order and
priority:
(A) first, to the
General Partner, until the cumulative Net Income allocated pursuant to
this Section 6.1(a)(i)(A) for the current and all prior periods equals
the cumulative Net Loss allocated pursuant to Section 6.1(a)(ii)(D) for
all prior periods;
(B) second, to the
holders of Units, including Class A Units, to the extent of, in
proportion to and in reverse order of their prior allocations of Net
Loss pursuant to Section 6.1(a)(ii)(C) until the cumulative Net Income
allocated pursuant to this Section 6.1(a)(i)(B) for the current and all
prior periods equals the cumulative Net Loss allocated to such holders
pursuant to Section 6.1(a)(ii)(C) for all prior periods;
(C) third, to the holders
of Class A Units until each holder of Class A Units has been allocated
Net Income pursuant to this Section 6.1(a)(i)(C) in an amount equal to
its Class A Preferred Return for the current and all prior periods;
- 2 -
<PAGE> 93
(D) fourth, to the holders
of Class A Units until each holder of Class A Units has been allocated
Net Income pursuant to this Section 6.1(a)(i)(D) in an amount equal to
the Net Income (as defined in Article I of the Realty Agreement)
allocated to a Unit of the Realty Partnership for all prior periods (or
portions thereof) from and after February 14, 1997 pursuant to Section
6.1(a)(i)(B) and (C) of the Realty Agreement, multiplied by the number
of Class A Units held by such holder;
(E) fifth, to the extent
the Partnership has made distributions pursuant to Section 6.2(c), to
the holders of Units, in accordance with and in proportion to
distributions made under Section 6.2(c); and
(F) thereafter, to the
holders of Units, including Class A Units, in accordance with and in
proportion to their respective holdings of Units.
(ii) Net Loss. Except as
otherwise provided herein, Net Loss of the Partnership for each fiscal
year or other applicable period shall be allocated in the following
order and priority;
(A) first, to the
holders of Units, including Class A Units, to the extent of, in
proportion to, and in the reverse order of, Net Income previously
allocated to the Partners pursuant to Section 6.1(a)(i)(F), until the
cumulative Net Loss allocated pursuant to this Section 6.1(a)(ii)(A)
for the current and all prior periods equals the cumulative Net Income
allocated pursuant to Section 6.1(a)(i)(F) for all prior periods;
(B) second, to the
holders of Class A Units to the extent of and in proportion to their
prior allocations of Net Income pursuant to Section 6.1(a)(i)(C) and
(D) until the cumulative Net Loss allocated pursuant to this Section
6.1(a)(ii)(B) for the current and all prior periods equals the
cumulative Net Income allocated to such holders pursuant to Section
6.1(a)(i)(C) and (D) for all prior periods;
(C) third, to the
holders of Units in accordance with their respective holdings of Units,
including Class A Units, provided that Net Losses shall not be
allocated pursuant to this Section 6.1(a)(ii)(C) to the extent such
allocations would cause any Limited Partner to have an Adjusted Capital
Account Deficit as of the end of the fiscal year to which such Net Loss
relates; and
(D) the balance, if
any, to the General Partner.
SECTION 2. Effective as of the date first above written, Section 6.2 is
hereby amended and restated in its entirety as follows:
- 3 -
<PAGE> 94
6.2 Distributions. The General Partner shall cause
the Partnership to distribute all, or such portion as the General
Partner may in its reasonable discretion determine, of Net Cash Flow to
the holders of Units, including Class A Units, who are holders on the
Partnership Record Date with respect to such distribution in the
following priority:
(a) First, to the holders of Class A
Units, pro rata in an amount equal to the excess, if any, of (i)(x) the
cumulative Class A Preferred Return from February 14, 1997 to the end
of such fiscal year or other applicable period ending on the
Partnership Record Date, over (y) the sum of all prior distributions to
the holders of Class A Units pursuant to this Section 6.2(a)(i), and
then (ii)(x) the cumulative Special Class A Distributions from February
14, 1997 to the end of such fiscal year or other applicable period
ending on the Partnership Record Date, over (y) the sum of all prior
distributions to the holders of Class A Units pursuant to this Section
6.2(a)(ii), treating the distributed amounts as paying the oldest
amounts due first;
(b) Thereafter, except as otherwise
provided in Section 6.2(c), to the holders of Units, including Class A
Units, pro rata in accordance with the holders' ownership of Units,
including Class A Units; and
(c) When the General Partner declares
a dividend to holders of Shares and the amount otherwise determined to
be distributable to each holder of a Unit, including Class A Units,
under Section 6.2(b) results in an amount that is less than the amount
distributable to each holder of a Share (on a per Share to per Unit
basis), the General Partner shall cause the Partnership to distribute
sufficient amounts to holders of Units, including Class A Units, as of
the Partnership Record Date so that such holders of Units, including
Class A Units, will receive an amount per Unit equal to the related
distributions to holders of Shares (on a per Share to per Unit basis).
The General Partner shall accomplish this by reducing the amounts
otherwise distributable to it under Section 6.2(b) and increasing the
amount otherwise distributable to holders of Units, including Class A
Units, under Section 6.2(b) and, to the extent necessary, by
contributing additional capital to the Partnership.
- 4 -
<PAGE> 95
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement or caused this Agreement to be executed on their behalf as of the date
first above written.
GENERAL PARTNER:
STARWOOD LODGING CORPORATION, a
Maryland corporation
By: /s/ Nir E. Margalit
------------------------------------------
Name: Nir E. Margalit
Title: Vice President and Secretary
LIMITED PARTNERS:
STARWOOD HOTEL INVESTORS II, L.P.
By: STARWOOD CAPITAL GROUP I, L.P.
By: BSS CAPITAL PARTNERS, L.P.,
General Partner
By: STERNLICHT HOLDINGS II, Inc.
General Partner
By: /s/ Madison F. Grose
------------------------------------------
Name: Madison F. Grose
Title: EVP
FIREBIRD CONSOLIDATED PARTNERS, L.P.
By: /s/ Madison F. Grose
------------------------------------------
Name: Madison F. Grose
Title: Authorized Signatory for
General Partner
APPOLLO REAL ESTATE INVESTMENT
FUND, L.P.
By: APPOLLO REAL ESTATE ADVISORS, L.P.
By: APPOLLO REAL ESTATE MANAGEMENT,
- 5 -
<PAGE> 96
INC.
By:
----------------------------------------
Name:
Title:
PHILADELPHIA HSR LIMITED PARTNERSHIP
By:
----------------------------------------
Name:
Title: General Partner
STARWOOD OPPORTUNITY FUND II, L.P.
By: STARWOOD CAPITAL GROUP I, L.P.
General Partner
By: BSS CAPITAL PARTNERS, L.P.,
General Partner
By: STERNLICHT HOLDINGS II, Inc.
General Partner
By: /s/ Madison F. Grose
----------------------------------------
Name: Madison F. Grose
Title: EVP
/s/ Edward J. Rohling
--------------------------------------------
EDWARD J. ROHLING
ZIFF INVESTORS PARTNERSHIP, L.P. II
By: /s/ Philip B. Korsant
----------------------------------------
Name: PBK Holdings, Inc.
Title: General Partner
By: Philip B. Korsant--President
MONTROSE CORPORATION
By:
----------------------------------------
- 6 -
<PAGE> 97
Name:
Title:
HARVEYWOOD HOTEL INVESTORS, L.P.
By: /s/ Madison F. Grose
----------------------------------------
Name: Madison F. Grose
Title: Authorized Signatory for
General Partner
STAR INVESTORS, G.P.
By:
----------------------------------------
Name:
Title:
MERIDIAN INVESTMENT GROUP
By:
----------------------------------------
Name:
Title:
THE HERMITAGE, L.P.
By: HERMITAGE OF NASHVILLE, INC.
General Partner
By:
----------------------------------------
Name:
Title:
BURDEN DIRECT INVESTMENT FUND I
By: /s/ Jeffrey A. Weber
----------------------------------------
Name: Jeffrey A. Weber
Title: President & CEO,
Burden Brothers Inc.,
General Partner,
William A.M. Burden & Co., LP
BRAINARD HOLDINGS, INC.
- 7 -
<PAGE> 98
By:
----------------------------------------
Name:
Title:
KJJ REVOCABLE TRUST
By: /s/ Hekmatollah Eilian
----------------------------------------
Name: Hekmatollah Eilian
Title: Trustee
----------------------------------------
BARRY S. STERNLICHT
THE BARRY S. STERNLICHT FAMILY SPRAY
TRUST I
By:
----------------------------------------
Name:
Title: Trustee
THE BARRY S. STERNLICHT FAMILY SPRAY
TRUST II
By:
----------------------------------------
Name:
Title: Trustee
THE BARRY S. STERNLICHT FAMILY SPRAY
TRUST III
By:
----------------------------------------
Name:
Title: Trustee
/S/ Jack Nash
----------------------------------------
JACK NASH
- 8 -
<PAGE> 99
THE NASH FAMILY PARTNERSHIP
By: /s/ Joshua Nash
----------------------------------------
Name: Joshua Nash
Title: General Partner
/s/ Madison F. Grose
----------------------------------------
MADISON F. GROSE
THE MADISON F. GROSE IRREVOCABLE
INSURANCE TRUST
By: /s/ Ellis F. Rinaldi
----------------------------------------
Name: Ellis F. Rinaldi
Title: Trustee
----------------------------------------
MAX C. CHAPMAN
/s/ Merrick R. Kleeman
----------------------------------------
MERRICK R. KLEEMAN
----------------------------------------
EUGENE A. GORAB
/s/ Jamie R. Gates
----------------------------------------
JAMIE R. GATES
/s/ Carly Simon
----------------------------------------
CARLY SIMON
----------------------------------------
STEVEN R. GOLDMAN
- 9 -
<PAGE> 100
/s/ Alan Schwartz
----------------------------------------
ALAN SCHWARTZ
/s/ Jay Sugarman
----------------------------------------
JAY SUGARMAN
/s/ John Z. Kukral
----------------------------------------
JOHN Z. KUKRAL
/s/ Jerome C. Silvey
----------------------------------------
JEROME C. SILVEY
/s/ Geoffrey T. Boisi
----------------------------------------
GEOFFREY T. BOISI
----------------------------------------
MICHAEL MUELLER
/s/ Donna Mitchell
----------------------------------------
CLATE JOSEPH KORSANT TRUST
By: /s/ Donna Mitchell
------------------------------------
Name: Donna Mitchell
Title: Trustee
By: /s/ Dirk Ziff
------------------------------------
Name: Dirk Ziff
Title: Trustee
/s/ Donna Mitchell
----------------------------------------
JUSTIN FREDERICK KORSANT TRUST
By: /s/ Donna Mitchell
------------------------------------
Name: Donna Mitchell
Title: Trustee
By: /s/ Dirk Ziff
------------------------------------
Name: Dirk Ziff
Title: Trustee
/s/ James G. Babb, III
----------------------------------------
JAMES G. BABB, III
LAMBSTER PARTNERS LIMITED
PARTNERSHIP
By:
----------------------------------------
Name:
Title: General Partner
- 10 -
<PAGE> 101
/s/ Jeff Dishner
----------------------------------------
JEFF DISHNER
----------------------------------------
GEOFFREY BEER
----------------------------------------
CHARLES E. MUELLER, M.D.
----------------------------------------
LOWELL D. KRAFF
/s/ Stephen Fiore
----------------------------------------
STEPHEN FIORE
/s/ Jennifer Albero
----------------------------------------
JENNIFER ALBERO
----------------------------------------
JAMES A. KLEEMAN, M.D., PC
/s/ Ellis F. Rinaldi
----------------------------------------
ELLIS F. RINALDI
/s/ J. Peter Paganelli
----------------------------------------
J. PETER PAGANELLI
----------------------------------------
JOHN F. COUTURE
/s/ James Oldham
----------------------------------------
JAMES OLDHAM
- 11 -
<PAGE> 102
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA, on behalf of Prudential Property
Investment Separate Account II
By: /s/ Roger S. Pratt
----------------------------------------
Name: Roger S. Pratt
Title: Vice President/Managing Director
ELEANOR MENDELL, AS TRUSTEE OF THE
GARY MENDELL FAMILY TRUST
By: /s/ Eleanor Mendell
----------------------------------------
Name: Eleanor Mendell
Title: Trustee
/s/ Gary Mendell
----------------------------------------
GARY MENDELL
/s/ Ellen-Jo Mendell
----------------------------------------
ELLEN-JO MENDELL
/s/ Stephen Mendell
----------------------------------------
STEPHEN MENDELL
----------------------------------------
JUDITH K. RUSHMORE
/s/ Murray Dow II
----------------------------------------
MURRAY DOW II
WESTPORT HOSPITALITY, INC.
- 12 -
<PAGE> 103
By: /s/ Gary Mendell
----------------------------------------
Name: Gary Mendell
Title: President
ZAPCO HOLDINGS, INC.
By: /s/ Orna L. Shulman
----------------------------------------
Name: Orna L. Shulman
Title: Executive Vice President
ZAPCO HOLDINGS, INC. DEFERRED
COMPENSATION PLAN TRUST
By: /s/ Nancy Heinrich
----------------------------------------
Name: Nancy Heinrich
Title: Trustee
/s/ Orna L. Shulman
----------------------------------------
ORNA L. SHULMAN
----------------------------------------
ARTHUR GREEN
----------------------------------------
MICHAEL HALL
----------------------------------------
MARK ROSINSKY
----------------------------------------
RANDI ROSINSKY
/s/ John Daily
----------------------------------------
JOHN DAILY
- 13 -
<PAGE> 104
----------------------------------------
FELIX CACCIATO
/s/ Thomas Clearwater
----------------------------------------
THOMAS CLEARWATER
----------------------------------------
HARVEY MOORE
----------------------------------------
TRACY DRISCOLL
CLASS "A" PARTNERS
Signature Blocks
/s/ Gary Mendell
----------------------------------------
GARY MENDELL
/s/ Stephen Mendell
----------------------------------------
STEPHEN MENDELL
----------------------------------------
JUDITH K. RUSHMORE
/s/ Murray Dow II
----------------------------------------
MURRAY DOW II
WESTPORT HOSPITALITY, INC.
By: /s/ Gary Mendell
----------------------------------------
Name: Gary Mendell
Title: President
- 14 -
<PAGE> 105
CERTIFICATE OF ADMISSION
OF SLT REALTY LIMITED PARTNERSHIP
THIS CERTIFICATE OF ADMISSION OF SLT REALTY LIMITED
PARTNERSHIP ("Certificate of Admission") is made effective January 2, 1998, by
Starwood Lodging Trust, a Maryland real estate investment trust, as the General
Partner of SLT Realty Limited Partnership, a Delaware limited partnership
("Partnership"), which was formed pursuant to the provisions of that certain
Limited Partnership Agreement of the Partnership dated as of December 15, 1994
and amended and restated as of June 29, 1995 and again as of November 14, 1997
and subsequently amended as of January 1, 1998 (as such agreement may be
hereafter amended from time to time, "Partnership Agreement"). All capitalized
terms not defined herein shall have the same meaning set forth in the
Partnership Agreement.
R E C I T A L S
WHEREAS, as of September 8, 1997, that certain Transaction
Agreement ("Transaction Agreement") was entered into among the General Partner,
the Partnership, SLC, the Operating Partnership, Westin Hotels & Resorts
Worldwide, Inc. ("Westin Worldwide"), a Delaware corporation, W&S Seattle Corp.
("Seattle"), a Delaware corporation, W&S Lauderdale Corp. ("Lauderdale"), a
Delaware corporation, W&S Denver Corp. ("Denver"), a Delaware corporation, and
the other parties thereto;
WHEREAS, pursuant to the Transaction Agreement, it is
contemplated that, among other things, the Persons whose names appear below the
General Partner's name on the signature pages of this Certificate of Admission
(each a "Contributing Party" and, collectively, the "Contributing Parties") will
contribute to the Partnership certain of the outstanding shares of capital stock
of Seattle, Lauderdale and Denver in exchange for Class A Units described below;
WHEREAS, pursuant to Section 4.1(e) of the Partnership
Agreement, the General Partner is authorized to cause the Partnership to issue
additional Partnership Interests in one or more classes or one or more series of
any of such classes, with such designations, preferences and relative,
participating, optional or other special rights, powers and duties, including
rights, powers and duties senior to the then-existing Partnership Interests and
Units, as shall be determined by the General Partner in its sole and absolute
discretion; and
WHEREAS, pursuant to Section 11.1(b)(3) and (4) of the
Partnership Agreement, the General Partner is authorized to amend the
Partnership Agreement without the Consent of the Limited Partners, and in
accordance with Section 11.1(b) of the Partnership Agreement, the Limited
Partners have received five Business Days' notice of this Certificate of
Admission.
NOW THEREFORE, the undersigned certifies that all appropriate
actions have been
- 1 -
<PAGE> 106
taken to admit the Contributing Parties to the Partnership upon the terms and
conditions set forth below:
SECTION 1. Each Contributing Party is hereby admitted as a Limited
Partner of the Partnership and shall receive, inter alia, its share of a maximum
total of 597,844 Class A Units(1) to be issued pursuant to the Transaction
Agreement. The number of Class A Units received by each Contributing Party is
set forth next to each such Contributing Party's signature block below. The
General Partner hereby consents to each such admission. If the number of Class A
Units to be received by any Contributing Party shall be adjusted after the date
hereof in accordance with the terms of or in connection with the Transaction
Agreement, the General Partner shall amend this Certificate of Admission to
reflect such adjustment.
SECTION 2. Each Contributing Party has agreed to comply with and to be
bound by the terms and conditions of the Partnership Agreement. Each
Contributing Party has represented that, to the best of its knowledge, its
admission as a Limited Partner does not violate any of the restrictions set
forth in Section 9.3 of the Partnership Agreement.
SECTION 3. The Partnership Agreement is hereby amended such that each
and every reference to the "Limited Partners" or to a "Limited Partner" includes
each Contributing Party.
SECTION 4. Exhibit A to the Partnership Agreement is hereby amended to
reflect this Certificate of Admission.
SECTION 5. Exhibit B to the Partnership Agreement is hereby amended to
reflect this Certificate of Admission. The notice address of each Contributing
Party is set forth on Exhibit A to this Certificate of Admission.
SECTION 6. Section 1.1 of the Partnership Agreement is hereby amended
by the addition of the following defined terms:
"Class A Certificate of Admission" shall mean the
Certificate of Admission of SLT Realty Limited Partnership, dated as of
January 2, 1998, that authorizes the issuance of the Class A Units.
"Class A Limited Partners" shall mean those Persons
admitted to the Partnership pursuant to the Class A Certificate of
Admission, and any Person who, at the time of reference thereto, is a
Class A Limited Partner of the Partnership.
"Class A Liquidation Preference Distribution" shall
mean, with respect to a Class A Unit, an amount equal to the "fair
market value" of one OP Ordinary Unit,
- --------
(1) The exact number of Class A Units to be issued to each Contributing Party
will be determined on or about December 29, 1997 in a manner consistent with the
Transaction Agreement.
- 2 -
<PAGE> 107
which shall be payable only in the event of the dissolution and
liquidation of the Partnership not preceded or accompanied by a
liquidation and dissolution of the Operating Partnership. Such fair
market value shall be determined in good faith by the General Partner
as of the effective date of such liquidation and dissolution or, if no
such effective date applies, as of the date of the first liquidating
distribution pursuant to Section 8.2. In the event of any change in (i)
the nature or amount of securities constituting a unit of Paired Shares
under the pairing agreement between the General Partner and SLC, (ii)
the correspondence of the number of non-preferred Units in the
Partnership to the number of Paired Shares outstanding or (iii) the
correspondence of the number of OP Ordinary Units to the number of
Paired Shares outstanding, the amount of the Class A Liquidation
Preference that shall accrue with respect to each Class A Unit as a
function of the fair market of each OP Ordinary Unit shall be equitably
adjusted.
"Class A RP Special Distribution" shall mean, with
respect to a Class A Unit, an amount equal to the sum, in cash, of the
fair market value of all operating and liquidating distributions by the
Operating Partnership with respect to OP Ordinary Units on or after
January 2, 1998 (whether pursuant to Section 6.2 or 8.2 of the
Operating Partnership Agreement) in an amount per Class A Unit equal to
the amount so distributed in respect of each OP Ordinary Unit. In the
event of any change in (i) the nature or amount of securities
constituting a unit of Paired Shares under the pairing agreement
between the General Partner and SLC, (ii) the correspondence of the
number of non- preferred Units in the Partnership to the number of
Paired Shares outstanding or (iii) the correspondence of the number of
OP Ordinary Units to the number of Paired Shares outstanding, the
amount of the Class A Special Distribution that shall accrue with
respect to each Class A Unit as a function of the amount of the
corresponding distribution on the OP Ordinary Units shall be equitably
adjusted. Class A RP Special Distributions may only be made with
respect to Class A Units and shall be due at the same time as such
operating or liquidating distributions are made by the Realty
Partnership.
"Class A Units" shall mean, collectively, the
interests of Class A Limited Partners in capital, allocations of Net
Income, Net Loss and distributions, including Class A RP Special
Distributions and Class A Liquidation Preference Distributions, if any.
The number of Class A Units owned by each Class A Limited Partner is
set forth on Exhibit A hereto.
"OP Ordinary Units" shall mean units of the Operating
Partnership other than units entitled to receive priority distributions
under the Operating Partnership Agreement such as the Class A Units and
Class B Units (as those terms are defined in the Operating Partnership
Agreement).
"Operating Partnership Agreement" shall mean that
certain Limited Partnership Agreement of the Operating Partnership
dated as of December 15, 1994 and amended and restated as of June 29,
1995 and again as of November 14, 1997 and
- 3 -
<PAGE> 108
subsequently amended as of January 1, 1998 pursuant to the First
Amendment to Second Amended and Restated Limited Partnership Agreement
of SLC Operating Limited Partnership Agreement and as of January 2,
1998 pursuant to the Certificate of Admission of SLC Operating Limited
Partnership, and as may hereafter be further amended, supplemented or
restated from time to time.
"Units" shall have the meaning set forth in Section
4.1(c) hereof, and such term shall include Class A Units except where
the context otherwise requires.
SECTION 7. Section 6.1(a) of the Partnership Agreement is hereby
amended and restated in its entirety as follows:
(a) Allocation of Net Income and Net Loss.
(i) Net Income. Except as
otherwise provided herein, Net Income for any fiscal year or other
applicable period shall be allocated in the following order and
priority:
(A) first, to the
General Partner, until the cumulative Net Income allocated pursuant to
this Section 6.1(a)(i)(A) for the current and all prior periods equals
the cumulative Net Loss allocated pursuant to Section 6.1(a)(ii)(D) for
all prior periods;
(B) second, to the
holders of Units, including Class A Units, to the extent of, in
proportion to and in reverse order of their prior allocations of Net
Loss pursuant to Section 6.1(a)(ii)(C) until the cumulative Net Income
allocated pursuant to this Section 6.1(a)(i)(B) for the current and all
prior periods equals the cumulative Net Loss allocated to such holders
pursuant to Section 6.1(a)(ii)(C) for all prior periods;
(C) third, to the holders
of Class A Units until each holder of Class A Units has been allocated
Net Income pursuant to this Section 6.1(a)(i)(C) in an amount equal to
its accrued Class A Special Distributions, if any;
(D) fourth, to the holders
of Class A Units until each holder of Class A Units has been allocated
Net Income pursuant to this Section 6.1(a)(i)(D) in an amount equal to
the excess of its accrued Class A Liquidation Preference Distributions,
if any, over the portion of such holder's initial Capital Account
balance allocable to the Class A Liquidation Preference;
(E) fifth, to the extent
the Partnership has made distributions pursuant to Section 6.2(c) to
the holders of Units, including Class A Units, in accordance with and
in proportion to distributions made under Section 6.2(c); and
- 4 -
<PAGE> 109
(F) thereafter, to the
holders of Units, including Class A Units, in accordance with and in
proportion to their respective holdings of Units.
(ii) Net Loss. Except as
otherwise provided herein, Net Loss of the Partnership for each fiscal
year or other applicable period shall be allocated in the following
order and priority;
(A) first, to the
holders of Units, including Class A Units, to the extent of, in
proportion to, and in the reverse order of, Net Income previously
allocated to the Partners pursuant to Section 6.1(a)(i)(F), until the
cumulative Net Loss allocated pursuant to this Section 6.1(a)(ii)(A)
for the current and all prior periods equals the cumulative Net Income
allocated pursuant to Section 6.1(a)(i)(F) for all prior periods;
(B) second, to the
holders of Class A Units to the extent of and in proportion to their
prior allocations of Net Income pursuant to Section 6.1(a)(i)(C) and
(D) until the cumulative Net Loss allocated pursuant to this Section
6.1(a)(ii)(B) for the current and all prior periods equals the
cumulative Net Income allocated to such holders pursuant to Section
6.1(a)(i)(C) and (D) for all prior periods;
(C) third, to the
holders of Units, including Class A Units, in accordance with their
respective holdings of Units, provided that Net Losses shall not be
allocated pursuant to this Section 6.1(a)(ii)(C) to the extent such
allocations would cause any Limited Partner to have an Adjusted Capital
Account Deficit as of the end of the fiscal year to which such Net Loss
relates; and
(D) the balance, if
any, to the General Partner.
SECTION 8. Section 6.2 of the Partnership Agreement is hereby amended
and restated in its entirety as follows:
6.2 Distributions. The General Partner shall cause
the Partnership to distribute all, or such portion as the General
Partner may in its reasonable discretion determine, of Net Cash Flow in
accordance with the distribution rules described below to the holders
of applicable Units who are holders on the Record Date with respect to
such distribution; provided that the General Partner shall be at all
times authorized to cause the Partnership to distribute to the holders
of Units pro rata in accordance with the holders' ownership of Units,
sufficient amounts to enable the General Partner to pay shareholder
dividends that will satisfy the REIT Requirements. For such purposes,
Net Cash Flow shall be distributed:
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<PAGE> 110
(a) first, to the holders of Class A
Units, pro rata in accordance with the holders' ownership of Class A
Units, in an amount equal to the excess, if any, of (i) the total of
all Class A RP Special Distributions that have accrued as of the date
of payment of such distribution, less (ii) the total of all previous
distributions to the holders of Class A Units in respect of such Class
A RP Special Distributions pursuant to Section 8.2(a)(iv), if any, and
this Section 6.2(a);
(b) except as otherwise provided in
Sections 6.2(c), to the holders of Units, including Class A Units, who
are holders on the Partnership Record Date with respect to such
distribution pro rata in accordance with the holders' ownership of
Units, including Class A Units; and
(c) when the General Partner declares
a distribution to holders of Shares and the amount otherwise determined
to be distributable to each holder of a Unit, including Class A Units,
under Section 6.2(b) results in an amount that is less than the amount
distributable to each holder of a Share (on a per Share to per Unit
basis), the General Partner shall cause the Partnership to distribute
sufficient amounts to holders of Units, including Class A Units, as of
the Partnership Record Date so that such holders of Units, including
Class A Units, will receive an amount per Unit equal to the related
distributions to holders of Shares (on a per Share to per Unit basis).
The General Partner shall accomplish this by reducing the amounts
otherwise distributable to it under Section 6.2(b) and increasing the
amount otherwise distributable to holders of Units, including Class A
Units, under Section 6.2(b) and, to the extent necessary, by
contributing additional capital to the Partnership.
SECTION 9. Section 8.2(a) of the Partnership Agreement is hereby
amended and restated in its entirety as follows:
8.2 Distributions on Dissolution.
(a) In the event of the dissolution and liquidation
of the Partnership for any reason, the assets of the Partnership shall
be liquidated for distribution in the following rank and order:
(i) payment of creditors of the Partnership,
including creditors who are Partners or former Partners;
(ii) establishment of reserves as provided by the
Liquidating Trustee to provide for contingent liabilities, if any;
(iii) to the holders of Class A Units, pro rata in
accordance with the holders' ownership of Class A Units, in an amount
equal to the excess, if any, of (x) the Class A Liquidation Preference
Distribution, over (y) the sum of all prior distributions to
- 6 -
<PAGE> 111
holders of Class A Units pursuant to this Section 8.2(a)(iii);
(iv) to the holders of Class A Units, pro rata in
accordance with the holders' ownership of Class A Units, in an amount
equal to the excess, if any, of (x) the total of all Class A RP Special
Distributions that have accrued as of the date of payment of such
liquidating distribution, less (y) the total of all previous
distributions to the holders of Class A Units in respect of such Class
A RP Special Distributions pursuant to Section 6.2(a) and this Section
8.2(a)(iv); and
(v) to the holders of Units, including Class A Units,
in accordance with the positive balances in their Capital Accounts
after giving effect to all contributions, distributions and allocations
for all periods.
Whenever the Liquidating Trustee reasonably determines that any
reserves established pursuant to paragraph (ii) above are in excess of
the reasonable requirements of the Partnership, the amount determined
to be excess shall be distributed to the Partners in accordance with
the provisions of this Section 8.2(a). No Partner or holder of Units
shall be liable to any other Partner or holder of Units for a deficit
balance in its Capital Account.
SECTION 10. Notwithstanding Section 6.16(d) of the Transaction
Agreement, no restrictions on the transfer of the shares of Denver, Seattle or
Lauderdale shall be enforced if and only to the extent that such restriction
would cause Denver, Seattle or Lauderdale to fail to meet the requirements of
Section 856(a)(2) of the Code.
SECTION 11. As provided for in this Certificate of Admission and as
otherwise necessary or appropriate to reflect the admission of the Contributing
Parties to the Partnership, the Partnership Agreement is hereby amended
effective as of the date first written above. Except as otherwise provided in
this Certificate of Admission, each and every provision of the Partnership
Agreement remains in full force and effect.
IN WITNESS WHEREOF, the party hereto has executed this
Certificate of Admission or caused this Certificate of Admission to be executed
on its behalf as of the date first above written.
STARWOOD LODGING TRUST, a Maryland real
estate investment trust
By: /s/ Ronald C. Brown
__________________________________
Name: Ronald C. Brown
Title: Senior Vice President and
Chief Financial Officer
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<PAGE> 112
IN WITNESS WHEREOF, the Contributing Parties hereby agree to
and acknowledge the terms of this Certificate of Admission.
117,036 Units WHWE L.L.C.
By: Whitehall Street Real Estate
Limited Partnership V,
Member and Manager
By:
By:
By: /s/ Jonathan Langer
___________________________
Name: Jonathan Langer
Title: Attorney-in-fact for
Whitehall Street Real
Estate Limited
Partnership V
221,081 Units Woodstar Investor Partnership
By: Marswood Investors, L.P.,
General Partner
By: Starwood Capital Group, L.P.,
General Partner
By: BSS Capital Partners, L.P.,
General Partner
By: Sternlicht Holdings II, Inc.,
General Partner
By: /s/ Ronald C. Brown
_________________________
Name: Ronald C. Brown
Title: Attorney-in-fact
- 8 -
<PAGE> 113
132,192 Units Nomura Asset Capital Corporation
By: /s/ Daniel S. Abrams
_________________________
Name: Daniel S. Abrams
Title: Managing Director
- 9 -
<PAGE> 1
Exhibit 10.4
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (hereinafter called this
"Agreement"), dated as of February __, 1998, between Starwood Hotels & Resorts
Trust, a Maryland real estate investment trust (the "Trust"), and Starwood
Hotels & Resorts Worldwide, Inc., a Maryland corporation (the "Corporation").
RECITALS
WHEREAS an Amended and Restated Agreement and Plan of Merger
(the "Merger Agreement") dated as of November 12, 1997 was entered into among
ITT Corporation, a Nevada corporation ("ITT"), the Corporation, the Trust and
Chess Acquisition Corp., a Nevada corporation owned by the Trust and the
Corporation ("Chess"), pursuant to which Chess will be merged with and into ITT
(the "Merger"), with the result that (i) ITT will be wholly owned by the Trust
and the Corporation and (ii) each outstanding share of common stock, par value
$.01 per share, of ITT ("ITT Common Shares"), other than shares held by ITT, the
Corporation, the Trust or any of their respective wholly owned subsidiaries,
will be converted into the right to receive, at the holder's election, $85 in
cash or shares of common stock, par value $.01 per share, of the Corporation
("Corporation Shares") and shares of beneficial interest, par value $.01 per
share, of the Trust ("Trust Shares" and, when paired with the Corporation
Shares, the "Paired Shares") with a value of $85, subject to certain collar
provisions;
WHEREAS in connection with the Merger, Trust will contribute
to Chess a number (the "Trust Number") of Trust Shares equal to the number of
Trust Shares to be issued to stockholders of ITT in connection with the Merger
in consideration for shares of common stock of Chess; and
WHEREAS the Trust desires to sell to the Corporation and the
Corporation desires to purchase from the Trust all of the shares of common stock
of Chess that will be owned by the Trust after the Merger (the "Chess Shares").
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
SECTION 1. Purchase and Sale
SECTION 1.1. Purchase and Sale of the Chess Shares. Upon the
terms and subject to the conditions of this Agreement, the Trust agrees to sell,
transfer, assign, convey and deliver to the Corporation immediately after the
Closing (as defined in the Merger Agreement), free and clear of liens, security
interests, claims, encumbrances and restrictions of any kind whatsoever
("Encumbrances"), and the Corporation hereby agrees to purchase and accept from
the Trust, all of the Chess Shares immediately after the Closing.
<PAGE> 2
SECTION 1.2. Purchase Price and Delivery Thereof. The purchase
price (the "Purchase Price") for the Chess Shares shall be equal to the product
of (i) the Adjusted Trust Number (as defined below) and (ii) the quotient of (a)
the lesser of (a) $85 and (ii) the closing price per an ITT Common Share as
reported on the New York Stock Exchange Composite Transaction Tape on the
business day immediately preceding the Closing Date divided by (b) 1.543. The
Purchase Price shall be paid by the assumption by the Corporation of $2.1
billion of debt of SLT Realty Limited Partnership payable to W.D. Investments
L.L.C. and the issuance by the Corporation to the Trust of a seven year mortgage
note in an amount equal to the Purchase Price less $2.1 billion, which note will
be secured by certain owned real estate of ITT and its subsidiaries and bear
interest at an annual rate of 8.5% (the "Mortgage Note").
For purposes of this Agreement, "Issuance Percentage" means
the percentage established from time to time by mutual agreement of the Board of
Directors of the Corporation and the Board of Trustees of the Trust of the
relative value of a Trust Share to the value of a Paired Share and "Adjusted
Trust Number" means the product of the Trust Number and the Issuance Percentage.
SECTION 2. Representations and Warranties of the Trust. The
Trust hereby represents and warrants to the Corporation as follows:
SECTION 2.1. Ownership of the Chess Shares. At the Closing,
the Trust will own the Chess Shares free from all Encumbrances of any kind.
SECTION 2.2. Power and Authority. The Trust has all requisite
power and authority and has taken all action necessary in order to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. This Agreement is a valid and binding
agreement of the Trust enforceable against it in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
SECTION 3. Representations and Warranties of the Corporation.
The Corporation hereby represents and warrants to the Trust as follows:
SECTION 3.1. Power and Authority. The Corporation has all
requisite corporate power and authority and has taken all corporate action
necessary in order to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby, and that this
Agreement is a valid and binding agreement of the Corporation enforceable
against it in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
SECTION 3.2. Mortgage Note. The Mortgage Note will, when
delivered as contemplated by this Agreement, be duly authorized and a valid and
enforceable obligation of the Corporation.
<PAGE> 3
SECTION 4. Miscellaneous and General.
SECTION 4.1. Further Assurances. From time to time following
the date hereof, the Trust shall execute and deliver, or cause to be executed
and delivered, to the Corporation such other bills of sale, deeds, endorsements,
assignments and other documents or instruments of conveyance and transfer as the
Corporation may reasonably request or as may be otherwise necessary to more
effectively convey and transfer to, and vest in, the Corporation the Chess
Shares, or in order to fully effectuate and to implement the purposes, terms and
provisions of this Agreement.
SECTION 4.2. Counterparts. This Agreement may be executed in
any number of counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute the same
agreement.
SECTION 4.3. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the internal laws of the State of New
York.
SECTION 4.4. Entire Agreement. This Agreement embodies the
complete agreement of the parties hereto with respect to the subject matter
hereof, and cannot be altered, amended, or modified except by their written
agreement.
SECTION 4.5. Interpretation; Certain Defined Terms. The
headings herein are for convenience of reference only, do not constitute part of
this Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof. Where a reference in this Agreement is made to a Section,
such reference shall be to a Section of this Agreement unless otherwise
indicated. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
SECTION 4.6. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
<PAGE> 4
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first written above.
STARWOOD HOTELS & RESORTS TRUST
By:
Name:
Title:
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
By:
Name:
Title:
<PAGE> 1
Exhibit 10.5
[Execution Copy]
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
between
STARWOOD HOTELS & RESORTS TRUST
and
BARRY S. STERNLICHT
Employment Agreement ("Agreement"), as amended and restated as
of February 17, 1998, between Barry S. Sternlicht ("Executive") and Starwood
Hotels & Resorts Trust, a Maryland real estate investment trust (the "Company"),
with its principal office at 2231 East Camelback Road, Suite 410, Phoenix,
Arizona 85016.
WHEREAS, Executive has served as Chairman and Chief Executive
Officer of the Company since December 1994 and currently serves as such;
WHEREAS, the Company desires to continue the services of
Executive as its Chairman and Chief Executive Officer and to enter into an
agreement embodying the terms of such continuing relationship; and
WHEREAS, Executive is willing to accept such continued
employment upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the agreements and
covenants contained herein, the Executive and the Company hereby agree as
follows:
ARTICLE I
Employment and Term
Section 1.01 Position; Responsibilities. (a) The Company
hereby employs and continues the employment of Executive as its Chairman and
Chief Executive Officer ("CEO") upon the terms and conditions hereinafter set
forth.
(b) As CEO, Executive shall at all times be the senior-most
officer of the Company, with the duties, responsibilities and authority
customarily associated with such position and consistent with such duties,
responsibilities and authority as has heretofore been his as CEO. Such duties
include authority and responsibility for acquisitions, divestitures, finance and
investor relations, subject to policies adopted by the Board of Trustees of the
Company (the "Board"). Executive shall perform such other additional duties and
services of a senior executive nature, consistent with his position, as may be
requested of him from time to time by the Board. Executive shall report directly
and solely to the Board.
Section 1.02 Performance of Duties; Other Commitments and
Activities.
<PAGE> 2
(a) Executive shall at all times endeavor to duly and
faithfully perform all of his duties hereunder to the best of his abilities.
(b) Executive shall devote such time and effort as may be
necessary and appropriate from time to time in the circumstances for the proper
discharge of his duties and obligations under this Agreement. The Company
acknowledges that Executive is involved in other business endeavors, including
with Starwood Capital Group L.L.C. ("SCG"), and as a consequence performs
multiple executive roles. Subject to the Executive's duties and obligations to
the Company as set forth in this Section 1.02(b), and subject to non-competition
agreements between the Company and Executive and between the Company and SCG,
the Company consents to the continuation of Executive's additional business
endeavors and multiple executive roles.
(c) Executive's base of operations under this Agreement shall
continue to be Greenwich, CT, although Executive may, at his election, render
his services from other locations. Executive shall not be required to relocate
or render services, on other than a temporary basis, outside of such town.
Section 1.03 Term. Executive's term of employment under this
Agreement (the "Term") shall commence on the date hereof (the "Commencement
Date") and shall expire on December 31, 1999, unless extended or sooner
terminated as herein provided.
Section 1.04 Representation and Warranty of Executive.
Executive hereby represents and warrants to the Company that he is not aware of
any presently existing fact, circumstance or event (including, but without
limitation, any health condition or legal constraint) which would preclude or
restrict him from providing to the Company the services contemplated by this
Agreement, or which would give rise to any breach of any term or provision
hereof, or which could otherwise result in the termination of his employment
hereunder for Cause or Good Reason (as such terms are hereinafter defined).
Section 1.05 Representation and Warranty of Company. The
Company hereby represents and warrants to Executive that (i) it is not aware of
any fact, circumstance or event which would give rise to any breach of any term
or provision of this Agreement or any agreement covering any Existing Awards (as
hereinafter defined), or which would form the basis for any claim or allegation
that (A) Executive's employment hereunder could be terminated for Cause or Good
Reason hereunder, or (B) the rights of Executive under any Existing Award should
be in whole or any part limited, forfeited or otherwise restricted; and (ii) it
has received all authorizations and has taken all actions, necessary or
appropriate for the due execution, delivery and performance of this Agreement,
all Existing Awards, and all Plan Agreements (as hereinafter defined), including
all amendments thereto effected by this Agreement.
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ARTICLE II
Compensation
Section 2.01 General. The Company shall compensate Executive
for all of his services under this Agreement, as set forth herein.
Section 2.02 Basic Compensation. Executive's minimum annual
salary ("Base Salary") shall be at the rate of $1,000,000 and shall be payable
in bi-weekly or other installments in accordance with the Company's normal
payment schedule for senior management (not less frequently than monthly). The
Base Salary shall be subject to annual review commencing at the end of 1998 and
at the end of each year thereafter during the Term, and may be increased (but
not decreased) for subsequent years.
Section 2.03 Incentive Compensation. In addition to the Base
Salary, the Company shall pay to Executive as incentive compensation ("Incentive
Compensation") in respect of each calendar year (or portion thereof) of the
Company, an amount determined in accordance with any bonus or short term
incentive compensation program (which may be based upon achieving certain
specified performance criteria) which may be established by the Board either for
the Executive or for senior management generally and which in any event shall be
established by the Board for each calendar year not later than the earlier to
occur of (x) March 31 of such year (or, in the case of 1998, 90 days after the
date of this Agreement), and (y) the date on which the Company's audited
financial statements for the prior calendar year are first available; provided,
however, that (i) as Incentive Compensation for the full calendar year ending
December 31, 1997, the Company has paid Executive $2,650,000, and (ii) subject
to Article III hereof, Incentive Compensation for the full calendar year ending
December 31, 1998 shall not be less than $1,325,000 (the "Guaranteed Portion").
All Incentive Compensation earned under this Section 2.03
shall be payable as soon as reasonably practicable, but in no event later than
120 days after end of the relevant calendar year (30 days after December 31,
1998 with respect to the Guaranteed Portion).
Section 2.04 Equity Incentive and Other Benefit Programs. (a)
On and prior to September 25, 1997, Executive was granted certain options,
warrants, restricted stock and performance awards (collectively, the "Existing
Awards"), summarized on the attached Exhibit A, under the Starwood Lodging Trust
1995 Long-Term Incentive Plan (as it has been amended and restated, from time to
time as of and subsequent to August 12, 1996) (the "LTIP") (as well as certain
options which were granted under the Starwood Lodging Trust 1995 Share Option
Plan (the "Share Option Plan"), prior to the amendment and restatement thereof
as of August 12, 1996) (the "Pre-Existing Awards"), all of which grants and
awards are hereby confirmed as having been duly and validly authorized and
issued, and being in full force and effect as of the date of execution of this
Agreement.
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Except as specifically provided in this Agreement, nothing in
this Agreement shall be deemed to modify or otherwise affect any of the terms or
provisions (including, but without limitation, any contingencies) of any
Pre-Existing Awards.
(b) Notwithstanding any provision to the contrary contained in
any agreement(s) (each, a "Plan Agreement") covering the relevant grant of
Existing Awards or Pre-Existing Awards, as the case may be, the following terms
shall apply with respect to such grants (the relevant provisions of this
Agreement constituting an amendment to the relevant Plan Agreement(s) to the
extent necessary to effectuate the same): (i) with respect to the Three Year
Option and the Five Year Option noted on Exhibit A, together with the
Performance Awards relating thereto, and the option granted on September 25,
1997 (collectively, the "Recent Options"), (A) termination for Cause and for
Good Reason shall be as set forth in and subject to this Agreement and (B) in
the event Executive's employment by the Company shall terminate for any reason
other than (1) termination by the Company for Cause, or (2) termination by
Executive without Good Reason (any such termination specified in this clause
(B), a "Non-Cause Termination"), all unvested portions of the Recent Options
shall thereupon immediately vest in full, free of restrictions (except that
Executive may not exercise or sell with respect to such unvested portions for a
period of one-year from the date of termination if the reason for such
termination shall have been the failure of the Company and Executive to agree to
an extension of Executive's employment by the Company by December 1, 1999), and
the Recent Options shall remain exercisable until the third anniversary of the
date of such termination; (ii) with respect to the remainder of the Existing
Awards and all Pre-Existing Awards, in the event of any Non-Cause Termination,
all unvested portions of such Awards shall thereupon immediately vest in full,
free of restrictions (except that Employee may not exercise or sell with respect
to such unvested portions for a period of one-year from the date of termination
if the reason for such termination shall have been the failure of the Company
and Executive to agree to an extension of Executive's employment by the Company
by December 1, 1999), and shall remain exercisable for the period provided by
the terms of such Awards but no less than a period ending three years from the
date of termination of employment hereunder; and (iii) no unvested portion of
any Existing Award shall be subject to forfeiture or restriction under any
circumstance other than in the event of a termination for Cause, or, in the case
of the Recent Options, by Executive without Good Reason. Executive shall be
eligible for grants in the future of additional Paired Options, Paired Shares
and Performance Awards under the LTIP (any such future grants, collectively,
"Subsequent Awards"). All Paired Shares included in or underlying any Existing
Awards or Pre-Existing Awards will be subject to applicable
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resale and other restrictions as set forth in the Plan Agreement(s). The Company
shall use its best efforts to file and keep effective a registration statement
on Form S-8 or other appropriate form with the Securities and Exchange
Commission covering such Paired Shares.
(c) Notwithstanding any provision to the contrary contained in
this Agreement, the LTIP, the Share Option Plan or any other agreement, upon the
Effective Time (as described in Section 1.2 of the Amended and Restated
Agreement and Plan of Merger, dated as of November 12, 1997, among the Starwood
Lodging Corporation (the "Corporation"), Chess Acquisition Corp., the Company
and ITT Corporation (the "ITT Merger Agreement)), all Existing Awards and
Pre-Existing Awards shall be 100% vested, except for such Existing Awards and
Pre-Existing Awards that will not vest at the Effective Time, as set forth on
Exhibit B hereto, which shall vest in accordance with their terms as modified by
this Agreement.
(d) Notwithstanding any provision to the contrary contained in
the agreements (the "Restricted Stock Agreements"), dated August 12, 1996,
covering the grant to Starwood Capital Group, L.L.C. of restricted stock awards
of Paired Shares, the following terms shall apply with respect to such grant to
the extent it was allocated to Executive, Madison Grose or Jonathan Eilian (such
portion, the "Award"): (i) the Award became 100% vested upon the Closing (as
defined in Section 1.6 of the Transaction Agreement (the "Westin Agreement"),
dated as of September 8, 1997, among WHWE L.L.C., Woodstar Investor Partnership,
Nomura Asset Capital Corporation, Juergen Bartels, W&S Hotel L.L.C., Westin
Hotels & Resorts Worldwide, Inc., W&S Lauderdale Corp., W&S Seattle Corp.,
Westin St. John Hotel Company, Inc., W&S Denver Corp., W&S Atlanta Corp.,
Starwood Lodging Trust, SLT Realty Limited Partnership, Starwood Lodging
Corporation and SLC Operating Limited Partnership, of the Merger (as defined in
the Westin Agreement) (the "Westin Merger"); (ii) upon the execution of this
Agreement, the Company shall pay to Executive an amount equal to 40% of the
aggregate of the Fair Market Value (as defined in the LTIP) (determined at the
time of vesting) of each Paired Share subject to the Award which vested prior to
the Closing; provided, however, that no amount of Fair Market Value of a Paired
Share in excess of $53 shall be taken into account; and (iii) no later than
April 10, 1999, the Company shall pay to Executive an amount equal to 40% of the
aggregate Fair Market Value (as defined in the LTIP) (determined on the date of
the Closing) of each Paired Share subject to the Award which vested upon the
Closing; provided, however, that no amount of Fair Market Value of a Paired
Share in excess of $53 shall be taken into account.
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(e) During the Term, Executive shall be entitled to
participate in the LTIP, any successor plan and all employee benefit plans,
including retirement programs, if any, group health care plans, and all fringe
benefit plans, of the Company. Such plans shall at all times be comparable to
those made available to the senior-most management of the Corporation. In
addition, the Company shall provide Executive with the following benefits during
the Term:
(i) use of an automobile, driver and car service for
business purposes consistent with past practice prior to the execution of this
Agreement;
(ii) priority scheduling on Company aircraft, if any, for
business purposes;
(iii) first-class travel accommodations (air and lodging)
for business-related travel (including the reasonable travel expenses incurred
by Executive's spouse when accompanying Executive on business-related travel);
and
(iv) tax preparation and financial planning assistance up
to a maximum cost of $25,000 per calendar year.
(f) During the Term, the Company shall purchase and maintain a
life insurance policy (the "Executive Insurance Policy") on Executive's life in
the face amount of $10,000,000, the proceeds of which shall be payable to
Executive's estate or such other person or persons as Executive shall designate.
The Company shall not be required to maintain such insurance after termination
of Executive's employment, but upon such termination the Company shall take all
actions reasonably requested by Executive necessary to transfer title to such
policy to Executive at no cost to Executive.
(g) The Company shall reimburse Executive for all legal fees
reasonably incurred by Executive in connection with the negotiation and
execution of this Agreement.
Section 2.05 Expense Reimbursements. The Company shall
reimburse Executive for all proper expenses incurred by him in the performance
of his duties hereunder in accordance with the policies and procedures of the
Company as in effect from time to time.
Section 2.06 Withholding. The Base Salary and all other
payments to Executive for his services to the Company shall be subject to all
withholding and deductions required by federal, state or other law (including
those authorized by Executive but not otherwise required by law), including but
not limited to state, federal and local income taxes, unemployment tax, Medicare
and FICA, together with such
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deductions as Executive may from time to time specifically authorize under any
employee benefit program which may be adopted by the Company for the benefit of
its senior executives or Executive.
ARTICLE III
Termination of Employment
Section 3.01 Termination.
(a) Executive's employment hereunder shall be terminable by
either party with or without Cause and with or without notice except as
otherwise provided herein, but with the effect set forth herein.
(b) Executive shall give the Company at least 30 days' advance
written notice prior to any termination by Executive other than for Good Reason.
The Company shall give Executive at least 30 days' advance written notice prior
to any termination of Executive without Cause.
(c) Executive may resign and terminate his employment
hereunder for Good Reason (which shall also be deemed a termination by the
Company other than for Cause), subject, however, to prior delivery to the
Company of a Preliminary Notice of Good Reason and the failure of the Company to
remedy the same within the cure period provided below. For purposes of this
Agreement, "Good Reason" means (i) the failure to elect and continue Executive
as CEO or Chairman of the Company or to nominate Executive for re-election as a
member of the Board (unless a Cause Termination Notice (as hereinafter defined)
shall theretofore have been given to Executive); (ii) the failure to assign
Executive duties, authorities, responsibilities and reporting requirements
consistent with his position and otherwise as set forth herein, or if the scope
of any of Executive's material duties or responsibilities as CEO of the Company
is reduced or expanded to a significant degree without Executive's prior
consent, except for any reduction in duties and responsibilities due to
Executive's illness or disability or temporary suspensions of duties and
responsibilities pending results of any Board commissioned investigation as to
potential Cause for termination of Executive's employment and except if a Cause
Termination Notice shall theretofore have been given to Executive; (iii) a
reduction in or a substantial delay in the payment of Executive's compensation
or benefits from those required to be provided in accordance with the provisions
of this Agreement, including under or in connection with any Existing Award or
Pre-Existing Award; (iv) a requirement by the Company or the Board, without
Executive's prior consent, that Executive be based outside of Greenwich,
Connecticut, other than on travel reasonably required to carry out Executive's
obligations under this Agreement; (v) the failure of the
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Company to indemnify Executive (including the prompt advancement of expenses),
or to maintain directors' and officers' liability insurance coverage for
Executive, in accordance with the provisions of Section 5.11 hereof; (vi) the
Company's purported termination of Executive's employment for Cause other than
in accordance with the requirements of this Agreement; (vii) a "Change of
Control," as such term is defined and used in the LTIP, shall have occurred
(unless a Cause Termination Notice shall theretofore have been given to
Executive); it being understood that neither the Merger (as described in Article
I of the ITT Merger Agreement) nor the Westin Merger shall constitute a "Change
of Control" under the LTIP for purposes of this Section 3.01(c); (viii) the
failure, by December 1, 1999, of the Company and Executive to agree to an
extension of the Term beyond December 31, 1999, or (ix) any other breach by the
Company of any provision of this Agreement; provided, that in the event Good
Reason is based on clause (ii), (iii), (iv), (v) or (ix) above, (a) "Good
Reason" shall not include acts which are cured by the Company within 30 days
from receipt by the Company of a written notice from Executive (a "Preliminary
Notice of Good Reason") identifying in reasonable detail the act or acts
constituting Good Reason, (b) Good Reason shall not exist unless the Preliminary
Notice of Good Reason shall have been given by Executive within 60 days after
learning of the act, failure or event (or, in the case of a series of related
acts, failures or events, within 120 days of the first such act, failure or
event) which Executive alleges constitutes Good Reason hereunder, (c) if the
Company has failed to cure as provided above, Good Reason shall not exist unless
Executive shall have given notice of termination hereunder for Good Reason
within 60 days from delivery of the Preliminary Notice of Good Reason (which
termination shall be effective 30 days from the giving of such notice), and (d)
if the Company has commenced an expedited arbitration in the manner prescribed
below within 15 days after receipt of Executive's notice of termination called
for under the immediately preceding clause (c), such termination shall not be
effective as a termination of employment and shall not be deemed a termination
by Executive for Good Reason unless and until the Arbitrator shall have
determined otherwise. If the Company has timely commenced such an arbitration
proceeding, in the manner prescribed below, no payments shall be due Executive
under Section 3.02 (i) or (ii) hereof until the conclusion of the arbitration
proceeding or further proceeding contemplated by Section 5.04 hereof and only if
an award is rendered by the Arbitrator in favor of Executive. Notwithstanding
the foregoing, if the Company fails to file a demand for arbitration with the
American Arbitration Association ("AAA") and pay the requisite fees pursuant to
Rule 4 of the AAA's National Rules for the Resolution of Employment Disputes
effective June 1, 1996 (the "National Rules") within 30 days after receipt of
notice of termination from
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Executive, and diligently pursue such proceeding in accordance with the
procedures set forth in Section 5.04 hereof, Executive's termination of
employment from the Company shall be conclusively presumed to have been for Good
Reason.
(d) The Company shall have the right to terminate Executive's
employment hereunder for Cause. For purposes hereof, "Cause" shall be defined as
Executive's having (a) been convicted of a criminal offense constituting a
felony, (b) committed one or more acts or omissions constituting fraud or
willful misconduct, or (c) failed, after written warning from the Board
specifying in reasonable detail the breach(es) complained of, to substantially
perform his duties under this Agreement (excluding, however, any failure to meet
any performance targets), except where such failure results from Executive's
incapacity due to physical or mental illness. For purposes of the foregoing, no
act or failure to act on the part of Executive shall be considered "willful"
unless it is done, or omitted to be done, by Executive without reasonable belief
that Executive's action or omission was in the best interests of the Company.
Any act or failure to act that is expressly authorized by the Board pursuant to
a resolution duly adopted by the Board, or pursuant to the written advice of
counsel for the Company, shall be conclusively presumed to be done, or omitted
to be done, by Executive in the best interests of the Company.
Notwithstanding the foregoing, termination by the Company for
Cause shall not be effective until and unless each of the following provisions
shall have been complied with: (i) notice of intention to terminate for Cause (a
"Preliminary Cause Notice"), the giving of which shall have been authorized by a
vote of not less than 50% of all disinterested Trustees then in office, which
shall include a written statement of the particular acts or circumstances which
are the basis for the termination for Cause and shall set forth a reasonable
period (not less than 30 days) to cure (the "Cure Period"), shall have been
given to Executive by the Board within sixty days after the Company first learns
of the act, failure or event constituting Cause; and (ii) Executive shall not
have cured the acts or circumstances complained of within the Cure Period; and
(iii) the Board shall have called an in personam meeting of the Board, at which
termination of Executive is an agenda item, and shall have provided Executive
with not less than 20 days' notice thereof; and (iv) Executive shall have been
afforded the opportunity, accompanied by counsel, to provide written materials
to the Trustees in advance of such meeting and, if he so desires, to personally
address the Trustees at such meeting; and (v) the Board shall have provided,
within three business days after such meeting, a written notice of termination
for Cause, stating that, based upon the evidence it has received and reviewed,
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and specifying in reasonable detail the acts and circumstances complained of, it
has voted by a vote of at least a majority of all of the disinterested Trustees
then in office to terminate Executive for Cause (such a notice, a "Cause
Termination Notice"), which such notice shall be effective on the sixteenth day
after receipt thereof by Executive, subject to the provisions hereof; provided
that if Executive has commenced an expedited arbitration in the manner
prescribed below within 15 days after his receipt of the Cause Termination
Notice, disputing the Company's right under this Agreement to so terminate for
Cause, Executive shall not be deemed to have been terminated for Cause unless
and until the Arbitrator shall thereafter have determined that Executive was
properly terminated for Cause in accordance with the provisions hereof; and
provided, further that the Company may suspend Executive (a) with pay, at any
time after any indictment of Executive for a criminal offense constituting a
felony or after the giving of the Preliminary Cause Notice, and (b) without pay,
at any time after the giving of the Cause Termination Notice, except that any
payments not so made shall be made within three business days after the
Arbitrator shall have made a determination that Executive was terminated other
than in compliance with the foregoing provisions relating to termination for
Cause. If Executive or his representative fails to file a demand for arbitration
with the AAA and pay the requisite fees pursuant to Rule 4 of the National Rules
within 30 days of his receipt of a Cause Termination Notice from the Board, and
diligently pursue such proceeding in accordance with the procedures set forth in
Section 5.04 hereof, such termination shall be conclusively presumed to have
been for Cause, it being understood and agreed that any decision of the
Arbitrator that Executive has been terminated hereunder for Cause, or any
failure of Executive to contest the Company's allegations of Cause hereunder (by
failing to file and/or prosecute a demand for arbitration or otherwise), is not
intended to, and shall not, have any effect or bearing whatsoever on any
Pre-Existing Award, and the parties specifically agree and undertake that,
notwithstanding anything to the contrary, no finding of any Arbitrator pursuant
hereto that Executive was properly terminated for Cause under this Agreement
shall be binding upon or admissible in any court or other proceeding in which
any Pre-Existing Awards are at issue.
If the Arbitrator declines to rule that Executive was
terminated for Cause, Executive shall be treated as having been terminated
without Cause and Executive shall have the rights provided under Section 3.02
below and provided elsewhere in this Agreement with respect to a termination
without Cause.
For all purposes of this Agreement, "Good Reason" and "Cause"
shall have the applicable defined meaning as set forth above in this Section
3.01.
No termination of Executive's employment shall require that
Executive resign any other position (including as Trustee or Chairman) he may
then be holding with
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the Company; provided, however, that (i) if Executive's employment hereunder is
terminated for Cause under the above provisions, Executive shall resign
forthwith from all positions he may then be holding with the Company, if
requested to do so by the Board, and (ii) if Executive terminates his employment
hereunder other than for Good Reason, Executive shall resign forthwith from all
such positions, if requested to do so by the Board, except for any position to
which he has been elected by the shareholders of the Company (such as Trustee).
Section 3.02 Severance Package. In the event Executive's
employment under this Agreement is terminated by the Company other than for
Cause (and a termination due to the Executive's death or permanent disability
shall be treated for purposes of this Agreement as a termination by the Company
other than for Cause) or is terminated by Executive for Good Reason, then, as
and for a severance package ("Severance Package"),
(i) Executive shall, subject only to the delays permitted by
Section 3.01 for arbitration, receive (A) an amount, which shall be payable in
one lump sum as soon as practicable, but in any event within 30 days of the date
of determination that Executive's termination is (x) other than for Cause, or
(y) for Good Reason as applicable, equal to 2 times the sum of (1) the annual
Base Salary then in effect, plus (2) the average of the Incentive Compensation
paid to Executive with respect to the 2 full calendar years ending immediately
prior to the calendar year in which the termination of employment occurs; and
(B) Company paid medical insurance benefits available to other senior executives
of the Company during the 12-month period subsequent to termination of
employment, all costs of which shall be paid by the Company (and thereafter all
COBRA rights available to Executive shall be paid by Executive); and
(ii) All Pre-Existing Awards and Existing Awards shall,
notwithstanding any provision to the contrary contained in any Plan Agreement(s)
covering the same (the relevant provisions of this Agreement constituting an
amendment to the relevant Plan Agreement(s) to the extent necessary to
effectuate the same), immediately vest in full (with all Performance Periods
terminating on the effective date of Executive's termination of employment and
all relevant Performance Measures being computed through such date), with
preservation of all of Executive's rights relating to all such awards and under
the relevant agreements granting or otherwise governing same for the full terms
thereof, and, following timely exercise of any such awards, Executive shall
receive title to the shares issued upon exercise or otherwise in respect thereof
free and clear of any lien, claim or encumbrance by, through or under the
Company.
If a corporate transaction which would constitute a Change of
Control event
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under the LTIP is agreed to during the pendency of an arbitration hereunder, the
Company will include appropriate provisions which will enable Executive to
participate in such Change of Control event as if the arbitration were resolved
favorably to Executive, but subject to such a favorable resolution.
The parties agree that the foregoing shall be Executive's sole
and exclusive monetary remedy under this Agreement by reason of termination by
Executive for Good Reason or by the Company other than for Cause, it being
agreed that as his actual damages under this Agreement would be difficult to
measure or quantify and would be impracticable to determine, such amount shall
constitute liquidated damages under this Agreement for Executive by reason of
such termination by Executive for Good Reason, or by reason of any termination
by the Company other than for Cause hereunder. Such payments shall not be
reduced or limited by amounts Executive might earn or be able to earn from other
employment or ventures. The parties agree that the Company shall have no
recourse whatsoever to any monetary remedy by reason of Executive's termination
of employment, other than for reimbursement of actual out-of-pocket damages
actually suffered and incurred by the Company as a direct result of Executive's
termination for Cause hereunder (excluding the costs of identifying and/or
hiring any replacement for Executive, or any attorney's fees or costs of
investigation, which shall be borne solely by the Company), all of which are
hereby waived; provided, however, that the foregoing limitation shall not apply
to any claims the Company may have against Executive relating to tortious
conduct by Executive which causes damage to the Company.
Section 3.03 Rights on Termination for Cause or Without Good
Reason. No Severance Package shall be due or owing to Executive in the event
that the Company shall duly terminate Executive's employment for Cause or in the
event that Executive shall terminate his employment with the Company for reasons
other than Good Reason (it being understood and agreed that the provisions
hereof relating to Existing or Pre-Existing Awards, including those set out in
Section 2.04, shall not be affected thereby); provided, however, that Executive
shall in all events be paid all accrued but unpaid Base Salary, earned but
unpaid Incentive Compensation, and other benefits through the date of
termination. In addition, in the event that the Company shall terminate
Executive's employment for Cause or in the event that Executive shall terminate
his employment with the Company for reasons other than Good Reason, then except
as provided in Section 2.04 above or in the following two sentences, all
unvested Recent Options, unvested Performance Awards and unvested restricted
Paired Shares then held by Executive shall automatically be forfeited (subject,
however, to any contrary
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provisions in the relevant Plan Agreements, as amended through the date of
termination, relating to such Recent Options, Awards or Paired Shares, or any
contrary determination of the Board in its sole discretion). No forfeiture of
unvested Recent Options, Performance Awards or unvested restricted Paired Shares
required hereby shall occur or be effective until 15 days after the later of (i)
the conclusion of any arbitration proceeding or further proceeding contemplated
by Section 3.01 hereof, (ii) if no arbitration proceeding is commenced, until
the time for commencing such a proceeding has lapsed, or (iii) with respect to
Pre-Existing Awards, the determination by a court of competent jurisdiction that
"cause," as such term is defined and used in the relevant Plan Agreement(s)
covering the grants of the Pre-Existing Awards, has occurred (the latest of such
three dates being referred to herein as the "Forfeiture Date"), but, except as
otherwise provided in Sections 2.04(a) and (b) above or in the relevant Plan
Agreement(s) governing the terms thereof, no additional service-based or
time-based vesting shall occur with respect to any such Recent Options,
Performance Awards or Paired Shares following the date Executive's employment is
deemed terminated under Section 3.01 hereof. It is expressly agreed that
Executive may exercise vested options and other vested Existing and Pre-Existing
Awards, and receive a settlement of vested Performance Awards, at any time prior
to the Forfeiture Date. In all other respects, the terms of the grant of any
such options or award of any such Paired Shares shall govern.
ARTICLE IV
Confidential Information; Inducing Company Employees
Section 4.01 Confidential Information. Except in the course of
his employment with the Company, or as he may be required pursuant to any law or
court order or similar process, Executive shall not at any time either during or
after his termination of employment hereunder, directly or indirectly disclose
or use any secret, proprietary, confidential information or data of the Company
or the Corporation, or any of their respective subsidiaries or affiliates;
provided, however, that after the expiration of 18 months from such termination
of employment, the Company's sole remedy shall be to seek and procure
appropriate equitable remedies. In the event of any dispute between Executive
and the Company or between Executive or the Company and others, Executive shall
cooperate with the Company as to redaction or other protective measures with
respect to any unnecessary public disclosure of any such confidential
information or proprietary data.
Section 4.02 Inducing of Company Employees. Except in the
course of his employment with the Company, or with the prior written approval of
the Board, Executive shall not at any time through the 12 month period after his
termination of employment hereunder, in any way directly or indirectly hire,
attempt to hire, or cause to
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be hired any person or persons who to Executive's best knowledge was employed at
any time during the period commencing six months prior to such termination by
the Company, the Corporation, or their respective subsidiaries or SLT Realty
Limited Partnership or SLC Operating Limited Partnership.
ARTICLE V
Miscellaneous
Section 5.01 Notices. All notices, requests or other
communications provided for in this Agreement shall be made, if to the Company,
to the Secretary of the Company at the Company's principal executive office, and
if to Executive, to his address on the books of the Company (or to such other
address as the Company or Executive may give to the other for purposes of notice
hereunder).
Copies of all notices given to Executive shall be sent to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Facsimile: (212) 310-8007
Attention: Dennis J. Block, Esq.
Copies of all notices given to the Company shall be sent to:
Sidley & Austin
555 West Fifth Street
Los Angeles, California 90013-1010
Attention: Sherwin L. Samuels, Esq.
Facsimile: (213) 896-6600
And
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004-1980
Attention: Howard B. Adler, Esq.
Facsimile: (212) 859-8588
All notices, requests or other communications required or
permitted by this Agreement shall be made in writing either (a) by personal
delivery to the party entitled
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<PAGE> 15
thereto, (b) by mailing via certified mail, postage prepaid, return receipt
requested, in the United States mails to the last known address of the party
entitled thereto, (c) by reputable overnight courier service, or (d) by
facsimile with confirmation of receipt. The notice, request or other
communication shall be deemed to be received upon actual receipt by the party
entitled thereto; provided, however, that if a notice, request or other
communication is not received during regular business hours, it shall be deemed
to be received on the next succeeding business day of the Company.
Section 5.02 Assignment and Succession. The rights and
obligations of the Company under this Agreement may not be assigned in whole or
any part except in the case of a consolidation or merger with, or a transfer of
all or substantially all of the assets of the Company to, another entity
acceptable to Executive, which not later than 15 days prior to the consummation
of such combination transaction expressly assumes in a writing satisfactory in
form and substance to Executive all of the Company's obligations to Executive
hereunder, under all Existing and Pre-Existing Awards and any Subsequent Awards
and otherwise. No such assignment shall limit or restrict Executive's right to
terminate this Agreement for Good Reason, which right shall remain absolute.
Executive's rights and obligations hereunder are personal and may not be
assigned; provided, however, that in the event of the termination of Executive's
employment due to Executive's death or permanent disability, Executive's legal
representative shall have the right to receive the Severance Package as more
particularly set forth in Section 3.02 above. This Agreement shall inure to the
benefit of and be enforceable by Executive's heirs, beneficiaries and/or legal
representatives.
Section 5.03 Headings. The Article, Section, paragraph and
subparagraph headings are for convenience of reference only and shall not define
or limit the provisions hereof.
Section 5.04 Arbitration. In the event of any controversy,
dispute or claim arising out of or related to this Agreement or Executive's
employment by the Company, the parties shall negotiate in good faith in an
attempt to reach a mutually acceptable settlement of such dispute. If
negotiations in good faith do not result in a settlement of any such
controversy, dispute or claim, it shall, except as otherwise provided for herein
be finally settled by expedited arbitration conducted by a single arbitrator
selected as hereinafter provided (the "Arbitrator") in accordance with the
National Rules, subject to the following (the parties hereby agreeing that,
notwithstanding the provisions of Rule 1 of the National Rules, in the event
that there is a conflict between the provisions of the National Rules and the
provisions of this Agreement, the provisions of this Agreement shall control):
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<PAGE> 16
(a) The Arbitrator shall be determined from a list of names of
five impartial arbitrators each of whom shall be an attorney experienced in
arbitration matters concerning executive employment disputes, supplied by the
AAA chosen by Executive and the Company each in turn striking a name from the
list until one name remains (with the Company being the first to strike a name).
(b) The expenses of the arbitration shall be borne equally by
each party; and each party shall bear its own legal fees and expenses, except
that the prevailing party shall be awarded his or its reasonable attorney's fees
and expenses with respect to such dispute.
(c) The Arbitrator shall determine whether and to what extent
any party shall be entitled to damages under this Agreement; provided that no
party shall be entitled to punitive or consequential damages (including, in the
case of the Company, any claim for alleged lost profits or other damages that
would have been avoided had Executive remained an employee), and each party
waives all such rights, if any.
(d) The Arbitrator shall not have the power to add to nor
modify any of the terms or conditions of this Agreement. The Arbitrator's
decision shall not go beyond what is necessary for the interpretation and
application of the provision(s) of this Agreement in respect of the issue before
the Arbitrator. The Arbitrator shall not substitute his or her judgment for that
of the parties in the exercise of rights granted or retained by this Agreement.
The Arbitrator's award or other permitted remedy, if any, and the decision shall
be based upon the issue as drafted and submitted by the respective parties and
the relevant and competent evidence adduced at the hearing.
(e) The Arbitrator shall have the authority to award any
remedy or relief (including provisional remedies and relief) that a court of
competent jurisdiction could order or grant. The Arbitrator's written decision
shall be rendered within sixty days of the closing of the hearing. The decision
reached by the Arbitrator shall be final and binding upon the parties as to the
matter in dispute. To the extent that the relief or remedy granted by the
Arbitrator is relief or remedy on which a court could enter judgment, a judgment
upon the award rendered by the Arbitrator shall be entered in any court having
jurisdiction thereof (unless in the case of an award of damages, the full amount
of the award is paid within 10 days of its determination by the Arbitrator).
Otherwise, the award shall be binding on the parties in connection with their
continuing performance of this Agreement and, except as otherwise provided
herein with respect to Existing Grants, in any subsequent arbitral or judicial
proceedings between the parties.
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<PAGE> 17
(f) The arbitration shall take place in New York, New York or
Chicago, Illinois, as elected by the party commencing arbitration.
(g) The arbitration proceeding and all filing, testimony,
documents and information relating to or presented during the arbitration
proceeding shall be disclosed exclusively for the purpose of facilitating the
arbitration process and in any court proceeding relating to the arbitration, and
for no other purpose, and shall be deemed to be information subject to the
confidentiality provisions of this Agreement.
(h) The parties shall continue performing their respective
obligations under this Agreement notwithstanding the existence of a dispute
while the dispute is being resolved unless and until such obligations are
terminated or expire in accordance with the provisions hereof.
(i) The parties may obtain a pre-hearing exchange of
information including depositions, interrogatories, production of documents,
exchange of summaries of testimony or exchange of statements of position, and
the Arbitrator shall limit such disclosure to avoid unnecessary burden to the
parties and shall schedule promptly all discovery and other procedural steps and
otherwise assume case management initiative and control to effect an efficient
and expeditious resolution of the dispute. At any oral hearing of evidence in
connection with an arbitration proceeding, each party and its counsel shall have
the right to examine its witness and to cross-examine the witnesses of the other
party. No testimony of any witness, or any evidence, shall be introduced by
affidavit, except as the parties otherwise agree in writing.
(j) Notwithstanding the dispute resolution procedures
contained in this Section 5.04, either party may apply to any court sitting in
the County, City and State of New York (i) to enforce this agreement to
arbitrate, (ii) to seek provisional injunctive relief so as to maintain the
status quo until the arbitration award is rendered or the dispute is otherwise
resolved, (iii) to confirm any arbitration award, or (iv) to challenge or vacate
any final judgment, award or decision of the Arbitrator that does not comport
with the express provisions of this Section 5.04.
(k) No later than 5 business days prior to the due date for
payment of any excise tax imposed on Executive pursuant to Section 4999 of the
Code due and owing as a result of the accelerated vesting at the Effective Time
of any Existing Awards or Pre-Existing Awards (including any such awards which
may vest (or are deemed to have vested) at the Effective Time notwithstanding
the waiver of such vesting pursuant to Section 2.04(c) hereof), the Company
shall pay to Executive an amount equal to such excise tax (the "Excise Tax
Payment"). The Company shall not be required to pay to
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<PAGE> 18
Executive any amount in respect of any income, excise or other taxes
attributable to payment of the Excise Tax Payment.
Section 5.05 Invalidity. If any provision of this Agreement is
or becomes invalid, illegal or unenforceable in any respect under any law, the
validity, legality or enforceability of the remaining provisions hereof shall
not in any way be affected or impaired.
Section 5.06 Waivers. No omission or delay by either party
hereto in exercising any right, power or privilege hereunder shall impair such
right, power or privilege, nor shall any single or partial exercise of any such
right, power or privilege, preclude any further exercise thereof, or the
exercise of any other right, power or privilege.
Section 5.07 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
Section 5.08 Entire Agreement. Except as otherwise provided or
referred to herein, this Agreement contains the entire understanding of the
parties and supersedes all prior agreements and understandings relating to the
subject matter hereof. This Agreement may not be amended, except by a written
instrument hereafter signed by each of the parties hereto.
Section 5.09 Interpretation. The parties hereto acknowledge
and agree that each party and its or his counsel reviewed and negotiated the
terms and provisions of this Agreement and have contributed to its drafting.
Accordingly, (i) the rules of construction to the effect that any ambiguities
are resolved against the drafting party shall not be employed in the
interpretation of this Agreement, and (ii) the terms and provisions of this
Agreement shall be construed fairly as to all parties hereto and not in favor of
or against any party regardless of which party was generally responsible for the
preparation of this Agreement. Except where the context requires otherwise, all
references herein to Sections, paragraphs and clauses shall be deemed to be
reference to Sections, paragraphs and clauses of this Agreement. The words
"include", "including" and "includes" shall be deemed in each case to be
followed by the phrase "without limitation". The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement.
Section 5.10 Governing Law. This Agreement and the performance
hereof shall be construed and governed in accordance with the internal laws of
the State of New
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<PAGE> 19
York without reference to principles of conflict of laws.
Section 5.11 Indemnification. In addition to any additional
benefits provided under applicable state law, as a Trustee and officer of the
Company, Executive shall be entitled to the benefits of: (a) those provisions of
the Declaration of Trust of the Company, as amended, and of the Trustees
Regulations of the Company, as amended, which provide for indemnification of
officers and Trustees of the Company (and no such provision shall be amended in
any way to limit or reduce the extent of indemnification available to Executive
as a Trustee or officer of the Company), (b) the Indemnification Agreement
between the Company and Executive dated as of June 8, 1995, as amended through
the date hereof (the "Indemnification Agreement").
The rights of Executive under such indemnification obligations
shall survive the termination of this Agreement and be applicable for so long as
Executive may be subject to any claim, demand, liability, cost or expense, which
the indemnification obligations referred to in this Section are intended to
protect and indemnify him against.
The Company shall, at no cost to Executive, use its best
efforts to at all times include Executive, during the term of Executive's
employment hereunder and for so long thereafter as Executive may be subject to
any such claim, as an insured under any directors' and officers' liability
insurance policy maintained by the Company, which policy shall provide such
coverage in such amounts as the Board shall deem appropriate for coverage of all
Trustees and officers of the Company.
Section 5.12 Disclaimer. The name "Starwood Hotels & Resorts
Trust" is the designation of a Maryland real estate investment trust and its
Trustees (as Trustees but not personally) under a Declaration of Trust, dated
August 25, 1969, as amended and restated, and all persons dealing with Starwood
Hotels & Resorts Trust must look solely to Starwood Hotels & Resorts Trust's
property for the enforcement of any claims against Starwood Hotels & Resorts
Trust, as the Trustees, officers, agents and security holders of Starwood Hotels
& Resorts Trust assume no personal obligations of Starwood Hotels & Resorts
Trust, and their respective property shall not be subject to claims of any
person relating to such obligation.
Section 5.13 Effectiveness. This Agreement shall be of no
force and effect, and shall be treated as having had no force and effect from
the date hereof, if the Effective Time shall not have occurred by March 31,
1998.
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<PAGE> 20
IN WITNESS WHEREOF, the Company has caused this Agreement to
be signed by its duly authorized officer and the Executive has signed this
Agreement as of the day and year first above written.
STARWOOD HOTELS & RESORTS TRUST
By: /s/ Ronald C. Brown
------------------------------------------
Name: Ronald C. Brown
Its: Senior Vice President and Chief Financial
Officer
/s/ Barry S. Sternlicht
----------------------------------------------
BARRY S. STERNLICHT
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<PAGE> 21
EXHIBIT A
to
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
between
STARWOOD HOTELS & RESORTS TRUST
and
BARRY S. STERNLICHT
DATED AS OF FEBRUARY 17, 1998
Existing Awards:
Award as of February 21, 1996 of 45,000 Paired Shares in the form of warrants
vesting over a one year period.
Paired Option to purchase 975,000 Paired Shares vesting over the three year
period August 12, 1996 to August 12, 1999.
Paired Option to purchase 450,000 Paired Shares vesting over the five year
period August 12, 1996 to August 12, 2001.
Performance Awards relating to all Paired Shares underlying the above Paired
Options granted to Barry S. Sternlicht.
Paired Option, granted on September 25, 1997, to purchase 400,000 Paired Shares.
Pre-Existing Awards:
Paired Option to purchase 616,500 Paired Shares granted June 29, 1995.
Paired Option to purchase 9,000 Paired Shares granted June 29, 1995.
Paired Option to purchase 120,000 Paired Shares granted April 30, 1996.
Paired Option to purchase 9,000 Paired Shares granted June 30, 1996.
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<PAGE> 22
EXHIBIT B
to
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
between
STARWOOD HOTELS & RESORTS TRUST
and
BARRY S. STERNLICHT
DATED AS OF FEBRUARY 17, 1998
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<PAGE> 23
EXHIBIT B
1. The unvested portion (one-third (1/3rd)) of the 616,500 options granted
in June, 1995.
2. The 1/3rd of the 120,000 options granted in April, 1996 that is scheduled
to vest in April, 1998.
3. The 1/3rd of the 975,000 three-year options granted in August, 1996 that
is scheduled to vest in August, 1998.
4. The 1/4th of the 450,000 five-year options granted in August, 1996 that
is scheduled to vest in August, 1998.
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<PAGE> 24
BARRY S. STERNLICHT
C/O STARWOOD HOTELS AND RESORTS
2231 EAST CAMELBACK ROAD
SUITE 410
PHOENIX, AZ 85016
March 11,1998
Starwood Hotels & Resorts
Attention: Secretary
2231 East Camelback Road
Suite 410
Phoenix, AZ 85016
RE: 1998 INCENTIVE COMPENSATION
To whom it may concern:
Pursuant to Sections 5.01 and 5.08 of the Amended and Restated
Employment Agreement (the "Agreement"), dated as of February 17, 1998, between
Starwood Hotels & Resorts (the "Company") and me, I hereby agree to amend
Section 2.03 of the Agreement in order to provide that the Board of Directors of
the Company shall have until May 17, 1998 to establish a bonus or short term
incentive compensation program pursuant to which the Incentive Compensation (as
defined in Section 2.03 of the Agreement) for the full calendar year ending
December 31, 1998 shall be determined.
In all other respects the Agreement shall remain in full force
and effect.
Please acknowledge the Company's agreement to the foregoing by
having this letter signed by its duly authorized officer and having a copy
returned to me at the address set forth above.
/s/ Barry S. Sternlicht
-----------------------------------
BARRY S. STERNLICHT
<PAGE> 25
IN WITNESS WHEREOF, the Company has caused this letter to be
signed by its duly authorized officer.
STARWOOD HOTELS & RESORTS
By: /s/ Steven R. Goldman
Name: Steven R. Goldman
Its: Executive Vice President
cc: Sherwin L. Samuels, Esq. (Sidley & Austin)
Howard B. Adler, Esq. (Fried, Frank, Harris,
Shriver & Jacobson)
Dennis J. Block, Esq. (Weil, Gotshal & Manges LLP)
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<PAGE> 1
Exhibit 10.6
[Execution Copy]
STARWOOD HOTELS & RESORTS TRUST
NON-QUALIFIED STOCK OPTION AGREEMENT
DATED FEBRUARY 17, 1998
Starwood Hotels & Resorts Trust, a trust organized under the laws of
Maryland (the "Company"), hereby grants to Barry S. Sternlicht (the "Optionee"),
as of February 17, 1998 (the "Option Date"), pursuant to the provisions of the
Starwood Lodging Trust 1995 Long-Term Incentive Plan (as amended and restated)
(the "Plan"), a non-qualified option (the "Option") to purchase from the Company
2,500,000 Paired Shares (as defined in the Plan) at a price per Paired Share
equal to the Fair Market Value (as defined in the Plan) of a Paired Share on the
Option Date upon and subject to the terms and conditions set forth below.
References to employment by the Company shall include employment by a subsidiary
or affiliate of the Company. Capitalized terms not defined herein or in the
Amended and Restated Employment Agreement, dated as of February 17, 1998,
entered into between the Optionee and the Company (the "Employment Agreement")
(for so long as the term of such agreement has not terminated) shall have the
meanings specified in the Plan.
1. Option Subject to Acceptance of Agreement.
The Option may not be exercised unless the Optionee shall accept this
Agreement by executing it in the space provided below and returning such
original execution copy to the Company.
2. Time and Manner of Exercise of Option.
2.1 Maximum Term of Option. In no event may the Option be exercised, in
whole or in part, after ten years from the Option Date (the "Expiration Date").
If the Effective Time (as defined in Section 1.2 of the Amended and Restated
Agreement and Plan of Merger among Starwood Lodging Corporation, Chess
Acquisition Corp., the Company and ITT Corporation, dated as of November 12,
1997 (the "Merger Agreement")) shall not have occurred by March 31, 1998, the
Option shall expire and be of no force and effect effective as of the Option
Date. Notwithstanding the terms of the Plan, the transaction contemplated by the
Merger Agreement shall not constitute a "Change of Control" under the Plan for
purposes of this Agreement.
2.2 Exercise of Option. (a) The Option shall vest and become exercisable
as to one-third of the number of Paired Shares subject to the Option on each
anniversary of December 31, 1997, commencing with the first anniversary
(occurring in 1998) through the third anniversary (occurring in 2000) and
otherwise as provided
<PAGE> 2
below in this Section 2.2.
(b) If the Optionee's employment by the Company (i) is terminated by the
Company for "Cause" or (ii) is terminated by the Optionee without "Good Reason,"
the portion of the Option which was not theretofore vested and exercisable on
the date of termination shall terminate automatically on the date of
termination. In the event of a termination of the Optionee's employment
described in this Section 2.2(b), the Option, to the extent vested and
exercisable on the date of termination, shall, subject to Section 2.2(d) hereof,
remain exercisable until the earliest to occur of: (i) the date which is three
months following the date of termination, and (ii) the Expiration Date, after
which the Option shall expire. If the Optionee's employment by the Company is
terminated by the Company for "Cause," the date of termination shall be the date
on which the Company delivers a Preliminary Cause Notice. For purposes of this
Agreement, and notwithstanding the terms of the Employment Agreement, "Good
Reason" shall not include the failure, by December 1, 1999, of the Company and
the Optionee to agree to an extension of the Term beyond December 31, 1999.
(c) If the Optionee's employment by the Company is terminated (i) by the
Company other than for "Cause," (ii) by the Optionee with "Good Reason," or
(iii) due to the Optionee's death or Disability, 100% of the portion of the
Option which was not theretofore vested and exercisable on the date of
termination shall vest and become exercisable on the date of termination, and
the Option, to the extent vested and exercisable as of the date of termination,
after taking into account this Section 2.2(c), shall, subject to Section 2.2(d)
hereof, remain exercisable by the Optionee or the Optionee's Legal
Representative or Permitted Transferee, as the case may be, until the earliest
to occur of: (i) the date which is three years following the date of termination
(one year in the case of a termination of the Optionee's employment due to the
Optionee's death or Disability), and (ii) the Expiration Date, after which the
Option shall expire.
(d) If the Optionee dies at any time following a termination of the
Optionee's employment and prior to the expiration of the Option, the Option
shall be exercisable, to the extent exercisable by the Optionee as of the date
of death, by the Optionee's Legal Representative or Permitted Transferee, as the
case may be, until the date which is one year following the date of the
Optionee's death (but no later than the Expiration Date), after which the Option
shall expire.
2.3 Method of Exercise. Subject to the limitations set forth in this
Agreement, the Option may be exercised by the Optionee (1) by giving written
notice to the Company specifying the number of whole Paired Shares to be
purchased and accompanied by payment therefor in full (or arrangement made for
such payment to the Company's satisfaction) either (i) in cash, (ii) previously
owned whole Paired Shares (which the Optionee has held for at least six months
prior to the delivery of such Paired Shares or which the Optionee purchased on
the open market and for which the Optionee
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<PAGE> 3
has good title, free and clear of all liens and encumbrances) having a Fair
Market Value, determined as of the date of exercise, equal to the aggregate
purchase price payable pursuant to the Option by reason of such exercise, (iii)
in cash by a broker-dealer acceptable to the Company to whom the Optionee has
submitted an irrevocable notice of exercise or (iv) a combination of (i) and
(ii), and (2) by executing such documents as the Company may reasonably request.
The Committee shall have sole discretion to disapprove of an election pursuant
to either clause (ii), (iii) or (iv). Any fraction of a Paired Share which would
be required to pay such purchase price shall be disregarded and the remaining
amount due shall be paid in cash by the Optionee. No certificate representing a
Paired Share shall be delivered until the full purchase price therefor has been
paid.
2.4 Termination of Option. (a) In no event may the Option be exercised
after it terminates as set forth in this Agreement.
(b) In the event that rights to purchase all or a portion of the Paired
Shares subject to the Option expire or are exercised, canceled, forfeited or
transferred pursuant to a Limited Transfer (as defined below), the Optionee
shall promptly return this Agreement to the Company for full or partial
cancellation, as the case may be. Such cancellation shall be effective
regardless of whether the Optionee returns this Agreement. If the Optionee
continues to have rights to purchase Paired Shares hereunder, the Company shall,
within 10 days of the Optionee's delivery of this Agreement to the Company,
either (i) mark this Agreement to indicate the extent to which the Option has
expired or been exercised, canceled, forfeited or transferred or (ii) issue to
the Optionee a substitute option agreement applicable to such rights, which
agreement shall otherwise be identical to this Agreement in form and substance.
3. Additional Terms and Conditions of Option.
3.1 Transferability of Option. (a) For the period commencing on the Option
Date and ending on June 30, 1998, the Optionee may transfer (a "Limited
Transfer") to Madison Grose, Jonathan Eilian and/or any other officers of the
Company or Starwood Capital Group, LLC, a Connecticut limited liability company,
designated by the Optionee (each, a "Limited Transferee") the right to purchase
from the Company an aggregate of 500,000 Paired Shares subject to the Option. A
Limited Transfer shall be made only pursuant to a written agreement approved by
the Company prior to the execution thereof. The aggregate number of Paired
Shares subject to the Option shall be reduced by the number of Paired Shares
subject to each Limited Transfer.
(b) The Option may not be transferred by the Optionee other than as
provided in Section 3.1(a) above, by will or the laws of descent and
distribution or pursuant to beneficiary designation procedures approved by the
Company. Except to the extent permitted by the foregoing sentence, during the
Optionee's lifetime the Option is
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<PAGE> 4
exercisable only by the Optionee or the Optionee's Legal Representative. Except
as permitted by the foregoing, the Option may not be sold, transferred,
assigned, pledged, hypothecated, voluntarily encumbered or otherwise disposed of
(whether by operation of law or otherwise) or be subject to execution,
attachment or similar process. Upon any attempt to so sell, transfer, assign,
pledge, hypothecate, voluntarily encumber or otherwise dispose of the Option,
the Option and all rights hereunder shall, to the extent of any such attempt,
immediately become null and void.
3.2 Investment Representation. The Optionee hereby represents and
covenants that (a) any Paired Shares purchased upon exercise of the Option will
be purchased for investment and not with a view to the distribution thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), unless such purchase has been registered under the Securities Act and any
applicable state securities laws; (b) any subsequent sale of any such Paired
Shares shall be made either pursuant to an effective registration statement
under the Securities Act and any applicable state securities laws, or pursuant
to an exemption from registration under the Securities Act and such state
securities laws; and (c) if requested by the Company, the Optionee shall submit
a written statement, in form satisfactory to the Company, to the effect that
such representation (x) is true and correct as of the date of purchase of any
Paired Shares hereunder or (y) is true and correct as of the date of any sale of
any such Paired Shares, as applicable. As a further condition precedent to any
exercise of the Option, the Optionee shall comply with all regulations and
requirements of any regulatory authority having control of or supervision over
the issuance or delivery of the Paired Shares and, in connection therewith,
shall execute any documents which the Board or the Committee shall in its sole
discretion deem necessary or advisable.
3.3 Withholding Taxes. (a) As a condition precedent to the delivery of
Paired Shares upon exercise of the Option, the Optionee shall, upon request by
the Company, pay to the Company in addition to the purchase price of the Paired
Shares, such amount of cash as the Company may be required, under all applicable
federal, state, local or other laws or regulations, to withhold and pay over as
income or other withholding taxes (the "Required Tax Payments") with respect to
such exercise of the Option. If the Optionee shall fail to advance the Required
Tax Payments after request by the Company, the Company may, in its discretion,
deduct any Required Tax Payments from any amount then or thereafter payable by
the Company to the Optionee.
(b) The Optionee may elect to satisfy his or her obligation to pay the
Required Tax Payments by any of the following means: (1) a cash payment to the
Company pursuant to Section 3.3(a), (2) delivery to the Company of previously
owned whole Paired Shares (which the Optionee has held for at least six months
prior to the delivery of such Paired Shares or which the Optionee purchased on
the open market and for which the Optionee has good title, free and clear of all
liens and encumbrances)
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<PAGE> 5
having a Fair Market Value, determined as of the date the obligation to withhold
or pay taxes first arises in connection with the Option (the "Tax Date"), equal
to the Required Tax Payments, (3) a cash payment by a broker-dealer acceptable
to the Company to whom the Optionee has submitted an irrevocable notice of
exercise or (4) any combination of (1) and (2). The Committee shall have sole
discretion to disapprove of an election pursuant to any of clauses (2)-(4).
Paired Shares to be delivered may not have a Fair Market Value in excess of the
minimum amount of the Required Tax Payments. Any fraction of a Paired Share
which would be required to satisfy any such obligation shall be disregarded and
the remaining amount due shall be paid in cash by the Optionee. No certificate
representing a Paired Share shall be delivered until the Required Tax Payments
have been satisfied in full.
(c) Unless the Committee otherwise determines, if the Optionee is subject
to Section 16 of the Exchange Act, the Optionee may deliver to the Company
previously owned whole Paired Shares in accordance with Section 3.3(b), but only
if such delivery is in connection with the delivery of Paired Shares in payment
of the exercise price of the Option.
3.4 Adjustment. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Paired Shares other than a regular cash
dividend, the number and class of securities subject to the Option and the
purchase price per security shall be appropriately adjusted by the Committee
without an increase in the aggregate purchase price. If any adjustment would
result in a fractional security being subject to the Option, the Company shall
pay the Optionee, in connection with the first exercise of the Option, in whole
or in part, occurring after such adjustment, an amount in cash determined by
multiplying (i) the fraction of such security (rounded to the nearest hundredth)
by (ii) the excess, if any, of (A) the fair market value of a Paired Share on
the exercise date over (B) the exercise price of the Option. The decision of the
Committee regarding any such adjustment shall be final, binding and conclusive.
3.5 Compliance with Applicable Law. The Option is subject to the condition
that if the listing, registration or qualification of the Paired Shares subject
to the Option upon any securities exchange or under any law, or the consent or
approval of any governmental body, or the taking of any other action is
necessary or desirable as a condition of, or in connection with, the purchase or
delivery of Paired Shares hereunder, the Option may not be exercised, in whole
or in part, unless such listing, registration, qualification, consent or
approval shall have been effected or obtained, free of any conditions not
acceptable to the Company. The Company agrees to use reasonable efforts to
effect or obtain any such listing, registration, qualification, consent or
approval.
3.6 Delivery of Certificates. Upon the exercise of the Option, in whole
-5-
<PAGE> 6
or in part, the Company shall deliver or cause to be delivered one or more
certificates representing the number of Paired Shares purchased against full
payment therefor. The Company shall pay all original issue or transfer taxes and
all fees and expenses incident to such delivery, except as otherwise provided in
Section 3.3 hereof.
3.7 Option Confers No Rights as Stockholder. The Optionee shall not be
entitled to any privileges of ownership with respect to Paired Shares subject to
the Option unless and until purchased and delivered upon the exercise of the
Option, in whole or in part, and the Optionee becomes a stockholder of record
with respect to such delivered Paired Shares; and the Optionee shall not be
considered a stockholder of the Company or the Corporation with respect to any
such Paired Shares not so purchased and delivered.
3.8 Option Confers No Rights to Continued Employment. In no event shall
the granting of the Option or its acceptance by the Optionee give or be deemed
to give the Optionee any right to continued employment by the Company or any
affiliate of the Company.
3.9 Decisions of Board or Committee. The Board or the Committee shall have
the right to resolve all questions which may arise in connection with the Option
or its exercise. Any interpretation, determination or other action made or taken
by the Board or the Committee regarding the Plan or this Agreement shall be
final, binding and conclusive (subject to the provisions for termination by the
Company for Cause and termination by the Optionee for Good Reason as set forth
in the Employment Agreement).
3.10 Company to Reserve Paired Shares. The Company shall at all times
prior to the expiration or termination of the Option, reserve or cause to be
reserved and keep or cause to be kept available, either in its treasury or out
of its authorized but unissued Paired Shares, the full number of Paired Shares
subject to the Option from time to time.
3.11 Agreement Subject to the Plan. Except to the extent otherwise
expressly provided herein, this Agreement is subject to the provisions of the
Plan and shall be interpreted in accordance therewith. The Optionee hereby
acknowledges receipt of a copy of the Plan.
4. Miscellaneous Provisions.
4.1 Designation as Non-Qualified Stock Option. The Option is hereby
designated as not constituting an "incentive stock option" within meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"); this
Agreement shall be interpreted and treated consistently with such designation.
-6-
<PAGE> 7
4.2 Meaning of Certain Terms. (a) As used herein, the term "Legal
Representative" shall include an executor, administrator, legal representative,
beneficiary or similar person and the term "Permitted Transferee" shall include
any transferee (i) pursuant to a transfer permitted under Section 4.4 of the
Plan and Section 3.1 hereof or (ii) designated pursuant to beneficiary
designation procedures which may be approved by the Company.
4.3 Successors. This Agreement shall be binding upon and inure to the
benefit of any successor or successors of the Company and any person or persons
who shall, upon the death of the Optionee, acquire any rights hereunder in
accordance with this Agreement or the Plan.
4.4 Notices. All notices, requests or other communications provided for in
this Agreement shall be made, if to the Company, to the Secretary of the Company
at the Company's principal executive office, and if to the Optionee, to his
address on the books of the Company (or to such other address as the Company or
Optionee may give to the other for purposes of notice hereunder).
Copies of all notices given to the Company shall be sent to:
Sidley & Austin
555 W. 5th St.
Los Angeles, CA 90013-1010
Attention: Sherwin L. Samuels, Esq.
Facsimile: (213) 896-6600
And
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004-1980
Attention: Howard B. Adler, Esq.
Facsimile: (212) 859-8588
All notices, requests or other communications provided for in this
Agreement shall be made in writing either (a) by personal delivery to the party
entitled thereto, (b) by facsimile with confirmation of receipt, (c) by mailing
in the United States mails to the last known address of the party entitled
thereto or (d) by express courier service. The notice, request or other
communication shall be deemed to be received upon personal delivery, upon
confirmation of receipt of facsimile transmission or upon receipt by the party
entitled thereto if by United States mail or express courier service; provided,
however, that if a notice, request or other communication is not received during
regular business hours, it shall be deemed to be received on the next succeeding
business day of
-7-
<PAGE> 8
the Company.
4.5 Governing Law. The Option, this Agreement, and all determinations made
and actions taken pursuant hereto and thereto, to the extent not governed by the
laws of the United States, shall be governed by the laws of the State of New
York and construed in accordance therewith without giving effect to principles
of conflicts of laws.
4.6 Counterparts. This Agreement may be executed in two counterparts each
of which shall be deemed an original and both of which together shall constitute
one and the same instrument.
4.7 Disclaimer. The name "Starwood Hotels & Resorts Trust" is the
designation of a Maryland real estate investment trust and its Trustees (as
Trustees but not personally) under a Declaration of Trust dated August 25, 1969,
as amended and restated, and all persons dealing with Starwood Hotels & Resorts
Trust must look solely to Starwood Hotels & Resorts Trust's property for the
enforcement of any claims against Starwood Hotels & Resorts Trust, as the
Trustees, officers, agents and security holders of Starwood Hotels & Resorts
Trust assume no personal obligations of Starwood Hotels & Resorts Trust, and
their respective property shall not be subject to claims of any person relating
to such obligation.
STARWOOD HOTELS & RESORTS TRUST
By: /s/ Ronald C. Brown
Name: Ronald C. Brown
Its: Senior Vice President and Chief
Financial Officer
Accepted
/s/ Barry S. Sternlicht
- -----------------------
Barry S. Sternlicht
"Optionee"
-8-
<PAGE> 1
Exhibit 10.7
PERSONAL AND CONFIDENTIAL
March 2, 1998
Ms. Susan R. Bolger
7120 Caron Drive
Paradise Valley, AZ 85253
Dear Susan,
We are very pleased to extend this offer of Executive Vice President of Human
Resources, Starwood Hotels and Resorts Worldwide, Inc. ("Starwood") to you. The
following will outline the specifics of your offer of employment:
POSITION:
You shall be the Executive Vice President of Human Resources of the Company and
shall perform such duties and services as may be assigned to you by the Chief
Executive Officer and/or the Board of Directors. You shall devote your full time
and attention to the affairs of the Company and to your duties as Executive Vice
President of Human Resources.
BASE SALARY:
Your initial base salary, expressed in semi-monthly terms, will be $12,500.00
(on an annualized basis equivalent to $300,000.00), annualized from the date of
acceptance, and will be subject to the appropriate withholdings for FICA, state
and federal taxes, and Medicare.
BONUS:
You will be eligible to receive a performance bonus based upon achieving
specified performance criteria which will be established and approved. The
maximum bonus will be defined in accordance with the Company's new plan.
However, for 1998 you will be guaranteed a minimum bonus equal to 50% of your
base pay prorated for the calendar year. In addition, you will receive an
additional bonus of $75,000 for calendar year 1997.
<PAGE> 2
March 2, 1998
Page 2
RETENTION BONUS:
In lieu of the base salary payment for change of control, you will be paid a
retention bonus equal to one year's base salary, at your current base salary
level, conditioned upon your staying with the Company at least one year after
the ITT closing. If you voluntarily leave the employ of the Company within that
one year period, you would be obligated to repay the Company the retention bonus
and the tax on the restricted stock.
EMPLOYEE BENEFITS:
You shall be eligible to participate in all employee benefit programs as are
generally available to other key executives of the Company.
OPTIONS:
The Company will recommend to the Options Committee a grant of options for
40,000 Paired Shares for you in accordance with the Long Term Incentive Plan
(the "LTIP"), which would be exercisable at the then fair market value of the
Paired Shares in accordance with the LTIP, and would vest over the normal three
year period following the grant.
TAXES ON RESTRICTED STOCK:
You received a restricted stock Award under the Company's 1995 LTIP in August
of 1996. The Company will pay you an amount to cover taxes on the Paired Shares
included in that Award. The amount of the payment would be 40% of the market
value of Paired Shares at the time of vesting (but not in excess of $53 per
Paired Share) multiplied by the number of Paired Shares then vesting.
RELOCATION EXPENSES:
To help cover the cost of living differential between Phoenix and
Fairfield/Westchester Counties, the company will pay the reasonable,
out-of-pocket costs of relocating your household furnishings and your family;
all relocation expenses will be grossed up. Other relocation costs to be covered
as necessary include third party purchase of your Phoenix home to facilitate an
expedient relocation and mortgage duplication expenses for a period not to
exceed six months. Upon your move to the Fairfield/Westchester County area, the
Company will make a second mortgage home loan available to you in the amount of
$400,000 which would be due in five years or upon termination of employment for
any reason. The loan would be non-interest bearing and will be secured by a
second mortgage on your home in Fairfield/Westchester County.
TERMINATION/SEVERANCE:
The Company reserves the right to terminate your employment with or without
cause at any time. In the event of an involuntary termination without cause, the
reduction of your role or responsibilities, a change in control of the Company,
or in the event of any breach by the Company of your employment agreement
entitling you to terminate same (after expiration of applicable notice and cure
periods for the benefit of the Company), you shall receive, as your sole right,
exclusive remedy and liquidated damages, a one time termination payment equal to
twelve (12) months base salary. In addition, the vesting of
<PAGE> 3
March 2, 1998
Page 3
your options shall be accelerated at the date of such termination. The Company
will also continue to provide medical benefits coverage during the 12 month
period subsequent to the termination of your employment.
No severance shall be due in the event that you are terminated for gross
misconduct or in the event that you leave the full-time employ of the Company
voluntarily.
In the event of any employment-related disputes with respect to your employment
by the Company, you and the Company agree that the same shall be resolved
through binding arbitration in the jurisdiction of the Company's headquarters
and in accordance with the rules and procedures from time to time of the
American Arbitration Association.
This letter represents the entirety of our agreement with respect to your
employment and any prior discussions or negotiations are hereby merged herein.
If this offer is acceptable to you, please sign this letter in the space
provided below and send it to my attention.
Very truly yours,
STARWOOD HOTELS AND RESORTS WORLDWIDE, INC.
/s/ Alan M. Schnaid
- -------------------------------------------
Alan M. Schnaid
Vice President, Corporate Controller
ACCEPTED AND AGREED TO:
/s/ Susan R. Bolger
- ------------------------------------------
Susan R. Bolger
cc: Personnel File
<PAGE> 1
Exhibit 10.8
March 25, 1998
Mr. Ronald C. Brown
6026 E. Cholla Lane
Scottsdale, AZ 85253
Dear Ron,
We are very pleased to extend to you this offer of employment as Executive Vice
President and Chief Financial Officer, Starwood Hotels and Resorts Worldwide,
Inc. ("Starwood" or the "Company"). The following will outline the specifics of
this offer of employment:
POSITION:
You shall be the Executive Vice President and Chief Financial Officer of
Starwood and shall perform such duties and services as will be assigned to you.
You shall devote your full time and attention to the affairs of the Company and
to your duties as Executive Vice President and Chief Financial Officer.
BASE SALARY:
Your initial base salary, expressed in semi-monthly terms, will be $13,541.67
(or on an annualized basis equivalent to $325,000) annualized from the date
hereof and will be subject to the appropriate withholdings for FICA, state and
federal unemployment tax and Medicare.
BONUS:
You will be eligible to receive a performance bonus based upon achieving
specified performance criteria which will be established and approved. The
maximum bonus will be defined in accordance with the Company's new plan which
will be recommended and must be approved by the Board of Directors.
RETENTION BONUS:
In lieu of the base salary payment for change of control, you will be paid a
retention bonus equal to one year's base salary, at your current base salary
level, conditioned upon your staying with the Company at least one year after
the ITT Merger. If you voluntarily leave the employ of the Company within that
one year period, you would be obligated to repay the Company the retention
bonus and the tax payment on the restricted stock.
EMPLOYEE BENEFITS:
You shall be eligible to participate in all employee benefit programs as are
generally available to other key executives of the Company.
<PAGE> 2
OPTIONS:
The Company will recommend to the Options Committee an additional grant of
options for 10,000 Paired Shares for you in accordance with the Long Term
Incentive Plan (the "LTIP") at current market, which would be exercisable at the
then fair market value of the Paired Shares in accordance with the LTIP and
would vest over the normal three year period following the grant.
TAXES ON RESTRICTED STOCK
You received a restricted stock Award under the Company's 1995 LTIP in August
of 1996. The Company will pay you an amount to cover taxes on the Paired Shares
included in that Award. The amount of the payment would be 40% of the market
value of Paired Shares at the time of vesting (but not in excess of $53 per
Paired Share) multiplied by the number of Paired Shares then vesting. If you
voluntarily leave the employ of the Company within that one year period, you
would be obligated to repay the Company the tax payment on the restricted stock.
TERMINATION/SEVERANCE:
The Company reserves the right to terminate your employment with or without
cause at any time. In the event of an involuntary termination without cause, or
relocation of the Finance offices from Phoenix, a material change in control of
the Company, or in the event of any breach by the Company of your employment
agreement entitling you to terminate same (after expiration of applicable notice
and cure periods for the benefit of the Company), you shall receive, as your
sole right, exclusive remedy and liquidated damages, a one time termination
payment equal to twelve (12) months base salary. In addition, the vesting of
your options shall be accelerated at the date of such termination. The Company
will also continue to provide medical benefits coverage during the twelve (12)
month period subsequent to the termination of your employment.
No severance shall be due in the event that you are terminated for gross
misconduct or in the event that you leave the full-time employ of the Company
voluntarily.
In the event of any employment-related disputes with respect to your employment
by the Company, you and the Company agree that the same shall be resolved
through binding arbitration in the jurisdiction of the Company's headquarters
and in accordance with the rules and procedures from time to time of the
American Arbitration Association.
This letter represents the entirety of our agreement with respect to your
employment and any prior discussions or negotiations are hereby merged herein.
If this offer is acceptable to you, then please sign this letter in the space
provided below and send it to my attention.
Very truly yours,
STARWOOD HOTELS AND RESORTS WORLDWIDE, INC.
/s/ Susan R. Bolger
- -------------------------------------------
Susan R. Bolger
Executive Vice President, Human Resources
ACCEPTED AND AGREED TO:
/s/ Ronald C. Brown
- -------------------------------------------
Ronald C. Brown
<PAGE> 1
Exhibit 10.9
PRIVILEGED & CONFIDENTIAL
March 25, 1998
Mr. Juergen Bartels
The Highlands
Seattle, WA 98177
Dear JB:
We are very pleased to extend this offer of Chief Executive Officer, The Hotel
Group for Starwood Hotels & Resorts Worldwide, Inc. ("Starwood"). The following
will outline the specifics of your offer of employment:
POSITION:
You shall be the Chief Executive Officer of The Hotel Group and shall perform
such duties and services as may be assigned to you by the Board of Directors.
You shall devote your full time and attention to the affairs of the Company and
to your duties as Chief Executive Officer of the Hotel Group.
BASE SALARY:
Your initial base salary, expressed in semi-monthly terms, will be $21,875.00
(on an annualized basis equivalent to $525,000.00), annualized from date of
acceptance and will be subject to the appropriate withholdings for FICA, state
and federal taxes, and Medicare.
BONUS:
You will be eligible to receive a performance bonus based upon achieving
specified performance criteria which will be established and approved. The
maximum bonus will be defined in accordance with the Company's new plan (see
attached) which will be recommended and must be approved by the Board of
Directors.
<PAGE> 2
Mr. Juergen Bartels
Page 2
OPTIONS:
The Company will recommend to the Options Committee a grant of options for
250,000 Paired Shares for you in accordance with the Long Term Incentive Plan
(the "LTIP"), at current market which would be exercisable at the then fair
market value of the Paired Shares in accordance with the LTIP and would vest
over the normal three year period following grant. The strike price of the
options will be the current market price at the close of market on the day prior
to the grant date.
RELOCATION EXPENSES:
The Company will pay the reasonable, out-of-pocket costs of relocating your
household furnishings and your family; all relocation expenses will be grossed
up. Other relocation costs to be covered as necessary include third party
purchase of your Seattle home to facilitate an expedient relocation.
TERMINATION/SEVERANCE:
The Company reserves the right to terminate your employment with or without
cause at any time. In the event of an involuntary termination without cause, the
reduction of your role or responsibilities, a change in control of the Company,
or in the event of any breach by the Company of your employment agreement
entitling you to terminate same (after expiration of applicable notice and cure
periods for the benefit of the Company), you shall receive, as your sole right,
exclusive remedy and liquidated damages, a one time termination payment equal to
twelve (12) months base salary. In addition, the vesting of your options shall
be accelerated at the date of such termination. The Company will also continue
to provide medical benefits coverage during the 12 month period subsequent to
the termination of your employment.
No severance shall be due in the event that you are terminated for gross
misconduct or in the event that you leave the full-time employ of the Company
voluntarily.
In the event of any employment-related disputes with respect to your employment
by the Company, you and the Company agree that the same shall be resolved
through binding arbitration in the jurisdiction of the Company's headquarters
and in accordance with the rules and procedures from time to time of the
American Arbitration Association.
NON-SOLICITATION/CONFIDENTIALITY:
All benefits provided hereunder shall be contingent on your compliance with the
non-solicitation/confidentiality covenants which will be set forth in a separate
agreement.
<PAGE> 3
Mr. Juergen Bartels
Page 3
This letter represents the entirety of our agreement with respect to your
employment and any prior discussions or negotiations are hereby merged herein.
If this offer is acceptable to you, please sign this letter in the space
provided below and send it to my attention.
Very truly yours,
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
/s/ Susan R. Bolger
- -----------------------------------------
Susan R. Bolger
Executive Vice President, Human Resources
ACCEPTED AND AGREED TO:
/s/ Juergen Bartels
- -----------------------------------------
Juergen Bartels
cc: Personnel File
<PAGE> 1
Exhibit 10.10
PERSONAL & CONFIDENTIAL
March 25, 1998
Mr. Ted Darnall
8235 N. 62nd Place
Paradise Valley, AZ 85253
Dear Ted:
We are very pleased to extend this offer of Executive Vice President, Hotel
Operations for Starwood Hotels & Resorts Worldwide, Inc. ("Starwood"). The
following will outline the specifics of your offer of employment:
POSITION:
You shall be the Executive Vice President of Hotel Operations and shall perform
such duties and services as may be assigned to you by the President, The
Americas. You shall devote your full time and attention to the affairs of the
Company and to your duties as Executive Vice President of Hotel Operations.
BASE SALARY:
Your initial base salary, expressed in semi-monthly terms, will be $14,583.33
(on an annualized basis equivalent to $350,000.00), annualized from date of
acceptance and will be subject to the appropriate withholdings for FICA, state
and federal taxes, and Medicare.
BONUS:
You will be eligible to receive a performance bonus based upon achieving
specified performance criteria which will be established and approved. The
maximum bonus will be defined in accordance with the Company's new plan which
will be recommended and must be approved by the Board of Directors.
RETENTION BONUS:
In lieu of the base salary payment for change of control, you will be paid a
retention bonus equal to one year's base salary, at your current base salary
level, conditioned upon your
<PAGE> 2
Mr. Ted Darnall
March 25, 1998
Page 2
staying with the Company at least one year after the ITT closing. If you
voluntarily leave the employ of the Company within that one year period, you
would be obliged to repay the Company the retention bonus and the tax payment on
the restricted stock.
OPTIONS:
The Company will recommend to the Options Committee an additional grant of
options for 125,000 Paired Shares for you in accordance with the Long Term
Incentive Plan (the "LTIP") at current market, which would be exercisable at the
then fair market value of the Paired Shares in accordance with the LTIP and
would vest over the normal three year period following grant. The strike price
of the options will be the current market price at the close of market on the
day prior to the grant date.
TAXES ON RESTRICTED STOCK:
You received a restricted stock Award under the Company's 1995 LTIP in August
of 1996. The Company will pay you an amount to cover taxes on the Paired Shares
included in that Award. The amount of the payment would be 40% of the market
value of Paired Shares at the time of vesting (but not in excess of $53 per
Paired Share) multiplied by the number of Paired Shares then vesting. If you
voluntarily leave the employ of the Company within that one year period, you
would be obligated to repay the Company the tax payment on the restricted stock.
RELOCATION EXPENSES:
To help cover the cost of living differential between Phoenix and
Fairfield/Westchester Counties, the Company will pay the reasonable,
out-of-pocket costs of relocating your household furnishings and your family;
all relocation expenses will be grossed up. Other relocation costs to be covered
as necessary include third party purchase of your Phoenix home to facilitate an
expedient relocation. Upon your move to the Fairfield/Westchester County area,
the Company will make a second mortgage home loan available to you in the amount
of $600,000 which would be due in five years or upon termination of employment
for any reason. The loan will be non-interest bearing and will be secured by a
second mortgage on your home in Fairfield/Westchester County.
TERMINATION/SEVERANCE:
The Company reserves the right to terminate your employment with or without
cause at any time. In the event of an involuntary termination without cause, the
reduction of your role or responsibilities, a chance in control of the Company,
or in the event of any breach by the Company of your employment agreement
entitling you to terminate same (after expiration of applicable notice and cure
periods for the benefit of the Company), you shall receive, as your sole right,
exclusive remedy and liquidated damages, a one time termination payment equal to
twelve (12) months base salary. In addition, the vesting of your options shall
be accelerated at the date of such termination. The Company will also
<PAGE> 3
Mr. Ted Darnall
March 25, 1998
Page 3
continue to provide medical benefits coverage during the 12 month period
subsequent to the termination of your employment.
No severance shall be due in the event that you are terminated for gross
misconduct or in the event that you leave the full-time employ of the Company
voluntarily.
In the event of any employment-related disputes with respect to your employment
by the Company, you and the Company agree that the same shall be resolved
through binding arbitration in the jurisdiction of the Company's headquarters
and in accordance with the rules and procedures from time to time of the
American Arbitration Association.
NON-SOLICITATION/CONFIDENTIALITY:
All benefits provided hereunder shall be contingent on your compliance with the
non-solicitation/confidentiality covenants which will be set forth in a separate
agreement.
This letter represent the entirety of our agreement with respect to your
employment and any prior discussions or negotiations are hereby merged herein.
If this offer is acceptable to you, please sign this letter in the space
provided below and send it to my attention.
Very truly yours,
STARWOOD HOTELS AND RESORTS WORLDWIDE, INC.
/s/ Susan R. Bolger
- -------------------------------------------
Susan R. Bolger
Executive Vice President, Human Resources
ACCEPTED AND AGREED TO:
/s/ Ted Darnall
- -------------------------------------------
Ted Darnall
cc: Personnel File
<PAGE> 1
Exhibit 10.11
PERSONAL & CONFIDENTIAL
March 25, 1998
Mr. Steve Goldman
6900 East Berneil Drive
Paradise Valley, AZ 85253
Dear Steve:
We are very pleased to extend this offer of Executive Vice President,
Acquisitions and Development for Starwood Hotels & Resorts ("Starwood").
The following will outline the specifics of your offer of employment:
POSITION:
You shall be the Executive Vice President of Acquisitions and Development with
primary responsibility for worldwide acquisitions, development, and franchising
of all Starwood hotels and shall perform such duties and services as may be
assigned to you. You shall devote your full time and attention to the affairs of
the Company and to your duties as Executive Vice President of Acquisitions and
Development.
BASE SALARY:
Your initial base salary, expressed in semi-monthly terms, will be $13,541.67
(on an annualized basis equivalent to $325,000.00), annualized from date of
acceptance and will be subject to the appropriate withholdings for FICA, state
and federal taxes, and Medicare.
BONUS:
You will be eligible to receive a performance bonus based upon achieving
specified performance criteria which will be established and approved. The
maximum bonus will be defined in accordance with the Company's new plan which
will be recommended and must be approved by the Board of Directors.
<PAGE> 2
Mr. Steve Goldman
Page 2
RETENTION BONUS:
In lieu of the base salary payment for change of control, you will be paid a
retention bonus equal to one year's base salary, at your current base salary
level, conditioned upon your staying with the Company at least one year after
the ITT closing. If you voluntarily leave the employ of the Company within that
one year period, you would be obliged to repay the Company the retention bonus
and the tax payment on the restricted stock.
OPTIONS:
The Company will recommend to the Options Committee a grant of options for
Paired Shares for you in accordance with the Long Term Incentive Plan (the
"LTIP"), which would be exercisable at the then fair market value of the Paired
Shares in accordance with the LTIP, and would vest over the normal three year
period following the grant.
TAXES ON RESTRICTED STOCK:
You received a restricted stock Award under the Company's 1995 LTIP in August
of 1996. The Company will pay you an amount to cover taxes on the Paired Shares
included in that Award. The amount of the payment would be 40% of the market
value of Paired Shares at the time of vesting (but not in excess of $53 per
Paired Share) multiplied by the number of Paired Shares then vesting. The amount
of this payment will be $795,000.00. If you voluntarily leave the employ of the
Company within that one year period, you would be obligated to repay the Company
the tax payment on the restricted stock.
RELOCATION EXPENSES:
To help cover the cost of living differential between Phoenix and
Fairfield/Westchester Counties, the Company will pay the reasonable,
out-of-pocket costs of relocating your household furnishings and your family and
acquiring a new home; all relocation expenses will be grossed up. Other
relocation costs to be covered as necessary include third party purchase of your
Phoenix home to facilitate an expedient relocation, and mortgage duplication
expenses for a period not to exceed six months. Upon your move to the
Fairfield/Westchester County area, the Company will make a second mortgage home
loan available to you in the amount of $400,000 which would be due in five years
or upon termination of employment for any reason. The loan would be non-interest
bearing and will be secured by a second mortgage on your home in
Fairfield/Westchester County.
TERMINATION/SEVERANCE:
The Company reserves the right to terminate your employment with or without
cause at any time. In the event of an involuntary termination without cause, the
reduction of your role or responsibilities, a change in control of the Company,
or in the event of any breach by the Company of your employment agreement
entitling you to terminate same (after expiration of applicable notice and cure
periods for the benefit of the Company), you shall receive, as your sole right,
exclusive remedy and liquidated damages, a one time termination payment equal to
twelve (12) months base salary. In addition, the vesting of your options shall
be accelerated at the date of such termination. The Company will also continue
to provide medical benefits coverage during the 12 month period subsequent to
the termination of your employment.
No severance shall be due in the event that you are terminated for gross
misconduct or in the event that you leave the full-time employ of the Company
voluntarily.
<PAGE> 3
Mr. Steve Goldman
Page 3
In the event of any employment-related disputes with respect to your employment
by the Company, you and the Company agree that the same shall be resolved
through binding arbitration in the jurisdiction of the Company's headquarters
and in accordance with the rules and procedures from time to time of the
American Arbitration Association.
NON-SOLICITATION/CONFIDENTIALITY:
All benefits provided hereunder shall be contingent on your compliance with the
non-solicitation/confidentiality covenants which will be set forth in a separate
agreement.
This letter represents the entirety of our agreement with respect to your
employment and any prior discussions or negotiations are hereby merged herein.
If this offer is acceptable to you, please sign this letter in the space
provided below and send it to my attention.
Very truly yours,
STARWOOD HOTELS & RESORTS
/s/ Barry S. Sternlicht
- --------------------------------
Barry S. Sternlicht
ACCEPTED AND AGREED TO:
/s/ Steve R. Goldman
- --------------------------------
Steve Goldman
cc: Personnel File
<PAGE> 1
Exhibit 10.22
TRADEMARK LICENSE AGREEMENT
This Trademark License Agreement, is made by and between Starwood
Capital Group, L.L.C., a Connecticut Limited Liability Company, with a place of
business at Three Pickwick Plaza, Suite 250, Greenwich, Connecticut 06830
("SCG"), and Starwood Lodging Trust, a Maryland real estate investment trust,
with a place of business at 2231 East Camelback Road, Suite 400, Phoenix,
Arizona 85016 ("SLT").
WITNESSETH:
WHEREAS, SCG is the owner, and has adopted and used in its business, in
connection with real estate services, including real estate investment services,
the trademark for which registration is being sought in the United States Patent
and Trademark Office under the following application number (the "SCG
Trademark"):
Trademark Application No. Filing Date
- --------- --------------- -----------
STARWOOD 75/229,277 1/22/97
WHEREAS, SLT was the owner, adopted and used in its business, in
connection with real estate services, including the acquisition of hotels, the
trademark for which registration is being sought in the United States Patent and
Trademark Office under the following application number (the "STARWOOD LODGING
TRUST Trademarks"):
Trademark Application No. Filing Date
- --------- --------------- -----------
STARWOOD LODGING TRUST 75/200,968 11/20/96
STARWOOD LODGING TRUST 75/352,062 9/5/97
and Design
WHEREAS, SLT has adopted and used in its business, in connection with
real estate services, including the acquisition of hotels, the trademark
depicted on Exhibit 1 of Exhibit A attached hereto (the "Star Design Trademark")
(the STARWOOD LODGING TRUST Trademarks and the Star Design Trademark are
hereinafter collectively referred to as the "SLT Trademarks");
WHEREAS, as evidenced by the Trademark Assignment Nunc Pro Tunc
attached hereto as Exhibit A, which has been executed concurrently with this
Trademark License Agreement, effective August 15, 1969, SLT assigned and
transferred to SCG, its entire right, title, and interest in, to and under the
SLT Trademarks and the applications for the STARWOOD LODGING TRUST Trademarks,
together with the goodwill of the business connected with the use of and
symbolized by the SLT Trademarks (the SCG Trademark and the SLT Trademarks are
hereinafter collectively referred to as the "STARWOOD Trademarks");
<PAGE> 2
121097
WHEREAS, SLT desires to continue to use the STARWOOD Trademarks in
connection with the acquisition, ownership, leasing, management, merchandising,
operation and disposition of hotels and hospitality services, and of properties,
entities and activities related to the acquisition, ownership, leasing,
management, operation and disposition of hotels and hospitality services ("the
Permitted Uses").
WHEREAS, SCG is willing to grant to SLT the right to use the STARWOOD
Trademarks subject to the terms and conditions of this Trademark License
Agreement, and SLT is willing to use the STARWOOD Trademarks on all terms and
conditions set forth below.
NOW, THEREFORE, in exchange for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and in consideration of
the mutual covenants set forth herein, the parties agree as follows:
I. GRANT OF LICENSE
A. SCG grants to SLT the royalty-free license and right to use the
STARWOOD Trademarks in connection with the Permitted Uses, exclusive to SLT and
its affiliates (except only for SCG and affiliates) in North America; provided,
however, that SLT shall have the right to use "Starwood" in its corporate name
worldwide.
B. The right granted in Subparagraph I(A) above shall be nondivisible
and shall not be transferred, assigned or sublicensed without SCG's prior
written consent, which SCG may not unreasonably withhold or delay.
C. In the event that SLT desires to use the STARWOOD Trademarks in
connection with other than Permitted Uses, it shall request a license therefor
from SCG, which license SCG agrees to offer on reasonable terms based on then
current prevailing market terms.
II. USE OF THE TRADEMARKS
A. SLT acknowledges SCG's exclusive right, title and interest in and to
the STARWOOD Trademarks. SLT will not at any time do or cause to be done any
act, directly or indirectly contesting or in any way impairing SCG's right,
title or interest in the STARWOOD Trademarks. In connection with its Permitted
Use of the STARWOOD Trademarks, SLT shall not in any manner represent that it
has any ownership interest in the STARWOOD Trademarks, and SLT specifically
acknowledges that its Permitted Use of the STARWOOD Trademarks shall not create
any right, title or interest in the STARWOOD Trademarks. Every Permitted Use of
the STARWOOD Trademarks by SLT shall inure to the benefit of SCG.
B. Without detracting from the generality of the foregoing, it is
agreed and understood by SLT that SLT does not have permission to: (1)
sublicense the STARWOOD Trademarks except as provided in Paragraph I(B) above;
or (2) transfer or assign any right
<PAGE> 3
granted by this Trademark License Agreement except as provided in paragraph I(B)
above.
C. In order to assure SCG the ability to protect the goodwill
associated with the STARWOOD Trademarks and the validity and integrity of the
STARWOOD Trademarks, and in order to prevent any deception to the public, SLT
shall operate its business in accordance with the standards and requirements of
quality which from time to time are reasonably prescribed by SCG, and shall use
the STARWOOD Trademarks in a manner consistent with any format reasonably
prescribed by SCG.
D. In order to assure compliance with the quality, specifications and
standards set forth by SCG, SLT shall make available to representatives of SCG,
any information reasonably requested relating to such quality control or use of
the STARWOOD Trademarks, and permit such representatives to inspect at
reasonable times and or reasonable notice documents or things upon which the
STARWOOD Trademarks are used as SCG reasonably considers necessary.
III. TERMS AND TERMINATION
A. This Trademark License Agreement shall be perpetual.
B. Notwithstanding Subparagraph III(A) above, if SLT makes any
assignment of assets or business for the benefit of creditors, if a trustee or
receiver is appointed to administer or conduct SLT's business or affairs, or if
SLT is adjudged in any legal proceeding to be either a voluntary or involuntary
bankruptcy, SCG may terminate this Trademark License Agreement upon fifteen days
prior written notice.
C. Notwithstanding Subparagraph III(A) above, if SLT breaches any of
the material terms and conditions of this Trademark License Agreement, and SCG
provides written notice of any such breach, SCG may terminate this Trademark
License Agreement, unless SLT cures any such breach within a reasonable period
after receiving written notice.
D. Upon the termination of this Trademark License Agreement, SLT agrees
to immediately discontinue all use of the STARWOOD Trademarks and will at no
time adopt or use, without SCG's prior written consent, any word, phrase,
symbol, logo or mark which is similar to or likely to be confusing with the
STARWOOD Trademarks.
IV. INDEMNIFICATION
SLT shall indemnify and hold harmless SCG, any parents, subsidiaries or
affiliates of SCG and their respective officers, directors, shareholders,
employees, agents, successors and assigns (collectively, the "SCG Indemnified
Parties") from and against any and all costs, losses, damages, obligations,
expenses, liability and/or attorneys' fees arising, directly or indirectly, by
reason of any claim made or asserted against the SCG Indemnified Parties by
third parties, during the term of this Trademark License Agreement or subsequent
to its termination, arising out of SLT's use of the STARWOOD Trademarks or SLT's
provision of services in connection with the STARWOOD Trademarks, unless such
claim involves an act performed by an SCG
<PAGE> 4
Indemnified Party, or arises out of SCG's breach of this Trademark License
Agreement.
SCG shall indemnify and hold harmless SLT, any parent, subsidiaries,
affiliates or affiliates of SLT and their respective officers, directors,
trustees, shareholders, employees, agents, successor and assigns (collectively
the "SLT Indemnified Parties") from and against any and all costs, losses,
damages, obligations, expenses, liability and/or attorneys' fees arising,
directly or indirectly by reason of any claim made or asserted against the SLT
Indemnified Parties by third parties, during the term of this License Agreement
or subsequent to its termination, arising out of SCG's use of the STARWOOD
Trademark or SCG's provision or services in connection with the Starwood
trademarks, unless such claim involves an act performed by an SLT Indemnified
Party or arises out of SLT's breach of this Trademark License Agreement.
V. GOVERNING LAW
This Trademark License Agreement shall be subject to and governed by
the substantive law of the State of Connecticut, United States of America,
without regard to principles of choice of law.
VI. ENTIRE AGREEMENT
This Trademark License Agreement including its attachments constitutes
the entire agreement between the parties and contains all of the agreement
between the parties with respect to the subject matter of this Trademark License
Agreement. This Trademark License Agreement supersedes any and all other
agreements, either oral or written, between the parties with respect to the
subject matter of this Trademark License Agreement. No change or modification of
this Trademark License Agreement shall be valid unless the same shall be in
writing and signed by the parties.
VII. SEVERABILITY
If any provisions of this Trademark Settlement Agreement, or the
application of any such provisions to the parties hereto, shall be held by a
court of competent jurisdiction to be unlawful or unenforceable, the remaining
provisions of this Trademark License Agreement shall nevertheless be valid,
enforceable and shall remain in full force and effect, and shall not be
affected, impaired or invalidated in any manner.
VIII. CONSTRUCTION
This Trademark License Agreement shall be construed without regard to
the party or parties responsible for the preparation of the Trademark License
Agreement and shall be deemed as prepared jointly by the parties. Any ambiguity
or uncertainty existing herein shall not be interpreted or construed against any
party.
<PAGE> 5
IX. EFFECTIVE DATE
This Trademark License Agreement shall be binding on the parties at the
time the last of them executes it below, which shall be the effective date of
this Trademark License Agreement.
X. COUNTERPARTS
This Trademark License Agreement may be executed in counterparts.
XI. HEADINGS
The headings in this Trademark License Agreement are inserted for
convenience only and are not to be considered in the interpretation or
construction of the provisions of this Trademark License Agreement.
XII. NOTICES
All notices called for in this Trademark License Agreement shall be
deemed to be sufficiently given if sent by registered or certified mail return
receipt requested to the other party at the above-referenced address or at such
other address as the party may designate in writing. Any such notice shall be
effective and deemed received when the return receipt is presented to the
addressee for execution.
XIII. AUTHORITY
The signatories respectively represent and warrant that they have full
authority to enter into this Trademark License Agreement on behalf of the entity
for which they have signed.
XIV. DISCLAIMER
The name "Starwood Lodging Trust" is the designation of Starwood
Lodging Trust and its Trustees (as Trustees but not personally) under a
Declaration of Trust dated August 25, 1996 as amended and restated, and all
Persons dealing with Starwood Lodging Trust must look solely to Starwood Lodging
Trust's property for the enforcement of any claims against Starwood Lodging
Trust, as the Trustees, officers, agents and security holders of Starwood
Lodging Trust assume no personal obligations of Starwood Lodging Trust, and
their respective properties shall not be subject to claims of any Person
relating to such obligation.
Dated:____________ STARWOOD CAPITAL GROUP, L.L.C.
By:
<PAGE> 6
Name:
Title:
Dated:____________ STARWOOD LODGING TRUST
By:
Name:
Title:
<PAGE> 7
TRADEMARK ASSIGNMENT NUNC PRO TUNC EXHIBIT A
WHEREAS, Starwood Lodging Trust, a Maryland real estate investment
trust, with a place of business at 2231 East Camelback Road, Suite 400, Phoenix,
Arizona 85016 ("Assignor"), has adopted and used in its business, since as early
as August 15, 1969, in connection with real estate services, including the
acquisition, ownership, leasing, management, merchandising, promotion, operation
and disposition of hotels and hospitality services, and of properties, entities
and activities related to the acquisition, ownership, leasing, management,
merchandising, promotion, operation and disposition of hotels and hospitality
services ("the Permitted Uses"), the trademark for which registration is being
sought in the United States Patent and Trademark Office under the following
application number (the "STARWOOD LODGING TRUST Trademarks"):
Trademark Application No. Filing Date
- --------- --------------- -----------
STARWOOD LODGING TRUST 75/200,968 11/20/96
STARWOOD LODGING TRUST 75/352,062 9/5/97
and Design
WHEREAS, SLT has adopted and used in its business, since at least as
early as August 15, 1969, in connection with real estate services, including the
acquisition of hotels, the trademark depicted on Exhibit 1 attached hereto (the
"Star Design Trademark") (the "STARWOOD LODGING TRUST Trademarks and the Star
Design Trademark are hereinafter collectively referred to as the "Trademarks");
WHEREAS, Starwood Capital Group, L.L.C., a Connecticut Limited
Liability Company, with a place of business at Three Pickwick Plaza, Suite 250,
Greenwich, Connecticut 06830 ("Assignee"), is desirous of acquiring the
Trademarks;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of
<PAGE> 8
which is hereby acknowledged, Assignor hereby sells, assigns and transfers to
Assignee, effective August 15, 1969, the entire right, title, and interest in,
to and under the Trademarks and the applications for the STARWOOD LODGING TRUST
Trademarks, which are listed above, together with the goodwill of the business
connected with the use of and symbolized by the Trademarks and the right to sue
for past, present and future infringement thereof.
The name "Starwood Lodging Trust" is the designation of Starwood
Lodging Trust and its Trustees (as Trustees but not personally) under a
Declaration of Trust dated August 25, 1996 as amended and restated, and all
Persons dealing with Starwood Lodging Trust must look solely to Starwood Lodging
Trust's property for the enforcement of any claims against Starwood Lodging
Trust, as the Trustees, officers, agents and security holders of Starwood
Lodging Trust assume no personal obligations of Starwood Lodging Trust, and
their respective properties shall not be subject to claims of any Person
relating to such obligation.
STARWOOD LODGING TRUST
By:
Name:
Title:
Date:
<PAGE> 9
EXHIBIT 1
<PAGE> 10
STATE OF ______________)
) SS
COUNTY OF ____________)
On this ___ day of ___________, 1997, before me appeared
_______________________, the person who signed this instrument, who acknowledged
that (s)he signed it as a free act on behalf of the identified corporation with
authority to do so.
Notary Public
<PAGE> 1
Exhibit 10.34
UNITS EXCHANGE RIGHTS AGREEMENT
This Units Exchange Rights Agreement (this "Agreement") is
made as of February 14, 1997 among Starwood Lodging Trust, a real estate
investment trust organized under the laws of the State of Maryland (the
"Trust"), Starwood Lodging Corporation, a Maryland corporation (the
"Corporation"), SLT Realty Limited Partnership, a Delaware limited partnership
(the "Realty Partnership"), SLC Operating Limited Partnership, a Delaware
limited partnership (the "Operating Partnership"), and each of the limited
partners of the Realty Partnership and the Operating Partnership listed on the
signature pages hereto (the "Starwood Partners"). Unless otherwise indicated,
capitalized terms used herein are used herein as defined in Section 11.
WHEREAS, pursuant to a Contribution Agreement dated as of
January 15, 1997 (the "Contribution Agreement") among the Trust, the
Corporation, Starwood Partners and other parties (i) on the date hereof the
Starwood Partners are making capital contributions to the Realty Partnership in
return for the issuance by the Realty Partnership to the Starwood Partners of
Units (as defined in the Limited Partnership Agreement of the Realty Partnership
(the "Realty Partnership Agreement")) of the Realty Partnership (such Units
issued by the Realty Partnership to the Starwood Partners on the date hereof,
together with any Units of the Realty Partnership issued to the Starwood
Partners after the date hereof, being hereinafter called the "Realty Units") and
(ii) on the date hereof the Starwood Partners are making capital contributions
to the Operating Partnership in return for the issuance by the Operating
Partnership to the Starwood Partners of Units (as defined in the Limited
Partnership Agreement of the Operating Partnership (the "Operating Partnership
Agreement")) of the Operating Partnership (such Units issued by the Operating
Partnership to the Starwood Partners on the date hereof, together with any Units
of the Operating Partnership issued to the Starwood Partners, being hereinafter
called the "Operating Units"); and
WHEREAS, pursuant to the Contribution Agreement the parties
hereto are entering into this Agreement to provide for the rights of the
Starwood Partners to tender Realty Units and Operating Units in exchange for
either Paired Shares (as defined herein), cash or a combination of Paired Shares
and cash, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants set forth herein, the parties hereto agree as follows:
SECTION 1. RIGHT TO TENDER STARWOOD UNITS. (a) Upon
<PAGE> 2
the terms and subject to the conditions of this Agreement, each holder of
Starwood Units (as defined below) shall have the right to tender to the Trust
outstanding Realty Units and the right to tender to the Corporation outstanding
Operating Units. Notwithstanding anything to the contrary contained in this
Agreement (i) no Realty Unit may be tendered to the Trust unless simultaneously
therewith the tendering holder also tenders to the Corporation an Operating Unit
and no Operating Unit may be tendered to the Corporation unless simultaneously
therewith the tendering holder also tenders to the Trust a Realty Unit (a Realty
Unit tendered for exchange and the Operating Unit simultaneously tendered for
exchange being hereinafter collectively referred to as a "Starwood Unit") and
(ii) any attempted tender of a Realty Unit or an Operating Unit which is not
accompanied by a simultaneous tender of an Operating Unit or Realty Unit,
respectively, shall be void and of no effect; it being understood that a
simultaneous tender of unequal numbers of Realty Units and Operating Units shall
be valid under this sentence to the extent of the lesser of the number of Realty
Units or Operating Units, as the case may be, included in such tender.
(b) Notwithstanding any other provision of this Agreement, no
Paired Shares or cash shall be issued or paid in respect of any tender of
Starwood Units (i) if, notwithstanding the provisions of Section 6 of this
Agreement, the right to tender Starwood Units and receive Paired Shares or cash
would result in the Trust not satisfying the REIT Requirements in any respect or
would result in any person or entity Beneficially Owning Trust Shares exceeding
the Ownership Limit, (ii) if, with respect to all Starwood Partners other than
Prudential Property Investment Separate Account II, the tender pursuant to
Section 1(a) is prior to the first anniversary of the date of this Agreement,
(iii) prior to the expiration or termination of the waiting period applicable to
such exchange and issuance, if any, under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as it may be amended from time to time, or (iv) prior
to the receipt of all governmental and regulatory approvals which are required
to be obtained prior to such tender and issuance or payment, including, without
limitation, any required approvals of the gaming authorities of the State of
Nevada and of Clark County, Nevada (the "Gaming Approvals"). Prior to the
receipt of Gaming Approvals, such holder shall, as a condition to any tender of
Starwood Units which would (if the Paired Share Option (as defined below) were
to be elected in respect of such tender) cause such holder to beneficially own,
in the aggregate, Paired Shares representing more than 4.9% of the then issued
and outstanding Paired Shares, give not less than 90 days' written notice to the
Trust and the Corporation (at the offices provided pursuant to Section 10) of
its intent to tender Starwood Units; provided, however, that the ownership by
Prudential Property Investment Separate Account II of Paired Shares as
contemplated
-2-
<PAGE> 3
by the penultimate sentence of Section 8.02(j) of the Contribution Agreement
shall not require any such written notice to the Trust and Corporation. In the
event that the ability to receive Paired Shares or cash would result in the
Trust not satisfying the REIT Requirements in any respect or would result in any
person or entity Beneficially Owning Trust Shares exceeding the Ownership Limit,
and as a result thereof no Paired Shares or cash may be issued or paid in
respect of any tender of Starwood Units pursuant to Section 1(b)(i) above, the
parties hereto shall use their respective best efforts to restructure the terms
and provisions of this Agreement (and, if necessary, the Partnership Agreements
and the Registration Rights Agreement (as defined in Section 6)), or to agree to
terms and provisions in addition to such terms and provisions, so as to provide
to each such party the same substantive rights (or substantive rights as close
thereto as is reasonably practicable) as those provided by this Agreement, the
Partnership Agreements and the Registration Rights Agreement.
(c) The rights to exchange Starwood Units pursuant to this
Agreement constitute a continuous offer and may not be withdrawn, amended or
modified by the Trust or the Corporation without the prior written consent of
each holder of outstanding Starwood Units adversely affected by such withdrawal,
amendment or modification; provided that any withdrawal, amendment or
modification that does not adversely affect any holder of outstanding Starwood
Units may be effected without the consent of such holder.
SECTION 2. ACCEPTANCE OF TENDER; ELECTION OF METHOD OF PAYMENT
FOR TENDERED STARWOOD UNITS. (a) Upon the terms and subject to the conditions of
this Agreement, the Trust and the Corporation shall accept Starwood Units
validly tendered in proper form and meeting all of the requirements of this
Agreement. In order for Starwood Units to be validly tendered pursuant to this
Agreement, the registered holder thereof shall deliver to the Trust and the
Corporation, at the address provided pursuant to Section 10, (i) a completed and
duly executed Letter of Transmittal in the form attached hereto as Exhibit A
(the "Letter of Transmittal") and any other documents required by the Letter of
Transmittal and (ii) a calculation, to the best knowledge of such registered
holder after due inquiry (together with such supporting documentation as the
Trust may reasonably request), of the maximum number of Paired Shares that may
be issued to such registered holder without causing either (x) the Trust to not
satisfy the REIT Requirements in any respect or (y) any person or entity to
Beneficially Own Trust Shares exceeding the Ownership Limit. The Trust and the
Corporation shall make all determinations as to the validity and form of any
tender of Starwood Units in accordance with the provisions of this Agreement and
upon rejection of a tender shall give the tendering
-3-
<PAGE> 4
holder written notice of such rejection, which shall include the reasons
therefor.
(b) Unless otherwise determined by agreement of the Trust and
the Corporation, tenders of Starwood Units pursuant to this Agreement shall be
irrevocable and shall not be subject to withdrawal or modification; provided
that if the Trust and the Corporation make the Paired Share Election with
respect to a tender, then within 5 days after such Election the tendering holder
may elect to revoke such tender so long as (i) no public disclosure of such
tender has been made prior to such revocation and (ii) such tendering holder
reimburses the Trust and the Corporation for all reasonable costs and expenses
incurred in connection with such tender.
(c) Within 15 days after the valid tender pursuant to this
Agreement of Starwood Units, the Trust and the Corporation shall make an
election to pay for such Starwood Units by delivering either (i) Paired Shares
(the "Paired Share Election"), (ii) cash (the "Cash Election") or (iii) a
combination of Paired Shares and cash (the "Combined Election"). Such election
shall be made pursuant to an agreement as to such election between the Trust and
the Corporation. If the Trust and the Corporation do not so agree within such
15-day period, they shall be deemed to have made the Cash Election.
SECTION 3. PAIRED SHARE ELECTION. (a) If with respect to any
tender of Starwood Units pursuant to this Agreement, the Trust and the
Corporation make the Paired Share Election, then, except as provided in Section
2(b), within fifteen days after the expiration of the 5-day period referred to
in Section 2(b), the Trust and the Corporation shall deliver to the tendering
holder one Paired Share for each Starwood Unit validly tendered pursuant to the
provisions of this Agreement.
(b) No fractional Paired Shares or scrip representing
fractional Paired Shares shall be issued upon exchange of Starwood Units
pursuant to this Agreement. If more than one Letter of Transmittal shall be
delivered at one time by the same holder, the number of full Paired Shares which
shall be issuable upon exchange of the Starwood Units tendered thereby shall be
computed on the basis of the aggregate number of Starwood Units so tendered.
Instead of any fractional Paired Shares which would otherwise be issuable upon
exchange of any Starwood Units, the Trust and the Corporation shall pay a cash
adjustment in respect of such fraction in an amount equal to the same fraction
of the Paired Share Closing Price on the last Business Day preceding the date of
exchange.
(c) If a holder exchanges Starwood Units pursuant to this
Agreement, the Trust and the Corporation shall pay any documentary, stamp or
similar issue or transfer tax due on any
-4-
<PAGE> 5
issue of Paired Shares upon such exchange. Such holder, however, shall (i) pay
to the Trust and the Corporation the amount of any additional documentary, stamp
or similar issue or transfer tax which is due (or shall establish to the
satisfaction of the Trust and the Corporation the payment thereof) as a result
of Paired Shares being issued in a name other than the name of such holder and
(ii) be responsible for all income or other taxes as a result of such exchange.
SECTION 4. CASH ELECTION. (a) If with respect to any tender of
Starwood Units pursuant to this Agreement, the Trust and the Corporation make or
are deemed to have made the Cash Election, then within 20 days after such tender
the Trust and the Corporation shall pay to the tendering holder an aggregate
amount of cash (the "Aggregate Cash Payment") equal to the product of (i) the
number of Paired Shares which would have been delivered to such holder if the
Trust and the Corporation had made the Paired Share Election with respect to
such tender and (ii) the average Paired Share Closing Price for the ten trading
day period ending one day prior to the date of such tender.
(b) In connection with any Aggregate Cash Payment pursuant to
Section 4(a) or any cash payment pursuant to Section 5(a)(ii), the Trust shall
pay 95% of such Aggregate Cash Payment or such cash payment and the Corporation
shall pay 5% of such Aggregate Cash Payment or such cash payment (such
percentages being herein called the "Issuance Percentages"); provided that the
Trust and the Corporation may from time to time change the Issuance Percentages
based on their determination of the relative fair values of the Trust Shares and
the Corporation Shares.
SECTION 5. COMBINED ELECTION. (a) If with respect to any
tender of Units pursuant to this Agreement, the Trust and the Corporation shall
make the Combined Election, then, except as provided in Section 2(b), within 15
days after the expiration of the 5-day period referred to in Section 2(b), the
Trust and the Corporation shall (i) notify the tendering holder of the number of
such tendered Units which will be exchanged for cash (the "Cash Units") and the
number of such tendered Units which will be exchanged for Paired Shares (the
"Paired Share Units"), (ii) pay to the tendering holder, in respect of each Cash
Unit validly tendered pursuant to the provisions of this Agreement, an amount of
cash (with each of the Trust and the Corporation paying its then respective
Issuance Percentage of such amount of cash) equal to the average Paired Share
Closing Price for the ten trading day period ending one day prior to the date of
such tender and (iii) deliver to the tendering holder one Paired Share for each
Paired Share Unit validly tendered pursuant to the provisions of this Agreement.
(b) The provisions of Sections 3(b) and 3(c) of this
-5-
<PAGE> 6
Agreement shall apply to the issuance of Paired Shares pursuant to Section 5(a).
SECTION 6. REGISTRATION RIGHTS. If at any time after six (6)
months from the date of this Agreement, (a) a Starwood Partner validly tenders
Starwood Units pursuant to the provisions of this Agreement, (b) the Trust and
the Corporation make the Paired Share Election or the Combined Election with
respect to such tender, (c) as a result of the Ownership Limit such Starwood
Partner cannot receive the full number of Paired Shares otherwise issuable to
such Starwood Partner pursuant to such tender and such Election (without giving
effect to the Ownership Limit) (the event described in clauses (a), (b) and (c)
being referred to as a "Paired Share Tender Reduction"; the number of such
Paired Shares which such Starwood Partner cannot receive pursuant to such tender
as a result of the Ownership Limit being referred to as the "Unissued Paired
Shares"; and the Starwood Units tendered in respect of such Unissued Paired
Shares being referred to as the "Delayed Payment Units"), then subject to the
other terms and conditions of this Agreement, such Starwood Partner shall be
entitled to receive the number of Paired Shares which it can receive pursuant to
such tender, such Election and the Ownership Limit and then, pursuant to the
terms of the Registration Rights Agreement, the Trust and the Corporation shall
cause there to be filed with the Securities and Exchange Commission a
registration statement and the Trust and the Corporation shall register and sell
pursuant thereto a number of Paired Shares equal to the number of such Unissued
Paired Shares requested by Starwood to be registered pursuant to Section 2.3 of
the Registration Rights Agreement. Within two Business Days after the receipt by
the Trust and the Corporation of the proceeds of any sale (after underwriting
discounts and commissions) of such Paired Shares pursuant to such registration,
the Trust and the Corporation shall pay such proceeds to the tendering holder of
the Delayed Payment Units, in full payment for the tender of such Delayed
Payment Units.
SECTION 7. REPRESENTATIONS OF TENDERING HOLDER. Each tender of
Starwood Units shall constitute a representation and warranty by the tendering
holder of each of the representations and warranties set forth in the form of
Letter of Transmittal. Without limiting the generality of the foregoing, unless,
at the time of a tender for exchange of Starwood Units pursuant to this
Agreement, a registration statement relating to any Paired Shares to be
delivered upon such tender is effective under the Securities Act of 1933, as
amended (the "Securities Act"), such tender shall constitute a representation
and warranty by the tendering holder to the Trust and the Corporation that such
tendering holder (i) is an "accredited investor" within the meaning of Rule 501
under the Securities Act, (ii) has sufficient knowledge and experience in
financial and business matters and in
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<PAGE> 7
investing in entities similar to the Partnerships, the Trust and the Corporation
so as to be able to evaluate the risks and merits of its investment in the
Partnerships, the Trust and the Corporation and it is able financially to bear
the risks thereof, (iii) has had an opportunity to discuss the business,
management and financial affairs of the Trust, the Corporation and the
Partnerships with the management of the Trust, the Corporation and the
Partnerships, and (iv) understands that the Paired Shares have not been
registered under the Securities Act by reason of their issuance in a transaction
exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) thereof or Rule 505 or 506 promulgated under the Securities Act and
such Paired Shares must be held indefinitely unless a subsequent disposition
thereof is registered under the Securities Act and applicable state securities
laws or is exempt from such registration.
SECTION 8. STATUS OF TENDERING HOLDER. Until the holder of
Starwood Units tendered pursuant to this Agreement becomes a holder of record of
the Paired Shares issued in exchange therefor (in the case of a Paired Share
Election or a Combined Election) or until such holder has received cash in
exchange therefor (in the case of a Cash Election or a Combined Election), such
holder shall continue to hold and own such Starwood Units for all purposes of
the Realty Partnership Agreement and the Operating Partnership Agreement. In the
case of a Paired Share Election or a Combined Election, no such holder shall
have any rights as a shareholder of the Trust or a stockholder of the
Corporation in respect of such Paired Shares until such holder becomes a holder
of record of such Paired Shares.
SECTION 9. RESERVATION OF SHARES; CLOSING OF TRANSFER BOOKS.
(a) The Trust shall reserve and shall at all times have reserved out of its
authorized but unissued Trust Shares, solely for the purpose of effecting the
exchange of Realty Units pursuant to this Agreement and the Class A Units
pursuant to the Class A Exchange Rights Agreement, enough Trust Shares to permit
the exchange of the then outstanding Realty Units and, in the case of the Class
A Exchange Rights Agreement, Class A Units. The Corporation shall reserve and
shall at all times have reserved out of its authorized but unissued Corporation
Shares, solely for the purpose of effecting the exchange of Operating Units
pursuant to this Agreement, enough Corporation Shares to permit the exchange of
the then outstanding Operating Units. All Paired Shares which may be issued upon
exchange of Starwood Units shall be validly issued, fully paid and nonassessable
and free from all taxes, liens and charges with respect to the issuance thereof
other than income taxes resulting from such exchange.
(b) The Trust shall not close its transfer books so as
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<PAGE> 8
to prevent the timely issuance of Trust Shares pursuant to this Agreement and
the Class A Exchange Rights Agreement. The Corporation shall not close its
transfer books so as to prevent the timely issuance of Corporation Shares
pursuant to this Agreement.
SECTION 10. NOTICES. All notices, documents and other
communications under this Agreement shall be in writing and shall be deemed
given when delivered personally or by overnight mail or when sent by facsimile
transmission, or four days after being mailed (by registered mail, return
receipt requested) to a party at the following address (or to such other address
as such party may have specified by notice given to the other parties pursuant
to this provision):
(a) If to the Trust or the Realty Partnership, to:
Starwood Lodging Trust
2231 E. Camelback Road, Suite 410
Phoenix, AZ 85016
Attention: Chief Financial Officer
Telecopy No.: (602) 852-0984
Telephone No.: (602) 852-3900
with a copy to:
Sidley & Austin
555 West 5th Street
Los Angeles, California 90013
Attention: Sherwin L. Samuels
Telecopy No.: (213) 896-6600
Telephone No.: (213) 896-6000
(b) If to the Corporation or the Operating Partnership, to:
Starwood Lodging Corporation
2231 E. Camelback Road, Suite 400
Phoenix, AZ 85016
Attention: General Counsel
Telecopy No.: (602) 852-0686
Telephone No.: (602) 852-3900
with a copy to:
Sidley & Austin
555 West 5th Street
Los Angeles, California 90013
Attention: Sherwin L. Samuels
Telecopy No.: (213) 896-6600
-8-
<PAGE> 9
Telephone No.: (213) 896-6000
(c) If to Prudential:
Prudential Real Estate Investors
8 Campus Drive
Parsippany, NJ 07054
Attention: Gary L. Kauffman
Telecopy No.: (201) 683-1790
Telephone No.: (201) 683-1612
Attention: Joseph D. Margolis, Esq.
James P. Walker, Esq.
Telecopy No.: (201) 683-1788
Telephone No.: (201) 683-1694 or 1690
with a copy to:
O'Melveny & Myers LLP
153 East 53rd Street
New York, NY 10022
Attention: Robert S. Insolia, Esq.
Telecopy No.: (212) 326-2061
Telephone No.: (212) 326-2000
(d) If to any other Holder, to the address specified on
Schedule A hereto.
with a copy to:
Willkie Farr & Gallagher
153 East 53rd Street
New York, NY 10022
Attention: Bruce M. Montgomerie, Esq.
Telecopy No.: (212) 821-8111
Telephone No.: (212) 821-8000
SECTION 11. DEFINITIONS. For purposes of this
Agreement:
"Beneficially Owning" means owning Trust Shares directly,
indirectly or constructively by a person or entity through the
application of Section 318(a) of the Code, as modified by Section
856(d)(5) of the Code, or Section 544 of the Code, as modified by
Section 856(h) of the Code. The term "Beneficially Own" shall have a
correlative meaning.
"Business Day" means any day other than Saturday, Sunday and
any day on which banks are not open to do business in New York, New
York.
"Class A Exchange Rights Agreement" means the Exchange
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<PAGE> 10
Rights Agreement dated the date hereof among the Corporation, the Operating
Partnership and certain other parties.
"Code" means the Internal Revenue Code of 1986, and the rules
and regulations promulgated thereunder, as amended from time to time.
"Corporation Shares" means the shares of common stock, par
value $.01 per share, of the Corporation.
"Declaration of Trust" means the Declaration of Trust of the
Trust dated August 25, 1969, as amended and restated as of June 6,
1988, and as further amended on February 1, 1995 and as amended from
time to time after the date of this Agreement.
"Disinterested Members" when used with respect to the Trust
has the meaning set forth in the Code of Regulations of the Trust and,
when used with respect to the Corporation, has the meaning set forth in
the By-Laws of the Corporation, in each case as amended from time to
time.
"Ownership Limit" when used with respect to Trust Shares, has
the meaning set forth in the Declaration of Trust and, when used with
respect to the Corporation Shares, has the meaning set forth in the
Restated Articles, in each case as amended from time to time.
"Paired Share" means a Corporation Share and a Trust Share
which are paired pursuant to the Pairing Agreement.
"Paired Share Closing Price" shall mean, with respect to a
particular date, the last reported sales price regular way on such date
or, in case no such reported sale takes place on such date, the average
of the reported closing bid and asked prices regular way on such date,
in either case on the New York Stock Exchange, or if the Paired Shares
are not then listed or admitted to trading on such Exchange, on the
principal national securities exchange on which the Paired Shares are
then listed or admitted to trading or, if not then listed or admitted
to trading on any national securities exchange, the closing sale price
on such date of the Paired Shares or, in case no reported sale takes
place on such date then, the average of the closing bid and asked
prices on such date, on NASDAQ or any comparable system. If the Paired
Shares are not then quoted on NASDAQ or any comparable system, the
Board of Trustees of the Trust and the Board of Directors of the
Corporation shall in good faith determine the Paired Share Closing
Price.
"Pairing Agreement" means the Pairing Agreement dated June 25,
1980 between the Trust and the Corporation, as it
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<PAGE> 11
may be amended from time to time.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the date first written above between the Trust,
the Corporation and certain other parties.
"REIT Requirements" shall mean the requirements for the Trust
to (i) qualify as a REIT under the Code and the rules and regulations
promulgated thereunder, (ii) avoid any federal income or excise tax
liability, (iii) retain its status as grandfathered pursuant to Section
132(c)(3) of the Deficit Reduction Act of 1984 and (iv) retain the
benefits of that certain private letter ruling issued by the Internal
Revenue Service to the Trust dated as of January 4, 1980.
"Restated Articles" means the Restated Articles of
Incorporation of the Corporation, as amended from time to time after
the date of this Agreement.
"Trust Shares" means the shares of beneficial interest,
$.01 par value, of the Trust.
SECTION 12. DETERMINATIONS AND INTERPRETATION. All agreements
between the Trust and the Corporation provided for in this Agreement shall be
made on behalf of the Trust and the Corporation by their respective
Disinterested Members, including, without limitation, any agreement between the
Trust and the Corporation as to the election of the Paired Share Election, the
Cash Election or the Combined Election with respect to a tender of Starwood
Units pursuant to Section 2(c), any agreement to permit the revocation,
withdrawal or modification of a tender of Starwood Units pursuant to Section
1(c) and any adjustment of the Issuance Percentages pursuant to Section 4(b).
All interpretations of the terms of this Agreement shall be resolved on behalf
of the Trust and the Corporation by their respective Disinterested Members.
SECTION 13. PARTIAL INVALIDITY. In case any one or more of the
provisions contained herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein unless the deletion of
such provision or provisions would result in such a material change as to cause
completion of the transactions contemplated hereby to be unreasonable.
SECTION 14. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties
-11-
<PAGE> 12
hereto and their respective permitted successors or assigns. In addition, and
whether or not any express assignment shall have been made, the provisions of
this Agreement which are for the benefit of the parties hereto other than the
Corporation, the Trust, the Realty Partnership and the Operating Partnership,
shall also be for the benefit of and enforceable by any subsequent holder of any
Units.
SECTION 15. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in one or more counterparts, each of which shall be considered an
original counterpart, and shall become a binding agreement when the Trust, the
Corporation, the Realty Partnership, the Operating Partnership, and each of the
Starwood Partners shall have each executed a counterpart of this Agreement.
SECTION 16. TITLES AND HEADINGS. Titles and headings to
Articles and Sections herein are inserted for convenience of reference only and
are not intended to be a part of or to affect the meaning or interpretation of
this Agreement.
SECTION 17. EXHIBITS. The Exhibits referred to in this
Agreement shall be construed with, and as an integral part of, this Agreement to
the same extent as if the same had been set forth verbatim herein.
SECTION 18. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This
Agreement, including the Exhibits, contains the entire understanding of the
parties hereto with regard to the subject matter contained herein. In addition
to amendments and modifications permitted by Section 1(c), the parties hereto,
by mutual agreement in writing, may amend, modify and supplement this Agreement;
provided that any such amendment, modification or supplement shall be approved
by a majority of the Disinterested Members of each of the Trust and the
Corporation. The failure of any party hereto to enforce at any time any
provision of this Agreement shall not be construed to be a waiver of such
provision, nor in any way to affect the validity of this Agreement or any part
hereof or the right of such party thereafter to enforce each and every such
provision. No waiver of any breach of this Agreement shall be held to constitute
a waiver of any other or subsequent breach.
SECTION 19. GOVERNING LAW. Except to the extent that Maryland
law is mandatorily applicable to the rights and obligations of the shareholders
of the Trust and the stockholders of the Corporation, this Agreement, and the
application or interpretation thereof, shall be governed exclusively by its
terms and by the internal laws of the State of New York, without regard to
principles of conflicts of laws as applied in the State of New York or any other
jurisdiction which, if applied, would result in the application of any laws
other than the internal
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<PAGE> 13
laws of the State of New York.
SECTION 20. STARWOOD LODGING TRUST. The parties hereto
understand and agree that the name "Starwood Lodging Trust" is a designation of
the Trust and its Trustees (as Trustees but not personally) under the
Declaration of Trust, and all persons dealing with the Trust shall look solely
to the Trust's assets for the enforcement of any claims against the Trust, and
that the Trustees, officers, agents and security holders of the Trust assume no
personal liability for obligations entered into on behalf of the Trust, and
their respective individual assets shall not be subject to the claims of any
person relating to such obligations.
SECTION 21. SUBMISSION TO JURISDICTION. Each of the parties
hereto irrevocably submits and consents to the jurisdiction of the United States
District Court for the Southern District of New York in connection with any
action or proceeding arising out of or relating to this Agreement, and
irrevocably waives any immunity from jurisdiction thereof and any claim of
improper venue, forum non conveniens or any similar basis to which it might
otherwise be entitled in any such action or proceeding.
SECTION 22. SPECIFIC PERFORMANCE. Each of the parties
acknowledges and agrees that in the event of any breach of this Agreement, the
non-breaching party or parties would be irreparably harmed and could not be made
whole by monetary damages. The parties hereby agree that in addition to any
other remedy to which they may be entitled at law or in equity, they shall be
entitled to compel specific performance of this Agreement in any action
instituted in any court of the United States or any state thereof having subject
matter jurisdiction for such action.
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<PAGE> 14
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the parties hereto or by their duly authorized officers, all as of
the date first above written.
STARWOOD LODGING TRUST,
a Maryland real estate investment
trust
By: /s/ Steven R. Goldman
-----------------------------
Name: Steven R. Goldman
Title: Senior Vice President
STARWOOD LODGING CORPORATION,
a Maryland corporation
By: /s/ Nir Margalit
-----------------------------
Name: Nir Margalit
Title: Secretary and General Counsel
SLT REALTY LIMITED PARTNERSHIP,
By: STARWOOD LODGING TRUST,
general partner
By: /s/ Steven R. Goldman
-------------------------------
Name: Steven R. Goldman
Title: Senior Vice President
SLC OPERATING LIMITED PARTNERSHIP
By: STARWOOD LODGING CORPORATION,
general partner
By: /s/ Nir Margalit
-----------------------------
Name: Nir Margalit
Title: Secretary and General Counsel
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<PAGE> 15
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA, on behalf of PRUDENTIAL
PROPERTY INVESTMENT SEPARATE
ACCOUNT II
By: /s/ Gary L. Kauffman
-------------------------------
Gary L. Kauffman
Vice President
THE GARY MENDELL FAMILY TRUST
By: /s/ Eleanor Mendell
-------------------------------
Eleanor Mendell
Trustee
/s/ Gary M. Mendell
-------------------------------
Gary M. Mendell
/s/ Steve Mendell
-------------------------------
Steve Mendell
/s/ Ellen-Jo Mendell
-------------------------------
Ellen-Jo Mendell
/s/ Felix J. Cacciato, Jr.
-------------------------------
Felix J. Cacciato, Jr.
/s/ Judith K. Rushmore
-------------------------------
Judith K. Rushmore
/s/ Murray L. Dow, II
-------------------------------
Murray L. Dow, II
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<PAGE> 16
/s/ Orna L. Shulman
___________________________________________
Orna L. Shulman
/s/ Arthur C. Green
___________________________________________
Arthur C. Green
/s/ Mark J. Rosinsky
___________________________________________
Mark J. Rosinsky
/s/ Randi L. Rosinsky
___________________________________________
Randi L. Rosinsky
/s/ John Daily
___________________________________________
John Daily
/s/ Michael D. Hall
___________________________________________
Michael D. Hall
/s/ Harvey Moore
___________________________________________
Harvey Moore
/s/ Tracey Driscoll
___________________________________________
Tracey Driscoll
/s/ Tom Clearwater
___________________________________________
Tom Clearwater
ZAPCO HOLDINGS, INC.
By: Orna L. Shulman
____________________________________________
Orna L. Shulman
Vice President
-16-
<PAGE> 17
ZAPCO HOLDINGS, INC. DEFERRED
COMPENSATION PLAN TRUST
By: /s/ Nancy S. Heinrich, Trustee
___________________________________________
Nancy S. Heinrich
Trustee
-17-
<PAGE> 18
SCHEDULE A TO
UNITS EXCHANGE RIGHTS AGREEMENT
NOTICE ADDRESS FOR HOLDERS
[To be provided at Closing]
<PAGE> 19
EXHIBIT A TO
UNITS EXCHANGE RIGHTS AGREEMENT
LETTER OF TRANSMITTAL
To Tender Units
Pursuant to the Units Exchange Rights Agreement
Dated as of February ___, 1997
TO: Starwood Lodging Trust
2231 E. Camelback Road, Suite 410
Phoenix, AZ 85016
Starwood Lodging Corporation
2231 E. Camelback Road, Suite 400
Phoenix, AZ 85016
DESCRIPTION OF UNITS
NAMES(S) AND ADDRESS(ES) UNITS TENDERED (ATTACH
OF REGISTERED OWNERS ADDITIONAL LIST IF
NECESSARY)
Realty
Units:
Operating
Units:
--------------------------------------
Total
<PAGE> 20
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Starwood Lodging Trust (the
"Trust") the above-described Realty Units (as defined in the Units Exchange
Rights Agreement dated as of February ___, 1997 (the "Units Exchange Rights
Agreement")) and hereby tenders to Starwood Lodging Corporation (the
"Corporation") the above-described Operating Units (as defined in the Units
Exchange Rights Agreement) in accordance with the terms and conditions of the
Units Exchange Rights Agreement and this Letter of Transmittal (which together
constitute the "Offer"), receipt of which is hereby acknowledged. All terms used
herein but not defined herein are used as defined in the Units Exchange Rights
Agreement.
Subject to, and effective upon the issuance of Paired Shares
and/or the payment of cash, as the case may be, for the Starwood Units tendered
hereby, the undersigned hereby assigns and transfers (i) to the Trust all right,
title and interest in and to all the Realty Units that are being tendered hereby
and irrevocably constitutes and appoints the Trust (the "Realty Unit Agent"),
with full power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), to (a) transfer such Realty Units
on the books of the Realty Partnership and (b) receive all rights, privileges
and benefits, and any and all obligations and liabilities appertaining thereto
and otherwise exercise all rights of beneficial ownership of such Realty Units,
all in accordance with the terms of the Offer and (ii) to the Corporation all
right, title and interest in and to all the Operating Units that are being
tendered hereby and irrevocably constitutes and appoints the Corporation (the
"Operating Unit Agent" and, together with the Realty Unit Agent, the "Agents"),
with full power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), to (a) transfer such Operating
Units on the books of the Operating Partnership and (b) receive all rights,
privileges and benefits, and any and all obligations and liabilities
appertaining thereto and otherwise exercise all rights of beneficial ownership
of such Operating Units, all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants (i) to the
Trust that the undersigned has full power and authority to tender, sell, assign
and transfer the tendered Realty Units and that upon payment therefor, the Trust
will acquire unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and the same will not be subject to any
adverse claim, (ii) to the Corporation that the undersigned has full
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<PAGE> 21
power and authority to tender, sell, assign and transfer the tendered Operating
Units and that upon payment therefor, the Corporation will acquire unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and the same will not be subject to any adverse claim, (iii) to the
Trust and the Corporation that the tender complies with each and every provision
of Section 1 of the Units Exchange Rights Agreement, and (iv) attached hereto is
a calculation, to the best knowledge of the undersigned after due inquiry
(together with such supporting documentation as the Trust may reasonably
request) of the maximum number of Paired Shares that may be issued to the
undersigned without causing either (x) the Trust to not satisfy the REIT
Requirements in any respect or (y) any person or entity to Beneficially Own
Trust Shares exceeding the Ownership Limit. The undersigned will, upon request,
execute any additional documents deemed by the Trust or the Corporation to be
reasonably necessary or desirable to complete the sale, assignment and transfer
of the tendered Starwood Units.
Unless a registration statement relating to any Paired Shares
to be delivered to the undersigned is effective under the Securities Act of
1933, as amended (the "Securities Act"), the undersigned hereby represents and
warrants to the Trust and the Corporation that the undersigned (A) is an
"accredited investor" within the meaning of Rule 501 under the Securities Act,
or (B) has sufficient knowledge and experience in financial and business matters
and in investing in entities similar to the Partnerships, the Trust and the
Corporation so as to be able to evaluate the risks and merits of its investment
in the Partnerships, the Trust and the Corporation and it is able financially to
bear the risks thereof, and in either case, (i) has had an opportunity to
discuss the business, management and financial affairs of the Trust, the
Corporation and the Partnerships with the management of the Trust, the
Corporation and the Partnerships, and (ii) understands that any such Paired
Shares have not been registered under the Securities Act by reason of their
issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated
under the Securities Act and any such Paired Shares must be held indefinitely
unless a subsequent disposition thereof is registered under the Securities Act
and applicable state securities laws or is exempt from such registration. If not
sold pursuant to an effective registration statement, any such Paired Shares
will bear an appropriate legend indicating that such Paired Shares have not been
registered under the Securities Act and resale of such Paired Shares is
restricted under applicable securities laws.
All authority conferred or agreed to be conferred in this
Letter of Transmittal shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and any
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<PAGE> 22
obligation of the undersigned hereunder shall be binding upon the successors,
assigns, heirs, executors, administrators and legal representatives of the
undersigned.
The undersigned understands that, except as provided in
Section 2(b) of the Units Exchange Rights Agreement, a tender of Starwood Units
pursuant to the Units Exchange Rights Agreement is irrevocable and constitutes a
binding agreement between the undersigned and the Trust and the Corporation upon
the terms and subject to the conditions of the Units Exchange Rights Agreement.
Unless otherwise indicated under "Special Delivery
Instructions", please mail any Paired Shares issuable upon exchange of the
Starwood Units tendered hereby (or, if the Cash Election or the Combined
Election is made, the cash payment payable pursuant thereto) to the address(es)
of the registered holder(s) appearing under "Description of Units." In the event
that the Special Delivery Instructions are completed, please issue the Paired
Shares (or, if the Cash Election or the Combined Election is made, the cash
payment payable pursuant thereto) in the name of the registered holder(s) and
transmit the same to the person or persons so indicated.
The Trust, the Corporation and the undersigned agree that they
will cooperate with each other and will make, execute, acknowledge, deliver,
record and file, or cause to be made, executed, acknowledged, delivered,
recorded and filed, at such times and places as the other may reasonably deem
necessary, all other and further documents and instruments, and will take all
other and further actions, as the other may reasonably request from time to time
in order to effectuate the purposes and provisions of the tender made pursuant
to this Letter of Transmittal.
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<PAGE> 23
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 5)
To be completed ONLY if Paired Shares or the cash payment are
to be sent to someone other than the undersigned or to the undersigned at an
address other than that above.
Mail certificate(s) for Paired Shares or cash payment to:
Name_____________________________________________________________
(please print)
Address__________________________________________________________
_________________________________________________________________
(include Zip Code)
_________________________________________________________________
_________________________________________________________________
(Tax Identification or Social Security Number)
SIGN HERE
Complete Substitute Form W-9 included
_________________________________________________________________
_________________________________________________________________
(Signature(s) of holder of Units)
(Must be signed by registered holder(s) as name(s) appear(s) on books and
records of the Partnership. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, please set forth full title
and see instruction 4.
Dated____________________________________________________________
Name(s)__________________________________________________________
(please print)
Capacity
(Full Title)_____________________________________________________
Address__________________________________________________________
(include Zip Code)
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<PAGE> 24
Area Code and Tel. No.___________________________________________
Tax Identification or
Social Security No.______________________________________________
(Complete Substitute Form W-9)
Guarantee of Signature(s)
(See Instruction 1)
Authorized
Signature________________________________________________________
Name of
Firm_____________________________________________________________
Dated____________________________________________________________
INSTRUCTIONS
Forming Part of the Terms and Conditions of the
Units Exchange Rights Agreement
1. GUARANTEE OF SIGNATURE. No signature guarantee on this
Letter of Transmittal is required unless the registered holder of the Starwood
Units has completed the box entitled "Special Delivery Instructions". In such
case all signatures on this Letter of Transmittal must be guaranteed by a member
firm of any registered national securities exchange in the United States or of
the National Association of Securities Dealers, Inc. or by a commercial bank or
trust company (not a savings bank or a savings and loan association) having an
office, branch or agency in the United States.
2. DELIVERY OF LETTER OF TRANSMITTAL. This Letter of
Transmittal is to be completed by the holder of Starwood Units. A properly
completed and duly executed Letter of Transmittal and any other documents
required by this Letter of Transmittal must be received by the Agents.
No alternative, conditional or contingent tenders will be
accepted, except as permitted pursuant to the Units Exchange Rights Agreement.
3. INADEQUATE SPACE. If the space provided herein is
inadequate, the Units tendered and/or other information required should be
listed on a separate schedule attached hereto.
4. SIGNATURES ON LETTER OF TRANSMITTAL. The signature must
correspond with the name as shown on the books and
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<PAGE> 25
records of the Partnerships without any change whatsoever.
If any of the Starwood Units tendered hereby are owned of
record by two or more joint owners, all such owners must sign the Letter of
Transmittal.
If any tendered Starwood Units are registered in different
names, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations.
If this Letter of Transmittal is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, each
person should so indicate when signing, and proper evidence satisfactory to the
Agents of their authority so to act must be submitted.
5. SPECIAL DELIVERY INSTRUCTIONS. If a certificate for Paired
Shares or the cash payment is to be sent to someone other than the signer of
this Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed.
6. WAIVER OF CONDITIONS. Each of the Trust and the Corporation
reserves the right to waive in its sole discretion any of the specified
conditions of the Offer in the case of the Starwood Units tendered; provided
that any such waiver shall not adversely affect any holder of outstanding
Starwood Units without the consent of such holder.
7. BACK-UP WITHHOLDING. Under the Federal income tax law, a
person surrendering Starwood Units must provide the Agents with his correct
taxpayer identification number ("TIN") on Substitute Form W-9 below unless an
exemption applies. If the correct TIN is not provided, a $50 penalty may be
imposed by the Internal Revenue Service and payments made in exchange for the
surrendered Starwood Units may be subject to back-up withholding of that rate
provided by the Federal income tax law (such rate being at the date of the Units
Exchange Rights Agreement, 31%).
The TIN that must be provided is that of the registered holder
of the Starwood Units. The TIN for an individual is his social security number.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance or additional copies of the Units Exchange Rights
Agreement and the Letter of Transmittal may be directed to the Agents at the
address set forth above.
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<PAGE> 26
IMPORTANT TAX INFORMATION
Under Federal income tax laws, a holder whose tendered
Starwood Units are accepted for payment is required by law to provide the Agents
(as payers) with his correct taxpayer identification number on Substitute Form
W-9 below. If such holder is an individual, the taxpayer identification number
is his social security number. If the Agents are not provided with the correct
taxpayer identification number, the holder may be subject to a $50 penalty
imposed by the Internal Revenue Service. In addition, payments that are made to
such holder with respect to Starwood Units purchased pursuant to the Offer may
be subject to back-up withholding.
If back-up withholding applies, the Agents are required to
withhold, at that rate provided by the Federal income tax law (such rate being
at the date of the Units Exchange Rights Agreement 31%), of any such payments
made to the holder of Starwood Units. Paired Shares otherwise deliverable
hereunder may, at the expense (and with all risk of loss for the account) of the
undersigned, be sold to pay such amounts. Back-up withholding is not an
additional tax. Rather, the tax liability of persons subject to back-up
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent back-up withholding on payments that are made to a
holder of Starwood Units purchased pursuant to the Offer, the holder is required
to notify the Agents of his correct taxpayer identification number by completing
the form below certifying that the taxpayer identification number provided on
Substitute Form W-9 is correct.
WHAT NUMBER TO GIVE THE AGENT
The holder is required to give the Agents the social security
number or employer identification number of the record owner of the Starwood
Units.
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<PAGE> 27
PAYER'S NAME: Starwood Lodging Trust
Starwood Lodging Corporation
<TABLE>
<S> <C> <C>
Substitute Part 1 - Please provide your TIN in the box at Social Security
Form W-9 right and certify by signing and dating below Number/Employer
Identification
Number
Department of the Certification - Under the penalties of perjury,
Treasury/Internal (i) I certify that the information provided on this
Revenue Service form is true, correct and complete and (ii) I am
not subject to backup withholding because: (a) I
am exempt from backup Service withholding, or (b) I
have not been notified by the Internal Revenue
Service (IRS) that I am subject to backup
withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup
withholding.
Signature ________________________________________ Date ______________
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACK-UP
WITHHOLDING AT THAT RATE PROVIDED BY THE FEDERAL INCOME TAX
LAW (SUCH RATE BEING AT THE DATE OF THE UNITS EXCHANGE RIGHTS
AGREEMENT 31%) OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER.
-27-
<PAGE> 1
Exhibit 10.35
CLASS A EXCHANGE RIGHTS AGREEMENT
This Class A Exchange Rights Agreement (this "Agreement") is
made as of February 14, 1997 among Starwood Lodging Corporation, a Maryland
corporation (the "Corporation"), SLC Operating Limited Partnership, a Delaware
limited partnership (the "Operating Partnership"), and each of the limited
partners of the Operating Partnership listed on the signature pages hereto (the
"Starwood Partners"). Unless otherwise indicated, capitalized terms used herein
are used herein as defined in Section 11.
WHEREAS, pursuant to a Contribution Agreement dated as of
January 15, 1997 (the "Contribution Agreement") among the Corporation, Operating
Partnership, Starwood Partners and other parties on the date hereof the Starwood
Partners are making capital contributions to the Operating Partnership in return
for the issuance of Class A Units (as that term is defined in the Contribution
Agreement);
WHEREAS, pursuant to the Contribution Agreement the parties
hereto are entering into this Agreement to provide for the rights of the
Starwood Partners to tender Class A Units in exchange for either Paired Shares
(as defined herein), cash or a combination of Paired Shares and cash, on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants set forth herein, the parties hereto agree as follows:
SECTION 1. RIGHT TO TENDER CLASS A UNITS. (a) Upon the terms
and subject to the conditions of this Agreement, each holder of Class A Units
shall have the right to tender to the Corporation outstanding Class A Units.
(b) Notwithstanding any other provision of this Agreement, no
Paired Shares or cash shall be issued or paid in respect of any tender of Class
A Units (i) if, notwithstanding the provisions of Section 6 of this Agreement,
the right to tender Class A Units and receive Paired Shares or cash would result
in the Trust not satisfying the REIT Requirements in any respect or would result
in any person or entity Beneficially Owning Trust Shares exceeding the Ownership
Limit, (ii) if the tender pursuant to Section 1(a) is prior to the first
anniversary of the date of this Agreement, (iii) prior to the expiration or
termination of the waiting period applicable to such exchange and issuance, if
any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as it may
be amended from time to time, or (iv) prior to the receipt of all governmental
and regulatory approvals which are required to be obtained prior to such tender
and issuance or payment, including, without limitation, any required approvals
of the gaming authorities of the State of
<PAGE> 2
Nevada and of Clark County, Nevada (the "Gaming Approvals"). Prior to the
receipt of Gaming Approvals, such holder shall, as a condition to any tender of
Class A Units which would (if the Paired Share Option (as defined below) were to
be elected in respect of such tender) cause such holder to beneficially own, in
the aggregate, Paired Shares representing more than 4.9% of the then issued and
outstanding Paired Shares, give not less than 90 days' written notice to the
Corporation (at the offices provided pursuant to Section 10) of its intent to
tender Class A Units. In the event that the ability to receive Paired Shares or
cash would result in the Trust not satisfying the REIT Requirements in any
respect or would result in any person or entity Beneficially Owning Trust Shares
exceeding the Ownership Limit, and as a result thereof no Paired Shares or cash
may be issued or paid in respect of any tender of Class A Units pursuant to
Section 1(b)(i) above, the parties hereto shall use their respective best
efforts to restructure the terms and provisions of this Agreement (and, if
necessary, the Partnership Agreements and the Registration Rights Agreement (as
defined in Section 6)), or to agree to terms and provisions in addition to such
terms and provisions, so as to provide to each such party the same substantive
rights (or substantive rights as close thereto as is reasonably practicable) as
those provided by this Agreement, the Partnership Agreements and the
Registration Rights Agreement.
(c) The rights to exchange Class A Units pursuant to this
Agreement constitute a continuous offer and may not be withdrawn, amended or
modified by the Corporation without the prior written consent of each holder of
outstanding Class A Units adversely affected by such withdrawal, amendment or
modification; provided that any withdrawal, amendment or modification that does
not adversely affect any holder of outstanding Class A Units may be effected
without the consent of such holder.
SECTION 2. ACCEPTANCE OF TENDER; ELECTION OF METHOD OF PAYMENT
FOR TENDERED CLASS A UNITS. (a) Upon the terms and subject to the conditions of
this Agreement, the Corporation shall accept Class A Units validly tendered in
proper form and meeting all of the requirements of this Agreement. In order for
Class A Units to be validly tendered pursuant to this Agreement, the registered
holder thereof shall deliver to the Corporation, at the address provided
pursuant to Section 10, (i) a completed and duly executed Letter of Transmittal
in the form attached hereto as Exhibit A (the "Letter of Transmittal") and any
other documents required by the Letter of Transmittal and (ii) a calculation, to
the best knowledge of such registered holder after due inquiry (together with
such supporting documentation as the Corporation may reasonably request), of the
maximum number of Paired Shares that may be issued to such registered holder
without causing either (x) the Trust to not satisfy the REIT Requirements in any
respect or (y) any person or entity to
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<PAGE> 3
Beneficially Own Trust Shares exceeding the Ownership Limit. The Corporation
shall make all determinations as to the validity and form of any tender of Class
A Units in accordance with the provisions of this Agreement and upon rejection
of a tender shall give the tendering holder written notice of such rejection,
which shall include the reasons therefor.
(b) Unless otherwise determined by agreement of the
Corporation, tenders of Class A Units pursuant to this Agreement shall be
irrevocable and shall not be subject to withdrawal or modification; provided
that if the Corporation makes the Paired Share Election with respect to a
tender, then within 5 days after such Election the tendering holder may elect to
revoke such tender so long as (i) no public disclosure of such tender has been
made prior to such revocation and (ii) such tendering holder reimburses the
Corporation for all reasonable costs and expenses incurred in connection with
such tender.
(c) Within 15 days after the valid tender pursuant to this
Agreement of Class A Units, the Corporation shall make an election to pay for
such Class A Units by delivering either (i) Paired Shares (the "Paired Share
Election"), (ii) cash (the "Cash Election") or (iii) a combination of Paired
Shares and cash (the "Combined Election"). Such election shall be made pursuant
to a decision by the Corporation. If the Corporation does not so decide within
such 15-day period, it shall be deemed to have made the Cash Election.
SECTION 3. PAIRED SHARE ELECTION. (a) If with respect to any
tender of Class A Units pursuant to this Agreement, the Corporation makes the
Paired Share Election, then, except as provided in Section 2(b), within 15 days
after the expiration of the 5-day period referred to in Section 2(b), the
Corporation shall deliver to the tendering holder one Paired Share for each
Class A Unit validly tendered pursuant to the provisions of this Agreement.
(b) No fractional Paired Shares or scrip representing
fractional Paired Shares shall be issued upon exchange of Class A Units pursuant
to this Agreement. If more than one Letter of Transmittal shall be delivered at
one time by the same holder, the number of full Paired Shares which shall be
issuable upon exchange of the Class A Units tendered thereby shall be computed
on the basis of the aggregate number of Class A Units so tendered. Instead of
any fractional Paired Shares which would otherwise be issuable upon exchange of
any Class A Units, the Corporation shall pay a cash adjustment in respect of
such fraction in an amount equal to the same fraction of the Paired Share
Closing Price on the last Business Day preceding the date of exchange.
-3-
<PAGE> 4
(c) If a holder exchanges Class A Units pursuant to this
Agreement, the Corporation shall pay any documentary, stamp or similar issue or
transfer tax due on any issue of Paired Shares upon such exchange. Such holder,
however, shall (i) pay to the Corporation the amount of any additional
documentary, stamp or similar issue or transfer tax which is due (or shall
establish to the satisfaction of the Corporation the payment thereof) as a
result of Paired Shares being issued in a name other than the name of such
holder and (ii) be responsible for all income or other taxes as a result of such
exchange.
SECTION 4. CASH ELECTION. (a) If with respect to any tender of
Class A Units pursuant to this Agreement, the Corporation makes or is deemed to
have made the Cash Election, then within 20 days after such tender the
Corporation shall pay to the tendering holder an aggregate amount of cash (the
"Aggregate Cash Payment") equal to the product of (i) the number of Paired
Shares which would have been delivered to such holder if the Corporation had
made the Paired Share Election with respect to such tender and (ii) the average
Paired Share Closing Price for the ten trading day period ending one day prior
to the date of such tender.
(b) In connection with any Aggregate Cash Payment pursuant to
Section 4(a) or any cash payment pursuant to Section 5(a)(ii), the Corporation
shall pay such Aggregate Cash Payment.
SECTION 5. COMBINED ELECTION. (a) If with respect to any
tender of Class A Units pursuant to this Agreement, the Corporation shall make
the Combined Election, then, except as provided in Section 2(b), within 15 days
after the expiration of the 5-day period referred to in Section 2(b), the
Corporation shall (i) notify the tendering holder of the number of such tendered
Class A Units which will be exchanged for cash (the "Cash Units") and the number
of such tendered Class A Units which will be exchanged for Paired Shares (the
"Paired Share Units"), (ii) pay to the tendering holder, in respect of each Cash
Unit validly tendered pursuant to the provisions of this Agreement, an amount of
cash equal to the average Paired Share Closing Price for the ten trading day
period ending one day prior to the date of such tender and (iii) deliver to the
tendering holder one Paired Share for each Paired Share Unit validly tendered
pursuant to the provisions of this Agreement.
(b) The provisions of Sections 3(b) and 3(c) of this Agreement
shall apply to the issuance of Paired Shares pursuant to Section 5(a).
SECTION 6. REGISTRATION RIGHTS. If at any time after six (6)
months from the date of this Agreement, (a) a Starwood Partner validly tenders
Class A Units pursuant to the provisions of this Agreement, (b) the Corporation
makes the Paired Share
-4-
<PAGE> 5
Election or the Combined Election with respect to such tender, (c) as a result
of the Ownership Limit such Starwood Partner cannot receive the full number of
Paired Shares otherwise issuable to such Starwood Partner pursuant to such
tender and such Election (without giving effect to the Ownership Limit) (the
event described in clauses (a), (b) and (c) being referred to as a "Paired Share
Tender Reduction"; the number of such Paired Shares which such Starwood Partner
cannot receive pursuant to such tender as a result of the Ownership Limit being
referred to as the "Unissued Paired Shares"; and the Class A Units tendered in
respect of such Unissued Paired Shares being referred to as the "Delayed Payment
Units"), then subject to the other terms and conditions of this Agreement, such
Starwood Partner shall be entitled to receive the number of Paired Shares which
it can receive pursuant to such tender, such Election and the Ownership Limit
and then, pursuant to the terms of the Registration Rights Agreement, the
Corporation shall cause there to be filed with the Securities and Exchange
Commission a registration statement and the Corporation shall register and sell
pursuant thereto a number of Paired Shares equal to the number of such Unissued
Paired Shares requested to be registered pursuant to Section 2.3 of the
Registration Rights Agreement. Within two Business Days after the receipt by the
Corporation of the proceeds of any sale (after underwriting discounts and
commissions) of such Paired Shares pursuant to such registration, the
Corporation shall pay such proceeds to the tendering holder of the Delayed
Payment Units, in full payment for the tender of such Delayed Payment Units.
SECTION 7. REPRESENTATIONS OF TENDERING HOLDER. Each tender of
Class A Units shall constitute a representation and warranty by the tendering
holder of each of the representations and warranties set forth in the form of
Letter of Transmittal. Without limiting the generality of the foregoing, unless,
at the time of a tender for exchange of Class A Units pursuant to this
Agreement, a registration statement relating to any Paired Shares to be
delivered upon such tender is effective under the Securities Act of 1933, as
amended (the "Securities Act"), such tender shall constitute a representation
and warranty by the tendering holder to the Corporation that such tendering
holder (i) is an "accredited investor" within the meaning of Rule 501 under the
Securities Act, (ii) has sufficient knowledge and experience in financial and
business matters and in investing in entities similar to the Partnerships, the
Trust and Corporation so as to be able to evaluate the risks and merits of its
investment in the Partnerships, the Trust and the Corporation and it is able
financially to bear the risks thereof, (iii) has had an opportunity to discuss
the business, management and financial affairs of the Trust, the Corporation and
the Partnerships with the management of the Trust, the Corporation and the
Partnerships, and (iv) understands that the Paired Shares have not been
registered under the Securities Act by reason of
-5-
<PAGE> 6
their issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated
under the Securities Act and such Paired Shares must be held indefinitely unless
a subsequent disposition thereof is registered under the Securities Act and
applicable state securities laws or is exempt from such registration.
SECTION 8. STATUS OF TENDERING HOLDER. Until the holder of
Class A Units tendered pursuant to this Agreement becomes a holder of record of
the Paired Shares issued in exchange therefor (in the case of a Paired Share
Election or a Combined Election) or until such holder has received cash in
exchange therefor (in the case of a Cash Election or a Combined Election), such
holder shall continue to hold and own such Class A Units for all purposes of the
Operating Partnership Agreement. In the case of a Paired Share Election or a
Combined Election, no such holder shall have any rights as a shareholder of the
Trust or a stockholder of the Corporation in respect of such Paired Shares until
such holder becomes a holder of record of such Paired Shares.
SECTION 9. RESERVATION OF SHARES; CLOSING OF TRANSFER BOOKS.
(a) The Corporation shall reserve and shall at all times have reserved out of
its authorized but unissued Corporation Shares, solely for the purpose of
effecting the exchange pursuant to this Agreement, enough Corporation Shares to
permit the exchange of the then outstanding Class A Units and shall use its best
efforts to cause the Trust to reserve and shall at all times have, solely for
the purpose of effecting the exchange pursuant to this Agreement, enough Trust
Shares to permit the exchange of the then outstanding Class A Units. All Paired
Shares which may be issued upon exchange of Class A Units shall be validly
issued, fully paid and nonassessable and free from all taxes, liens and charges
with respect to the issuance thereof other than income taxes resulting from such
exchange.
(b) The Corporation shall use its best efforts to cause the
Trust not to close its transfer books so as to prevent the timely issuance of
Trust Shares pursuant to this Agreement. The Corporation shall not close its
transfer books so as to prevent the timely issuance of Corporation Shares
pursuant to this Agreement.
SECTION 10. NOTICES. All notices, documents and other
communications under this Agreement shall be in writing and shall be deemed
given when delivered personally or by overnight mail or when sent by facsimile
transmission, or four days after being mailed (by registered mail, return
receipt requested) to a party at the following address (or to such other address
as such party may have specified by notice given to the other parties pursuant
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<PAGE> 7
to this provision):
(a) If to the Corporation or the Operating Partnership, to:
Starwood Lodging Corporation
2231 E. Camelback Road, Suite 400
Phoenix, AZ 85016
Attention: General Counsel
Telecopy No.: (602) 852-0686
Telephone No.: (602) 852-3900
with a copy to:
Sidley & Austin
555 West 5th Street
Los Angeles, California 90013
Attention: Sherwin L. Samuels
Telecopy No.: (213) 896-6600
Telephone No.: (213) 896-6000
(b) If to Prudential:
Prudential Real Estate Investors
8 Campus Drive
Parsippany, NJ 07054
Attention: Gary L. Kauffman
Telecopy No.: (201) 683-1790
Telephone No.: (201) 683-1612
Attention: Joseph D. Margolis, Esq.
James P. Walker, Esq.
Telecopy No.: (201) 683-1788
Telephone No.: (201) 683-1694 or 1690
with a copy to:
O'Melveny & Myers LLP
153 East 53rd Street
New York, NY 10022
Attention: Robert S. Insolia, Esq.
Telecopy No.: (212) 326-2061
Telephone No.: (212) 326-2000
(c) If to any other Starwood Partner, to the address
specified on Schedule A hereto.
with a copy to:
Willkie Farr & Gallagher
153 East 53rd Street
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<PAGE> 8
New York, NY 10022
Attention: Bruce M. Montgomerie, Esq.
Telecopy No.: (212) 821-8111
Telephone No.: (212) 821-8000
SECTION 11. DEFINITIONS. For purposes of this Agreement:
"Beneficially Owning" means owning Trust Shares directly,
indirectly or constructively by a person or entity through the
application of Section 318(a) of the Code, as modified by Section
856(d)(5) of the Code, or Section 544 of the Code, as modified by
Section 856(h) of the Code. The term "Beneficially Own" shall have a
correlative meaning.
"Business Day" means any day other than Saturday, Sunday and
any day on which banks are not open to do business in New York, New
York.
"Code" means the Internal Revenue Code of 1986, and the rules
and regulations promulgated thereunder, as amended from time to time.
"Corporation Shares" means the shares of Common Stock, par
value $.01 per share, of the Corporation.
"Declaration of Trust" means the Declaration of Trust of the
Trust dated August 25, 1969, as amended and restated as of June 6,
1988, and as further amended on February 1, 1995 and as amended from
time to time after the date of this Agreement.
"Disinterested Members" when used with respect to the Trust
has the meaning set forth in the Code of Regulations of the Trust and,
when used with respect to the Corporation, has the meaning set forth in
the By-Laws of the Corporation, in each case as amended from time to
time.
"Ownership Limit" when used with respect to Trust Shares, has
the meaning set forth in the Declaration of Trust and, when used with
respect to the Corporation Shares, has the meaning set forth in the
Restated Articles, in each case as amended from time to time.
"Paired Share" means a Corporation Share and a Trust Share
which are paired pursuant to the Pairing Agreement.
"Paired Share Closing Price" shall mean, with respect to a
particular date, the last reported sales price regular way on such date
or, in case no such reported sale takes place on such date, the average
of the reported closing bid
-8-
<PAGE> 9
and asked prices regular way on such date, in either case on the New
York Stock Exchange, or if the Paired Shares are not then listed or
admitted to trading on such Exchange, on the principal national
securities exchange on which the Paired Shares are then listed or
admitted to trading or, if not then listed or admitted to trading on
any national securities exchange, the closing sale price on such date
of the Paired Shares or, in case no reported sale takes place on such
date then, the average of the closing bid and asked prices on such
date, on NASDAQ or any comparable system. If the Paired Shares are not
then quoted on NASDAQ or any comparable system, the Board of Trustees
of the Trust and the Board of Directors of the Corporation shall in
good faith determine the Paired Share Closing Price.
"Pairing Agreement" means the Pairing Agreement dated June 25,
1980 between the Corporation, as it may be amended from time to time.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the date first written above between the Trust,
the Corporation and certain other parties.
"REIT Requirements" shall mean the requirements for the Trust
to (i) qualify as a REIT under the Code and the rules and regulations
promulgated thereunder, (ii) avoid any federal income or excise tax
liability, (iii) retain its status as grandfathered pursuant to Section
132(c)(3) of the Deficit Reduction Act of 1984 and (iv) retain the
benefits of that certain private letter ruling issued by the Internal
Revenue Service to the Trust dated as of January 4, 1980.
"Restated Articles" means the Restated Articles of
Incorporation of the Corporation, as amended from time to time after
the date of this Agreement.
"Trust Shares" means the shares of Beneficial Interest,
$.01 par value, of the Trust.
SECTION 12. DETERMINATIONS AND INTERPRETATION. All agreements
between the Trust and the Corporation provided for in (or required by or
pursuant to) this Agreement shall be made on behalf of the Corporation by their
respective Disinterested Members, including, without limitation, any agreement
between the Corporation as to the election of the Paired Share Election, the
Cash Election or the Combined Election with respect to a tender of Class A Units
pursuant to Section 2(c), any agreement to permit the revocation, withdrawal or
modification of a tender of Class A Units pursuant to Section 1(c). All
interpretations of the terms of this Agreement shall be resolved on behalf of
the
-9-
<PAGE> 10
Corporation by their respective Disinterested Members.
SECTION 13. PARTIAL INVALIDITY. In case any one or more of the
provisions contained herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein unless the deletion of
such provision or provisions would result in such a material change as to cause
completion of the transactions contemplated hereby to be unreasonable.
SECTION 14. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors or assigns. In addition, and whether or not any express
assignment shall have been made, the provisions of this Agreement which are for
the benefit of the parties hereto other than the Corporation, the Trust, the
Realty Partnership and the Operating Partnership, shall also be for the benefit
of and enforceable by any subsequent holder of any Class Units.
SECTION 15. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in one or more counterparts, each of which shall be considered an
original counterpart, and shall become a binding agreement when the Corporation,
the Operating Partnership and each of the Starwood Partners shall have each
executed a counterpart of this Agreement.
SECTION 16. TITLES AND HEADINGS. Titles and headings to
Articles and Sections herein are inserted for convenience of reference only and
are not intended to be a part of or to affect the meaning or interpretation of
this Agreement.
SECTION 17. EXHIBITS. The Exhibits referred to in this
Agreement shall be construed with, and as an integral part of, this Agreement to
the same extent as if the same had been set forth verbatim herein.
SECTION 18. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This
Agreement, including the Exhibits, contains the entire understanding of the
parties hereto with regard to the subject matter contained herein. In addition
to amendments and modifications permitted by Section 1(c), the parties hereto,
by mutual agreement in writing, may amend, modify and supplement this Agreement;
provided that any such amendment, modification or supplement shall be approved
by a majority of the Disinterested Members of the Corporation. The failure of
any party hereto to enforce at any time any provision of this Agreement shall
not be construed to be a waiver of such provision, nor in any way to
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<PAGE> 11
affect the validity of this Agreement or any part hereof or the right of such
party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
SECTION 19. GOVERNING LAW. Except to the extent that Maryland
law is mandatorily applicable to the rights and obligations of the shareholders
of the Trust and the stockholders of the Corporation, this Agreement, and the
application or interpretation thereof, shall be governed exclusively by its
terms and by the internal laws of the State of New York, without regard to
principles of conflicts of laws as applied in the State of New York or any other
jurisdiction which, if applied, would result in the application of any laws
other than the internal laws of the State of New York.
SECTION 20. SUBMISSION TO JURISDICTION. Each of the parties
hereto irrevocably submits and consents to the jurisdiction of the United States
District Court for the Southern District of New York in connection with any
action or proceeding arising out of or relating to this Agreement, and
irrevocably waives any immunity from jurisdiction thereof and any claim of
improper venue, forum non conveniens or any similar basis to which it might
otherwise be entitled in any such action or proceeding.
SECTION 21. SPECIFIC PERFORMANCE. Each of the parties
acknowledges and agrees that in the event of any breach of this Agreement, the
non-breaching party or parties would be irreparably harmed and could not be made
whole by monetary damages. The parties hereby agree that in addition to any
other remedy to which they may be entitled at law or in equity, they shall be
entitled to compel specific performance of this Agreement in any action
instituted in any court of the United States or any state thereof having subject
matter jurisdiction for such action.
-11-
<PAGE> 12
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the parties hereto or by their duly authorized officers, all as of
the date first above written.
STARWOOD LODGING CORPORATION,
a Maryland corporation
By: /s/ Nir Margalit
--------------------------
Name: Nir Margalit
Title: Secretary and General Counsel
SLC OPERATING LIMITED PARTNERSHIP
By: STARWOOD LODGING CORPORATION,
general partner
By: /s/ Nir Margalit
-----------------------------
Name: Nir Margalit
Title: Secretary and General Counsel
/s/ Gary M. Mendell
------------------------------
Gary M. Mendell
/s/ Steven Mendell
------------------------------
Steve Mendell
/s/ Judith K. Rushmore
------------------------------
Judith K. Rushmore
/s/ Murray L. Dow, II
------------------------------
Murray L. Dow, II
WESTPORT HOSPITALITY, INC.
By: /s/ Gary Mendell
--------------------------
Name: Gary Mendell
Title: President
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<PAGE> 13
SCHEDULE A TO
UNITS EXCHANGE RIGHTS AGREEMENT
NOTICE ADDRESS FOR HOLDERS
[To be provided at Closing]
<PAGE> 14
EXHIBIT A TO
CLASS A EXCHANGE RIGHTS AGREEMENT
LETTER OF TRANSMITTAL
To Tender Units
Pursuant to the Class A Exchange Rights Agreement
Dated as of February ___, 1997
TO: Starwood Lodging Corporation
2231 E. Camelback Road, Suite 400
Phoenix, AZ 85016
DESCRIPTION OF UNITS
NAMES(S) AND ADDRESS(ES) UNITS TENDERED (ATTACH
OF REGISTERED OWNERS ADDITIONAL LIST IF
NECESSARY)
Class A Units:
-----------------------
Total
<PAGE> 15
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Starwood Lodging Trust
Corporation (the "Corporation") the above-described Class A Units (as defined in
the Class A Exchange Rights Agreement dated as of February ___, 1997 (the "Class
A Exchange Rights Agreement")) in accordance with the terms and conditions of
the Class A Exchange Rights Agreement and this Letter of Transmittal (which
together constitute the "Offer"), receipt of which is hereby acknowledged. All
terms used herein but not defined herein are used as defined in the Class A
Exchange Rights Agreement.
Subject to, and effective upon the issuance of Paired Shares
and/or the payment of cash, as the case may be, for the Class A Units tendered
hereby, the undersigned hereby assigns and transfers to the Corporation all
right, title and interest in and to all the Class A Units that are being
tendered hereby and irrevocably constitutes and appoints the Corporation (the
"Class A Unit Agent"), with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest), to (a)
transfer such Class A Units on the books of the Operating Partnership and (b)
receive all rights, privileges and benefits, and any and all obligations and
liabilities appertaining thereto and otherwise exercise all rights of beneficial
ownership of such Class A Units, all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants (i) to the
Corporation that the undersigned has full power and authority to tender, sell,
assign and transfer the tendered Class A Units and that upon payment therefor,
the Corporation will acquire unencumbered title thereto, free and clear of all
liens, restrictions, charges and encumbrances and the same will not be subject
to any adverse claim, (ii) to the Corporation that the tender complies with each
and every provision of Section 1 of the Class A Exchange Rights Agreement, and
(iii) attached hereto is a calculation, to the best knowledge of the undersigned
after due inquiry (together with such supporting documentation as the
Corporation may reasonably request) of the maximum number of Paired Shares that
may be issued to the undersigned without causing either (x) the Trust to not
satisfy the REIT Requirements in any respect or (y) any person or entity to
Beneficially Own Trust Shares exceeding the Ownership Limit. The undersigned
will, upon request, execute any additional documents deemed by the Trust or the
Corporation to be reasonably necessary or desirable to complete the sale,
assignment and transfer of the tendered Class A Units.
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<PAGE> 16
Unless a registration statement relating to any Paired Shares
to be delivered to the undersigned is effective under the Securities Act of
1933, as amended (the "Securities Act"), the undersigned hereby represents and
warrants to the Corporation that the undersigned (A) is an "accredited investor"
within the meaning of Rule 501 under the Securities Act, or (B) has sufficient
knowledge and experience in financial and business matters and in investing in
entities similar to the Partnerships, the Corporation so as to be able to
evaluate the risks and merits of its investment in the Partnerships, the
Corporation and it is able financially to bear the risks thereof, and in either
case (i) has had an opportunity to discuss the business, management and
financial affairs of the Trust, the Corporation and the Partnerships with the
management of the Trust, the Corporation and the Partnerships, and (ii)
understands that any such Paired Shares have not been registered under the
Securities Act by reason of their issuance in a transaction exempt from the
registration requirements of the Securities Act pursuant to Section 4(2) thereof
or Rule 505 or 506 promulgated under the Securities Act and any such Paired
Shares must be held indefinitely unless a subsequent disposition thereof is
registered under the Securities Act and applicable state securities laws or is
exempt from such registration. If not sold pursuant to an effective registration
statement, any such Paired Shares will bear an appropriate legend indicating
that such Paired Shares have not been registered under the Securities Act and
resale of such Paired Shares is restricted under applicable securities laws.
All authority conferred or agreed to be conferred in this
Letter of Transmittal shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and any obligation of the undersigned hereunder
shall be binding upon the successors, assigns, heirs, executors, administrators
and legal representatives of the undersigned.
The undersigned understands that, except as provided in
Section 2(b) of the Class A Exchange Rights Agreement, a tender of Class A Units
pursuant to the Class A Exchange Rights Agreement is irrevocable and constitutes
a binding agreement between the undersigned and the Corporation upon the terms
and subject to the conditions of the Class A Exchange Rights Agreement.
Unless otherwise indicated under "Special Delivery
Instructions", please mail any Paired Shares issuable upon exchange of the Class
A Units tendered hereby (or, if the Cash Election or the Combined Election is
made, the cash payment payable pursuant thereto) to the address(es) of the
registered holder(s) appearing under "Description of Units." In the event that
the Special Delivery Instructions are completed, please
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<PAGE> 17
issue the Paired Shares (or, if the Cash Election or the Combined Election is
made, the cash payment payable pursuant thereto) in the name of the registered
holder(s) and transmit the same to the person or persons so indicated.
The Corporation and the undersigned agree that they will
cooperate with each other and will make, execute, acknowledge, deliver, record
and file, or cause to be made, executed, acknowledged, delivered, recorded and
filed, at such times and places as the other may reasonably deem necessary, all
other and further documents and instruments, and will take all other and further
actions, as the other may reasonably request from time to time in order to
effectuate the purposes and provisions of the tender made pursuant to this
Letter of Transmittal.
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<PAGE> 18
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 5)
To be completed ONLY if Paired Shares or the cash payment are
to be sent to someone other than the undersigned or to the undersigned at an
address other than that above.
Mail certificate(s) for Paired Shares or cash payment to:
Name
----------------------------------------------------------------------------
(please print)
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(include Zip Code)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Tax Identification or Social Security Number)
SIGN HERE
Complete Substitute Form W-9 included
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Signature(s) of holder of Units)
(Must be signed by registered holder(s) as name(s) appear(s) on books and
records of the Partnership. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, please set forth full title
and see instruction 4.
Dated
---------------------------------------------------------------------------
Name(s)
-------------------------------------------------------------------------
(please print)
Capacity
(Full Title)
--------------------------------------------------------------------
Address
-------------------------------------------------------------------------
(include Zip Code)
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<PAGE> 19
Area Code and Tel. No.__________________________________________________________
Tax Identification or
Social Security No._____________________________________________________________
(Complete Substitute Form W-9)
Guarantee of Signature(s)
(See Instruction 1)
Authorized
Signature_______________________________________________________________________
Name of
Firm____________________________________________________________________________
Dated___________________________________________________________________________
INSTRUCTIONS
Forming Part of the Terms and Conditions of the
Class A Exchange Rights Agreement
1. GUARANTEE OF SIGNATURE. No signature guarantee on this
Letter of Transmittal is required unless the registered holder of the Class A
Units has completed the box entitled "Special Delivery Instructions". In such
case all signatures on this Letter of Transmittal must be guaranteed by a member
firm of any registered national securities exchange in the United States or of
the National Association of Securities Dealers, Inc. or by a commercial bank or
trust company (not a savings bank or a savings and loan association) having an
office, branch or agency in the United States.
2. DELIVERY OF LETTER OF TRANSMITTAL. This Letter of
Transmittal is to be completed by the holder of Class A Units. A properly
completed and duly executed Letter of Transmittal and any other documents
required by this Letter of Transmittal must be received by the Class A Unit
Agent.
No alternative, conditional or contingent tenders will be
accepted, except as permitted pursuant to the Class A Exchange Rights Agreement.
3. INADEQUATE SPACE. If the space provided herein is
inadequate, the Units tendered and/or other information required should be
listed on a separate schedule attached hereto.
4. SIGNATURES ON LETTER OF TRANSMITTAL. The signature must
correspond with the name as shown on the books and
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<PAGE> 20
records of the Partnerships without any change whatsoever.
If any of the Class A Units tendered hereby are owned of
record by two or more joint owners, all such owners must sign the Letter of
Transmittal.
If any tendered Class A Units are registered in different
names, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations.
If this Letter of Transmittal is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, each
person should so indicate when signing, and proper evidence satisfactory to the
Class A Unit Agent of their authority so to act must be submitted.
5. SPECIAL DELIVERY INSTRUCTIONS. If a certificate for Paired
Shares or the cash payment is to be sent to someone other than the signer of
this Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed.
6. WAIVER OF CONDITIONS. The Corporation reserves the right to
waive in its sole discretion any of the specified conditions of the Offer in the
case of the Class A Units tendered; provided that any such waiver shall not
adversely affect any holder of outstanding Class A Units without the consent of
such holder.
7. BACK-UP WITHHOLDING. Under the Federal income tax law, a
person surrendering Class A Units must provide the Class A Unit Agent with his
correct taxpayer identification number ("TIN") on Substitute Form W-9 below
unless an exemption applies. If the correct TIN is not provided, a $50 penalty
may be imposed by the Internal Revenue Service and payments made in exchange for
the surrendered Class A Units may be subject to back-up withholding of that rate
provided by the Federal income tax law (such rate being at the date of the Class
A Exchange Rights Agreement, 31%).
The TIN that must be provided is that of the registered holder
of the Class A Units. The TIN for an individual is his social security number.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance or additional copies of the Class A Exchange Rights
Agreement and the Letter of Transmittal may be directed to the Class A Unit
Agent at the address set forth above.
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<PAGE> 21
IMPORTANT TAX INFORMATION
Under Federal income tax laws, a holder whose tendered Class A
Units are accepted for payment is required by law to provide the Class A Unit
Agent (as payer) with his correct taxpayer identification number on Substitute
Form W-9 below. If such holder is an individual, the taxpayer identification
number is his social security number. If the Class A Unit Agent is not provided
with the correct taxpayer identification number, the holder may be subject to a
$50 penalty imposed by the Internal Revenue Service. In addition, payments that
are made to such holder with respect to Class A Units purchased pursuant to the
Offer may be subject to back-up withholding.
If back-up withholding applies, the Class A Unit Agent is
required to withhold, at that rate provided by the Federal income tax law (such
rate being at the date of the Class A Exchange Rights Agreement 31%), of any
such payments made to the holder of Class A Units. Paired Shares otherwise
deliverable hereunder may, at the expense (and with all risk of loss for the
account) of the undersigned, be sold to pay such amounts. Back-up withholding is
not an additional tax. Rather, the tax liability of persons subject to back-up
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent back-up withholding on payments that are made to a
holder of Class A Units purchased pursuant to the Offer, the holder is required
to notify the Class A Unit Agent of his correct taxpayer identification number
by completing the form below certifying that the taxpayer identification number
provided on Substitute Form W-9 is correct.
WHAT NUMBER TO GIVE THE AGENT
The holder is required to give the Class A Unit Agent the
social security number or employer identification number of the record owner of
the Class A Units.
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<PAGE> 22
PAYER'S NAME:
Starwood Lodging Corporation
<TABLE>
<CAPTION>
Substitute Part 1 - Please provide your TIN in the box at Social Security
Form W-9 right and certify by signing and dating below Number/Employer
Identification
Number
- ----------------- --------------------------------------------------- ---------------
<S> <C> <C>
Department of the Certification - Under the penalties of perjury,
Treasury/Internal (i) I certify that the information provided on this
Revenue Service form is true, correct and complete and (ii) I am
not subject to backup withholding because: (a) I
am exempt from backup Service withholding, or (b) I
have not been notified by the Internal Revenue
Service (IRS) that I am subject to backup
withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup
withholding.
Signature ________________________________________ Date __________
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACK-UP
WITHHOLDING AT THAT RATE PROVIDED BY THE FEDERAL INCOME TAX LAW (SUCH
RATE BEING AT THE DATE OF THE CLASS A EXCHANGE RIGHTS AGREEMENT 31%) OF
ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
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<PAGE> 1
Exhibit 10.41
EXCHANGE RIGHTS AGREEMENT
This Exchange Rights Agreement (this "Agreement") is made as of
March 11, 1997 among Starwood Lodging Trust, a real estate investment trust
organized under the laws of the State of Maryland (the "Trust"), Starwood
Lodging Corporation, a Maryland corporation (the "Corporation"), SLT Realty
Limited Partnership, a Delaware limited partnership (the "Realty Partnership"),
SLC Operating Limited Partnership, a Delaware limited partnership (the
"Operating Partnership"), and The Hermitage, L.P., a Tennessee limited
partnership (the "Hermitage Partner"). Unless otherwise indicated, capitalized
terms used herein are used herein as defined in Section 10.
WHEREAS, pursuant to an Agreement of Purchase and Sale dated as
of January 16, 1997 (the "Purchase Agreement") among the Realty Partnership,
Operating Partnership and Hermitage Partner, (i) the Realty Partnership and
Operating Partnership are acquiring from the Hermitage Partner a hotel, and (ii)
a portion of the consideration set forth in Section 2.02 of the Purchase
Agreement may, at the election of the Hermitage Partner, be paid in Units of the
Realty Partnership (as such Units are defined in the Limited Partnership
Agreement of the Realty Partnership ("Realty Units")) and Units of the Operating
Partnership (as such Units are defined in the Limited Partnership Agreement of
the Operating Partnership ("Operating Units")); and
WHEREAS, pursuant to the Purchase Agreement the parties hereto
are entering into this Agreement to provide for the rights of the Hermitage
Partner to tender Realty Units and Operating Units in exchange for either Paired
Shares (as defined herein), cash or a combination of Paired Shares and cash, on
the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, the parties hereto agree as follows:
SECTION 1. RIGHT TO TENDER STARWOOD UNITS. (a) Upon the terms and
subject to the conditions of this Agreement, each holder of Starwood Units (as
defined below) shall have the right to tender to the Trust outstanding Realty
Units and the right to tender to the Corporation outstanding Operating Units.
Notwithstanding anything to the contrary contained in this Agreement (i) no
Realty Unit may be tendered to the Trust unless simultaneously therewith the
tendering holder also tenders to the Corporation an Operating Unit and no
Operating Unit may be tendered to the Corporation unless simultaneously
therewith the tendering holder also tenders to the Trust a Realty Unit (a Realty
Unit tendered for exchange and the Operating Unit
<PAGE> 2
simultaneously tendered for exchange being hereinafter collectively referred to
as a "Starwood Unit") and (ii) any attempted tender of a Realty Unit or an
Operating Unit which is not accompanied by a simultaneous tender of an Operating
Unit or Realty Unit, respectively, shall be void and of no effect; it being
understood that a simultaneous tender of unequal numbers of Realty Units and
Operating Units shall be valid under this sentence to the extent of the lesser
of the number of Realty Units or Operating Units, as the case may be, included
in such tender.
(b) Notwithstanding any other provision of this Agreement, no
Paired Shares or cash shall be issued or paid in respect of any tender of
Starwood Units (i) if the right to tender Starwood Units and receive Paired
Shares or cash would result in the Trust not satisfying the REIT Requirements in
any respect or would result in any person or entity Beneficially Owning Trust
Shares exceeding the Ownership Limit, (ii) prior to the expiration or
termination of the waiting period applicable to such exchange and issuance, if
any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as it may
be amended from time to time, or (iii) prior to the receipt of all governmental
and regulatory approvals which are required to be obtained prior to such tender
and issuance or payment, including, without limitation, any required approvals
of the gaming authorities of the State of Nevada and of Clark County, Nevada
(the "Gaming Approvals"). Prior to the receipt of Gaming Approvals, such holder
shall, as a condition to any tender of Starwood Units which would (if the Paired
Share Option (as defined below) were to be elected in respect of such tender)
cause such holder to beneficially own, in the aggregate, Paired Shares
representing more than 4.9% of the then issued and outstanding Paired Shares,
give not less than 90 days' written notice to the Trust and the Corporation (at
the offices provided pursuant to Section 9) of its intent to tender Starwood
Units. In the event that the ability to receive Paired Shares or cash would
result in the Trust not satisfying the REIT Requirements in any respect or would
result in any person or entity Beneficially Owning Trust Shares exceeding the
Ownership Limit, and as a result thereof no Paired Shares or cash may be issued
or paid in respect of any tender of Starwood Units pursuant to Section 1(b)(i)
above, the parties hereto shall use their respective best efforts to restructure
the terms and provisions of this Agreement (and, if necessary, the Partnership
Agreements), or to agree to terms and provisions in addition to such terms and
provisions, so as to provide to each such party the same substantive rights (or
substantive rights as close thereto as is reasonably practicable) as those
provided by this Agreement, the Partnership Agreements and the Registration
Rights Agreement.
(c) The rights to exchange Starwood Units pursuant to
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<PAGE> 3
this Agreement constitute a continuous offer and may not be withdrawn, amended
or modified by the Trust or the Corporation without the prior written consent of
each holder of outstanding Starwood Units adversely affected by such withdrawal,
amendment or modification; provided that any withdrawal, amendment or
modification that does not adversely affect any holder of outstanding Starwood
Units may be effected without the consent of such holder.
SECTION 2. ACCEPTANCE OF TENDER; ELECTION OF METHOD OF PAYMENT
FOR TENDERED STARWOOD UNITS. (a) Upon the terms and subject to the conditions of
this Agreement, the Trust and the Corporation shall accept Starwood Units
validly tendered in proper form and meeting all of the requirements of this
Agreement. In order for Starwood Units to be validly tendered pursuant to this
Agreement, the registered holder thereof shall deliver to the Trust and the
Corporation, at the address provided pursuant to Section 9, (i) a completed and
duly executed Letter of Transmittal in the form attached hereto as Exhibit A
(the "Letter of Transmittal") and any other documents required by the Letter of
Transmittal and (ii) a calculation, to the best knowledge of such registered
holder after due inquiry (together with such supporting documentation as the
Trust may reasonably request), of the maximum number of Paired Shares that may
be issued to such registered holder without causing either (x) the Trust to not
satisfy the REIT Requirements in any respect or (y) any person or entity to
Beneficially Own Trust Shares exceeding the Ownership Limit. The Trust and the
Corporation shall make all determinations as to the validity and form of any
tender of Starwood Units in accordance with the provisions of this Agreement and
upon rejection of a tender shall give the tendering holder written notice of
such rejection, which shall include the reasons therefor.
(b) Unless otherwise determined by agreement of the Trust and the
Corporation, tenders of Starwood Units pursuant to this Agreement shall be
irrevocable and shall not be subject to withdrawal or modification; provided
that if the Trust and the Corporation make the Paired Share Election, as defined
below, with respect to a tender, then within 5 days after such Election the
tendering holder may elect to revoke such tender so long as (i) no public
disclosure of such tender has been made prior to such revocation and (ii) such
tendering holder reimburses the Trust and the Corporation for all reasonable
costs and expenses incurred in connection with such tender.
(c) Within 15 days after the valid tender pursuant to this
Agreement of Starwood Units, the Trust and the Corporation shall make an
election to pay for such Starwood Units by delivering either (i) Paired Shares
(the "Paired Share Election"), (ii) cash (the "Cash Election") or (iii) a
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<PAGE> 4
combination of Paired Shares and cash (the "Combined Election"). Such election
shall be made pursuant to an agreement as to such election between the Trust and
the Corporation. If the Trust and the Corporation do not so agree within such
15-day period, they shall be deemed to have made the Cash Election.
SECTION 3. PAIRED SHARE ELECTION. (a) If with respect to any
tender of Starwood Units pursuant to this Agreement, the Trust and the
Corporation make the Paired Share Election, then, except as provided in Section
2(b), within fifteen days after the expiration of the 5-day period referred to
in Section 2(b), the Trust and the Corporation shall deliver to the tendering
holder one Paired Share for each Starwood Unit validly tendered pursuant to the
provisions of this Agreement.
(b) No fractional Paired Shares or scrip representing fractional
Paired Shares shall be issued upon exchange of Starwood Units pursuant to this
Agreement. If more than one Letter of Transmittal shall be delivered at one time
by the same holder, the number of full Paired Shares which shall be issuable
upon exchange of the Starwood Units tendered thereby shall be computed on the
basis of the aggregate number of Starwood Units so tendered. Instead of any
fractional Paired Shares which would otherwise be issuable upon exchange of any
Starwood Units, the Trust and the Corporation shall pay a cash adjustment in
respect of such fraction in an amount equal to the same fraction of the Paired
Share Closing Price on the last Business Day preceding the date of exchange.
(c) If a holder exchanges Starwood Units pursuant to this
Agreement, the Trust and the Corporation shall pay any documentary, stamp or
similar issue or transfer tax due on any issue of Paired Shares upon such
exchange. Such holder, however, shall (i) pay to the Trust and the Corporation
the amount of any additional documentary, stamp or similar issue or transfer tax
which is due (or shall establish to the satisfaction of the Trust and the
Corporation the payment thereof) as a result of Paired Shares being issued in a
name other than the name of such holder and (ii) be responsible for all income
or other taxes as a result of such exchange.
SECTION 4. CASH ELECTION. (a) If with respect to any tender of
Starwood Units pursuant to this Agreement, the Trust and the Corporation make or
are deemed to have made the Cash Election, then within 20 days after such tender
the Trust and the Corporation shall pay to the tendering holder an aggregate
amount of cash (the "Aggregate Cash Payment") equal to the product of (i) the
number of Paired Shares which would have been delivered to such holder if the
Trust and the Corporation had made the Paired Share Election with respect to
such tender and (ii) the average Paired Share Closing Price for the ten trading
day period
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<PAGE> 5
ending one day prior to the date of such tender.
(b) In connection with any Aggregate Cash Payment pursuant to
Section 4(a) or any cash payment pursuant to Section 5(a)(ii), the Trust shall
pay 95% of such Aggregate Cash Payment or such cash payment and the Corporation
shall pay 5% of such Aggregate Cash Payment or such cash payment (such
percentages being herein called the "Issuance Percentages"); provided that the
Trust and the Corporation may from time to time change the Issuance Percentages
based on their determination of the relative fair values of the Trust Shares and
the Corporation Shares.
SECTION 5. COMBINED ELECTION. (a) If with respect to any tender
of Units pursuant to this Agreement, the Trust and the Corporation shall make
the Combined Election, then, except as provided in Section 2(b), within 15 days
after the expiration of the 5-day period referred to in Section 2(b), the Trust
and the Corporation shall (i) notify the tendering holder of the number of such
tendered Units which will be exchanged for cash (the "Cash Units") and the
number of such tendered Units which will be exchanged for Paired Shares (the
"Paired Share Units"), (ii) pay to the tendering holder, in respect of each Cash
Unit validly tendered pursuant to the provisions of this Agreement, an amount of
cash (with each of the Trust and the Corporation paying its then respective
Issuance Percentage of such amount of cash) equal to the average Paired Share
Closing Price for the ten trading day period ending one day prior to the date of
such tender and (iii) deliver to the tendering holder one Paired Share for each
Paired Share Unit validly tendered pursuant to the provisions of this Agreement.
(b) The provisions of Sections 3(b) and 3(c) of this Agreement
shall apply to the issuance of Paired Shares pursuant to Section 5(a).
SECTION 6. REPRESENTATIONS OF TENDERING HOLDER. Each tender of
Starwood Units shall constitute a representation and warranty by the tendering
holder of each of the representations and warranties set forth in the form of
Letter of Transmittal. Without limiting the generality of the foregoing, unless,
at the time of a tender for exchange of Starwood Units pursuant to this
Agreement, a registration statement relating to the delivery of any Paired
Shares upon such tender is effective under the Securities Act of 1933, as
amended (the "Securities Act"), such tender shall constitute a representation
and warranty by the tendering holder to the Trust and the Corporation that such
tendering holder (i) is an "accredited investor" within the meaning of Rule 501
under the Securities Act, (ii) has sufficient knowledge and experience in
financial and business matters and in investing in entities similar to the
Partnerships, the Trust and the Corporation so as to be able to evaluate the
risks and merits
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<PAGE> 6
of its investment in the Partnerships, the Trust and the Corporation and it is
able financially to bear the risks thereof, (iii) has had an opportunity to
discuss the business, management and financial affairs of the Trust, the
Corporation and the Partnerships with the management of the Trust, the
Corporation and the Partnerships, and (iv) understands that the Paired Shares
have not been registered under the Securities Act by reason of their issuance in
a transaction exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated under the
Securities Act and such Paired Shares must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act and
applicable state securities laws or is exempt from such registration.
SECTION 7. STATUS OF TENDERING HOLDER. Until the holder of
Starwood Units tendered pursuant to this Agreement becomes a holder of record of
the Paired Shares issued in exchange therefor (in the case of a Paired Share
Election or a Combined Election) or until such holder has received cash in
exchange therefor (in the case of a Cash Election or a Combined Election), such
holder shall continue to hold and own such Starwood Units for all purposes of
the Realty Partnership Agreement and the Operating Partnership Agreement. In the
case of a Paired Share Election or a Combined Election, no such holder shall
have any rights as a shareholder of the Trust or a stockholder of the
Corporation in respect of such Paired Shares until such holder becomes a holder
of record of such Paired Shares.
SECTION 8. RESERVATION OF SHARES; CLOSING OF TRANSFER BOOKS. (a)
The Trust shall reserve and shall at all times have reserved out of its
authorized but unissued Trust Shares, solely for the purpose of effecting the
exchange of Realty Units pursuant to this Agreement, enough Trust Shares to
permit the exchange of the then outstanding Realty Units. The Corporation shall
reserve and shall at all times have reserved out of its authorized but unissued
Corporation Shares, solely for the purpose of effecting the exchange of
Operating Units pursuant to this Agreement, enough Corporation Shares to permit
the exchange of the then outstanding Operating Units. All Paired Shares which
may be issued upon exchange of Starwood Units shall be validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issuance thereof other than income taxes resulting from such exchange.
(b) The Trust shall not close its transfer books so as to prevent
the timely issuance of Trust Shares pursuant to this Agreement. The Corporation
shall not close its transfer books so as to prevent the timely issuance of
Corporation Shares pursuant to this Agreement.
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<PAGE> 7
SECTION 9. NOTICES. All notices and requests given pursuant to
this Agreement shall be in writing and shall be made by hand-delivery,
first-class mail (registered or certified, return receipt requested), confirmed
facsimile or overnight air courier guaranteeing next Business Day delivery to
the relevant address specified below. Except as otherwise provided in this
Agreement, the date of each such notice and request shall be deemed to be, and
the date on which each such notice and request shall be deemed given shall be:
at the time delivered, if personally delivered or mailed; when receipt is
acknowledged, if sent by facsimile; and the next Business Day after timely
delivery to the courier, if sent by overnight air courier guaranteeing next
Business Day delivery. All notices and requests shall be given at the following
address (or to such other address as such party may have specified by notice
given to the other parties pursuant to this provision):
(a) If to the Trust or the Realty Partnership, to:
Starwood Lodging Trust
2231 E. Camelback Road, Suite 410
Phoenix, AZ 85016
Attention: Chief Financial Officer
Telecopy No.: (602) 852-0984
Telephone No.: (602) 852-3900
with a copy to:
Sidley & Austin
555 West 5th Street
Los Angeles, California 90013
Attention: Sherwin L. Samuels
Telecopy No.: (213) 896-6600
Telephone No.:(213) 896-6000
(b) If to the Corporation or the Operating Partnership, to:
Starwood Lodging Corporation
2231 E. Camelback Road, Suite 400
Phoenix, AZ 85016
Attention: General Counsel
Telecopy No.: (602) 852-0686
Telephone No.: (602) 852-3900
with a copy to:
Sidley & Austin
555 West 5th Street
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<PAGE> 8
Los Angeles, California 90013
Attention: Sherwin L. Samuels
Telecopy No.: (213) 896-6600
Telephone No.:(213) 896-6000
(c) If to Hermitage Partner:
The Hermitage, L.P.
c/o Hermitage of Nashville, Inc.
1407 Union Avenue, Suite 400
Memphis, TN 38014
Attention: Pace Cooper, President
Telecopy No.: (901) 274-9169
Telephone No.: (901) 725-9631
with a copy to:
Harkavy, Shainberg, Kosten & Kaplan
530 Oak Court Drive, Suite 350
Memphis, TN 38117
Attention: Raymond M. Shainberg
Telecopy No.: (901) 763-3340
Telephone No.: (901) 761-1263
SECTION 10. DEFINITIONS. For purposes of this
Agreement:
"Beneficially Owning" means owning Trust Shares directly,
indirectly or constructively by a person or entity through the
application of Section 318(a) of the Code, as modified by Section
856(d)(5) of the Code, or Section 544 of the Code, as modified by
Section 856(h) of the Code. The term "Beneficially Own" shall have a
correlative meaning.
"Business Day" means any day other than Saturday, Sunday and any
day on which banks are not open to do business in Phoenix, Arizona.
"Code" means the Internal Revenue Code of 1986, and the rules and
regulations promulgated thereunder, as amended from time to time.
"Corporation Shares" means the shares of common stock, par value
$.01 per share, of the Corporation.
"Declaration of Trust" means the Declaration of Trust of the
Trust dated August 25, 1969, as amended and restated as of June 6, 1988,
and as further amended on February 1, 1995 and as amended from time to
time after the date of this Agreement.
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<PAGE> 9
"Disinterested Members" when used with respect to the Trust has
the meaning set forth in the Code of Regulations of the Trust and, when
used with respect to the Corporation, has the meaning set forth in the
By-Laws of the Corporation, in each case as amended from time to time.
"Operating Partnership" means the Limited Partnership
Agreement of the Operating Partnership.
"Ownership Limit" when used with respect to Trust Shares, has the
meaning set forth in the Declaration of Trust and, when used with
respect to the Corporation Shares, has the meaning set forth in the
Restated Articles, in each case as amended from time to time.
"Paired Share" means a Corporation Share and a Trust Share which
are paired pursuant to the Pairing Agreement.
"Paired Share Closing Price" shall mean, with respect to a
particular date, the last reported sales price regular way on such date
or, in case no such reported sale takes place on such date, the average
of the reported closing bid and asked prices regular way on such date,
in either case on the New York Stock Exchange, or if the Paired Shares
are not then listed or admitted to trading on such Exchange, on the
principal national securities exchange on which the Paired Shares are
then listed or admitted to trading or, if not then listed or admitted to
trading on any national securities exchange, the closing sale price on
such date of the Paired Shares or, in case no reported sale takes place
on such date then, the average of the closing bid and asked prices on
such date, on NASDAQ or any comparable system. If the Paired Shares are
not then quoted on NASDAQ or any comparable system, the Board of
Trustees of the Trust and the Board of Directors of the Corporation
shall in good faith determine the Paired Share Closing Price.
"Pairing Agreement" means the Pairing Agreement dated June 25,
1980 between the Trust and the Corporation, as it may be amended from
time to time.
"Partnerships" mean the Realty Partnership Agreement
and the Operating Partnership Agreement.
"Realty Partnership" means the Limited Partnership
Agreement of the Realty Partnership.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the date first written above between the Trust,
the Corporation and the Hermitage Partner.
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<PAGE> 10
"REIT Requirements" shall mean the requirements for the Trust to
(i) qualify as a REIT under the Code and the rules and regulations
promulgated thereunder, (ii) avoid any federal income or excise tax
liability, (iii) retain its status as grandfathered pursuant to Section
136(c)(3) of the Deficit Reduction Act of 1984 and (iv) retain the
benefits of that certain private letter ruling issued by the Internal
Revenue Service to the Trust dated as of January 4, 1980.
"Restated Articles" means the Restated Articles of Incorporation
of the Corporation, as amended from time to time after the date of this
Agreement.
"Trust Shares" means the shares of beneficial interest, $.01 par
value, of the Trust.
SECTION 11. DETERMINATIONS AND INTERPRETATION. All agreements
between the Trust and the Corporation provided for in this Agreement shall be
made on behalf of the Trust and the Corporation by their respective
Disinterested Members, including, without limitation, any agreement between the
Trust and the Corporation as to the election of the Paired Share Election, the
Cash Election or the Combined Election with respect to a tender of Starwood
Units pursuant to Section 2(c), any agreement to permit the revocation,
withdrawal or modification of a tender of Starwood Units pursuant to Section
1(c) and any adjustment of the Issuance Percentages pursuant to Section 4(b).
All interpretations of the terms of this Agreement shall be resolved on behalf
of the Trust and the Corporation by their respective Disinterested Members.
SECTION 12. PARTIAL INVALIDITY. In case any one or more of the
provisions contained herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein unless the deletion of
such provision or provisions would result in such a material change as to cause
completion of the transactions contemplated hereby to be unreasonable.
SECTION 13. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors or assigns. In addition, and whether or not any express
assignment shall have been made, the provisions of this Agreement which are for
the benefit of the parties hereto other than the Corporation, the Trust, the
Realty Partnership and the Operating Partnership, shall also be for the benefit
of and enforceable by any
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<PAGE> 11
subsequent holder of any Units.
SECTION 14. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in one or more counterparts, each of which shall be considered an
original counterpart, and shall become a binding agreement when the Trust, the
Corporation, the Realty Partnership, the Operating Partnership and the Hermitage
Partner shall have each executed a counterpart of this Agreement.
SECTION 15. TITLES AND HEADINGS. Titles and headings to Articles
and Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
SECTION 16. EXHIBITS. The Exhibits referred to in this Agreement
shall be construed with, and as an integral part of, this Agreement to the same
extent as if the same had been set forth verbatim herein.
SECTION 17. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This
Agreement, including the Exhibits, contains the entire understanding of the
parties hereto with regard to the subject matter contained herein. In addition
to amendments and modifications permitted by Section 1(c), the parties hereto,
by mutual agreement in writing, may amend, modify and supplement this Agreement;
provided that any such amendment, modification or supplement shall be approved
by a majority of the Disinterested Members of each of the Trust and the
Corporation. The failure of any party hereto to enforce at any time any
provision of this Agreement shall not be construed to be a waiver of such
provision, nor in any way to affect the validity of this Agreement or any part
hereof or the right of such party thereafter to enforce each and every such
provision. No waiver of any breach of this Agreement shall be held to constitute
a waiver of any other or subsequent breach.
SECTION 18. GOVERNING LAW. Except to the extent that Maryland law
is mandatorily applicable to the rights and obligations of the shareholders of
the Trust and the stockholders of the Corporation, this Agreement, and the
application or interpretation thereof, shall be governed exclusively by its
terms and by the internal laws of the State of Delaware, without regard to
principles of conflicts of laws as applied in the State of Delaware or any other
jurisdiction which, if applied, would result in the application of any laws
other than the internal laws of the State of Delaware.
SECTION 19. STARWOOD LODGING TRUST. The parties hereto understand
and agree that the name "Starwood Lodging Trust" is a designation of the Trust
and its Trustees (as Trustees but not personally) under the Declaration of
Trust, and
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<PAGE> 12
all persons dealing with the Trust shall look solely to the Trust's assets for
the enforcement of any claims against the Trust, and that the Trustees,
officers, agents and security holders of the Trust assume no personal liability
for obligations entered into on behalf of the Trust, and their respective
individual assets shall not be subject to the claims of any person relating to
such obligations.
SECTION 20. SUBMISSION TO JURISDICTION. Each of the parties
hereto irrevocably submits and consents to the jurisdiction of the United States
District Court for the Southern District of New York and the United States
District Court for the District of Maryland in connection with any action or
proceeding arising out of or relating to this Agreement, and irrevocably waives
any immunity from jurisdiction thereof and any claim of improper venue, forum
non conveniens or any similar basis to which it might otherwise be entitled in
any such action or proceeding.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the parties hereto or by their duly authorized officers, all as of
the date first above written.
STARWOOD LODGING TRUST,
a Maryland real estate investment
trust
By: /s/ Steven R. Goldman
----------------------------
Name: Steven R. Goldman
Title: Senior Vice President
STARWOOD LODGING CORPORATION,
a Maryland corporation
By: /s/ Joseph Long
----------------------------
Name: Joseph Long
Title: Vice President
SLT REALTY LIMITED PARTNERSHIP,
By: STARWOOD LODGING TRUST,
general partner
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<PAGE> 13
By: /s/ Steven R. Goldman
--------------------------------
Name: Steven R. Goldman
Title: Senior Vice President
SLC OPERATING LIMITED PARTNERSHIP
By: STARWOOD LODGING CORPORATION,
general partner
By: /s/ Joseph Long
--------------------------------
Name: Joseph Long
Title: Vice President
THE HERMITAGE, L.P.
By: Hermitage of Nashville, Inc.,
its General Partner
By: /s/ Pace Cooper
--------------------------------
Pace Cooper
President
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<PAGE> 14
EXHIBIT A TO
Exchange Rights Agreement
LETTER OF TRANSMITTAL
To Tender Units
Pursuant to the Exchange Rights Agreement
Dated as of March , 1997
TO: Starwood Lodging Trust
2231 E. Camelback Road, Suite 410
Phoenix, AZ 85016
Starwood Lodging Corporation
2231 E. Camelback Road, Suite 400
Phoenix, AZ 85016
DESCRIPTION OF UNITS
- --------------------------------------------------------------------------------
NAME(S) AND ADDRESS (ES) UNITS TENDERED (ATTACH
OF REGISTERED OWNERS ADDITIONAL LIST IF
NECESSARY)
Realty
Units:
Operating
Units:
--------------------------------------
Total
<PAGE> 15
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Starwood Lodging Trust (the
"Trust") the above-described Realty Units (as defined in the Exchange Rights
Agreement dated as of March , 1997 (the "Exchange Rights Agreement")) and
hereby tenders to Starwood Lodging Corporation (the "Corporation") the
above-described Operating Units (as defined in the Exchange Rights Agreement)
in accordance with the terms and conditions of the Exchange Rights Agreement
and this Letter of Transmittal (which together constitute the "Offer"), receipt
of which is hereby acknowledged. All terms used herein but not defined herein
are used as defined in the Exchange Rights Agreement.
Subject to, and effective upon the issuance of Paired Shares
and/or the payment of cash, as the case may be, for the Starwood Units tendered
hereby, the undersigned hereby assigns and transfers (i) to the Trust all right,
title and interest in and to all the Realty Units that are being tendered hereby
and irrevocably constitutes and appoints the Trust (the "Realty Unit Agent"),
with full power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), to (a) transfer such Realty Units
on the books of the Realty Partnership and (b) receive all rights, privileges
and benefits, and any and all obligations and liabilities appertaining thereto
and otherwise exercise all rights of beneficial ownership of such Realty Units,
all in accordance with the terms of the Offer and (ii) to the Corporation all
right, title and interest in and to all the Operating Units that are being
tendered hereby and irrevocably constitutes and appoints the Corporation (the
"Operating Unit Agent" and, together with the Realty Unit Agent, the "Agents"),
with full power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), to (a) transfer such Operating
Units on the books of the Operating Partnership and (b) receive all rights,
privileges and benefits, and any and all obligations and liabilities
appertaining thereto and otherwise exercise all rights of beneficial ownership
of such Operating Units, all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants (i) to the Trust
that the undersigned has full power and authority to tender, sell, assign and
transfer the tendered Realty Units and that upon payment therefor, the Trust
will acquire unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and the same will not be subject to any
adverse claim, (ii) to the Corporation that the undersigned has full power and
authority to tender, sell, assign and transfer the
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<PAGE> 16
tendered Operating Units and that upon payment therefor, the Corporation will
acquire unencumbered title thereto, free and clear of all liens, restrictions,
charges and encumbrances and the same will not be subject to any adverse claim,
(iii) to the Trust and the Corporation that the tender complies with each and
every provision of Section 1 of the Exchange Rights Agreement, and (iv) attached
hereto is a calculation, to the best knowledge of the undersigned after due
inquiry (together with such supporting documentation as the Trust may reasonably
request) of the maximum number of Paired Shares that may be issued to the
undersigned without causing either (x) the Trust to not satisfy the REIT
Requirements in any respect or (y) any person or entity to Beneficially Own
Trust Shares exceeding the Ownership Limit. The undersigned will, upon request,
execute any additional documents deemed by the Trust or the Corporation to be
reasonably necessary or desirable to complete the sale, assignment and transfer
of the tendered Starwood Units.
Unless a registration statement relating to any Paired Shares to
be delivered to the undersigned is effective under the Securities Act of 1933,
as amended (the "Securities Act"), the undersigned hereby represents and
warrants to the Trust and the Corporation that the undersigned (A) is an
"accredited investor" within the meaning of Rule 501 under the Securities Act,
or (B) has sufficient knowledge and experience in financial and business matters
and in investing in entities similar to the Partnerships, the Trust and the
Corporation so as to be able to evaluate the risks and merits of its investment
in the Partnerships, the Trust and the Corporation and it is able financially to
bear the risks thereof, and in either case, (i) has had an opportunity to
discuss the business, management and financial affairs of the Trust, the
Corporation and the Partnerships with the management of the Trust, the
Corporation and the Partnerships, and (ii) understands that any such Paired
Shares have not been registered under the Securities Act by reason of their
issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated
under the Securities Act and any such Paired Shares must be held indefinitely
unless a subsequent disposition thereof is registered under the Securities Act
and applicable state securities laws or is exempt from such registration. If not
sold pursuant to an effective registration statement, any such Paired Shares
will bear an appropriate legend indicating that such Paired Shares have not been
registered under the Securities Act and resale of such Paired Shares is
restricted under applicable securities laws.
All authority conferred or agreed to be conferred in this Letter
of Transmittal shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and any obligation of the undersigned hereunder
shall be binding upon the
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<PAGE> 17
successors, assigns, heirs, executors, administrators and legal representatives
of the undersigned.
The undersigned understands that, except as provided in Section
2(b) of the Exchange Rights Agreement, a tender of Starwood Units pursuant to
the Exchange Rights Agreement is irrevocable and constitutes a binding agreement
between the undersigned and the Trust and the Corporation upon the terms and
subject to the conditions of the Exchange Rights Agreement.
Unless otherwise indicated under "Special Delivery Instructions",
please mail any Paired Shares issuable upon exchange of the Starwood Units
tendered hereby (or, if the Cash Election or the Combined Election is made, the
cash payment payable pursuant thereto) to the address(es) of the registered
holder(s) appearing under "Description of Units." In the event that the Special
Delivery Instructions are completed, please issue the Paired Shares (or, if the
Cash Election or the Combined Election is made, the cash payment payable
pursuant thereto) in the name of the registered holder(s) and transmit the same
to the person or persons so indicated.
The Trust, the Corporation and the undersigned agree that they
will cooperate with each other and will make, execute, acknowledge, deliver,
record and file, or cause to be made, executed, acknowledged, delivered,
recorded and filed, at such times and places as the other may reasonably deem
necessary, all other and further documents and instruments, and will take all
other and further actions, as the other may reasonably request from time to time
in order to effectuate the purposes and provisions of the tender made pursuant
to this Letter of Transmittal.
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<PAGE> 18
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 5)
To be completed ONLY if Paired Shares or the cash payment are to
be sent to someone other than the undersigned or to the undersigned at an
address other than that above.
Mail certificate(s) for Paired Shares or cash payment to:
Name_____________________________________________________________
(please print)
Address__________________________________________________________
_________________________________________________________________
(include Zip Code)
_________________________________________________________________
_________________________________________________________________
(Tax Identification or Social Security Number)
SIGN HERE
Complete Substitute Form W-9 included
_________________________________________________________________
_________________________________________________________________
(Signature(s) of holder of Units)
(Must be signed by registered holder(s) as name(s) appear(s) on books and
records of the Partnership. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, please set forth full title
and see instruction 4.
Dated____________________________________________________________
Name(s)__________________________________________________________
(please print)
Capacity
(Full Title)_____________________________________________________
Address__________________________________________________________
(include Zip Code)
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<PAGE> 19
Area Code and Tel. No.___________________________________________
Tax Identification or
Social Security No.______________________________________________
(Complete Substitute Form W-9)
Guarantee of Signature(s)
(See Instruction 1)
Authorized
Signature________________________________________________________
Name of
Firm_____________________________________________________________
Dated____________________________________________________________
INSTRUCTIONS
Forming Part of the Terms and Conditions of the
Exchange Rights Agreement
1. GUARANTEE OF SIGNATURE. No signature guarantee on this Letter
of Transmittal is required unless the registered holder of the Starwood Units
has completed the box entitled "Special Delivery Instructions". In such case all
signatures on this Letter of Transmittal must be guaranteed by a member firm of
any registered national securities exchange in the United States or of the
National Association of Securities Dealers, Inc. or by a commercial bank or
trust company (not a savings bank or a savings and loan association) having an
office, branch or agency in the United States.
2. DELIVERY OF LETTER OF TRANSMITTAL. This Letter of Transmittal
is to be completed by the holder of Starwood Units. A properly completed and
duly executed Letter of Transmittal and any other documents required by this
Letter of Transmittal must be received by the Agents.
No alternative, conditional or contingent tenders will be
accepted, except as permitted pursuant to the Exchange Rights Agreement.
3. INADEQUATE SPACE. If the space provided herein is inadequate,
the Units tendered and/or other information required should be listed on a
separate schedule attached hereto.
4. SIGNATURES ON LETTER OF TRANSMITTAL. The signature must
correspond with the name as shown on the books and
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<PAGE> 20
records of the Partnerships without any change whatsoever.
If any of the Starwood Units tendered hereby are owned of record
by two or more joint owners, all such owners must sign the Letter of
Transmittal.
If any tendered Starwood Units are registered in different names,
it will be necessary to complete, sign and submit as many separate Letters of
Transmittal as there are different registrations.
If this Letter of Transmittal is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, each person should so indicate
when signing, and proper evidence satisfactory to the Agents of their authority
so to act must be submitted.
5. SPECIAL DELIVERY INSTRUCTIONS. If a certificate for Paired
Shares or the cash payment is to be sent to someone other than the signer of
this Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed.
6. WAIVER OF CONDITIONS. Each of the Trust and the Corporation
reserves the right to waive in its sole discretion any of the specified
conditions of the Offer in the case of the Starwood Units tendered; provided
that any such waiver shall not adversely affect any holder of outstanding
Starwood Units without the consent of such holder.
7. BACK-UP WITHHOLDING. Under the Federal income tax law, a
person surrendering Starwood Units must provide the Agents with his correct
taxpayer identification number ("TIN") on Substitute Form W-9 below unless an
exemption applies. If the correct TIN is not provided, a $50 penalty may be
imposed by the Internal Revenue Service and payments made in exchange for the
surrendered Starwood Units may be subject to back-up withholding of that rate
provided by the Federal income tax law (such rate being at the date of the
Exchange Rights Agreement, 31%).
The TIN that must be provided is that of the registered holder of
the Starwood Units. The TIN for an individual is his social security number.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance or additional copies of the Exchange Rights Agreement
and the Letter of Transmittal may be directed to the Agents at the address set
forth above.
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<PAGE> 21
IMPORTANT TAX INFORMATION
Under Federal income tax laws, a holder whose tendered Starwood
Units are accepted for payment is required by law to provide the Agents (as
payers) with his correct taxpayer identification number on Substitute Form W-9
below. If such holder is an individual, the taxpayer identification number is
his social security number. If the Agents are not provided with the correct
taxpayer identification number, the holder may be subject to a $50 penalty
imposed by the Internal Revenue Service. In addition, payments that are made to
such holder with respect to Starwood Units purchased pursuant to the Offer may
be subject to back-up withholding.
If back-up withholding applies, the Agents are required to
withhold, at that rate provided by the Federal income tax law (such rate being
at the date of the Exchange Rights Agreement 31%), of any such payments made to
the holder of Starwood Units. Paired Shares otherwise deliverable hereunder may,
at the expense (and with all risk of loss for the account) of the undersigned,
be sold to pay such amounts. Back-up withholding is not an additional tax.
Rather, the tax liability of persons subject to back-up withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent back-up withholding on payments that are made to a
holder of Starwood Units purchased pursuant to the Offer, the holder is required
to notify the Agents of his correct taxpayer identification number by completing
the form below certifying that the taxpayer identification number provided on
Substitute Form W-9 is correct.
WHAT NUMBER TO GIVE THE AGENT
The holder is required to give the Agents the social security
number or employer identification number of the record owner of the Starwood
Units.
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<PAGE> 22
PAYER'S NAME: Starwood Lodging Trust
Starwood Lodging Corporation
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
Substitute Part 1 - Please provide your TIN in the box at Social Security
Form W-9 right and certify by signing and dating below Number/Employer
Identification
Number
- -------------------------------------------------------------------------------------------------
Department of the Certification - Under the penalties of perjury,
Treasury/Internal (i) I certify that the information provided on this
Revenue Service form is true, correct and complete and (ii) I am
not subject to backup withholding because: (a) I
am exempt from backup Service withholding, or (b) I
have not been notified by the Internal Revenue Service
(IRS) that I am subject to backup withholding as a
result of a failure to report all interest or dividends,
or (c) the IRS has notified me that I am no longer
subject to backup
withholding.
- -------------------------------------------------------------------------------------------------
Signature _______________________________________Date ______________
- -------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACK-UP
WITHHOLDING AT THAT RATE PROVIDED BY THE FEDERAL INCOME TAX LAW
(SUCH RATE BEING AT THE DATE OF THE EXCHANGE RIGHTS AGREEMENT
31%) OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
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<PAGE> 1
Exhibit 10.42
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made as
of March 11, 1997 among Starwood Lodging Trust, a real estate investment trust
organized under the laws of the State of Maryland (the "Trust"), Starwood
Lodging Corporation, a Maryland corporation (the "Corporation") and The
Hermitage, L.P., a Tennessee limited partnership (the "Holder"). Unless
otherwise indicated, capitalized terms used herein are used herein as defined in
Section 1.1.
RECITALS
WHEREAS, pursuant to an Agreement of Purchase and Sale dated as
of January 16, 1997 (the "Purchase Agreement") among SLT Realty Limited
Partnership, a Delaware limited partnership (the "Realty Partnership"), SLC
Operating Limited Partnership, a Delaware limited partnership (the "Operating
Partnership") and Holder, (i) the Realty Partnership and Operating Partnership
are acquiring from the Holder a hotel, and (ii) a portion of the consideration
set forth in Section 2.02 of the Purchase Agreement may, at the election of the
Holder, be paid in Units of the Realty Partnership (as such Units are defined in
the Limited Partnership Agreement of the Realty Partnership ("Realty Units"))
and Units of the Operating Partnership (as such Units are defined in the Limited
Partnership Agreement of the Operating Partnership ("Operating Units")); and
WHEREAS, pursuant to the Purchase Agreement, the parties hereto
desire to set forth the rights of the Holder and the obligations of the Trust
and the Corporation to cause the registration of the Registrable Securities
pursuant to the Securities Act;
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS AND USAGE.
1.1. DEFINITIONS. As used in this Agreement:
Beneficially Owning. "Beneficially Owning" means owning Trust
Shares directly, indirectly or constructively by a Person through the
application of Section 318(a) of the Code, as modified by Section 856(d)(5) of
the Code, or Section 544 of the Code, as modified by Section 856(h) of the Code.
<PAGE> 2
Business Day. "Business Day" means any day other than Saturday,
Sunday and any day on which commercial banks are not open to do business in
Phoenix, Arizona.
Code. "Code" shall mean the Internal Revenue Code of 1986, and
the rules and regulations promulgated thereunder, as amended from time to time.
Commission. "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
Continuously Effective. "Continuously Effective", with respect to
a specified registration statement, shall mean that such registration statement
shall not cease to be effective and available for Transfers of Registrable
Securities thereunder for longer than either (i) any ten (10) consecutive
Business Days, or (ii) an aggregate of fifteen (15) Business Days during the
period specified in the relevant provision of this Agreement.
Corporation Shares. "Corporation Shares" shall mean the shares of
common stock, par value $.01 per share, of the Corporation.
Exchange Act. "Exchange Act" shall mean the Securities Exchange
Act of 1934 and the rules and regulations of the Commission thereunder, all as
the same shall be in effect at the time.
Exchange Rights Agreement. "Exchange Rights Agreement" shall mean
the Exchange Rights Agreement dated the date hereof among the Trust, the
Corporation, the Realty Partnership, the Operating Partnership and the Holder.
Holder. "Holder" shall have the meaning set forth in the
recitals.
Issuance Percentages. "Issuance Percentage", when used with
respect to the Trust, shall mean 95% and, when used with respect to the
Corporation, shall mean 5%; provided that the Trust and the Corporation may from
time to time change the Issuance Percentages based on their joint determination
of the relative values of the Trust Shares and Corporation Shares.
Operating Partnership. "Operating Partnership" shall have the
meaning set forth in the recitals.
Operating Units. "Operating Units" shall have the meaning set
forth in the recitals.
Ownership Limit. "Ownership Limit" when used with respect to
Trust Shares, has the meaning set forth in the
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<PAGE> 3
Declaration of Trust of the Trust and, when used with respect to the Corporation
Shares, has the meaning set forth in the Restated Articles of Incorporation of
the Corporation, in each case as amended from time to time.
Paired Shares. "Paired Shares" shall mean the Trust Shares and
shares of Corporation Stock which are "paired" pursuant to the Pairing Agreement
dated June 25, 1980 between the Trust and the Corporation, as it may be amended
from time to time.
Person. "Person" shall mean any individual, corporation,
partnership, joint venture, association, joint-stock company, limited liability
company, trust, unincorporated organization or government or other agency or
political subdivision thereof.
Piggyback Registration. "Piggyback Registration" shall have the
meaning set forth in Section 3.
Realty Partnership. "Realty Partnership" shall have the meaning
set forth in the recitals.
Realty Units. "Realty Units" shall have the meaning set forth in
the recitals.
Register, Registered and Registration. "Register", "registered",
and "registration" shall refer to a registration effected by preparing and
filing a registration statement or similar document in compliance with the
Securities Act, and the declaration or ordering by the Commission of
effectiveness of such registration statement or document.
Registrable Securities. "Registrable Securities" shall mean: (i)
the Paired Shares issued upon exchange of Realty Units and Operating Units
pursuant to the Exchange Rights Agreement, (ii) any Paired Shares or other
securities issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange by the Trust and the Corporation
generally for, or in replacement by the Trust and the Corporation generally of,
such Paired Shares; and (iii) any securities issued in exchange for Paired
Shares in any merger or reorganization of the Trust and the Corporation;
provided, however, that Registrable Securities shall not include any securities
which have theretofore been registered and sold pursuant to the Securities Act
or which have been sold to the public pursuant to Rule 144 or any similar rule
promulgated by the Commission pursuant to the Securities Act, and, provided
further, the Trust and the Corporation shall have no obligation under Sections 2
and 3 to register any Registrable Securities if the Trust and the Corporation
shall deliver to the Holder of such Registrable
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Securities an opinion of counsel to the effect that the proposed sale or
disposition of all of the Registrable Securities for which registration was
requested does not require registration under the Securities Act for a sale or
disposition in a single public sale, and, upon written request by the Holder,
the Trust and the Corporation shall remove any and all legends restricting
transfer from the certificates evidencing such Registrable Securities.
Registrable Securities then outstanding. "Registrable Securities
then outstanding" shall mean, with respect to a specified determination date,
the Registrable Securities owned by the Holder on such date and the Registrable
Securities which are issuable upon exchange of Realty Units and Operating Units
owned by the Holder on such date.
Registration Expenses. "Registration Expenses" shall have the
meaning set forth in Section 6.1.
REIT Requirements. "REIT Requirements" shall mean the
requirements for the Trust to (i) qualify as a Real Estate Investment Trust
("REIT") under the Internal Revenue Code of 1986, as amended from time to time,
and the rules and regulations promulgated thereunder, (ii) avoid any federal
income or excise tax liability, (iii) retain its status as grandfathered
pursuant to Section 136(c)(3) of the Deficit Reduction Act of 1984 and (iv)
retain the benefits of that certain private letter ruling issued by the Internal
Revenue Service to the Trust dated as of January 4, 1980.
Securities Act. "Securities Act" shall mean the Securities Act of
1933 and the rules and regulations of the Commission thereunder, all as the same
may be in effect at the time.
Shelf Registration. "Shelf Registration" shall have the meaning
set forth in Section 2.1.
Transfer. "Transfer" shall mean and include the act of selling,
giving, transferring, creating a trust (voting or otherwise), assigning or
otherwise disposing of (other than pledging, hypothecating or otherwise
transferring as security) (and correlative words shall have correlative
meanings); provided however, that any transfer or other disposition upon
foreclosure or other exercise of remedies of a secured creditor after an event
of default under or with respect to a pledge, hypothecation or other transfer as
security shall constitute a "Transfer".
Trust Shares. "Trust Shares" shall mean the shares of
beneficial interest, $.01 par value, of the Trust.
Underwriters' Representative. "Underwriters'
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Representative" shall mean the managing underwriter, or, in the case of a
co-managed underwriting, the managing underwriter designated as the
Underwriters' Representative by the co-managers.
Units. "Units" shall mean Realty Units and Operating Units.
Violation. "Violation" shall have the meaning set forth in
Section 7.1.
1.2. USAGE.
(i) References to a Person are also references to its assigns and
successors in interest (by means of merger, consolidation or sale of all or
substantially all the assets of such Person or otherwise, as the case may be).
(ii) References to Registrable Securities "owned" by a Holder
shall include Registrable Securities beneficially owned by such Person but which
are held of record in the name of a nominee, trustee, custodian, or other agent,
but shall exclude Paired Shares held by a Holder in a fiduciary capacity for
customers of such Person.
(iii) References to a document are to it as amended, waived and
otherwise modified from time to time and references to a statute or other
governmental rule are to it as amended and otherwise modified from time to time
(and references to any provision thereof shall include references to any
successor provision).
(iv) References to Sections or to Schedules or Exhibits are to
sections hereof or schedules or exhibits hereto, unless the context otherwise
requires.
(v) The definitions set forth herein are equally applicable both
to the singular and plural forms and the feminine, masculine and neuter forms of
the terms defined.
(vi) The term "including" and correlative terms shall be deemed
to be followed by "without limitation" whether or not followed by such words or
words of like import.
(vii) The term "hereof" and similar terms refer to this Agreement
as a whole.
(viii) The "date of" any notice or request given pursuant to this
Agreement shall be determined in accordance with Section 11.
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SECTION 2. DEMAND SHELF REGISTRATIONS.
2.1. Subject to Sections 2.4 and 6.3, if the Holder shall make a
written request to the Trust and the Corporation to effect a registration on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act (a
"Shelf Registration") with respect to all or any portion of the Registrable
Securities, then the Trust and the Corporation shall as soon as practicable
cause there to be filed with the Commission such Shelf Registration. The Trust
and the Corporation shall include therein all or any portion of the Registrable
Securities requested by the Holder. Any request made pursuant to this Section
2.1 shall be addressed to the attention of the Secretary of each of the Trust
and the Corporation, and shall specify the number of Registrable Securities to
be registered, the possible intended methods of disposition thereof and that the
request is for a Shelf Registration pursuant to this Section 2.1.
2.2. (i) The Trust and the Corporation shall be entitled to
postpone for up to 90 days the filing of any registration statement otherwise
required to be prepared and filed pursuant to this Section 2, if the Trust and
the Corporation shall furnish to the Holder a certificate signed by the
Secretary of each of the Trust and the Corporation stating that the Board of
Trustees of the Trust and the Board of Directors of the Corporation have in good
faith determined that such registration and the Transfer of Registrable
Securities contemplated thereby would interfere with, or require premature
disclosure of, any material financing, acquisition, disposition, reorganization
or other transaction involving the Realty Partnership, the Operating
Partnership, the Trust or the Corporation or any of their respective
subsidiaries and the Trust or the Corporation, as the case may be, promptly
gives the Holder notice of such determination. If a disclosure of such
transactions occurs prior to the end of the 90-day period, such postponement
shall terminate on such earlier day. The Holder hereby acknowledges that any
notice given by the Trust or the Corporation pursuant to this Section 2.2(i)
shall constitute material non-public information and that the United States
securities laws prohibit any Person who has material non-public information
about a company from purchasing or selling securities of such company or from
communicating such information to any other Person under circumstances in which
it is reasonably foreseeable that such Person is likely to purchase or sell such
securities.
(ii) The Trust and the Corporation shall not be obligated to file
any registration statement pursuant to this Section 2 if, within thirty (30)
days after their receipt of the written request of the Holder, the Trust and the
Corporation notify the Holder that, prior to their receipt of such request,
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they had a plan or intention promptly to register equity securities under the
Securities Act. The Trust and the Corporation shall not be obligated to file any
registration statement pursuant to the preceding sentence, only if the Trust and
the Corporation are actively employing in good faith all reasonable efforts to
cause such registration statements to become effective. The Holder shall have
rights to participate in any such registration on the terms provided in Section
3 hereof.
2.3. Following receipt of a request for a Shelf Registration, the
Trust and the Corporation shall:
(i) File the registration statement with the Commission as
promptly as practicable, and shall use their respective reasonable efforts to
have the registration declared effective under the Securities Act as soon as
reasonably practicable, in each instance giving due regard to the need to
prepare current financial statements, conduct due diligence and complete other
actions that are reasonably necessary to effect a registered public offering.
(ii) Use their respective reasonable efforts to keep the relevant
registration statement Continuously Effective until such date as of which all
the Registrable Securities under the Shelf Registration statement have been
disposed of in a manner described in the registration statement. In no event
will such registration statement be required to be Continuously Effective for
more than 3 years.
2.4. Notwithstanding anything in this Agreement to the contrary,
(a) in no event will the Trust or the Corporation be obligated to effect more
than one Shelf Registration, and (b) no registration shall be effected under
this Agreement and no Transfer of Registrable Securities may be effected if as a
result thereof the Trust would not satisfy the REIT Requirements in any respect
or if such registration or Transfer would result in any Person Beneficially
Owning Paired Shares in excess of the Ownership Limit. For purposes of the
preceding sentence, registration shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective, or
(ii) if after such registration statement has become effective, the related
offer, sale or distribution of Registrable Securities thereunder is prohibited
by any stop order, injunction or other order or requirement of the Commission or
other governmental agency or court for any reason not attributable to the Holder
and such prohibition is not thereafter eliminated. If the Trust and the
Corporation shall have complied with their respective obligations under this
Agreement, a right to demand a registration pursuant to this Section 2 shall be
deemed to have been satisfied upon the effective date of such Shelf
Registration, provided no stop order or similar order, or
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<PAGE> 8
proceedings for such an order, is thereafter entered or initiated.
2.5. A registration pursuant to this Section 2 shall be on such
appropriate registration form of the Commission as shall be selected by the
Trust and the Corporation and shall permit the disposition of the Registrable
Securities in accordance with the intended method or methods of disposition
specified in the request pursuant to Section 2.1.
SECTION 3. PIGGYBACK REGISTRATION.
3.1. If at any time the Trust and the Corporation (either for
itself or pursuant to a registration rights agreement) propose to register
securities under the Securities Act in connection with the public offering
solely for cash on Form S-1, S-2, S-3, or S-11 (or any replacement or successor
forms), the Trust and the Corporation shall promptly give the Holder written
notice of such registration. Upon the written request of the Holder given as
promptly as practicable but in any event within twenty (20) days following the
date of such notice, the Trust and the Corporation shall cause to be included in
such registration statement and use their respective reasonable efforts to be
registered under the Securities Act all the Registrable Securities that the
Holder shall have requested to be registered; provided, however, that such right
of inclusion shall not apply to any registration statement covering an offering
of debt securities or convertible debt securities (any such registration in
which Holder participate pursuant to this Section 3.1 being referred to as a
"Piggyback Registration"). The Trust and the Corporation shall have the absolute
right to delay, withdraw or cease to prepare or file any registration statement
for any offering referred to in this Section 3 without any obligation or
liability to the Holder, it being understood that any Registrable Securities
previously included in any such withdrawn Registration Statement shall not cease
to be Registrable Securities by reason of such inclusion or withdrawal. If the
Holder has requested inclusion of Registrable Securities in a Piggyback
Registration, the Holder may withdraw therefrom by written notice to the Trust,
the Corporation and the underwriter, provided such withdrawal is made prior to
the effective date of the relevant registration statement.
3.2. If the Underwriters' Representative shall advise the Trust
and the Corporation that, in its opinion, the amount or type of Registrable
Securities requested to be included in a Piggyback Registration would adversely
affect such offering, or the timing thereof, then the Trust and the Corporation
will include in such registration, to the extent of the amount and class which
the Trust and the Corporation are so advised can be sold without such adverse
effect in such offering: first, all securities, if any, requested to be included
in a registration
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statement pursuant to the exercise of demand registration rights granted by the
Trust and the Corporation; second, all securities proposed to be sold by the
Trust and the Corporation for their own accounts; and third, the Registrable
Securities requested to be included in such registration by Holder pursuant to
this Section 3 and all other securities requested to be included in such
registration pursuant to registration rights agreements with other parties pro
rata based on the estimated gross proceeds from the sale thereof.
SECTION 4. REGISTRATION PROCEDURES. Whenever required under
Section 2 or Section 3 to effect the registration of any Registrable Securities,
the Trust and the Corporation shall, as expeditiously as practicable:
4.1. Prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use their respective
reasonable efforts to cause such registration statement to become effective;
provided, however, that before filing a registration statement or prospectus or
any amendments or supplements thereto, the Trust and the Corporation shall
furnish to one firm of counsel for the Holder, copies of all such documents in
the form substantially as proposed to be filed with the Commission and provide
reasonable opportunity to comment.
4.2. Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act and rules thereunder with respect to the
disposition of all securities covered by such registration statement. If the
registration is for an underwritten offering, the Trust and the Corporation
shall amend the registration statement or supplement the prospectus whenever
required by the terms of the underwriting agreement entered into pursuant to
Section 4.5. If the registration statement is for a Shelf Registration, the
Trust and the Corporation shall amend the registration statement or supplement
the prospectus so that it will remain current and in compliance with the
requirements of the Securities Act for the period specified in Section 2.3(ii),
and if during such period any event or development occurs as a result of which
the registration statement or prospectus contains a misstatement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, the Trust or the
Corporation shall promptly notify the Holder, amend the registration statement
or supplement the prospectus so that each will thereafter comply with the
Securities Act and furnish to the Holder such amended or supplemented
prospectus, which the Holder shall thereafter use in the Transfer of Registrable
Securities covered by such
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registration statement. Pending any such amendment or supplement described in
this Section 4.2, the Holder shall cease making offers or Transfers of
Registrable Shares pursuant to the prior prospectus. In the event that any
Registrable Securities included in a registration statement subject to, or
required by, this Agreement remain unsold at the end of the period during which
the Trust and the Corporation are obligated to use their respective reasonable
efforts to maintain the effectiveness of such registration statement, the Trust
and the Corporation may file a post-effective amendment to the registration
statement for the purpose of removing such Registrable Securities from
registered status.
4.3. Furnish to the Holder, without charge, such numbers of
copies of the registration statement, any pre-effective or post-effective
amendment thereto, the prospectus, including each preliminary prospectus and any
amendments or supplements thereto, in each case in conformity with the
requirements of the Securities Act and the rules thereunder, and such other
related documents as the Holder may reasonably request in order to facilitate
the disposition of Registrable Securities owned by the Holder.
4.4. Use their respective reasonable efforts (i) to register and
qualify the securities covered by such registration statement under such other
securities or Blue Sky laws of such states where an exemption from registration
is not available and as shall be reasonably requested by the Underwriters'
Representative and (ii) to obtain the withdrawal of any order suspending the
effectiveness of a registration statement, or the lifting of any suspension of
the qualification (or exemption from qualification) of the offer and transfer of
any of the Registrable Securities in any state, at the earliest possible moment;
provided, however, that neither the Trust nor the Corporation shall be required
in connection therewith or as a condition thereto to qualify to do business or
to consent to general service of process in any state.
4.5. In the event of any underwritten offering, use their
respective reasonable efforts to enter into and perform their respective
obligations under an underwriting agreement (including indemnification and
contribution obligations of underwriters), in usual and customary form, with the
managing underwriter or underwriters of such offering. The Trust and the
Corporation shall also cooperate with the Holder, and the Underwriters'
Representative for such offering in the marketing of the Registerable
Securities, including making available the officers, accountants, counsel,
premises, books and records of the Trust and the Corporation for such purpose;
provided, however, that neither the Trust nor the Corporation shall be required
to incur any material out-of-pocket expense pursuant to
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this sentence and; provided, further, that the officers of the Trust and the
Corporation will not be required to participate in more than one "roadshow" in
any twelve month period.
4.6. Promptly notify the Holder of any stop order issued or
threatened to be issued by the Commission in connection therewith and take all
reasonable actions required to prevent the entry of such stop order or to remove
it if entered.
4.7. Make available for inspection by the Holder, any underwriter
participating in such offering and the representatives of the Holder and
Underwriter (but not more than one firm of counsel to the Holder), all financial
and other information as shall be reasonably requested by them, and provide the
Holder, any underwriter participating in such offering and the representatives
of the Holder and Underwriter the reasonable opportunity to discuss the business
affairs of the Trust and the Corporation with their principal executives and
independent public accountants who have certified the audited financial
statements included in such registration statement, in each case all as
necessary to enable them to exercise their due diligence responsibility under
the Securities Act; provided, however, that information that the Trust or the
Corporation determine to be confidential and which the Trust or the Corporation
advise such Person in writing, is confidential shall not be disclosed unless
such Person signs a confidentiality agreement reasonably satisfactory to the
Trust and the Corporation or the Holder agrees to be responsible for such
Person's breach of confidentiality on terms reasonably satisfactory to the Trust
and the Corporation.
4.8. Use their respective reasonable efforts to obtain a
so-called "comfort letter" from the independent public accountants of the Trust
and the Corporation, and legal opinions of counsel to the Trust and the
Corporation addressed to the Holder, in customary form and covering such matters
of the type customarily covered by such letters, and in a form that shall be
reasonably satisfactory to the Holder. Delivery of any such opinion or comfort
letter shall be subject to the recipient furnishing such written representations
or acknowledgments as are customarily provided by selling shareholders who
receive such comfort letters or opinions.
4.9. Use their respective reasonable efforts to cause the
Registrable Securities covered by such registration statement (i) if the Paired
Shares are then listed on a securities exchange or included for quotation in a
recognized trading market, to continue to be so listed or included for a
reasonable period of time after the offering, and (ii) to be registered with or
approved by such other United States or state governmental agencies or
authorities as may be necessary by virtue of the
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business and operations of the Trust and the Corporation to enable the Holder to
consummate the disposition of such Registrable Securities.
4.10. Take such other actions as are reasonably required in order
to expedite or facilitate the disposition of Registrable Securities included in
each such registration.
SECTION 5. HOLDER OBLIGATIONS. It shall be a condition precedent
to the obligations of the Trust and the Corporation to take any action pursuant
to this Agreement with respect to the Registrable Securities of the Holder that
the Holder shall:
5.1. Furnish to the Trust and the Corporation such information
regarding the Holder, the number of the Registrable Securities owned by it, and
the intended method of disposition of such securities as shall be required to
effect the registration of the Holder's Registrable Securities, and to cooperate
fully with the Trust and the Corporation in preparing such registration.
5.2. Except as set forth in Section 3.1, agree to sell its
Registrable Securities to the underwriters at the same price and on
substantially the same terms and conditions as the Trust and the Corporation or
the other Persons on whose behalf the registration statement was being filed
have agreed to sell its securities, and to execute the underwriting agreement
agreed to by the Holder (in the case of a registration under Section 2) or the
Trust and the Corporation and the Holder (in the case of a registration under
Section 3).
SECTION 6. EXPENSES OF REGISTRATION. Expenses in connection with
registrations pursuant to this Agreement shall be allocated and paid as follows:
6.1. With respect to a Shelf Registration, except as otherwise
provided herein, each of the Trust and the Corporation shall bear and pay all
expenses incurred in connection with any registration, filing, or qualification
of Registrable Securities with respect to such Registration for the Holder,
including all registration, filing and National Association of Securities
Dealers, Inc. fees, all fees and expenses of complying with securities or blue
sky laws, all printing expenses, messenger and delivery expenses, the reasonable
fees and disbursements of counsel for the Trust and the Corporation, and of the
independent public accountants for the Trust and the Corporation, including the
expenses of "cold comfort" letters required by or incident to such performance
and compliance (the "Registration Expenses"), but excluding underwriting
discounts and commissions relating to Registrable Securities (which shall be
paid by the Holder) and
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all fees and expenses of counsel for the Holder; provided, however, that the
Trust and the Corporation shall not be required to pay for any expenses of any
registration proceeding begun pursuant to Section 2 if the registration is
subsequently withdrawn as a result of the failure of the Holder to satisfy its
obligations under this Agreement (in which case the Holder shall bear such
expenses), unless the Holder indicates that such withdrawn registration shall
have constituted the Shelf Registration available to it under Section 2 hereof.
Notwithstanding the preceding sentence, the Trust and the Corporation shall not
be required to bear the first $25,000 of Registration Expenses; the Holder shall
bear and pay the first $25,000 of Registration Expenses. With respect to such
$25,000 of Registration Expenses, the Holder shall include a payment for this
amount with the written request for a Shelf Registration. The Trust and the
Corporation each agree between themselves that they shall bear and pay
Registration Expenses in an amount equal to their respective Issuance Percentage
of such Registration Expenses and that they shall reimburse each other to the
extent necessary to cause each of them to so bear and pay such respective
amounts.
6.2. The Holder shall not bear or pay any Registration Expenses
incurred in connection with any Piggyback Registrations pursuant to Section 3,
but excluding underwriting discounts and commissions relating to Registrable
Securities (which shall be paid by the Holder) and all fees and expenses of
counsel for the Holder.
6.3. Notwithstanding anything to the contrary in this Agreement,
(i) no request for Shelf Registration pursuant to Section 2.1 may be made unless
such request is accompanied by a payment of $25,000 and (ii) the Trust and the
Corporation shall have no obligation to make a Shelf Registration pursuant to
Section 2.1 effective until the Holder has satisfied its obligation under
Section 6.1 to bear and pay Registration Expenses. The $25,000 referred to in
the preceding sentence shall be considered an advance of the Holder's payment of
Registration Expenses pursuant to Section 6.1 and if such Registration Expenses
do not exceed $25,000, then any excess shall be refunded to the Holder.
SECTION 7. INDEMNIFICATION; CONTRIBUTION. If any Registrable
Securities are included in a registration statement under this Agreement:
7.1. To the extent permitted by applicable law, each of the Trust
and the Corporation, severally and not jointly, shall indemnify and hold
harmless the Holder, each Person, if any, who controls the Holder within the
meaning of the Securities Act, and each officer, director, partner and employee
of the
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Holder and such controlling Person, against any and all losses, claims,
damages, liabilities and expenses (joint or several), including reasonable
attorneys' fees and disbursements and reasonable expenses of investigation,
incurred by such party pursuant to any actual or threatened action, suit,
proceeding or investigation, or to which any of the foregoing Persons may
otherwise become subject under the Securities Act, the Exchange Act or other
federal or state laws, insofar as such losses, claims, damages, liabilities and
expenses arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"):
(i) Any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein, or any amendments
or supplements thereto; or
(ii) The omission or alleged omission to state therein a material
fact required to be stated therein, or necessary to make the statements therein
not misleading;
provided, however, that the indemnification required by this Section 7.1 shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or expense if such settlement is effected without the consent of the
Trust or the Corporation (which consent shall not be unreasonably withheld), nor
shall the Trust or the Corporation be liable in any such case for any such loss,
claim, damage, liability or expense to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
information furnished to the Trust or the Corporation by the indemnified party
in writing expressly for use in connection with such registration; and provided,
further, that the indemnity agreement contained in this Section 7 shall not
apply to the extent that any such loss is based on or arises out of an untrue
statement or alleged untrue statement of a material fact, or an omission or
alleged omission to state a material fact, contained in or omitted from any
preliminary prospectus if the final prospectus shall correct such untrue
statement or alleged untrue statement, or such omission or alleged omission, and
a copy of the final prospectus has not been sent or given to such person at or
prior to the confirmation of sale to such person if an underwriter or Holder was
under an obligation to deliver such final prospectus and failed to do so.
7.2. To the extent permitted by applicable law, the Holder shall
indemnify and hold harmless the Trust, the Corporation, each of the Trustees of
the Trust, each of the directors of the Corporation, each of the officers of the
Trust or the Corporation who shall have signed the registration statement, each
Person, if any, who controls the Trust or the Corporation within the meaning of
the Securities Act, against any
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and all losses, claims, damages, liabilities and expenses (joint and several),
including reasonable attorneys' fees and disbursements and reasonable expenses
of investigation, incurred by such party pursuant to any actual or threatened
action, suit, proceeding or investigation, or to which any of the foregoing
Persons may otherwise become subject under the Securities Act, the Exchange Act
or other federal or state laws, but only insofar as such losses, claims,
damages, liabilities and expenses arise out of or are based upon any Violation,
in each case to the extent that such Violation arises out of or is based upon
information furnished by the Holder in writing expressly for use in connection
with such registration; provided, however, that (x) the indemnification required
by this Section 7.2 shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or expense if such settlement is effected without
the consent of the relevant Holder (which consent shall not be unreasonably
withheld) and (y) in no event shall the amount of any indemnity under this
Section 7.2 exceed the gross proceeds from the applicable offering received by
the Holder.
7.3. Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit, proceeding,
investigation or threat thereof made in writing for which such indemnified party
may make a claim under this Section 7, such indemnified party shall deliver to
the indemnifying party a written notice thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain its own
counsel, with the fees and disbursements and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time following the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 7 to the extent of such prejudice but shall
not relieve the indemnifying party of any liability that it may have to any
indemnified party otherwise than pursuant to this Section 7. Any fees and
expenses incurred by the indemnified party (including any fees and expenses
incurred in connection with investigating or preparing to defend such action or
proceeding) shall be paid to the indemnified party, as incurred, within thirty
(30) days of written notice thereof to the indemnifying party (regardless of
whether it is ultimately determined that an indemnified party is not entitled
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to indemnification hereunder). Any such indemnified party shall have the right
to employ separate counsel in any such action, claim or proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be the expenses of such indemnified party unless (i) the indemnifying
party has agreed to pay such fees and expenses or (ii) the indemnifying party
shall have failed to promptly assume the defense of such action, claim or
proceeding or (iii) the named parties to any such action, claim or proceeding
(including any impleaded parties) include both such indemnified party and the
indemnifying party, and such indemnified party shall have been advised by
counsel that there may be one or more legal defenses available to it which are
different from or in addition to those available to the indemnifying party and
that the assertion of such defenses would create a conflict of interest such
that counsel employed by the indemnifying party could not faithfully represent
the indemnified party (in which case, if such indemnified party notifies the
indemnifying party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action, claim or proceeding on behalf of
such indemnified party, it being understood, however, that the indemnifying
party shall not, in connection with any one such action, claim or proceeding or
separate but substantially similar or related actions, claims or proceedings in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (together with appropriate local counsel) at any time
for all such indemnified parties, unless in the reasonable judgment of such
indemnified party a conflict of interest may exist between such indemnified
party and any other of such indemnified parties with respect to such action,
claim or proceeding, in which event the indemnifying party shall be obligated to
pay the fees and expenses of such additional counsel or counsels).
7.4. If the indemnification required by this Section 7 from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any losses, claims, damages, liabilities or expenses referred to in this
Section 7:
(i) The indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference to,
among other things,
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<PAGE> 17
whether any Violation has been committed by, or relates to information supplied
by, such indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such Violation. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 7.1 and Section 7.2,
any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
(ii) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7.4 were determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in Section 7.4(i). No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
7.5. If indemnification is available under this Section 7, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in this Section 7 without regard to the relative fault of such
indemnifying party or indemnified party or any other equitable consideration
referred to in Section 7.4.
7.6. The obligations of the Trust, the Corporation and the Holder
under this Section 7 shall survive the completion of any offering of Registrable
Securities pursuant to a registration statement under this Agreement, and
otherwise.
SECTION 8. HOLDBACK. The Holder, if so requested by the
Underwriters' Representative in connection with an offering of any securities
covered by a registration statement filed by Trust and the Corporation, whether
or not Holder's securities are included therein, shall not effect any public
sale or distribution of Paired Shares or any securities convertible into or
exchangeable or exercisable for Paired Shares, including a sale pursuant to Rule
144 under the Securities Act (except as part of such underwritten registration),
during the 15-day period prior to, and during the 90-day period beginning on,
the date such registration statement is declared effective under the Securities
Act by the Commission. In order to enforce the foregoing covenant, the Trust and
the Corporation shall be entitled to impose stop-transfer instructions with
respect to the Registrable Securities of the Holder until the end of such
period. The Holder shall have the right to participate in any such registration
on the terms provided in Section 3 hereof.
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<PAGE> 18
SECTION 9. AMENDMENT, MODIFICATION AND WAIVERS;
FURTHER ASSURANCES.
(i) This Agreement may be amended with the consent of the Trust
and the Corporation and the Trust and the Corporation may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Trust and the Corporation shall have obtained the written consent of
the Holder to such amendment, action or omission to act.
(ii) No waiver of any terms or conditions of this Agreement shall
operate as a waiver of any other breach of such terms and conditions or any
other term or condition, nor shall any failure to enforce any provision hereof
operate as a waiver of such provision or of any other provision hereof. No
written waiver hereunder, unless it by its own terms explicitly provides to the
contrary, shall be construed to effect a continuing waiver of the provisions
being waived and no such waiver in any instance shall constitute a waiver in any
other instance or for any other purpose or impair the right of the party against
whom such waiver is claimed in all other instances or for all other purposes to
require full compliance with such provision.
(iii) Each of the parties hereto shall execute all such further
instruments and documents and take all such further action as any other party
hereto may reasonably require in order to effectuate the terms and purposes of
this Agreement.
SECTION 10. ASSIGNMENT; BENEFIT. This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the parties hereto and
their respective successors and assigns. In addition, and whether or not any
express assignment shall have been made, the provisions of this Agreement which
are for the benefit of the parties hereto other than the Corporation and the
Trust, shall also be for the benefit of and enforceable by any subsequent holder
of any Registrable Securities, subject to all the provisions herein, including
those respecting the minimum numbers or percentages of shares of Registrable
Securities required in order to be entitled to certain rights, or take certain
actions, contained herein.
SECTION 11. MISCELLANEOUS.
11.1. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without giving
regard to the conflict of laws principles thereof.
11.2. NOTICES. All notices and requests given pursuant to this
Agreement shall be in writing and shall be made by hand-delivery, first-class
mail (registered or certified, return receipt requested), confirmed facsimile or
overnight air
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<PAGE> 19
courier guaranteeing next Business Day delivery to the relevant address
specified in the Exchange Rights Agreement. Except as otherwise provided in this
Agreement, the date of each such notice and request shall be deemed to be, and
the date on which each such notice and request shall be deemed given shall be:
at the time delivered, if personally delivered or mailed; when receipt is
acknowledged, if sent by facsimile; and the next Business Day after timely
delivery to the courier, if sent by overnight air courier guaranteeing next
Business Day delivery.
11.3. ENTIRE AGREEMENT; INTEGRATION. This Agreement supersedes
all prior agreements between or among any of the parties hereto with respect to
the subject matter contained herein and therein, and such agreements embody the
entire understanding among the parties relating to such subject matter.
11.4. SECTION HEADINGS. Section headings are for convenience of
reference only and shall not affect the meaning of any provision of this
Agreement.
11.5. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original, and all of which shall
together constitute one and the same instrument. All signatures need not be on
the same counterpart.
11.6. SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable, such invalidity or unenforceability shall not affect
the validity and enforceability of the remaining provisions of this Agreement,
unless the result thereof would be unreasonable, in which case the parties
hereto shall negotiate in good faith as to appropriate amendments hereto.
11.7. TERMINATION. This Agreement may be terminated at any time
by a written instrument signed by the Trust, the Corporation and the Holder.
Unless sooner terminated in accordance with the preceding sentence, this
Agreement (other than Section 7 hereof) shall terminate in its entirety on such
date as there shall be (a) no Registrable Securities outstanding, and (b) no
securities outstanding which are convertible or exchangeable into Registrable
Securities; provided that any Paired Shares previously subject to this Agreement
shall not be Registrable Securities following the sale of any such shares in an
offering registered pursuant to this Agreement.
11.8. STARWOOD LODGING TRUST. The parties hereto understand and
agree that the name "Starwood Lodging Trust" is a designation of the Trust and
its Trustees (as Trustees but not personally) under the Declaration of Trust,
and all persons dealing with the Trust shall look solely to the Trust's assets
for the enforcement of any claims against the Trust, and that the
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<PAGE> 20
Trustees, officers, agents and security holders of the Trust assume no personal
liability for obligations entered into on behalf of the Trust, and their
respective individual assets shall not be subject to the claims of any person
relating to such obligations.
11.9. SUBMISSION TO JURISDICTION. Each of the parties hereto and
each of the Holder irrevocably submits and consents to the jurisdiction of the
United States District Court for the Southern District of New York and the
United States District Court for the District of Maryland in connection with any
action or proceeding arising out of or relating to this Agreement, and
irrevocably waives any immunity from jurisdiction thereof and any claim of
improper venue, forum non conveniens or any similar basis to which it might
otherwise be entitled in any such action or proceeding.
11.10. SPECIFIC PERFORMANCE. Each of the parties acknowledges and
agrees that in the event of any breach of this Agreement, the non-breaching
party or parties would be irreparably harmed and could not be made whole by
monetary damages. The parties hereby agree that in addition to any other remedy
to which they may be entitled at law or in equity, they shall be entitled to
compel specific performance of this Agreement in any action instituted in any
court of the United States or any state thereof having subject matter
jurisdiction for such action.
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<PAGE> 21
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first written above.
STARWOOD LODGING TRUST,
a Maryland real estate investment
trust
By:________________________________
Name:
Title:
STARWOOD LODGING CORPORATION,
a Maryland corporation
By:________________________________
Name:
Title:
THE HERMITAGE, L.P.
By: Hermitage of Nashville, Inc.,
its General Partner
By:____________________________
Pace Cooper
President
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<PAGE> 1
Exhibit 10.43
Page
[Execution Copy]
************************************************************
SLT MEXICO, S. de R.L. de C.V.
and
SLT REALTY LIMITED PARTNERSHIP
and
STARWOOD LODGING TRUST
-----------------------------
CREDIT AGREEMENT
Dated as of August 18, 1997
------------------------------
BANCOMER, S.A., Cayman Islands Branch,
as Agent
************************************************************
<PAGE> 2
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience of reference only.
Page
Section 1. Definitions and Accounting Matters...............................2
1.01 Certain Defined Terms............................................2
1.02 Accounting Terms and Determinations.............................22
Section 2. Commitments, Loans, Notes and Prepayments.......................22
2.01 Loans...........................................................22
2.02 Borrowings......................................................22
2.03 Lending Offices.................................................22
2.04 Several Obligations; Remedies Independent.......................22
2.05 Notes...........................................................23
2.06 Optional Prepayments............................................23
2.07 Mandatory Prepayments...........................................23
Section 3. Payments of Principal and Interest..............................23
3.01 Repayment of Loans..............................................23
3.02 Interest........................................................23
Section 4. Payments; Pro Rata Treatment; Computations; Etc.................24
4.01 Payments........................................................24
4.02 Pro Rata Treatment..............................................24
4.03 Computations....................................................25
4.04 Minimum Amounts.................................................25
4.05 Certain Notices.................................................25
4.06 Non-Receipt of Funds by the Agent...............................25
4.07 Sharing of Payments, Etc........................................26
Section 5. Yield Protection, Etc...........................................27
5.01 Additional Costs................................................27
5.02 Illegality......................................................28
5.03 Taxes...........................................................29
5.04 Compensation....................................................31
5.05 Replacement of Lenders. .......................................31
Section 6. Guarantee.......................................................32
(2)
<PAGE> 3
Page
6.01 The Guarantee...................................................32
6.02 Obligations Unconditional.......................................32
6.03 Reinstatement...................................................34
6.04 Subrogation.....................................................34
6.05 Remedies........................................................35
6.06 Continuing Guarantee............................................35
6.07 Waiver of Civil Articles........................................35
Section 7. Conditions Precedent............................................35
Section 8. Representations and Warranties..................................39
8.01 Corporate Existence.............................................39
8.02 Financial Condition.............................................40
8.03 Litigation......................................................40
8.04 No Breach.......................................................41
8.05 Action..........................................................41
8.06 Approvals.......................................................41
8.07 Legal Form......................................................41
8.08 Ranking.........................................................42
8.09 Taxes...........................................................42
8.10 Commercial Activity; Absence of Immunity........................42
8.11 Material Agreements and Liens...................................42
8.12 Solvency........................................................42
8.13 Subsidiaries, Etc...............................................42
8.14 True and Complete Disclosure....................................43
8.15 ERISA...........................................................43
8.16 Licenses........................................................44
8.17 Assets of the Trust.............................................44
8.18 REIT Status.....................................................44
8.19 Stock...........................................................44
8.20 Operations......................................................44
8.21 Environmental Matters...........................................44
Section 9. Covenants of the Obligors. ....................................46
9.01 Financial Statements Etc........................................46
9.02 Litigation......................................................48
9.03 Existence, Etc..................................................48
9.04 Insurance.......................................................49
9.05 Prohibition of Fundamental Changes..............................52
9.06 Limitation on Liens.............................................52
9.07 Indebtedness....................................................53
9.08 Investments.....................................................53
(3)
<PAGE> 4
Page
9.09 Payout Ratios...................................................54
9.10 Debt Service Coverage Ratio.....................................54
9.11 Combined Debt Service Coverage Ratio.............................55
9.12 Tangible Net Worth..............................................55
9.13 Capital Expenditures............................................55
9.15 Subordinated Indebtedness.......................................55
9.16 Lines of Business...............................................55
9.17 Transactions with Affiliates....................................55
9.18 Use of Proceeds.................................................56
9.19 Certain Obligations Respecting Subsidiaries.....................56
9.20 Compliance with ERISA...........................................56
9.21 Modifications of Certain Documents..............................57
Section 10. Events of Default..............................................57
Section 11. The Agent......................................................62
11.01 Appointment, Powers and Immunities.............................62
11.02 Reliance by Agent..............................................62
11.03 Defaults.......................................................63
11.04 Rights as a Lender.............................................63
11.05 Indemnification................................................63
11.06 Non-Reliance on Agent and Other Lenders........................64
11.07 Failure to Act.................................................64
11.08 Resignation of Agent...........................................64
11.09 Consents under Other Basic Documents...........................64
Section 12. Miscellaneous..................................................65
12.01 Waiver.........................................................65
12.02 Notices........................................................65
12.03 Expenses.......................................................65
12.04 Indemnification................................................66
12.05 Amendments, Etc................................................66
12.06 Successors and Assigns.........................................67
12.07 Assignments and Participations.................................67
12.08 Survival.......................................................68
12.09 Captions.......................................................68
12.10 Counterparts...................................................68
12.11 Judgment Currency..............................................68
12.12 Governing Law..................................................69
12.13 Jurisdiction; Service of Process; Venue........................69
12.15 Waiver of Jury Trial...........................................70
12.16 The Trustee of the Trust.......................................70
(4)
<PAGE> 5
12.17 Use of English Language........................................71
SCHEDULES:
Schedule 1.01
Schedule 8.11
Schedule 8.15
Schedule 8.17
Schedule 8.20
Schedule 8.21
EXHIBIT A - Form of Note
EXHIBIT B-1 - Form of SLC Mexico Pledge Agreement
EXHIBIT B-2 - Form of SLT Realty Pledge Agreement
EXHIBIT B-3 - Form of Mortgage
EXHIBIT C-1 - Form of Opinion of Mexican Counsel to the Obligors
EXHIBIT C-2 - Form of Opinion of New York Counsel to the Obligors
EXHIBIT D - Step Plan
(5)
<PAGE> 6
CREDIT AGREEMENT, dated as of August 18, 1997 (as amended, modified or
amended and restated from time to time, this "Agreement") among:
(a) SLT MEXICO, S. de R.L. de C.V., a corporation duly organized and
validly existing under the laws of Mexico (the "Company");
(b) SLT REALTY LIMITED PARTNERSHIP, a limited partnership organized
under the laws of Maryland ("SLT");
(c) STARWOOD LODGING TRUST, a real estate investment trust organized
under the laws of Maryland, (the "Trust", and, together with SLT, the
"Guarantors"; and the Guarantors collectively with the Company, the
"Obligors");
(d) each of the lenders that is a signatory hereto identified under
the caption "Lenders" on the signature pages hereto or that, pursuant to
Section 12.07(b) hereof, shall become a "Lender" hereunder (individually, a
"Lender" and, collectively, the "Lenders"); and
(e) BANCOMER, S.A., Cayman Islands Branch, as agent for the Lenders
(in such capacity, together with its successors in such capacity, the
"Agent").
WHEREAS, SLC Mexico, S.A. de C.V. ("SLC Mexico"), a Subsidiary of SLC
(defined herein) will be acquiring certain hotel properties from Desarrollos
Turisticos Regina, S. de R.L. de C.V. ("DTB") pursuant to the First Amended and
Restated Stock Purchase Agreement (the "Stock Purchase Agreement"), dated as of
June 25, 1997, by and between Bancomer S.A., Institucion de Banca Multiple,
Grupo Financiero, DTB, Club Regina Resorts, Inc. and CR Hotel Acquisition
Company LLC (the "Acquisition");
WHEREAS, in order to consummate the Acquisition (as well as certain other
transactions), a Step Plan (the "Step Plan") (attached hereto as Exhibit D) has
been devised by the parties hereto, as well as certain other parties, which Step
Plan details the interim transactions required to occur prior to or concurrent
with the Acquisition;
WHEREAS, after giving effect to the interim transactions contemplated by
the Step Plan, SLC Mexico will have formed the following three Wholly Owned
Subsidiaries (each, a "Hotel Company"):
(i) Promotora Turistica Nizuc, S.A. de C.V., which, upon the consummation
of the Acquisition will be renamed "Starwood Cancun, S. de R.L. de C.V."
("Nizuc"), the principal asset of which is the Westin Regina Cancun;
(ii) Promotora y Desarrolladora Pacifico, S.A. de C.V., which, upon the
consummation of the Acquisition will be renamed "Starwood Puerto Vallarta,
S. de R.L. de C.V." ("Prodepa"), the principal asset of which is the
Westin Regina
<PAGE> 7
Vallarta; and
(iii) Desarrollos Turisticos Integrales Cabo San Lucas, S.A. de C.V.,
which, upon the consummation of the Acquisition will be renamed "Starwood
Cabo San Lucas, S. de R.L. de C.V." ("DTI Los Cabos"), the principal asset
of which is the Westin Regina Los Cabos;
WHEREAS, after giving effect to the interim transactions contemplated by
the Step Plan, Bancomer S.A., Institucion de Banca Multiple, Grupo Financiero
will have sold 100% of the capital stock of DTB (the principal remaining asset
of which will be 50% of the equity interest of Corporacion Habitacional
Mexicana, S.A. de C.V. to DTB Acquisition Sub, S. de R.L. de C.V., which, upon
the consummation of the Acquisition, will be renamed "Corporacion Habitacional
Mexicana, S. de R.L. de C.V." ("CHM");
WHEREAS, upon the consummation of the Acquisition, each Hotel Company
(Nizuc, Prodepa, DTI Los Cabos) will be a Wholly Owned Subsidiary of SLC Mexico,
and CHM will be 50% owned by SLC Mexico;
WHEREAS, the aggregate purchase price payable by the Hotel Companies and
SLC Mexico upon the consummation of the Acquisition will be approximately
U.S.$132,750,000;
WHEREAS, in order to finance the Acquisition, the Obligors have requested
that the Lenders make loans to the Company in an aggregate principal amount not
exceeding U.S.$118,750,000, the proceeds of which shall in turn be loaned by the
Company on terms satisfactory to the Lenders to the Hotel Companies (each such
loan to each such Hotel Company is referred to as an "Acquisition Loan");
WHEREAS, approximately U.S.$14,000,000 will be contributed by a direct or
indirect parent of SLC Mexico to the common equity of SLC Mexico in order to
finance the balance of the aggregate purchase price not financed indirectly by
the loans made hereunder (the "Capital Contribution");
WHEREAS, the Lenders are willing to make such loans on the terms and
conditions of this Agreement and, accordingly, the parties hereto agree as
follows:
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following terms shall have
the following meanings (all terms defined in this Section 1.01 or in other
provisions of this Agreement in the singular to have the same meanings when used
in the plural and vice versa):
"Acquired Property" shall mean, with respect to each Hotel Company, all
real
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<PAGE> 8
estate held by such Hotel Company after giving effect to the Acquisition,
including, but not limited to, the real property and improvements on which the
Westin Regina Cancun, the Westin Regina Los Cabos and the Westin Regina Vallarta
are located.
"Acquisition" shall have the meaning set forth in the first recital.
"Acquisition Loan" shall have the meaning set forth in the seventh
recital.
"Acquisition Documents" shall have the meaning set forth in Section 7(b)
hereof.
"Adjusted EBITDA" shall mean, for any period, with respect to any Person,
the lesser of:
(a) Operating Lease Payments received by such Person and such
Person's Subsidiaries for all Hotel Assets for such period, less the
aggregate FF&E Reserves, property taxes, insurance premiums, and other
expenses paid or incurred by such Person or such Person's Subsidiaries for
such period and
(b) Adjusted NOI in respect of such Person's and such Person's
Subsidiaries' Hotel Assets, calculated on a combined basis.
"Adjusted NOI" shall mean, with respect to any Hotel Assets and, with
respect to any Hotel managed by SLC and not owned by SLC or SLT or any of their
Subsidiaries, for any period, the Net Operating Income for such Hotel Assets for
such period, less the FF&E Reserve for such Hotel Assets for such period.
"Affiliate" shall mean any Person that directly or indirectly controls, or
is under common control with, or is controlled by, the Company and, if such
Person is an individual, any member of the immediate family (including parents,
spouse, children and siblings) of such individual and any trust whose principal
beneficiary is such individual or one or more members of such immediate family
and any Person who is controlled by any such member or trust. As used in this
definition, "control" (including, with its correlative meanings, "controlled by"
and "under common control with") shall mean possession, directly or indirectly,
of power to direct or cause the direction of management or policies (whether
through ownership of securities or partnership or other ownership interests, by
contract or otherwise).
"Agent" shall have the meaning set forth in the preamble.
"Agent's Account" shall mean account no. 400-001942 of Bancomer, S.A.
maintained at The Chase Manhattan Bank (ABA No. 021000021), or such other
account at such other bank in New York City as the Agent shall specify from time
to time to the Company and the Lenders.
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<PAGE> 9
"Available Cash Amount" shall mean, with respect to Available Cash
Balances, as of the date of determination, the combined Dollar amount of such
Available Cash Balances minus trade payables outstanding for more than 60 days.
"Available Cash Balances" shall mean, with respect to any Person,
unrestricted Cash and Cash Equivalents of such Person and such Person's
Subsidiaries.
"Base Rate" shall mean, for any day, a rate per annum equal to the higher
of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the Prime Rate
for such day. Each change in any interest rate provided for herein based upon
the Base Rate resulting from a change in the Base Rate shall take effect at the
time of such change in the Base Rate.
"Basic Documents" shall mean, collectively, this Agreement, the Notes and
the Security Documents.
"Business Day" shall mean (a) any day on which commercial banks are not
authorized or required to close in New York City and Mexico and (b) if such day
relates to a borrowing of, a payment or prepayment of principal of or interest
on, or an Interest Period for, a Loan or a notice by the Company with respect to
any such borrowing, payment, prepayment or Interest Period, any day on which
dealings in Dollar deposits are carried out in the London interbank market.
"Capital Expenditures" shall mean, with respect to any Person,
expenditures (including, without limitation, the aggregate amount of Capital
Lease Obligations) made by such Person and any of its Subsidiaries to acquire or
construct fixed assets, plant and equipment (including renewals, improvements
and replacements, but excluding repairs) during such period computed in
accordance with GAAP or, as the case may be, generally accepted accounting
principles applied by the Company.
"Capital Contribution" shall have the meaning set forth in the eighth
recital.
"Capital Lease Obligations" shall mean, for any Person, all obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) Property to the extent such obligations are required
to be classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP, and, for purposes of this Agreement, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP.
"Cash" shall mean coin or currency of the government of the United States
of America.
"Cash and Cash Equivalents" shall mean any or a combination of (i) Cash
and (ii) U.S. Government Obligations.
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<PAGE> 10
"Change in Control" shall mean (i) the Trust shall fail to be the general
partner of SLT, or (ii) the Corporation shall fail to be the general partner of
SLC, or (iii) SLC shall fail to own and control, directly or indirectly, at
least 66-2/3% of the issued and outstanding shares of capital stock of any Hotel
Company (on a fully diluted basis), or (iv) the death, incapacitation, dismissal
or departure of Barry Sternlicht and replacement management acceptable to the
Majority Lenders not having been appointed by the SLT and the Trust within 180
days of the event referred to above. "Control" shall have the meaning set forth
in the definition of "Affiliate".
"CHM" shall have the meaning set forth in the fourth recital.
"Closing Date" shall mean the date upon which the Loans hereunder are
made.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and any successor statute, together with all rules and regulations from
time to time promulgated thereunder.
"Combined Debt Service Coverage Ratio" shall mean, at the close of any
Fiscal Quarter, the ratio, computed for the period consisting of such Fiscal
Quarter and each of the three immediately preceding Fiscal Quarters of:
(i) EBITDA of SLT and SLC for such period less the FF&E Reserve,
over
(ii) all Debt Service of SLT and SLC for such period (other than
scheduled balloon maturity payments in respect of Indebtedness that
are not past due);
provided, that for the purposes of this calculation, (i) payments required to be
made by SLT and the Trust in respect of Operating Leases and (ii) Indebtedness
between (a) SLT and the Trust and their Subsidiaries, and (b) SLC and the
Corporation and their Subsidiaries, shall be excluded.
"Commitment" shall mean, for each Lender, the obligation of such Lender to
make a single Tranche A Loan and a single Tranche B Loan in an aggregate amount
up to but not exceeding the amount set opposite the name of such Lender on the
signature pages hereof under the caption "Commitment". The original aggregate
principal amount of the Commitments is U.S. $118,750,000.
"Commitment Termination Date" shall mean August 19, 1997.
"Company" shall have the meaning set forth in the preamble.
"Contingent Obligation" as to any Person shall mean any obligation of such
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<PAGE> 11
Person guaranteeing or intended to guarantee any Indebtedness, leases (including
Capital Lease Obligations), dividends or other obligations ("primary
obligations") of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, any obligation of such
Person, whether or not contingent, (i) to purchase any such primary obligation
or any property constituting direct or indirect security therefor, (ii) to
advance or supply funds (x) for the purchase or payment of any such primary
obligation or (y) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth, solvency or other financial
condition of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold harmless the owner of such
primary obligation against loss in respect thereof; provided, however, that the
term Contingent Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
accrued or accruable Contingent Obligation shall be determined in accordance
with GAAP.
"Corporation" shall mean Starwood Lodging Corporation, a corporation
organized under the laws of the State of Maryland.
"Debt Service" shall mean, with respect to any Person for any period, the
sum (without duplication) of (a) Interest Expense of such Person for such
period, plus (b) scheduled principal amortization of Indebtedness (other than
the scheduled balloon maturity payments in respect of Indebtedness that are not
past due) of such Person for such period (whether or not such payments are
made), plus (c) preferred stock dividends required to be made during such
period, plus (d) the amount of scheduled lease payments with respect to
leasehold interests or obligations of the respective Person.
"Debt Service Coverage Ratio" shall mean, at the close of any Fiscal
Quarter, the ratio, computed for the period consisting of such Fiscal Quarter
and each of the three immediately preceding Fiscal Quarters of:
(i) EBITDA of SLT and the Trust for such period, over
(ii) all Debt Service of SLT and the Trust for such period (other
than scheduled balloon maturity payments in respect of Indebtedness
that are not past due).
"Default" shall mean an Event of Default or an event that with notice or
lapse of time or both would become an Event of Default.
"Distribution" shall mean any dividends (other than dividends payable
solely in common stock), distributions, return of capital to any stockholders,
general or limited
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<PAGE> 12
partners or member, other payments, distributions or delivery of property or
cash to stockholders, general or limited partners or members, or any redemption,
retirement, purchase or other acquisition, directly or indirectly, of any shares
of any class of capital stock now or hereafter outstanding (or any options or
warrants issued with respect to capital stock), any general or limited
partnership interest, or the setting aside of funds for any of the foregoing.
"Dollars" and "U.S.$" shall mean lawful money of the United States of
America.
"DTB" shall have the meaning set forth in the first recital.
"DTI Los Cabos" shall have the meaning set forth in the third recital.
"EBITDA" shall mean, with respect to any Person, for any applicable
period, the sum (without duplication) of
(a) Net Income (Loss),
plus
(b) the amount deducted, in determining Net Income (Loss) ,
representing amortization,
plus
(c) the amount deducted, in determining Net Income (Loss), of all
income taxes (whether paid or deferred) of such Person and its
Subsidiaries,
plus
(d) the amount deducted, in determining Net Income (Loss), for
Interest Expense,
plus
(e) the amount deducted, in determining Net Income (Loss),
representing depreciation of assets.
"Employee Benefit Plan" shall mean an employee benefit plan within the
meaning of Section 3(3) of ERISA (i) that is maintained by any Obligor or (ii)
with respect to which any such person has any obligation or liability, whether
direct or indirect; provided, however, that "Employee Benefit Plan" shall not
include any "multiemployer plan" as defined in Section 4001(a)(3) of ERISA.
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<PAGE> 13
"Environmental Claim" shall mean, with respect to any Person, any written
or oral notice, claim, demand or other communication (collectively, a "claim")
by any other Person alleging or asserting such Person's liability for
investigatory costs, cleanup costs, governmental response costs, damages to
natural resources or other Property, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the presence, or Release into the
environment, of any Hazardous Material at any location, whether or not owned by
such Person, or (ii) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law. The term "Environmental Claim"
shall include, without limitation, any claim by any governmental authority for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and any claim by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence of Hazardous Materials or arising
from alleged injury or threat of injury to health, safety or the environment.
"Environmental Laws" shall mean any and all present and future United
States Federal, state, local and Mexican laws, rules or regulations, and any
orders or decrees, in each case as now or hereafter in effect, relating to the
regulation or protection of human health, safety or the environment or to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals or toxic or hazardous substances or wastes into the
indoor or outdoor environment, including, without limitation, ambient air, soil,
surface water, ground water, wetlands, land or subsurface strata, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals or toxic
or hazardous substances or wastes.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time and any successor statute, together with all rules and
regulations promulgated thereunder.
"ERISA Controlled Group" shall mean any corporation or entity or trade or
business or person that is a member of any group described in Section 414(b),
(c), (m) or (o) of the Code of which an Obligor is a member.
"Equity Rights" shall mean, with respect to any Person, any subscriptions,
options, warrants, commitments, preemptive rights or agreements of any kind
(including, without limitation, any stockholders' or voting trust agreements)
for the issuance, sale, registration or voting of, or securities convertible
into, any additional shares of capital stock of any class, or partnership or
other ownership interests of any type in, such Person.
"Eurodollar Rate" shall mean, with respect to any Loan for any Interest
Period, the rate per annum (rounded upwards, if necessary, to the nearest 1/16
of 1%) reported, at approximately 11:00 a.m. London time (or as soon thereafter
as practicable) on the date two Business Days prior to the first day of such
Interest Period, on Telerate Access Service Page 3750 (British Bankers
Association Settlement Rate)
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<PAGE> 14
as the London interbank offered rate for Dollar deposits having a term
comparable to the duration of such Interest Period and an in amount equal to or
greater than U.S.$1,000,000.
"Event of Default" shall have the meaning assigned to such term in Section
10 hereof.
"Federal Funds Rate" shall mean, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day, provided that (a) if the day for which such rate is to be determined is not
a Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day and (b) if such rate is not so published for any
Business Day, the Federal Funds Rate for such Business Day shall be the average
rate charged on such Business Day on such transactions as determined by the
Agent.
"FF&E Reserve" shall mean, for any Person (or with respect to any Hotel)
for any period, a reserve equal to four percent (4%) of Gross Revenues from any
Hotel owned by such Person (or from such Hotel), for such Period, plus for any
person, such Person's pro rata share of any FF&E Reserve for any Hotel owned by
such Person's Unconsolidated Entities.
"Fiscal Quarter" shall mean any quarter of a Fiscal Year.
"Fiscal Year" shall mean any period of twelve consecutive calendar months
ending on December 31st; references to a Fiscal Year with a number corresponding
to any calendar year (e.g. the "1997 Fiscal Year") refer to the Fiscal Year
ending on the December 31st occurring during such calendar year.
"Funds From Operations" shall mean, with respect to any Person,
consolidated Net Income (Loss) before extraordinary items, determined in
accordance with GAAP for such Person, plus, to the extent deducted in
determining Net Income (Loss) and without duplication,
(i) gains (or losses) from debt restructuring and sales of property,
(ii) non-recurring charges,
(iii) provisions for losses,
(iv) real estate related depreciation and amortization (which shall
include
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<PAGE> 15
amortization of financing costs on a basis consistent with the preparation
of such Person's quarterly and annual financial statements), and
(v) amortization of organizational expenses less, to the extent
included in determining Net Income (Loss), (a) non-recurring income and
(b) equity income (loss) from Unconsolidated Entities less the
proportionate share of funds from operations of such Unconsolidated
Entities, which adjustments shall be calculated on a consistent basis.
"GAAP" shall mean generally accepted accounting principles in the United
States as in effect on December 31, 1996.
"Gross Revenues" shall mean, with respect to any Hotel Asset for any
period, all income, rents, room rates, additional rents, revenues, issues and
profits and other items, including without limitation, all revenues and credit
card receipts collected from guest rooms, restaurants, meeting rooms, bars,
mini-bars, banquet rooms, recreational facilities, vending machines and
concessions derived from the customary operation of such Hotel Asset.
"Guarantee" shall mean a guarantee, an endorsement, a contingent agreement
to purchase or to furnish funds for the payment or maintenance of, or otherwise
to be or become contingently liable under or with respect to, the Indebtedness,
other obligations, net worth, working capital or earnings of any Person, or a
guarantee of the payment of dividends or other distributions upon the stock or
equity interests of any Person, or an agreement to purchase, sell or lease (as
lessee or lessor) Property, products, materials, supplies or services primarily
for the purpose of enabling a debtor to make payment of such debtor's
obligations or an agreement to assure a creditor against loss, and including,
without limitation, causing a bank or other financial institution to issue a
letter of credit or other similar instrument for the benefit of another Person,
but excluding endorsements for collection or deposit in the ordinary course of
business. The terms "Guarantee" and "Guaranteed" used as a verb shall have a
correlative meaning.
"Guarantors" shall have the meaning set forth in the preamble.
"Hazardous Material" shall mean, collectively, (a) any petroleum or
petroleum products, flammable materials, explosives, radioactive materials,
asbestos, urea formaldehyde foam insulation, and transformers or other equipment
that contain polychlorinated biphenyls ("PCB's"), (b) any chemicals or other
materials or substances that are now or hereafter become defined as or included
in the definition of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants", "pollutants" or words of
similar import under any Environmental Law and (c) any other chemical or other
material or substance, exposure to which is now or hereafter prohibited, limited
or regulated under any Environmental Law.
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<PAGE> 16
"Hospitality Business" shall mean the business of owning, operating,
franchising, and/or managing, directly or indirectly, full or limited service
hotel properties.
"Hotel" shall mean any Real Estate or Lease comprising an operating
facility offering hotel or other lodging services.
"Hotel Assets" shall mean, with respect to (and without duplication):
(1) SLT and its Subsidiaries, with respect to the following
types of assets:(i) Hotels owned by SLT and its Subsidiaries and
leased by SLT or its Subsidiaries to SLC or its Subsidiaries, and
(ii) Investments in Hotels held by SLT and its Subsidiaries; and
(2) SLC and its Subsidiaries, with respect to the following
types of assets: (i) Hotels owned by SLC and its Subsidiaries,
subject to a mortgage held by SLT or its Subsidiaries; and (ii)
Investments in Hotels made by SLC and its Subsidiaries; and
(3) with respect to any of the foregoing Persons, Management
Contracts and franchise agreements, to the extent of such Person's
interest therein.
"Hotel Company" shall have the meaning set forth in the third recital.
"Hotel Construction" shall mean, at any time, up to four full service
Hotel projects (it being understood that one Hotel project may include multiple
facilities) under construction, having an aggregate construction cost at any
time of no more than $350,000,000, as certified to the Lenders by SLT in the
compliance certificate required to be delivered pursuant to Section 9.01 hereof.
"Indebtedness"of any Person shall mean, without duplication, (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, (ii) all indebtedness of such Person evidenced by
a note, bond, debenture or similar instrument, (iii) the outstanding amount
drawn and unpaid under all letters of credit issued for the account of such
Person and, without duplication, all unreimbursed amounts drawn thereunder, (iv)
all indebtedness of any other Person secured by any Lien on any property owned
by such Person, whether or not such indebtedness has been assumed, (v) all
Contingent Obligations of such Person, (vi) all Unfunded Benefit Liabilities of
such Person, (vii) all actual payment obligations of such Person under any
Interest Rate Protection Agreement (including, without limitation, any interest
rate swaps, caps, floors, collars and similar agreements) and currency swaps and
similar agreements, (viii) all indebtedness and liabilities secured by any Lien
or mortgage on any property of such Person, whether or not the same would be
classified as a liability on a balance sheet, (ix) the liability of such Person
in respect of banker's acceptances
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<PAGE> 17
and the estimated liability under any participating mortgage, convertible
mortgage or similar arrangement, (x) the aggregate amount of rentals or other
consideration payable by such Person in accordance with GAAP over the remaining
unexpired term of all Capital Lease Obligations, (xi) all final, non-appealable
judgments or decrees by a court or courts of competent jurisdiction entered
against such Person (except to the extent that the amounts payable in respect of
such judgments are insured), (xii) all indebtedness, payment obligations,
contingent obligations, etc. of any partnership in which such Person holds a
general partnership interest, and (xiii) such Person's pro rata share of any
indebtedness described above of an Unconsolidated Entity; (xiv) all obligations,
liabilities, reserves and any other items which are listed as a liability on a
balance sheet of such Person determined on a consolidated basis in accordance
with GAAP, but excluding all general contingency reserves and reserves for
deferred income taxes and investment credit.
"Interest Expense" shall mean, with respect to any Person for any Fiscal
Quarter, the aggregate consolidated cash interest expense of such Person and its
Subsidiaries for such Fiscal Quarter, as determined in accordance with GAAP.
"Interest Period" shall mean, with respect to any Loan, each period
commencing on the date such Loan is made or the last day of the next preceding
Interest Period for such Loan and ending on the numerically corresponding day in
the first, second or third calendar month thereafter, as the Company may select
as provided in Section 4.05 hereof, except that each Interest Period that
commences on the last Business Day of a calendar month (or on any day for which
there is no numerically corresponding day in the appropriate subsequent calendar
month) shall end on the last Business Day of the appropriate subsequent calendar
month. Notwithstanding the foregoing, each Interest Period that would otherwise
end on a day that is not a Business Day shall end on the next succeeding
Business Day (or, if such next succeeding Business Day falls in the next
succeeding calendar month, on the next preceding Business Day).
"Interest Rate Protection Agreement" shall mean, for any Person, an
interest rate swap, cap or collar agreement or similar arrangement between such
Person and one or more financial institutions providing for the transfer or
mitigation of interest risks either generally or under specific contingencies.
"Investment" shall mean, for any Person: (a) the acquisition (whether for
cash, Property, services or securities or otherwise) of capital stock, bonds,
notes, debentures, partnership or other ownership interests or other securities
of any other Person or any agreement to make any such acquisition (including,
without limitation, any "short sale" or any sale of any securities at a time
when such securities are not owned by the Person entering into such sale); (b)
the making of any deposit with, or advance, loan or other extension of credit
to, any other Person (including the purchase of Property from another Person
subject to an understanding or agreement, contingent or otherwise, to resell
such Property to such Person), but excluding any such advance, loan or extension
of credit having a term not exceeding 90 days representing the purchase
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<PAGE> 18
price of inventory or supplies sold by such Person in the ordinary course of
business); or (c) the entering into of any Guarantee of, or other contingent
obligation with respect to, Indebtedness or other liability of any other Person
and (without duplication) any amount committed to be advanced, lent or extended
to such Person.
"Lease" shall mean, with respect to any Person or such Person's
Subsidiaries, a leasehold estate in real property owned by such Person, such
Person's Subsidiary as lessee.
"Lenders" shall have the meaning set forth in the preamble.
"Lending Office" shall mean, for each Lender, the "Lending Office" of such
Lender (or of an affiliate of such Lender) designated on the signature pages
hereof or such other office of such Lender (or of an affiliate of such Lender)
as such Lender may from time to time specify to the Agent and the Company as the
office at which its Loans are to be made and maintained.
"Lien" shall mean, with respect to any Property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement and the other Basic Documents, a Person
shall be deemed to own subject to a Lien any Property that it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement (other than an
operating lease) relating to such Property.
"Loans" shall mean, collectively, the Tranche A Loans and the Tranche B
Loans.
"Majority Lenders" shall mean Lenders holding at least 66-2/3% of the
aggregate outstanding principal amount of the Loans or, if the Loans shall not
have been made, at least 66-2/3% of the Commitments.
"Management Contract" shall mean any management agreement between the
owner of a Hotel and the entity hired to manage and operate such Hotel.
"Margin" shall mean 1.69% per annum.
"Market Capitalization" shall mean at any time (and without duplication),
with respect to any Person and, with respect to each of the following types of
assets of a Person and such Person's Subsidiaries, the aggregate value thereof
to be calculated as follows:
(a) For Hotel Assets owned or leased for four (4) Fiscal Quarters or more,
Adjusted EBITDA on a consolidated basis from such Hotel Assets for the preceding
twelve (12) months divided by ten percent (10%);
(b) For Hotel Assets and Hotel Construction owned or leased for less than
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<PAGE> 19
four (4) Fiscal Quarters, ninety-five percent (95%) of the Total Investment in
such Hotel Assets or in such Hotel Construction;
(c) For Mortgage Loans, eighty-five percent (85%) of the unpaid principal
balances thereof;
(d) For Available Cash Balances, the Available Cash Amount;
(e) For Undeveloped Land and assets in businesses other than the
Hospitality Business, eighty-five percent (85%) of the Total Investment, as
approved by the Lenders, in such Undeveloped Land and such non-Hospitality
Business assets;
(f) For Stock Acquisitions, the lesser of (i) such Person's or such
Person's Subsidiary's cost basis in such Stock or (ii) ninety-five percent (95%)
of the market value of such Stock at the time of determination; and
(g) For Hotels managed and not owned and for which such Person has a
management contract having a remaining term of 12 months or more, two hundred
and fifty percent (250%) of the net income of such Person derived during the
most recent 12-month period from management contracts for such Hotels;
provided, however, that
(1) the value attributable to Hotels owned by Unconsolidated Entities
shall be calculated by reference to such Person's ownership percentage of
the applicable Unconsolidated Entity (and otherwise in accordance with the
above criteria); and
(2) in no event shall more than (i) twenty-five percent (25%) of SLT's
Market Capitalization be attributable to Hotels owned by Unconsolidated
Entities and (ii) ten percent (10%) of SLT's Market Capitalization be
attributable to Available Cash Balances.
"Material Adverse Effect" shall mean a material adverse effect on (a) the
Property, business, operations, financial condition, liabilities or
capitalization of the Trust, SLT and their Subsidiaries taken as a whole, (b)
the ability of any Obligor to perform its obligations under any of the Basic
Documents to which it is a party, (c) the validity or enforceability of any of
the Basic Documents, (d) the rights and remedies of the Lenders and the Agent
under any of the Basic Documents or (e) the timely payment of the principal of
or interest on the Loans.
"Maturity Date" shall mean:
(i) with respect to Tranche A Loans, (a) the Business Day which is the
nine-month anniversary of the Commitment Termination Date, or (b) such
earlier date on which the Loans are due pursuant to Section 10 hereof, and
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(ii) with respect to Tranche B Loans, the Business Day which is the
nine-month anniversary of the Commitment Termination Date, subject to
possible extension, as provided in the Side Letter, or (b) such earlier
date on which the Loans are due pursuant to Section 10 hereof.
"Mexico" shall mean the United Mexican States.
"Mexican Taxes" shall mean all present and future income, stamp,
registration and other taxes and levies, imposts, deductions, charges,
compulsory loans and withholdings whatsoever, and all interest, penalties or
similar amounts with respect thereto, now or hereafter imposed, assessed, levied
or collected by Mexico or any political subdivision or taxing authority thereof
or therein, or by any federation or association of or with which Mexico may be a
member or associated, on or in respect of this Agreement, the Loans, the Notes,
the other Basic Documents, the recording, registration, notarization or other
formalization of any thereof, the enforcement thereof or the introduction
thereof in any judicial proceedings, or on or in respect of any payments of
principal, interest, premiums, charges, fees or other amounts made on, under or
in respect of any thereof.
"Mortgage" shall mean each Mortgage executed by a Hotel Company in favor
of the Company in connection with the Acquisition and delivered to the Agent, in
each case substantially in the form of Exhibit B-3 hereto and covering the
respective properties identified in Schedule 1.01 hereto.
"Mortgage Loan" shall mean, with respect to any Person, each mortgage loan
now or hereafter owned by such Person or its Subsidiaries the obligor of which
is not in default under such Loan, which Loan is evidenced by a mortgage note
and secured by Mortgage Note Security Documents.
"Mortgage Note" shall mean, with respect to each Acquisition Loan, the
note duly executed and delivered by the applicable Hotel Company in favor of the
Company, which note is being delivered to the Agent and is secured by a Mortgage
on the corresponding Acquired Property.
"Mortgage Note Security Documents" shall mean, with respect to each
mortgage note owned by any Person, all presently existing or hereafter acquired
loan agreements, installment land sale contracts, mortgages, deeds of trust,
assignments for security or absolute assignments of rents and leases, financing
statements, fixture filings, security agreements, pledges, deposit account
pledge agreements, collateral assignments (including any collateral assignments
of any management contracts or franchise agreements), guaranties, letters of
credit, credit supports, keep well agreements or other agreements or
undertakings from any person to or in favor of such Person or its Subsidiaries
and securing or supporting the repayment of indebtedness or performance of any
other obligation under the applicable mortgage note or any
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<PAGE> 21
Mortgage Note Security Documents and all amendments, modifications, supplements,
substitutions and restatements of any of the foregoing.
"Multiemployer Plan" shall mean a "pension plan" as defined in Section
3(2) of ERISA which is a "multiemployer plan" as defined in Section 4001(a)(3)
of ERISA.
"Net Available Proceeds" shall mean, with respect to an equity offering,
the aggregate amount of all cash received by the Company and its Subsidiaries in
respect of such equity offering net of reasonable expenses incurred by the
applicable Obligor in connection therewith.
"Net Income (Loss)" shall mean, for any Person for any period, the
aggregate of net income (or loss) of such Person and its Subsidiaries for such
period, determined on a consolidated basis in conformity with GAAP.
"Net Operating Income" shall mean, with respect to any Hotel Asset for any
period, the sum of the following (without duplication) (a) the Gross Revenues
derived from the customary operation of such Hotel Assets during such period,
less Operating Expenses attributable to such Hotel Asset for such period, and
shall include only the Gross Revenues and other such income actually received
and earned, in accordance with GAAP, attributable to such Hotel Asset during the
twelve (12) month period ending at the end of the calendar month for which the
Net Operating Income is being calculated, as set forth on operating statements
satisfactory to Lender. Net Operating Income shall be calculated in accordance
with customary accounting principles applicable to real estate and in accordance
with the Uniform System of Accounts; provided, that "Net Operating Income" shall
exclude (i) any condemnation or insurance proceeds (excluding rent or business
interruption insurance proceeds applied to such period), (ii) any proceeds
resulting from the sale, exchange, transfer, financing or refinancing of all or
any portion of the Hotel Asset for which it is to be determined, (iii) amounts
received from tenants as security deposits, (iv) amounts received as advance
reservation deposits unless earned in accordance with GAAP, and (v) any type of
income otherwise included in Net Operating Income but paid directly by any
tenant or guest to a person other than SLT, SLC and or any of their
Subsidiaries, as applicable.
"Nizuc" shall have the meaning set forth in the third recital.
"No Liens Certificate" shall have the meaning set forth in Section 7(d)
hereof.
"Notes" shall mean the promissory notes provided for by Section 2.05
hereof and all promissory notes delivered in substitution or exchange therefor,
in each case as the same shall be modified and supplemented and in effect from
time to time.
"Obligors" shall have the meaning set forth in the preamble.
"Operating Entity" shall mean, with respect to any Person, each
corporation,
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<PAGE> 22
partnership, limited liability company or other business entity ninety-nine
percent (99%) or more of whose Stock, partnership or membership interests are
owned, directly or indirectly, and which is controlled by such Person and which
is the lessee of a Hotel under an Operating Lease.
"Operating Expenses" shall mean, with respect to any Person's Hotel
Assets, for any given period (and shall include the pro rata portion for such
period of all such expenses attributable to, but not paid during, such period),
all expenses paid, accrued, or payable, as determined in accordance with GAAP
and the Uniform System of Accounts by such Person and its Subsidiaries during
such period in connection with the operation of such Hotel Assets; provided,
that "Operating Expenses" shall exclude (i) depreciation and amortization; (ii)
interest, principal, fees, costs and expense reimbursements of the Lenders in
administering the Loans (other than on account of their exercising any of their
rights under this Agreement or the Basic Documents); (iii) any expenditure
(other than leasing and financing costs, leasing commissions, tenant concessions
and improvements, and replacement reserves) which is properly treatable as a
capital item under GAAP; and (iv) Operating Lease Payments.
"Operating Lease" shall mean, with respect to any Person, an operating
lease between such Person or such Person's Subsidiary, as lessor, and an
Operating Entity, as lessee, with respect to the operation of a single Hotel
owned by such lessor and leased and operated by such lessee thereunder.
"Operating Lease Payments" shall mean, with respect to any Person, with
respect to any Hotel or Hotels, the rent due and payable to such Person or such
Person's Subsidiaries under the related Operating Lease, including, without
limitation, all Base Rent, Basic Rent and all Percentage Rent (as defined in the
related Operating Lease) and other property related operating expenses paid or
incurred by such Person or such Person's Subsidiaries (as each term is defined
in the related Operating Lease) minus any payments pursuant to any contractual
arrangement which provides for such Person or such Person's Subsidiaries to pay
a portion of the proceeds or profits from such Operating Lease Payments to any
other Person.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
under ERISA, or any successor thereto.
"Permitted Investments" shall mean: (a) direct obligations of the United
States of America, or of any agency thereof, or obligations guaranteed as to
principal and interest by the United States of America, or of any agency
thereof, in either case maturing not more than 90 days from the date of
acquisition thereof; (b) certificates of deposit issued by any bank or trust
company organized under the laws of the United States of America or any state
thereof and having capital, surplus and undivided profits of at least
U.S.$500,000,000, maturing not more than 90 days from the date of acquisition
thereof; and (c) commercial paper rated A-1 or better or P-1 by Standard &
Poor's Corporation or Moody's Investors Services, Inc., respectively, maturing
not more than 90 days from
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<PAGE> 23
the date of acquisition thereof.
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).
"Plan" shall mean any employee benefit plan covered by Title IV of ERISA
or subject to Section 412 of the Code or Section 302 of ERISA (i) that is
maintained by any Obligor or (ii) with respect to which any such person has or
may have any obligation or liability, whether direct or indirect; provided,
however, that "Plan" shall not include any "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA.
"Plan Asset Entity" shall mean any "employee benefit plan" as defined
under ERISA, any "plan" as defined under Section 4975 of the Code, and any
entity any portion or all of the assets of which are deemed pursuant to the
United Sates Department of Labor Regulation Section 2510.3-101 or otherwise
pursuant to ERISA or the Code to be, for any purpose of ERISA or Section 4975 of
the Code, assets of any such "employee benefit plan" or "plan" which invests in
such entity.
"Post-Default Rate" shall mean, in respect of any principal of any Loan,
interest thereon or any other amount owing hereunder that is not paid when due
(whether at stated maturity, by acceleration, by optional or mandatory
prepayment or otherwise), a rate per annum equal to the Base Rate plus 3%.
"Prime Rate" shall mean the rate of interest from time to time publicly
announced by The Chase Manhattan Bank as its prime commercial lending rate.
"Process Agent" has the meaning given to that term in Section 12.13(b)
hereof.
"Prodepa" shall have the meaning set forth in the third recital.
"Property" shall mean any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.
"Real Estate" shall mean, with respect to any Person, all of those plots,
pieces or parcels of land now owned or hereafter acquired by such Person or such
Person's Subsidiaries (the "Land"), together with the right, title and interest
of such Person or such Person's Subsidiaries, if any, in and to the streets, the
land lying in the bed of any streets, roads or avenues, opened or proposed, in
front of, adjoining or abutting the Land to the center line thereof, the air
space and development rights pertaining to the Land and the right to use such
air space and development rights, all rights of way, privileges, liberties,
tenements, hereditaments and appurtenances belonging or in any way appertaining
thereto, all fixtures, all easements now or hereafter benefitting the Land and
all royalties and rights appertaining to the use and enjoyment of the Land,
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including, without limitation, all alley, vault, drainage, mineral, water, oil
and gas rights, together with all improvements within such Hotels and other
buildings and improvements now or hereafter erected on the Land, and any
fixtures appurtenant thereto.
"Recourse Indebtedness" shall mean, with respect to any Person, all
Indebtedness of such Person for which the holder of such Indebtedness has
recourse to the assets of such Person for the payment of such Indebtedness.
"Regulations A, D, U and X" shall mean, respectively, Regulations A, D, U
and X of the Board of Governors of the Federal Reserve System of the United
States of America (or any successor), as the same may be modified and
supplemented and in effect from time to time.
"Regulatory Change" shall mean, with respect to any Lender, any change
after the date of this Agreement in law or regulations (including, without
limitation, Regulation D) or the adoption or making after such date of any
interpretation, directive or request applying to a class of financial
institutions including such Lender of or under any law or regulations (whether
or not having the force of law and whether or not failure to comply therewith
would be unlawful) by any court or governmental or monetary authority charged
with the interpretation or administration thereof.
"Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including, without limitation, the movement
of Hazardous Materials through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata.
"Release Date" shall mean the date upon which the obligations of Bancomer,
S.A., Institucion de Banca Multiple, Grupo Financiero (the "Seller") under
Section 2(a) of that certain Post-Closing and Indemnify Agreement, dated as of
August 18, 1997, given by Seller in favor of certain Benefitted Parties (defined
therein) shall have been terminated or been satisfied.
"Relevant Parties" shall have the meaning assigned to such term in Section
10(c) hereof.
"Reportable Event" shall have the meaning set forth in Section 4043(c)(3),
(5), (6) or (13) or ERISA (other than a Reportable Event as to which the
provision of 30 days' notice to the PBGC is waived under applicable
regulations).
"Secured Indebtedness" shall mean, with respect to any Person,
Indebtedness of such Person (which may be Recourse Indebtedness) (i) the
repayment of which is collateralized by identified assets of such Person or (ii)
with respect to which identified assets of such Person may not be encumbered or
otherwise transferred prior to the
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repayment thereof.
"Security Documents" shall mean, collectively, the SLC Mexico Pledge
Agreement, the SLT Realty Pledge Agreement, each Mortgage, each Mortgage Note,
and any assignments of any management contract and franchise agreement.
"Side Letter" shall mean that certain letter agreement, dated August 18,
1997, between the Agent, the Lenders and the Obligors.
"SLC" shall mean SLC Operating Limited Partnership.
"SLC Mexico" shall have the meaning set forth in the first recital.
"SLC Mexico Pledge Agreement" shall mean the SLC Mexico Pledge Agreement
executed and delivered by SLC Mexico in favor of the Agent, substantially in the
form of Exhibit B-1 hereto, as amended, supplemented, amended and restated or
otherwise modified from time to time.
"SLT" shall have the meaning set forth in the preamble.
"SLT Realty Pledge Agreement" shall mean the SLT Realty Pledge Agreement
executed and delivered by SLT in favor of the Agent, substantially in the form
of Exhibit B-2 hereto, as amended, supplemented, amended and restated or
otherwise modified from time to time.
"Solvent" shall mean, with respect to any Person, that (i) the sum of the
assets of such Person, at a fair valuation based upon appraisals or comparable
valuation, will exceed its liabilities, including contingent liabilities, (ii)
such Person will have sufficient capital with which to conduct its business as
presently conducted and as proposed to be conducted and (iii) such person has
not incurred debt, and does not intend to incur debts, beyond its ability to pay
such debts as they mature. For the purposes of this definition, "debt" means any
liability on a claim, and "claim" means (x) a right to payment, whether or not
such right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, leal, equitable, secured or unsecured,
or (y) a right to an equitable remedy for breach of performance if such breach
gives rise to a payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, leal, equitable, secured or unsecured (except to the extent such
claims are insured) . With respect to any such contingent liabilities, such
liabilities shall be computed in accordance with GAAP at the amount which, in
light of the facts and circumstances existing at the time, represents the amount
which can reasonably be expected to become an actual or matured liability.
"Step Plan" shall have the meaning set forth in the second recital.
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"Stock" shall mean shares of capital stock, beneficial or partnership
interests, participations or other equivalents (regardless of how designated) of
or in a corporation or equivalent entity, whether voting or non-voting, and
includes, without limitation, common stock and preferred stock.
"Stock Acquisition" shall mean, with respect to any Person, the purchase
by such Person or any of such Person's Subsidiaries of stock of an entity
primarily engaged in the lodging or leisure related business.
"Stock Purchase Agreement" shall have the meaning set forth in the first
recital.
"Stock Repurchase Plan" shall mean the Trust and the Corporation's stock
repurchase plan pursuant to which the Trust and the Corporation may purchase
1,500,000, shares of its common stock. The number of shares which remain to be
repurchased, as of the Closing Date, may not have a total acquisition value of
more than $40,000,000.
"Subordinated Indebtedness" shall mean, with respect to any Person
collectively, Indebtedness of such Person that is subordinated to such Person's
obligations hereunder (including, without limitation, in respect of its
Guarantee under Section 6 hereof) on terms, and pursuant to documentation
containing other terms (including interest, amortization, covenants and events
of default), in form and substance satisfactory to the Majority Lenders.
"Subsidiary" shall mean, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.
"Tangible Net Worth" shall mean, as at any date for any Person, the sum
for such Person and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following:
(a) the amount of capital stock; plus
(b) the amount of surplus and retained earnings (or, in the case of
a surplus or retained earnings deficit, minus the amount of such deficit);
minus
(c) the sum of the following: cost of treasury shares and the book
value
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of all assets that should be classified as intangibles (without
duplication of deductions in respect of items already deducted in arriving
at surplus and retained earnings) but in any event including goodwill,
minority interests, research and development costs, trademarks, trade
names, copyrights, patents and franchises, unamortized debt discount and
expense, all reserves and any write-up in the book value of assets
resulting from a revaluation thereof.
"Termination Event" shall mean (i) a Reportable Event, or (ii) the
initiation of any action by any Guarantor or any member of the Guarantors' ERISA
Controlled Group or any other person to terminate a Plan or the treatment of any
amendment to a Plan as a termination under ERISA, in either case, which could
result in liability to any Guarantor, (iii) the institution of proceedings by
the PBGC under Section 4042 of ERISA to terminate a Plan or to appoint a trustee
to administer any Plan, (iv) any partial or total withdrawal from a
Multiemployer Plan which in either case, could result in liability to any
Guarantor or (v) the taking of any action that would require Security to the
Plan under Section 401(a)(29) of the Code.
"Title Companies" shall have the meaning set forth in Section 7(d) hereof.
"Total Investment" shall mean, with respect to any Person and with respect
to any Hotel and Hotel Construction, such Person's or such Person's Subsidiary's
investment in such Hotel or Hotel Construction (including all investments
constituting, evidencing or secured by an interest in property, whether tangible
or intangible and whether real, personal or mixed, that is used or intended for
use in, or in any manner connected with or relating to, the ownership or leasing
of such Hotel, specifically including, without limitation, investments in
Subsidiaries and Unconsolidated Entities owning or leasing Hotels) at cost, on a
consolidated basis, provided that in determining the cost of such investments,
there shall be included (i) the amount of all cash paid and the value (as
determined by the Board of Directors of the Trust for purposes of such
investment and approved by such Person's and the Trust's independent public
accountants of recognized national standing) of any other property transferred
therefor by such Person or such Person's Subsidiary, (ii) the amount of all
indebtedness and other obligations assumed or incurred by such Person or such
Person's Subsidiary or to which such Person or such Person's Subsidiary takes
subject, (iii) the value (as determined by the Board of Directors of the Trust
for the purposes of such investment and approved by such Person's and the
Trust's independent public accountants of recognized national standing) of all
operating partnership units of which the issuer is an entity that is, or upon
such investment will be, included within such Person or such Person's Subsidiary
and which are issued (otherwise than for cash) to, or retained by, any person
other than such Person or such Person's Subsidiary in connection with such
investment and (iv) any other costs incurred in connection with such investment
as reasonably acceptable to the Lenders. For purposes of this definition only
"indebtedness" of a Person or such Person's Subsidiary shall mean the
consolidated liabilities of such Person and such Person's Subsidiaries for
borrowed money (including
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all notes payable and drafts accepted representing extensions of credit) and all
obligations evidenced by bonds, debentures, notes or other similar instruments
on which interest charges are customarily paid, including Capital Lease
Obligations.
"Tranche A Loans" shall mean the loans provided for in Section 2.01 hereof
the proceeds of which shall be loaned by the Company to a Hotel Company to
purchase Acquired Property other than the Westin Regina Cancun.
"Tranche B Loans" shall mean the loans provided for in Section 2.01 hereof
the proceeds of which shall be loaned by the Company to a Hotel Company to
purchase the Westin Regina Cancun.
"Trust" shall have the meaning set forth in the preamble.
"Unconsolidated Entity" shall mean, with respect to any Person, at any
date, any other Person in whom such Person holds an Investment (including an
Investment held by such Person in a joint venture), which Investment is
accounted for in the financial statements of such Person on an equity basis of
accounting and whose financial results would not be consolidated financial
statements of such Person, if such statements were prepared as of such date.
"Undeveloped Land" means any non-income producing Real Estate.
"Unfunded Benefit Liabilities" shall mean, with respect to any Plan at any
particular time, the amount (if any) by which (i) the present value of all
benefit liabilities under such Plan as defined in Section 4001(a)(16) of ERISA,
exceeds (ii) the fair market value of all Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such Plan
(on the basis of assumptions prescribed by the PBGC for the purpose of Section
4044 of ERISA).
"Uniform System of Accounts" shall mean the Uniform System of Accounts for
Hotels as approved by the American Hotel and Motel Association (as in effect
from time to time) applied on a consistent basis.
"Unsecured Indebtedness" shall mean, with respect to any Person,
Indebtedness of such Person (which may be Recourse Indebtedness) the repayment
of which is not collateralized by assets of such Person.
"U.S. Government Obligations" shall mean certain obligations of, or
obligations guaranteed as to principal and interest by, the United States
government or any agency or instrumentally thereof, when such obligations have a
maturity of less than 365 days and are backed by the full faith and credit of
the United States and have a predetermined fixed dollar of principal due at
maturity that cannot vary or change. Interest may either be fixed or variable.
Interest must be tied to a single interest rate
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index plus a single fixed spread (if any), and move proportionately, but not
inversely, with that index.
"Wholly Owned Subsidiary" shall mean, with respect to any Person, any
corporation, partnership or other entity of which all of the equity securities
or other ownership interests are directly or indirectly owned or controlled by
such Person or one or more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such Person.
1.02 Accounting Terms and Determinations. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
with respect to the Trust and SLT required to be furnished to the Agent or the
Lenders hereunder shall be prepared, in accordance with GAAP, applied on a basis
consistent with that used in the audited consolidated financial statements of
the Trust and SLT and their consolidated Subsidiaries referred to in Section
8.02 hereof (except for changes concurred with by their independent public
accountants). Unless otherwise specified herein, all accounting terms used
herein shall be interpreted, all determinations with respect to accounting
matters hereunder shall be made, and all financial statements and certificates
and reports as to financial matters with respect to the Company required to be
furnished to the Agent or the Lenders hereunder shall be prepared, in accordance
with generally accepted accounting principles applied by the Company on the
Closing Date, applied on a consistent basis.
Section 2. Commitments, Loans, Notes and Prepayments.
2.01 Loans. Each Lender severally agrees, on the terms and conditions of
this Agreement, and on the Closing Date to make a Tranche A Loan and a Tranche B
Loan (each of which shall be a non-revolving term loan) to the Company in
Dollars on or before the Commitment Termination Date in an aggregate principal
amount up to but not exceeding the amount of the Commitment of such Lender with
respect to each such Loan.
2.02 Borrowings. The Company shall give the Agent notice of the borrowing
hereunder as provided in Section 4.05 hereof. Not later than 1:00 p.m., New York
time, on the date specified for the borrowing hereunder, each Lender shall make
available the amount of the Loan to be made by it on such date to the Agent, at
the Agent's Account, in immediately available funds, for account of the Company.
The amount so received by the Agent shall, subject to the terms and conditions
of this Agreement, be made available to the Company by depositing the same, in
immediately available funds, in an account of the Company maintained at a bank
in New York City designated by the Company.
2.03 Lending Offices. The Loans made by each Lender shall be made and
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maintained at such Lender's Lending Office.
2.04 Several Obligations; Remedies Independent. The failure of any Lender
to make any Loan to be made by it on the date specified therefor shall not
relieve any other Lender of its obligation to make its Loan on such date, but
neither any Lender nor the Agent shall be responsible for the failure of any
other Lender to make a Loan to be made by such other Lender, and no Lender shall
have any obligation to the Agent or any other Lender for the failure by such
Lender to make any Loan required to be made by such Lender. The amounts payable
by the Company at any time hereunder and under the Notes to each Lender shall be
a separate and independent debt and each Lender shall be entitled to protect and
enforce its rights arising out of this Agreement and the Notes, and it shall not
be necessary for any other Lender or the Agent to consent to, or be joined as an
additional party in, any proceedings for such purposes.
2.05 Notes. Each Tranche A Loan and the Tranche B Loan made by each Lender
shall be evidenced by a promissory note of the Company substantially in the form
of Exhibit A hereto, dated the date of such Loan, payable to such Lender in a
principal amount equal to the amount of such Loan and otherwise duly completed.
2.06 Optional Prepayments. Subject to Section 4.04 hereof, the Company
shall have the right to prepay Loans (in whole or in part) at any time or from
time to time, provided that (i) the Company shall give the Agent notice of each
such prepayment as provided in Section 4.05 hereof (and, upon the date specified
in any such notice of prepayment, the amount to be prepaid shall become due and
payable hereunder), and (ii) until the Release Date, Tranche B Loans may not be
prepaid with prepayments of the Acquisition Loan made to either Prodepa or DTI
Los Cabos.
2.07 Mandatory Prepayments. Upon any prepayment of any Acquisition Loan
(whether mandatory or optional), the Company shall prepay the Loans in an
aggregate amount equal to 100% of the principal prepayment thereof; provided,
that until the Release Date, Tranche B Loans may not be prepaid with prepayments
of the Acquisition Loan made to either Prodepa or DTI Los Cabos.
Section 3. Payments of Principal and Interest.
3.01 Repayment of Loans. The Company hereby promises to pay to the Agent
for account of each Lender the full amount of the principal of such Lender's
Loan on the Maturity Date. Until the Release Date, the repayment of the Tranche
B Loans is subject to the terms of the Side Letter.
3.02 Interest. The Company hereby promises to pay to the Agent for account
of each Lender interest on the unpaid principal amount of each Loan made by such
Lender for the period from and including the date of such Loan to but excluding
the date such Loan shall be paid in full, at a rate per annum, for each Interest
Period
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relating thereto, equal to the Eurodollar Rate for such Loan for such
Interest Period plus the Margin. Notwithstanding the foregoing, the Company
hereby promises to pay to the Agent for account of each Lender interest at the
applicable Post-Default Rate on any principal of any Loan made by such Lender
and on any other amount payable by the Company hereunder or under the Notes held
by such Lender to or for account of such Lender, that shall not be paid in full
when due (whether at stated maturity, by acceleration, by mandatory prepayment
or otherwise), for the period from and including the due date thereof to but
excluding the date the same is paid in full. Accrued interest on each Loan shall
be payable (i) on the last day of the Interest Period in effect at such time
(and, if the Interest Period in effect at such time is longer than one month at
one-month intervals following the first day of such Interest Period), and (ii)
upon the payment or prepayment thereof (but only on the principal amount so paid
or prepaid), except that interest payable at the Post-Default Rate shall be
payable from time to time on demand. Promptly after the determination of any
interest rate provided for herein or any change therein, the Agent shall give
notice thereof to the Lenders to which such interest is payable and to the
Company.
Section 4. Payments; Pro Rata Treatment; Computations; Etc.
4.01 Payments.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest and other amounts to be made by the Company under this
Agreement and the Notes, and, except to the extent otherwise provided therein,
all payments to be made by the Obligors under any other Basic Document, shall be
made in Dollars, in immediately available funds, without deduction, set-off or
counterclaim (except as provided in the Side Letter with respect to the Tranche
B Loans only), to the Agent at the Agent's Account, not later than 1:00 p.m.,
New York time, on the date on which such payment shall become due (each such
payment made after such time on such due date to be deemed to have been made on
the next succeeding Business Day).
(b) At the time of making each payment under this Agreement or any Note
for account of any Lender, each such payment is to be applied first, to pay fees
(if any) due at such time, second, to pay interest due at such time, and third,
to the principal amount outstanding hereunder; provided, that if an Event of
Default has occurred and is continuing at such time, the Agent may distribute
such payment to the Lenders for application in such manner as it or the Majority
Lenders, subject to Section 4.02 hereof, may determine to be appropriate.
(c) Each payment received by the Agent under this Agreement or any Note
for account of any Lender shall be paid by the Agent promptly to such Lender, in
immediately available funds, for account of such Lender's Lending Office for the
Loan or other obligation in respect of which such payment is made.
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(d) If the due date of any payment under this Agreement or any Note would
otherwise fall on a day that is not a Business Day, such date shall be extended
to the next succeeding Business Day, and interest shall be payable for any
principal so extended for the period of such extension.
4.02 Pro Rata Treatment. Except to the extent otherwise provided herein:
(a) each borrowing of Loans from the Lenders under Section 2.01 hereof shall be
made from the Lenders pro rata according to the amounts of their respective
Commitments; (b) each payment or prepayment of principal of Loans by the Company
shall be made for account of the Lenders of the applicable tranche pro rata in
accordance with the respective unpaid principal amounts of the Loans of such
tranche held by them; and (c) each payment of interest on Loans by the Company
shall be made for account of the Lenders of the applicable tranche pro rata in
accordance with the amounts of interest on such Loans then due and payable to
the respective Lenders of such tranche.
4.03 Computations. Interest on each Loan shall be computed on the basis of
a year of 360 days and the actual number of days elapsed (including the first
day but excluding the last day) occurring in the period for which payable.
4.04 Minimum Amounts. Except for mandatory prepayments made pursuant to
Section 2.07 hereof, each partial prepayment of principal of Loans shall be in
an aggregate amount at least equal to U.S.$500,000 or a larger multiple of
U.S.$100,000 in excess thereof.
4.05 Certain Notices. Notices by the Company to the Agent of borrowings
and optional prepayments of Loans and the duration of Interest Periods shall be
irrevocable and shall be effective only if received by the Agent not later than
10:00 a.m., New York time, three Business Days prior to the date of the
borrowing or prepayment or the first day of such Interest Period. Each such
notice of borrowing or optional prepayment shall specify the amount (subject to
Section 4.04 hereof) of each Loan to be borrowed or prepaid and the date of
borrowing or optional prepayment (which shall be a Business Day). Each such
notice of the duration of an Interest Period shall specify the Loans to which
such Interest Period is to relate. The Agent shall promptly notify the Lenders
of the contents of each such notice. In the event that the Company shall have
failed to notify the Agent of the duration of any Interest Period, the Company
shall be deemed to have selected an Interest Period having a duration of one
month. In the event that the final Interest Period, if selected, would otherwise
extend beyond the Maturity Date of the Loans, the Eurodollar Rate for the period
from, and including, the last day of the last complete Interest Period to, but
excluding the Maturity Date (such period, the "Stub Period"), shall be
determined by the Agent based on the Eurodollar Rate for the Stub Period.
4.06 Non-Receipt of Funds by the Agent. Unless the Agent shall have been
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notified by a Lender or the Company (the "Payor") prior to the date on which the
Payor is to make payment to the Agent of (in the case of a Lender) the proceeds
of a Loan to be made by such Lender hereunder or (in the case of the Company) a
payment to the Agent for account of one or more of the Lenders hereunder (such
payment being herein called the "Required Payment"), which notice shall be
effective upon receipt, that the Payor does not intend to make the Required
Payment to the Agent, the Agent may assume that the Required Payment has been
made and may, in reliance upon such assumption (but shall not be required to),
make the amount thereof available to the intended recipient(s) on such date;
and, if the Payor has not in fact made the Required Payment to the Agent, the
recipient(s) of such payment shall, on demand, repay to the Agent the amount so
made available together with interest thereon in respect of each day during the
period commencing on the date (the "Advance Date") such amount was so made
available by the Agent until the date the Agent recovers such amount at a rate
per annum equal to the Federal Funds Rate for such day and, if such recipient(s)
shall fail promptly to make such payment, the Agent shall be entitled to recover
such amount, on demand, from the Payor, together with interest as aforesaid,
provided that if neither the recipient(s) nor the Payor shall return the
Required Payment to the Agent within three Business Days of the Advance Date,
then, retroactively to the Advance Date, the Payor and the recipient(s) shall
each be obligated to pay interest on the Required Payment as follows:
(i) if the Required Payment shall represent a payment to be made by
the Company to the Lenders, the recipient(s) shall be obligated
retroactively to the Advance Date to pay interest in respect of the
Required Payment at the Post-Default Rate (and, in case the recipient(s)
shall return the Required Payment to the Agent, without limiting the
obligation of the Company under Section 3.02 hereof to pay interest to
such recipient(s) at the Post-Default Rate in respect of the Required
Payment) and
(ii) if the Required Payment shall represent proceeds of a Loan to
be made by the Lender to the Company, the Payor and the Company shall each
be obligated retroactively to the Advance Date to pay interest in respect
of the Required Payment at the rate of interest provided for such Required
Payment pursuant to Section 3.02 hereof (and, in case the Company shall
return the Required Payment to the Agent, without limiting any claim the
Company may have against the Payor in respect of the Required Payment).
4.07 Sharing of Payments, Etc.
(a) The Company agrees that, in addition to (and without limitation of)
any right of set-off, banker's lien or counterclaim a Lender may otherwise have,
each Lender shall be entitled, at its option, to offset balances held by it for
account of the Company at any of its offices, in Dollars or in any other
currency, against any principal of or interest on any of such Lender's Loans or
any other amount payable to such Lender hereunder, that is not paid when due
(regardless of whether such balances are then due to the Company), in which case
it shall promptly notify the Company and the Agent
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thereof, provided that such Lender's failure to give such notice shall not
affect the validity thereof.
(b) If any Lender shall obtain from any Obligor payment of any principal
of or interest on any Loan owing to it or payment of any other amount under this
Agreement or any other Basic Document through the exercise of any right of
set-off, banker's lien or counterclaim or similar right or otherwise (other than
from the Agent as provided herein), and, as a result of such payment, such
Lender shall have received a greater percentage of the principal of or interest
on the Loans or such other amounts then due hereunder or thereunder by such
Obligor to such Lender than the percentage received by any other Lender, it
shall promptly purchase from such other Lenders participations in (or, if and to
the extent specified by such Lender, direct interests in) the Loans or such
other amounts, respectively, owing to such other Lenders (or in interest due
thereon, as the case may be) in such amounts, and make such other adjustments
from time to time as shall be equitable, to the end that all the Lenders shall
share the benefit of such excess payment (net of any expenses that may be
incurred by such Lender in obtaining or preserving such excess payment) pro rata
in accordance with the unpaid principal of and/or interest on the Loans or such
other amounts, respectively, owing to each of the Lenders. To such end all the
Lenders shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must otherwise
be restored.
(c) The Company agrees that any Lender so purchasing such a participation
(or direct interest) may exercise all rights of set-off, banker's lien,
counterclaim or similar rights with respect to such participation as fully as if
such Lender were a direct holder of Loans or other amounts (as the case may be)
owing to such Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise any such
right or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of any Obligor. If, under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of a set-off to
which this Section 4.07 applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Lender entitled under this Section 4.07 to share in the
benefits of any recovery on such secured claim.
Section 5. Yield Protection, Etc.
5.01 Additional Costs.
(a) The Company shall pay directly to the Agent on behalf of any Lender
from time to time such amounts as any Lender may determine to be necessary to
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compensate such Lender for any costs that such Lender determines are
attributable to its making or maintaining of any Loans or its obligation to make
any Loans hereunder, or any reduction in any amount receivable by such Lender
hereunder in respect of any Loans or such obligation (such increases in costs
and reductions in amounts receivable being herein called "Additional Costs"),
resulting from any Regulatory Change that:
(i) shall subject any Lender (or its Lending Office) to any tax,
duty or other charge in respect of such Loans or its Notes or changes the
basis of taxation of any amounts payable to such Lender under this
Agreement or its Notes in respect of Loans (excluding changes in the rate
of tax on the overall net income of such Lender or of such Lending Office
by the jurisdiction in which such Lender has its principal office or such
Lending Office); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements relating to any extensions of credit or other assets of, or
any deposits with or other liabilities of, such Lender (including, without
limitation, any of such Loans or any deposits referred to in the
definition of "Eurodollar Rate" in Section 1.01 hereof), or any commitment
of such Lender (including, without limitation, the Commitment of such
Lender hereunder); or
(iii) imposes any other condition affecting this Agreement or its
Notes (or any of such extensions of credit or liabilities) or its
Commitment.
(b) Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), the Company shall pay to the Agent on
behalf of any Lender from time to time on request such amounts as such Lender
may determine to be necessary to compensate such Lender (or, without
duplication, the bank holding company of which such Lender is a subsidiary) for
any costs that it determines are attributable to the maintenance by such Lender
(or any Lending Office or such bank holding company), pursuant to any law or
regulation or any interpretation, directive or request (having the force of law
and where the failure to comply therewith would be unlawful) of any court or
governmental or monetary authority (i) following any Regulatory Change or (ii)
implementing any risk-based capital guideline or other requirement (having the
force of law and where the failure to comply therewith would be unlawful)
heretofore or hereafter issued by any government or governmental or supervisory
authority implementing at the national level the Basle Accord, of capital in
respect of its Commitments or Loans (such compensation to include, without
limitation, an amount equal to any reduction of the rate of return on assets or
equity of such Lender (or any Lending Office or such bank holding company) to a
level below that which such Lender (or any Lending Office or such bank holding
company) could have achieved but for such law, regulation, interpretation,
directive or request). For purposes of this Section 5.01(b), "Basle Accord"
shall mean the proposals for risk-based capital framework described by the Basle
Committee on Banking Regulations and Supervisory Practices in its paper entitled
"International Convergence of Capital Measurement and Capital Standards" dated
July 1988, as amended, modified and supplemented and in effect
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from time to time or any replacement thereof.
(c) Each Lender shall notify the Agent (who shall in turn notify the
Company) of any event occurring after the date of this Agreement entitling such
Lender to compensation under paragraph (a) or (b) of this Section 5.01 as
promptly as practicable, but in any event within 45 days, after such Lender
obtains actual knowledge thereof; provided that (i) if any Lender fails to give
such notice within 45 days after it obtains actual knowledge of such an event,
such Lender shall, with respect to compensation payable pursuant to this Section
5.01 in respect of any costs resulting from such event, only be entitled to
payment under this Section 5.01 for costs incurred from and after the date 45
days prior to the date that such Lender does give such notice and (ii) each
Lender will designate a different Lending Office for the Loans of such Lender if
such designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the sole opinion of such Lender, be
disadvantageous to such Lender, except that such Lender shall have no obligation
to designate a Lending Office located in the United States of America. Each
Lender will furnish to the Company a certificate setting forth the basis and
amount of each request by such Lender for compensation under paragraph (a) or
(b) of this Section 5.01. Determinations and allocations by any Lender for
purposes of this Section 5.01 of the effect of any Regulatory Change pursuant to
paragraph (a) or (b) of this Section 5.01, or of the effect of capital
maintained pursuant to paragraph (b) of this Section 5.01, on its costs or rate
of return of maintaining Loans or its obligation to make Loans, or on amounts
receivable by it in respect of Loans, and of the amounts required to compensate
such Lender under this Section 5.01, shall be conclusive, provided that such
determinations and allocations are made on a reasonable basis.
5.02 Illegality. Notwithstanding any other provision of this Agreement, in
the event that it becomes unlawful for any Lender or its Lending Office to honor
its obligation to make or maintain any of its Loans hereunder (and, in the
reasonable opinion of such Lender, the designation of a different Lending Office
would either not avoid such unlawfulness or would be disadvantageous to the
Lender), then such Lender shall immediately notify the Agent, and such Lender's
obligation to maintain or continue Loans bearing interest at the Eurodollar Rate
shall be suspended (until such Lender shall notify the Agent that the
circumstances causing such unlawfulness no longer exist), whereupon such
Lender's Loans shall automatically convert into Loans bearing interest at the
Base Rate and such Lender shall not be entitled to compensation from the Company
of the type set forth in Section 5.04 hereof resulting therefrom.
5.03 Taxes.
(a) All payments on account of the principal of and interest on the Loans,
fees and all other amounts payable hereunder by the Company to or for the
account of the Agent or any Lender, including, without limitation, amounts
payable under clause (b) of
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this Section 5.03, shall be made free and clear of and without reduction or
liability for Mexican Taxes. The Company will pay all Mexican Taxes for its
account, prior to the date on which penalties attach thereto, except for any
Mexican Taxes (other than Mexican Taxes imposed on or in respect of any amount
payable hereunder, under the Notes or under any other Basic Document) the
payment of which is being contested in good faith and by proper proceedings and
against which adequate reserves are being maintained, so long as no claim for
such Mexican Taxes is made on the Agent or any Lender. If, as a result of the
making of any deduction or withholding of Mexican Taxes under this Section 5.03,
and the Agent or a Lender obtains the benefit of a credit or relief against or
repayment of any tax through an actual reduction in taxes paid or receipt of a
refund (a "Tax Credit"), the Agent or Lender, as the case may be, shall
reimburse to the Company an amount equal to the proportion of the Tax Credit as
will leave the Agent or Lender after such reimbursement in no better or worse
position (on an after tax basis) than it would have been in if such deduction or
withholding had been made and such increased payment had not been required.
Nothing in this clause shall obligate the Agent or Lender to utilize such Tax
Credit in priority to any other credit or relief available to it for tax
purposes, but the Agent or Lender shall otherwise take reasonable steps to
obtain the benefit of such Tax Credit. If the benefit obtained by the Agent or
Lender through use of the Tax Credit is reduced or eliminated after payment has
been made to Company under this Section 5.03 (through adjustment to the Agent's
or Lender's tax return or otherwise), the Company shall be obligated to repay to
such Agent or Lender the amount by which the tax benefit to the Agent or Lender
is reduced. Nothing in this clause shall obligate the Agent or Lender to
disclose any information regarding its tax affairs or computations to the
Company.
(b) The Company shall indemnify the Agent and each Lender against, and
reimburse the Agent and each Lender on demand for, any Mexican Taxes and any
loss, liability, claim or expense, including interest, penalties and legal fees,
which the Agent or such Lender (as the case may be) may incur at any time
arising out of or in connection with any failure of the Company to make any
payment of Mexican Taxes when due.
(c) In the event that the Company is required by applicable law, decree or
regulation to deduct or withhold Mexican Taxes from any amounts payable on,
under or in respect of this Agreement or the Loans (including, without
limitation, the Mexican income taxes referred to in clause (f) of this Section
5.03), the Company shall promptly pay the Person entitled to such amount such
additional amounts as may be required, after the deduction or withholding of
Mexican Taxes to enable such Person to receive from the Company, on the due date
thereof, an amount equal to the full amount stated to be payable to such Person
under this Agreement.
(d) The Company shall not be obligated to pay the Agent or any Lender any
additional amounts described in Section 5.03(c) in respect of Mexican Taxes to
the extent that such Mexican Taxes or any portion thereof have been imposed as a
result of: (A) the failure of any Lender (i) to provide to the Company, upon the
written request
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of the Company and if and when required under applicable law, a letter
specifying that such Lender is the effective beneficiary of interest hereunder
and under the Note held by such Lender, as set forth in the Resolucion
Miscelanea Fiscal para 1997 or any equivalent administrative regulations in
effect thereafter while this Agreement shall remain in full force and effect,
(ii) following a reasonable written request of the Company, to complete and to
file with the appropriate governmental authority (at the Company's expense), or
to provide to the Company, such forms, certificates, documents, information,
applications, declarations or returns prescribed by any law, rule or regulation
enacted or issued by Mexico or any political subdivision thereof or authority
therein, or a double taxation treaty to which Mexico is a party and which is in
effect, that are necessary to avoid or reduce such Mexican Taxes pursuant to
provisions of any law, rule or regulation enacted or issued by Mexico or any
political subdivision thereof or authority therein, or a double taxation treaty
to which Mexico is a party and which in effect (provided that such Lender shall
be under no obligation to provide to the Company or to file with any
governmental authority any such forms, certificates, documents, information,
applications, declarations or returns which contain any information that such
Lender reasonably deems to be confidential or proprietary, and the provision or
the filing of which would, in the reasonable judgment of such Lender, be
materially adverse to such Lender, or (iii) to maintain its registration with
the Ministry of Finance and Public Credits as a foreign financial institution
for purposes of the Mexican Income Tax Law, the rules thereunder (or any
successor statute or rules) and any administrative regulations (resoluciones
miscelaneas) thereunder so long as such requirement remains applicable and such
Lender remains legally entitled to maintain such registration or (B) the
redesignation of the Lender's Lending Office to another jurisdiction (except if
such redesignation results from an event of illegality described in 5.03
hereof).
(e) Each Lender that is not organized under the laws of Mexico and that is
a signatory hereto represents and warrants that, as of the date hereof, such
Lender is (i) registered with the Ministry of Finance and Public Credit as a
foreign financial institution for purposes of the Mexican Income Tax Law, the
rules thereunder and any administrative regulations (resoluciones miscelaneas)
thereunder and (ii) a resident for tax purposes of a jurisdiction with which
Mexico has in effect a treaty for the avoidance of double taxation.
(f) The Company represents and warrants to the Lenders and the Agent that,
on and as of the date of this Agreement and assuming the accuracy of the
representations made by each Lender in Section 5.03(e), none of this Agreement,
any other Basic Document, or the execution or delivery by the Company of this
Agreement or any other Basic Document, is subject to any Mexican Taxes, and no
payment to be made by the Company under this Agreement is subject to any Mexican
Taxes, except for Mexican income taxes at the rate of 4.9% on amounts payable by
the Company hereunder (other than principal of the Loans) required to be
withheld and paid by the Company.
(g) The Company shall furnish to the Agent, upon the request of any Lender
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(through the Agent), original official tax receipts, or certified copies
thereof, in respect of each payment of Mexican Taxes required under this Section
5.03, when it delivers the compliance certificate required to be delivered
pursuant to Section 9.01 hereof, and the Company shall promptly furnish to the
Agent at its request or at the request of any Lender (through the Agent) any
other information, documents and receipts that the Agent or such Lender may
reasonably require to establish to its satisfaction that full and timely payment
has been made of all Mexican Taxes required to be paid under this Section 5.03.
(h) If any Obligor is required to pay additional amounts to or for the
account of any Lender pursuant to this Section 5.03 in excess of any additional
amounts that may be payable on the Closing Date (and, in the case of a Lender
that becomes a Lender hereunder after the Closing Date, in excess of any
additional amounts that would have been payable had such Lender been a Lender on
the Closing Date), then such Lender will designate a different Lending Office
for the Loans of such Lender if such designation would eliminate or reduce any
such excess additional amounts and would not, in the reasonable opinion of such
Lender, be disadvantageous to such Lender.
5.04 Compensation. The Company shall pay to the Agent for account of each
Lender, upon the request of such Lender through the Agent, such amount or
amounts as shall be sufficient (in the reasonable opinion of such Lender) to
compensate it for any loss, cost or expense that such Lender determines is
attributable to:
(a) any payment or mandatory or optional prepayment of a Loan made
by such Lender for any reason (including, without limitation, the
acceleration of the Loans pursuant to Section 10 hereof) on a date other
than the last day of an Interest Period for such Loan; or
(b) any failure by the Company for any reason (including, without
limitation, the failure of any of the conditions precedent specified in
Section 7 hereof to be satisfied) to borrow a Loan from such Lender on the
date for such borrowing specified in the relevant notice of borrowing
given pursuant to Section 2.02 hereof.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued on the principal amount so paid, prepaid, or
not borrowed for the period from the date of such payment, prepayment, or
failure to borrow to the last day of the then current Interest Period for such
Loan (or, in the case of a failure to borrow, the Interest Period for such Loan
that would have commenced on the date specified for such borrowing) at the
applicable rate of interest for such Loan provided for herein over (ii) the
amount of interest that otherwise would have accrued on such principal amount at
a rate per annum equal to the interest component of the amount such Lender would
have bid in the London interbank market for Dollar deposits of leading banks in
amounts comparable to such principal amount and with maturities comparable to
such
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period (as reasonably determined by such Lender).
5.05 Replacement of Lenders. Each Lender agrees that if it makes any
demand for payment under Sections 5.02 or 5.03 hereof, and such demand is made
as a result of the failure by such Lender to maintain its registration with the
Ministry of Finance and Public Credits as a foreign financial institution for
purposes of the Mexican Income Tax Law and the rules thereunder (where such
Lender remains legally entitled to maintain such registration), so long as no
Event of Default has occurred and is continuing, at the request of the Company,
such Lender shall assign its Loans (i) to one or more assignees agreeing to
purchase such Loans and identified either by the Company or the Agent (who
shall, upon request by the Company, use its reasonable efforts to identify an
assignee) by written notice to such Lender or, which assignees (if identified by
the Company) shall be reasonably acceptable to the Agent, and shall otherwise
satisfy the requirements of Section 12.07 hereof, (ii) in an amount on the date
of such assignment equal to the amount that would be payable to such Lender if
such assignment were a prepayment in full of such Lender's Loans and (iii)
pursuant to documentation reasonably satisfactory to such Lender.
Section 6. Guarantee.
6.01 The Guarantee. The Guarantors hereby jointly and severally guarantee
to each Lender and the Agent and their respective successors and assigns the
prompt payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the principal of and interest on the Loans made by the Lenders to,
and the Notes held by each Lender of, the Company and all other amounts from
time to time owing to the Lenders or the Agent by the Company under this
Agreement and under the Notes and by the Company under any of the other Basic
Documents (including amounts payable in accordance with Sections 5 and 12.04
hereof), in each case strictly in accordance with the terms thereof (such
obligations being herein collectively called the "Guaranteed Obligations"). The
Guarantors hereby further jointly and severally agree that if the Company shall
fail to pay in full when due (whether at stated maturity, by acceleration or
otherwise) any of the Guaranteed Obligations, the Guarantors will promptly pay
the same, without any demand or notice whatsoever, and that in the case of any
extension of time of payment or renewal of any of the Guaranteed Obligations,
the same will be promptly paid in full when due (whether at extended maturity,
by acceleration or otherwise) in accordance with the terms of such extension or
renewal.
6.02 Obligations Unconditional. The obligations of the Guarantors under
Section 6.01 hereof are absolute and unconditional, joint and several,
irrespective of the value, genuineness, validity, regularity or enforceability
of the obligations of the Company under this Agreement, the Notes or any other
agreement or instrument referred to herein or therein, or any substitution,
release or exchange of any other guarantee of or security for any of the
Guaranteed Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever that
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might otherwise constitute a legal or equitable discharge or defense of a surety
or guarantor, it being the intent of this Section 6.02 that the obligations of
the Guarantors hereunder shall be absolute and unconditional, joint and several,
under any and all circumstances. Without limiting the generality of the
foregoing, it is agreed that the occurrence of any one or more of the following
shall not alter or impair the liability of the Guarantors hereunder which shall
remain absolute and unconditional as described above:
(i) at any time or from time to time, without notice to the
Guarantors, the time for any performance of or compliance with any of the
Guaranteed Obligations shall be extended, or such performance or
compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of this
Agreement or the Notes or any other agreement or instrument referred to
herein or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under this Agreement
or the Notes or any other agreement or instrument referred to herein or
therein shall be waived or any other guarantee of any of the Guaranteed
Obligations or any security therefor shall be released or exchanged in
whole or in part or otherwise dealt with;
(iv) insolvency, bankruptcy, reorganization, arrangement,
adjustment, composition, assignment for the benefit of creditors,
liquidation, winding up or dissolution of the Company or any Guarantor;
(v) any limitation, discharge, moratorium or cessation of the
liability of the Company or any Guarantor due to any statute, regulation,
decree, judgment, order, stay or rule of law, or any invalidity or
unenforceability in whole or in part of any documents evidencing the
obligations of the Company hereunder;
(vi) any merger, acquisition, consolidation or change in structure
of the Company, SLT or the Trust, or any sale, lease, transfer or other
disposition of any or all of the assets or shares or ownership interests
of the Company, SLT or the Trust;
(vii) any assignment or other transfer, in whole or in part, of the
interests in and rights under this Agreement, including the right of the
Lender to receive payment of the Guaranteed Obligations and the other
amounts payable hereunder or any assignment or other transfer, in whole or
in part, of the interests of the Lender in and to any collateral securing
the Guaranteed Obligations;
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(viii) any claim, counterclaim or setoff, other than that of prior
payment in cash in full or performance, that the Company, SLT or the Trust
may have or assert, including any defense of incapacity or lack of
corporate, partnership or other authority to execute any Basic Documents
or any related documents or any collateral securing the Guaranteed
Obligations;
(ix) the amendment, modification, renewal, extension, cancellation
or surrender of any agreement, document or instrument relating to any
Basic Document or any collateral securing the Guaranteed Obligations
(other than any cancellation or surrender reflecting prior payment in cash
in full or performance), or the exchange, release, or waiver of any
collateral securing the Guaranteed Obligations;
(x) the exercise or nonexercise by the Lender of any power, right or
remedy with respect to any of the Guaranteed Obligations or any collateral
securing any of the Guaranteed Obligations, including the compromise,
release, settlement or waiver by the Lender with or of the Company, the
Trust or SLT or any other Person;
(xi) the vote, claim, distribution, election, acceptance, action or
inaction by the Lender in any bankruptcy case related to any of the
Guaranteed Obligations, or any collateral securing the Guaranteed
Obligations; or
(xii) any impairment or invalidity of any of the collateral securing
any of the Guaranteed Obligations or any failure to perfect (including a
failure to perfect after the occurrence of a Default hereunder) any of the
Liens of the Lender thereon or therein.
The Guarantors hereby expressly waive diligence, presentment, demand of payment,
protest and all notices whatsoever, and any requirement that the Agent or any
Lender exhaust any right, power or remedy or proceed against the Company under
this Agreement or the Notes or any other agreement or instrument referred to
herein or therein, or against any other Person under any other guarantee of, or
security for, any of the Guaranteed Obligations. Without notice to or further
assent from any Guarantor the Lenders may discharge or release, in whole or in
part, any Guarantor or any other Person liable for the payment and performance
of all or any part of the Guaranteed Obligations, and may permit or consent to
any such action or any result of such action, and shall not be obligated to
demand or enforce payment or performance upon any of the Guaranteed Obligations
or collateral securing any Guaranteed Obligations, nor shall the Lenders be
liable to any Guarantor or any other Person for any failure to collect or
enforce payment or performance of any of the Guaranteed Obligations or to
realize on any of the collateral securing any Guaranteed Obligation.
6.03 Reinstatement. The obligations of the Guarantors under this Section 6
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shall be automatically reinstated if and to the extent that for any reason any
payment by or on behalf of the Company in respect of the Guaranteed Obligations
is rescinded or must be otherwise restored by any holder of any of the
Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise and the Guarantors jointly and severally agree that
they will indemnify the Agent and each Lender on demand for all reasonable costs
and expenses (including, without limitation, fees of counsel) incurred by the
Agent or such Lender in connection with such rescission or restoration,
including any such costs and expenses incurred in defending against any claim
alleging that such payment constituted a preference, fraudulent transfer or
similar payment under any bankruptcy, insolvency or similar law.
6.04 Subrogation. No payment or performance hereunder by any Guarantor
shall entitle such Guarantor to (a) subrogation to (or any other interest in)
the rights of the Lenders to any of the loans, or (b) to any payment or
performance by the Company, except in each case after payment and performance in
full of the Guaranteed Obligations. Upon such payment and performance in full,
and subject to the other provisions of this Section 6, such Guarantor shall be
entitled to exercise, by way of subrogation, remaining rights and remedies (if
any) of the Company in respect of the Guaranteed Obligations. If any amount
shall be paid to such Guarantor on account of the foregoing rights at any time
prior to the time that the Guaranteed Obligations have been paid in full, such
amount shall be held in trust for the benefit of the Lenders and shall forthwith
be paid to the Lenders, to be credited and applied to the Guaranteed
Obligations, whether matured or unmatured, in accordance with applicable terms
of the Basic Documents.
6.05 Remedies. The Guarantors jointly and severally agree that, as between
the Guarantors and the Lenders, the obligations of the Company under this
Agreement and the Notes may be declared to be forthwith due and payable as
provided in Section 10 hereof (and shall be deemed to have become automatically
due and payable in the circumstances provided in said Section 10) for purposes
of Section 6.01 hereof notwithstanding any stay, injunction or other prohibition
preventing such declaration (or such obligations from becoming automatically due
and payable) as against the Company and that, in the event of such declaration
(or such obligations being deemed to have become automatically due and payable),
such obligations (whether or not due and payable by the Company) shall forthwith
become due and payable by the Guarantors for purposes of said Section 6.01.
6.06 Continuing Guarantee. The guarantee in this Section 6 is a continuing
guarantee, and shall apply to all Guaranteed Obligations whenever arising.
6.07 Waiver of Civil Articles. The Guarantors hereby waive the rights and
benefits of order, excusion, and division, as well as all others contained in
Articles 2812, 2813, 2814, 2816, 2817, 2818, 2819, 2820, 2822, 2823, 2824, 2826,
2827, 2842, 2844, 2845, 2846, 2847, 2848 and 2849 of the Civil Code for the
Federal District of
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Mexico, and in the corresponding provisions in the Civil Codes for all of the
states of Mexico, which provisions they represent to know and understand in
their full scope.
Section 7. Conditions Precedent. The obligation of any Lender to make its
Loan hereunder is subject to the conditions precedent that (i) such Loan shall
be made on or before August 19, 1997, (ii) both immediately prior to the making
of such Loan and also after giving effect thereto and to the intended use
thereof: (a) no Default shall have occurred and be continuing; and (b) the
representations and warranties made by the Obligors in Section 8 hereof, and by
each Obligor in each of the other Basic Documents to which it is a party, shall
be true and complete on and as of the date of the making of such Loan with the
same force and effect as if made on and as of such date (or, if any such
representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date) (the notice of borrowing by the Company
hereunder shall constitute a certification by the Company to the effect set
forth in the preceding clauses (a) and (b)), both as of the date of such notice
and, unless the Company otherwise notifies the Agent prior to the date of such
borrowing, as of the date of such borrowing) and (iii) the Agent shall have
received the following documents, each of which shall be satisfactory to the
Agent in form and substance:
(a) Corporate Documents; Pro Forma Financial Statements. The
following documents:
(i) (A) for the Company and SLC Mexico, a certificate of the
secretary or assistant secretary of such Person, certifying: a true
and correct copy of the estatutos sociales, as amended and in effect
on the Closing Date, the names and true signatures of the incumbent
officers of such Person authorized to sign the Basic Documents to
which such Person will be a party, and the resolutions of the board
of directors of such Person authorizing the execution, delivery and
performance of the Basic Documents to which such Person will be a
party, (B) for SLT, certified copies of the agreement of limited
partnership of SLT and the certificate of limited partnership of
SLT, in each case, as amended and in effect on the Closing Date,
together with a good standing certificate from the secretary of
state in the jurisdiction under which SLT is organized (dated a date
reasonably close to the Closing Date), together with a certificate
of an appropriate officer of SLT certifying the names and true
signatures of the incumbent officers of SLT authorized to sign the
Basic Documents to which SLT will be a party, and the resolutions of
the partnership authorizing the execution, delivery and performance
of the Basic Documents to which SLT will be a party, and (C) for the
Trust, a certified copy of its declaration of trust, as amended and
in effect on the Closing Date, together with a copy of a good
standing certificate from the secretary in the jurisdiction under
which the Trust is organized (dated a date reasonably close to the
Closing Date), together with a certificate of
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an appropriate officer of the Trust certifying the names and true
signatures of the incumbent officers of the Trust authorized to sign
the Basic Documents to which the Trust will be a party, and the
resolutions of the board of trustees of the Trust authorizing the
execution, delivery and performance of the Basic Documents to which
the Trust will be a party;
(ii) for the Company and SLC Mexico, the powers of attorney
granted by the Company authorizing the execution and delivery of
such of the Basic Documents to which the Company or, as the case may
be, SLC Mexico is or is intended to be a party by the individuals
named in such powers of attorney; and
(iii) a certificate of a senior financial officer of the Trust
certifying that the Trust and SLT are in compliance, as at June 30,
1997, with Sections 9.07(b)-(g), Sections 9.09, 9.10, 9.11 and 9.12
hereof as of such date and as of the end of the such period (as the
case may be), in each case, on a pro forma basis.
(b) Acquisition Documents. A certified copy of the Stock Purchase
Agreement, together with all schedules and exhibits thereto and all other
documents and instruments delivered in connection with the consummation of
the Acquisition that are required to be delivered pursuant to the terms of
the Stock Purchase Agreement, including all certificates, filings,
documents, consents, approvals, board of directors resolutions and
opinions furnished pursuant to or in connection with each Acquisition and
such items shall be satisfactory in all respects to the Agent (the
"Acquisition Documents"). The Agent shall be satisfied with all material
amendments, waivers or other modifications of, or other forbearance to
exercise any rights with respect to, any of the terms or provisions of the
Acquisition Documents (including the exhibits and schedules thereto).
(c) Acquisition Loan Documents. A certified copy of the Acquisition
Loan documents for each Hotel Company, together with all schedules and
exhibits thereto and all other documents and instruments delivered in
connection with each such Acquisition Loan, including all certificates,
filings, documents, consents, approvals, board of directors resolutions
and opinions furnished pursuant to or in connection with each such
Acquisition Loan and such items shall be satisfactory in all respects to
the Agent.
(d) Mortgage and Title Insurance. The following documents each of
which shall be executed and delivered (and, where appropriate,
acknowledged) by Persons satisfactory to the Agent:
(i) one or more Mortgages covering each of the Acquired
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Properties naming the Company as the secured party, duly executed
and delivered by the applicable Hotel Company to the Company
(whereupon the Company shall deliver to the Agent each such
Mortgage), in each case, in recordable form (in such number of
copies as the Agent shall have requested) (it being understood that
the Mortgages shall not be recorded or registered unless it is
required to do so pursuant to Section 10 hereof);
(ii) one or more subordinated Mortgages covering each of the
Acquired Properties naming the Agent as the secured party, duly
executed and delivered by the applicable Hotel Company to the Agent,
in each case, in recordable form (in such number of copies as the
Agent shall have requested) (it being understood that the
subordinated Mortgages shall not be recorded or registered unless it
is required to do so pursuant to Section 10 hereof);
(iii) to the extent delivered with the Acquisition Documents,
one or more policies of title insurance, in favor of SLC, on forms
of and issued by one or more title companies organized in the United
States satisfactory to the Agent (the "Title Companies"), insuring
the title to the Acquired Properties for and in amounts satisfactory
to the Agent, subject only to such exceptions as are satisfactory to
the Agent;
(iv) to the extent delivered with the Acquisition Documents,
as-built surveys of recent date of each of the facilities to be
covered by the Mortgage(s), showing such matters as may be required
by the Agent, which surveys shall be in form and content acceptable
to the Agent;
(v) to the extent delivered with the Acquisition Documents,
certified copies of permanent and unconditional certificates of
occupancy (or, if it is not the practice to issued certificates of
occupancy in Mexico, then such other evidence reasonably
satisfactory to the Agent) permitting the fully functioning
operation and occupancy of each such facility and of such other
permits necessary for the use and operation of each such facility
issued by the respective governmental authorities having
jurisdiction over such facility;
(vi) the Operating Agreement for each Acquired Property on
terms satisfactory to the Agent; and
(vii) a certificate of the applicable public registry of
property with respect to each Acquired Property, in form and
substance satisfactory to the Agent, that such Acquired Property is
and will be free and clear of all liens (except such liens to be
granted in favor of, or otherwise consented to by, the Agent) and
otherwise certifying that no person (other than the
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applicable Hotel Company and the owners of condominium interests in
each Acquired Property under the Operating Agreement referred to in
clause (vi)) has an interest in such Acquired Property (such
certificate, a "No Liens Certificate").
In addition, SLC shall have paid to the Title Companies all expenses and
premiums of the Title Companies in connection with the issuance of such
policies.
(e) Pledge Agreements and Management and Franchise Contracts. (i)
The SLC Mexico Pledge Agreement, duly executed and delivered by SLC
Mexico.
(ii) The SLT Realty Pledge Agreement, duly executed and delivered by
SLT.
(iii) copies of each franchise contract being assigned to SLT Mexico
under each Acquisition Loan document.
(f) Evidence of Perfection of Pledged Equity Interests. (i)
certificate of the secretary of SLC Mexico certifying (A) as to a true and
correct copy of the resolutions of the members of SLC Mexico approving the
pledge of the SLC Mexico's equity interest in each Hotel Company pursuant
to the SLC Mexico Pledge Agreement and (B) that the transfer of the SLC
Mexico's equity interest in each Hotel Company and CHM to the Agent
pursuant to the SLC Mexico Pledge Agreement has been duly recorded on the
share register for the applicable Hotel Company and, as the case may be,
CHM.
(ii) certificate of the secretary of SLT Mexico certifying that the
transfer of the SLT's equity interest in SLT Mexico to the Agent pursuant
to the SLT Realty Pledge Agreement has been duly recorded on the share
register for SLT Mexico.
(g) The Capital Contribution. Evidence that SLC Mexico has made a
cash contribution in dollars to the common equity of each Hotel Company in
the following amounts:
(i) Prodepa: U.S.$2,380,500;
(ii) Nizuc: U.S. $3,979,000; and
(iii) DTI Los Cabos: U.S. $5,140,500,
and that SLC Mexico has applied U.S.$2,500,000 of the total Capital Contribution
to purchase 50% of the capital stock of CHM.
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(h) Management Arrangements. Receipt of existing management
and franchise agreements with respect to the Acquired Properties and
satisfaction with the terms of the management agreements to be entered
into with Westin Corp. or SLC or any of its Subsidiaries with respect
to the Acquired Properties concurrent with the Acquisition.
(i) The Acquisition. Evidence that the Acquisition has been or
will, concurrently with the Loan be, consummated.
(j) Opinion of Mexican Counsel to the Obligors. An opinion,
dated the Closing Date, of Creel, Garcia Cuellar y Muggenberg, counsel
to the Obligors, substantially in the form of Exhibit C-1 hereto and
covering such other matters as the Agent or any Lender may reasonably
request (and each Obligor hereby instructs such counsel to deliver such
opinion to the Lenders and the Agent).
(k) Opinion of New York Counsel to the Obligors. An opinion,
dated the Closing Date, of Sidley & Austin, New York counsel to the
Obligors, substantially in the form of Exhibit C-2 hereto and covering
such other matters as the Agent or any Lender may reasonably request
(and each Obligor hereby instructs such counsel to delivery such
opinion the Lenders and the Agent).
(l) Notes. The Notes evidencing the Loans, duly completed and
executed.
(m) Process Agent. A written acceptance by the Process Agent
of its appointment under Section 12.13(b) hereof.
(n) Other Documents. Such other documents as the Agent or any
Lender or special New York counsel to Bancomer, S.A. may reasonably
request.
The obligation of any Lender to make its Loan hereunder is also subject to the
payment by the Company of such fees as the Company shall have agreed to pay to
any Lender or the Agent in connection herewith, including, without limitation,
the reasonable fees and expenses of Mayer, Brown & Platt, special New York
counsel to Bancomer, S.A. in connection with the negotiation, preparation,
execution and delivery of this Agreement and the Notes and the other Basic
Documents and the making of the Loans hereunder (to the extent that statements
for such fees and expenses have been delivered to the Company).
Section 8. Representations and Warranties. Each of the Obligors
represents and warrants to the Agent and the Lenders at all times during the
term of this Agreement that:
8.01 Corporate Existence. Each of the Obligors (a) is a corporation,
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partnership or other entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization; (b) has all
requisite corporate or other power, and has all material governmental licenses,
authorizations, consents and approvals necessary to own its assets and carry on
its business as now being or as proposed to be conducted; and (c) is qualified
to do business and is in good standing in all jurisdictions in which the nature
of the business conducted by it makes such qualification necessary and where
failure so to qualify could (either individually or in the aggregate) have a
Material Adverse Effect.
8.02 Financial Condition. The Obligors have heretofore furnished to
each of the Lenders the following:
(i) (a) audited and consolidated balance sheets of the Trust and
SLT as at December 31, 1996 and the related consolidated
statements of income, retained earnings and cash flow of the
Trust and SLT for the fiscal year ended on said date, with the
opinion thereon (in the case of said consolidated balance
sheet and statements) of a nationally recognized public
accounting firm,
(b) the unaudited consolidated balance sheets of the Trust and
SLT as at June 30, 1997 and the related consolidated
statements of income, retained earnings and cash flow of the
Trust and SLT for the six-month period ended on such date; and
(ii) an opening balance sheet of each Hotel Company giving effect to
the Loans contemplated hereby, the Acquisition (and the transactions
contemplated thereby, including the Acquisition Loans), respectively.
All such financial statements delivered pursuant to clause (a) are complete and
correct in all material respects and fairly present the consolidated financial
condition of the Trust and SLT, as at said dates and the consolidated results of
their operations for the fiscal year and six-month period ended on said dates
(subject, in the case of such financial statements as at June 30, 1997, to
normal year-end audit adjustments), all in accordance with generally accepted
accounting principles and practices applied on a consistent basis. None of the
Obligors has on the date hereof any material contingent liabilities, liabilities
for taxes, unusual forward or long-term commitments or unrealized or anticipated
losses from any unfavorable commitments, except as referred to or reflected or
provided for in said balance sheets as at said dates. Since December 31, 1996,
there has been no material adverse change in the consolidated financial
condition, operations, business or prospects taken as a whole of the Trust and
SLT from that set forth in said financial statements as at said date.
8.03 Litigation. There are no legal or arbitral proceedings, or any
proceedings by or before any governmental or regulatory authority or agency, now
pending or (to the knowledge of any Obligor) threatened against any of the
Obligors or any of their respective Subsidiaries that (x) contest the
Acquisition or (y) if adversely determined
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could (in the aggregate), could reasonably be expected to have a material
adverse effect on the financial condition, operations, assets, business or
properties of the Obligors, taken as a whole. There are no legal or arbitral
proceedings, or any proceedings by or before any governmental or regulatory
authority or agency, now pending or (to the knowledge of any Obligor) threatened
against SLC Mexico or any of the Hotel Companies or any of their respective
Subsidiaries that (x) contest the Acquisition or (y) if adversely determined
could reasonably be expected to have a material adverse effect on the financial
condition, operations, assets, business or properties of the SLC Mexico and the
Hotel Companies, taken as a whole.
8.04 No Breach. None of the execution and delivery of this Agreement
and the Notes and the other Basic Documents, the consummation of the
transactions herein and therein contemplated or compliance with the terms and
provisions hereof and thereof will conflict with or result in a breach of, or
require any consent under, the estatutos sociales, partnership agreement, or, as
the case may be, trust agreement of any Obligor, or any applicable law or
regulation, or any order, writ, injunction or decree of any court or
governmental authority or agency, or any agreement or instrument to which any of
the Obligors or any of their Subsidiaries is a party or by which any of them or
any of their Property is bound or to which any of them is subject, or constitute
a default under any such agreement or instrument, or (except for the Liens
created pursuant to the Security Documents) result in the creation or imposition
of any Lien upon any Property of any of the Obligor or any of their respective
Subsidiaries pursuant to the terms of any such agreement or instrument.
8.05 Action. Each Obligor has all necessary corporate or partnership
power (as the case may be), authority and legal right to execute, deliver and
perform its obligations under each of the Basic Documents to which it is a
party; the execution, delivery and performance by each Obligor of each of the
Basic Documents to which it is a party have been duly authorized by all
necessary corporate or partnership action (as the case may be) on its part
(including, without limitation, any required shareholder or partnership
approvals); and this Agreement has been duly and validly executed and delivered
by each Obligor and constitutes, and each of the Notes and the other Basic
Documents to which it is a party when executed and delivered by such Obligor (in
the case of the Notes, for value) will constitute, its legal, valid and binding
obligation, enforceable against each Obligor in accordance with its terms.
8.06 Approvals. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange, are necessary for the consummation of the
Acquisition or the execution, delivery or performance by any Obligor of the
Basic Documents to which it is a party or the execution, delivery or performance
by each Person party to any Acquisition Document, or for the legality, validity
or enforceability thereof.
8.07 Legal Form. This Agreement and each other Basic Document is in
proper
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legal form under the law of Mexico for the enforcement thereof against the
Obligors and, as the case may be, SLC Mexico under such law, and if this
Agreement and each other Basic Document were stated to be governed by such law,
they would constitute legal, valid and binding obligations of each Obligor and,
as the case may be, SLC Mexico under such law, enforceable in accordance with
their respective terms. All formalities required in Mexico for the validity and
enforceability of this Agreement and each other Basic Document (including,
without limitation, any necessary registration, recording or filing with any
court or other authority in Mexico (other than any such registration, recording
or filing of the Mortgage, which, on the date hereof will not be accomplished))
have been accomplished, and no Mexican Taxes are required to be paid and no
notarization is required, for the validity and enforceability thereof (other
than, upon any registration, recording or filing of a Mortgage pursuant to the
terms hereof, Mexican Taxes payable at such time).
8.08 Ranking. This Agreement and each other Basic Document and the
obligations evidenced hereby and thereby are and will at all times be direct and
unconditional general obligations of each Obligor and rank and will at all times
rank in right of payment and otherwise at least pari passu with all other senior
unsecured Indebtedness of each Obligor, whether now existing or hereafter
outstanding.
8.09 Taxes. Each of the Obligor, SLC Mexico and their respective
Subsidiaries have filed all material tax returns that are required to be filed
by them and have paid all taxes due pursuant to such returns or pursuant to any
assessment received by any of the Obligor, SLC Mexico or any of their respective
Subsidiaries. The charges, accruals and reserves on the books of the Obligors,
SLC Mexico and their respective Subsidiaries in respect of taxes and other
governmental charges are, in the opinion of the Obligors, adequate.
8.10 Commercial Activity; Absence of Immunity. Each of the Company and
SLC Mexico is subject to civil and commercial law with respect to its
obligations under each of the Basic Documents to which it is a party. The
execution, delivery and performance by the Company and SLC Mexico of each Basic
Document to which it is a party constitute private and commercial acts rather
than public or governmental acts. None of the Company, SLC Mexico, nor any of
their respective Properties or revenues, is entitled to any right of immunity in
any jurisdiction from suit, court jurisdiction, judgment, attachment (whether
before or after judgment), set-off or execution of a judgment or from any other
legal process or remedy relating to the obligations of such Person under any of
the Basic Documents to which it is a party.
8.11 Material Agreements and Liens. Schedule 8.11 hereto is a complete
and correct list, as of the date of this Agreement, of indebtedness under loans
of each Obligor or any of their respective Subsidiaries, and the aggregate
principal or face amount outstanding or that may become outstanding under each
such arrangement is correctly described in said Schedule 8.11.
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8.12 Solvency. On the Closing Date and after giving effect to the
Loans, the Company, the Trust and SLT will be Solvent.
8.13 Subsidiaries, Etc. Each Obligor and its Subsidiaries owns, free
and clear of Liens, and has the unencumbered right to vote, all outstanding
ownership interests in each Person owned by it, all of the issued and
outstanding capital stock of each such Person organized as a corporation is
validly issued, fully paid and nonassessable and there are no outstanding Equity
Rights with respect to such Person, except as may be provided by the provisions
of (i) that certain Membership Pledge and Security Agreement dated as of August
16, 1996, by and between SLT, as Debtor, and Goldman Sachs Mortgage Company, as
Secured Party, and (ii) that certain Membership Pledge and Security Agreement
dated as of August 16, 1996, by and between SLC, the Corporation and SLT
Financing Partnership, as Debtors, and Goldman Sachs Mortgage Company, as
Secured Party. Each of the Membership Pledge and Security Agreements described
in items (i) and (ii) was executed in connection with that certain Loan
Agreement dated as of August 16, 1996, between SLT and the Trust, as Borrowers,
and Goldman Sachs Mortgage Company, Individually and as Agent for one or more
co-lenders.
8.14 True and Complete Disclosure. The information, reports, financial
statements, exhibits and schedules furnished in writing by or on behalf of the
Obligors to the Agent or any Lender in connection with the negotiation,
preparation or delivery of this Agreement and the other Basic Documents or
included herein or therein or delivered pursuant hereto or thereto, when taken
as a whole do not contain any untrue statement of material fact or omit to state
any material fact necessary to make the statements herein or therein, in light
of the circumstances under which they were made, not misleading. All written
information furnished after the date hereof by the Obligors and their respective
Subsidiaries to the Agent and the Lenders in connection with this Agreement and
the other Basic Documents and the transactions contemplated hereby and thereby
will be true, complete and accurate in every material respect, or (in the case
of projections) based on reasonable estimates, on the date as of which such
information is stated or certified. There is no fact known to any Obligor that
could have a Material Adverse Effect that has not been disclosed herein, in the
other Basic Documents or in a report, financial statement, exhibit, schedule,
disclosure letter or other writing furnished to the Lenders for use in
connection with the transactions contemplated hereby or thereby.
8.15 ERISA. As of the Closing Date, none of the Guarantors has any
Plans other than those listed on Schedule 8.15. No accumulated funding
deficiency (as defined in Section 412 of the Code or Section 302 of ERISA) still
outstanding, or Reportable Event, which exceeds $5,000,000 or which has or could
reasonably be expected to have a Material Adverse Effect has occurred with
respect to any Plan and there is no lien outstanding under Section 412 of the
Code or Section 302 of ERISA with respect to any Obligor's assets. As of the
Closing Date, the Unfunded Benefit Liabilities do not in the aggregate exceed
$1,000,000. The Guarantors have not failed to comply in all
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material respects with the requirements of ERISA and the Code and plan documents
for any Employee Benefit Plan which has or could reasonably be expected to have
a Material Adverse Effect and are not in default (as defined in Section
4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan which has
or could reasonably be expected to have a Material Adverse Effect. None of the
Guarantors, nor any member of their respective ERISA Controlled Groups
(determined without reference to Section 414(m) or (o) of the Code, if
liabilities of entities in the Guarantors' ERISA Controlled Group solely by
reason of Section 414(m) or (o) could not result in liability to the Guarantors)
is subject to any present or potential withdrawal liability pursuant to Section
4201 or 4204 of ERISA which, individually or in the aggregate is in excess of
$5,000,000 or has or could reasonably be expected to have a Material Adverse
Effect. To the best knowledge of the Guarantors, no Multiemployer Plan is or is
likely to be disqualified for tax purposes, in reorganization (within the
meaning of Section 4241 of ERISA or Section 418 of the Code) or is insolvent (as
defined in Section 4245 of ERISA), which event would have a Material Adverse
Effect. No liability to the PBGC (other than required premium payments), the
Internal Revenue Service (with respect to an Employee Benefit Plan), any Plan or
any trust established under Section 4049 of ERISA has been, or is expected by
the Guarantors to be, incurred by the Guarantors (other than annual
contributions) which is in excess of $5,000,000 or would have a Material Adverse
Effect. Except as otherwise disclosed on Schedule 8.15 hereto, none of the
Guarantors has any contingent liability with respect to any post-retirement
benefits under any "welfare plan" (as defined in Section 3(1) of ERISA) or
withdrawal liability or exist fee or charge with respect to any "welfare plan"
(as defined in Section 3(1) of ERISA), other than liability for continuation
coverage under Part 6 of Title I of ERISA or state laws which require similar
continuation coverage for which the employee pays approximately the full cost of
coverage, and other than such liability that is both not more than $5,000,000
and that would not have a Material Adverse Effect. No lien under Section 412(n)
of the Code or 302(f) of ERISA or requirement to provide security under Section
401(a)(29) of the Code or Section 307 of ERISA has been or is reasonably
expected by the Guarantors to be imposed on the assets of the Guarantors. Except
as disclosed on Schedule 8.15 none of the Guarantors is a party to any
collective bargaining agreement. None of the Guarantors has engaged in any
transaction prohibited by Section 408 of ERISA or Section 4975 of the Code which
has a Material Adverse Effect. As of the Closing Date and throughout the term of
the Loan, none of the Guarantors is or will be an "employee benefit plan" as
defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, and none
of the assets of the Guarantors will constitute "plan assets" of one or more
such plans for purposes of Title I of ERISA. As of the Closing Date and
throughout the term of the Loan, none of the Guarantors is or will be a
"governmental plan" within the meaning of Section 3(3) of ERISA and none of the
Guarantors will be subject to state statutes applicable to such Guarantors
regulating investments.
8.16 Licenses. Each Obligor has obtained and holds in full force and
effect, all material franchises, trademarks, trade names, copyrights, licenses,
permits, certificates,
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authorizations, qualifications, accreditations, easements, rights of way and
other rights, consents and approvals which are necessary for the operation of
their respective businesses as presently conducted.
8.17 Assets of the Trust. The sole asset of the Trust is its general
partnership interest in SLT and such other assets that may be incidental to or
required in connection with the ownership of such general partnership interest,
or as set forth in Schedule 8.17.
8.18 REIT Status. The Trust qualifies as a "real estate investment
trust" as defined in Section 856 of the Code.
8.19 Stock. The Trust and the Corporation list all of their outstanding
shares of stock on the New York Stock Exchange and such shares trade as "paired
shares" subject to a pairing agreement between the Trust and the Corporation.
8.20 Operations. The Trust conducts its business only through SLT,
except as set forth in Schedule 8.20.
8.21 Environmental Matters. Each of the Obligors and their respective
Subsidiaries has obtained all environmental, health and safety permits, licenses
and other authorizations required under all Environmental Laws to carry on its
business as now being or as proposed to be conducted, except to the extent
failure to have any such permit, license or authorization would not (either
individually or in the aggregate) have a Material Adverse Effect. Each of such
permits, licenses and authorizations is in full force and effect and each of the
Obligors and their respective Subsidiaries is in compliance with the terms and
conditions thereof, and is also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in any applicable Environmental Law or in any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder, except to the extent
failure to comply therewith would not (either individually or in the aggregate)
have a Material Adverse Effect.
In addition, except as set forth in Schedule 8.21 hereto:
(a) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been
filed, no penalty has been assessed and no investigation or review is
pending or threatened by any governmental or other entity with respect
to any alleged failure by any Obligor or any Subsidiary of any Obligor
to have any environmental, health or safety permit, license or other
authorization required under any Environmental Law in connection with
the conduct of the business of such Obligor or any of its Subsidiaries
or with respect to any generation, treatment, storage, recycling,
transportation, discharge or disposal, or any Release of any Hazardous
Materials
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generated by such Obligor or any of its Subsidiaries.
(b) None of the Obligors nor any of their Subsidiaries owns,
operates or leases a treatment, storage or disposal facility requiring
a permit under the Resource Conservation and Recovery Act of 1976, as
amended, or under any comparable state or local statute; and
(i) no polychlorinated biphenyls (PCB's) is or has
been present at any site or facility now or previously owned,
operated or leased by the Obligors or their Subsidiaries;
(ii) no asbestos or asbestos-containing materials is
or has been present at any site or facility now or previously
owned, operated or leased by the Obligors or their
Subsidiaries;
(iii) there are no underground storage tanks or
surface impoundments for Hazardous Materials, active or
abandoned, at any site or facility now or previously owned,
operated or leased by the Obligors or their Subsidiaries;
(iv) no Hazardous Materials have been Released at, on
or under any site or facility now or previously owned,
operated or leased by the Obligors or their Subsidiaries in a
reportable quantity established by statute, ordinance, rule,
regulation or order that would (either individually or in the
aggregate) have a Material Adverse Effect; and
(v) no Hazardous Materials have been otherwise
Released at, on or under any site or facility now or
previously owned, operated or leased by the Obligors or their
Subsidiaries that would (either individually or in the
aggregate) have a Material Adverse Effect.
(c) No oral or written notification of a Release of a
Hazardous Material has been filed by or on behalf of any Obligor or
their Subsidiaries and no site or facility now or previously owned,
operated or leased by any Obligor or any of their Subsidiaries is
listed or proposed for listing on the NPL, CERCLIS or any similar state
list of sites requiring investigation or clean-up.
(d) No Liens have arisen under or pursuant to any
Environmental Laws on any site or facility owned, operated or leased by
any Obligor or any of their Subsidiaries, and no government action has
been taken or is in process that could subject any such site or
facility to such Liens and none of the Obligors nor any of their
Subsidiaries would be required to place any notice or restriction
relating to the presence of Hazardous Materials at any site or facility
owned by it in any deed to the real property on which such site or
facility is located.
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(e) All environmental investigations, studies, audits, tests,
reviews or other analyses conducted by or that are in the possession of
the Company or any of its Subsidiaries in relation to facts,
circumstances or conditions at or affecting any site or facility now or
previously owned, operated or leased by the Company or any of its
Subsidiaries and that could result in a Material Adverse Effect have
been made available to the Lenders.
Section 9. Covenants of the Obligors. Each of Company, the Trust and
SLT covenants and agrees with the Lenders and the Agent that, so long as any
Commitment or Loan is outstanding and until payment in full of all amounts
payable by the Company hereunder:
9.01 Financial Statements Etc. The Obligors shall deliver to each of
the Lenders:
(a) as soon as available and in any event within 45 days after
the end of each quarterly fiscal period of each fiscal year of the
Trust and SLT, consolidated statements of income, retained earnings and
cash flow of the Trust, SLT and their Subsidiaries for such period and
for the period from the beginning of the respective fiscal year to the
end of such period, and the related consolidated balance sheets of the
Trust, SLT and their Subsidiaries as at the end of such period, setting
forth in each case in comparative form the corresponding consolidated
figures for the corresponding periods in the preceding fiscal year,
accompanied by a certificate of a senior financial officer of the
Trust, which certificate shall state that said consolidated financial
statements fairly present the consolidated financial condition and
results of operations of the Trust, SLT and their Subsidiaries in
accordance with GAAP, consistently applied, as at the end of, and for,
such period (subject to normal year-end audit adjustments); and
(b) as soon as available and in any event within 90 days after
the end of each fiscal year of the Trust and SLT, consolidated
statements of income, retained earnings and cash flow of the Trust, SLT
and their Subsidiaries for such fiscal year and the related
consolidated balance sheets of the Trust, SLT and their Subsidiaries as
at the end of such fiscal year, setting forth in each case in
comparative form the corresponding consolidated figures for the
preceding fiscal year, and accompanied by an unqualified opinion
thereon of independent certified public accountants of recognized
national standing, which opinion shall state that said consolidated
financial statements fairly present the consolidated financial
condition and results of operations of the Trust, SLT and their
Subsidiaries as at the end of, and for, such fiscal year in accordance
with GAAP, and a certificate of such accountants stating that, in
making the examination necessary for their opinion, they obtained no
knowledge, except as specifically stated, of any Default;
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(c) together with the compliance certificate required to be
delivered pursuant to this Section 9.01, copies of all registration
statements and regular periodic reports, if any, that the Trust and the
Corporation shall have filed with the Securities and Exchange
Commission (or any governmental agency substituted therefor) or any
national securities exchange;
(d) promptly upon the mailing thereof to the holders of the
"paired shares" of the Trust and the Corporation or to holders of
Subordinated Indebtedness generally, copies of all financial
statements, reports and proxy statements so mailed;
(e) promptly after the Company, the Trust or SLT knows or has
reason to believe that any Default has occurred, a notice of such
Default describing the same in reasonable detail and, together with
such notice or as soon thereafter as possible, a description of the
action that the Company or the Trust or SLT, as the case may be, has
taken or proposes to take with respect thereto;
(f) with respect to each Acquisition Loan and promptly
following the completion of the Acquisition, a budget for each of the
Acquired Properties for either the 12-month period following the
Acquisition or for the 1997 or 1998 calendar year (whichever is
available), containing the amount of good faith estimated capital
expenditures that will be incurred during such period, together with
financial projections of the applicable Hotel Company and such other
matters requested by the Agent, in form and substance satisfactory to
the Agent;
(g) from time to time such other information regarding the
financial condition, operations, business or prospects of the Trust,
SLT or the Company as any Lender or the Agent may reasonably request;
(h) within five New York Business Days of the Closing Date,
(i) consolidated balance sheets of the Trust and SLT as at June 30,
1997 and the related consolidated statements of income, of the Trust
and SLT for the six-month period ended on said date, giving effect, on
a pro forma basis, to the Acquisition and the Loans contemplated
hereby; and (ii) a certificate of a senior financial officer of the
Trust setting forth in reasonable detail the computations necessary to
determine whether the Trust and SLT are in compliance, as at June 30,
1997, with Sections 9.07(b)-(g), 9.09, 9.10, 9.11 and 9.12 hereof as of
such date and as of the end of the such period (as the case may be), in
each case, on a pro forma basis, in each case, in form and substance
satisfactory to the Agent; and
(i) all information received by the Company pursuant to
Section 8.01 of each Acquisition Loan agreement.
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Each of the Obligors will furnish to each Lender, at the time it furnishes each
set of financial statements pursuant to paragraph (a) or (b) above, a
certificate of a senior financial officer of the applicable Obligor (i) to the
effect that no Default has occurred and is continuing (or, if any Default has
occurred and is continuing, describing the same in reasonable detail and
describing the action that the Obligors have taken or proposes to take with
respect thereto) and (ii) setting forth in reasonable detail the computations
necessary to determine whether the Obligors (as applicable) are in compliance
with Sections 9.07(b)-(g), 9.08, 9.09, 9.10, 9.11 and 9.12 hereof as of the end
of the respective quarterly fiscal period or fiscal year.
9.02 Litigation. The Obligors will promptly give to each Lender notice
of all legal or arbitral proceedings, and of all proceedings by or before any
governmental or regulatory authority or agency, and any material development in
respect of such legal or other proceedings, affecting the Trust, SLT or any of
their Subsidiaries (including, without limitation, the Company), except
proceedings that, if adversely determined, would not (either individually or in
the aggregate) have a Material Adverse Effect. Without limiting the generality
of the foregoing, the Obligors will give to each Lender notice of the assertion
of any Environmental Claim by any Person against, or with respect to the
activities of, the Obligors or any of their Subsidiaries and notice of any
alleged violation of or non-compliance with any Environmental Laws or any
permits, licenses or authorizations, other than any Environmental Claim or
alleged violation that, if adversely determined, would not (either individually
or in the aggregate) have a Material Adverse Effect.
9.03 Existence, Etc. The Trust and SLT will cause the Company to:
(a) preserve and maintain its legal existence and all of its
material rights, privileges, licenses and franchises (provided that
nothing in this Section 9.03 shall prohibit any transaction expressly
permitted under Section 9.05 hereof);
(b) comply with the requirements of all applicable laws,
rules, regulations and orders of governmental or regulatory authorities
if failure to comply with such requirements could (either individually
or in the aggregate) have a Material Adverse Effect;
(c) pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on any
of its Property prior to the date on which penalties attach thereto,
except for any such tax, assessment, charge or levy the payment of
which is being contested in good faith and by proper proceedings and
against which adequate reserves are being maintained;
(d) maintain all of its Properties used or useful in its
business in good working order and condition, ordinary wear and tear
excepted;
(e) keep adequate records and books of account, in which
complete
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entries will be made in accordance with generally accepted accounting
principles consistently applied; and
(f) permit representatives of any Lender or the Agent, during
normal business hours, to examine, copy and make extracts from its
books and records, to inspect any of its Properties, and to discuss its
business and affairs with its officers, all to the extent reasonably
requested by such Lender or the Agent (as the case may be).
9.04 Insurance.
(a) The Trust and SLT will, and will cause each of their
Subsidiaries (including, without limitation, the Company) to, maintain
insurance with financially sound and reputable insurance companies, and
with respect to Property and risks of a character usually maintained by
corporations engaged in the same or similar business similarly
situated, against loss, damage and liability of the kinds and in the
amounts customarily maintained by such corporations.
(b) The Company shall require, with respect to each
Acquisition Loan, the applicable Hotel Company to:
(A) (i) maintain with financially sound and reputable
insurance companies insurance on itself and its properties in
commercially reasonable amounts, and (ii) furnish to the Agent from
time to time, upon written request, certificates of insurance or
certified copies or abstracts of all insurance policies required under
the Acquisition Loan documents and such other information relating to
such insurance as the Agent may reasonably request.
(B) With respect to each Acquired Property, the Company shall
require the applicable Hotel Company to obtain and maintain, or cause to be
maintained, insurance providing at least the following coverages:
(i) (1) comprehensive all risk insurance on the improvements
and the personal property (A) in an amount equal to 100% of the "Full
Replacement Cost," which for purposes of this Agreement shall mean
actual replacement value (exclusive of costs of excavations,
foundations, underground utilities and footings) with a waiver of
depreciation; (B) containing an agreed amount endorsement with respect
to the improvements owned or leased by Hotel Company and personal
property or a waiver of all co-insurance provisions; and (C) providing
for no deductible in excess of $50,000, and (2) flood hazards insurance
if any portion of the improvements is currently or at any time in the
future located in a federally designated "special flood hazard area"
and earthquake insurance in amounts and in form and substance
reasonably satisfactory to the Agent and the Lenders in the event the
Acquired Property is located in an area with a high degree of seismic
activity, or otherwise as required
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by the Agent and the Lenders, provided that the insurance pursuant
hereof shall be on terms consistent with the comprehensive all risk
insurance policy required under this Section 9.04(b)(B), except that
the deductible on such insurance and on wind insurance if the Acquired
Property is located in a coast line area, shall not be in excess of
five percent (5%) of the appraised value of the Acquired Property:
(ii) commercial general liability insurance against claims for
personal injury, bodily injury, death or property damage occurring
upon, in or about the Acquired Property, including liquor liability
coverage if alcoholic beverages are sold from or may be consumed at the
Acquired Property, such insurance (A) to be on the so-called
"occurrence" form with a combined single limit of not less than
$1,000,000 or such greater amount or may be generally required by
institutional lenders for hotels comparable to the Acquired Property;
(B) to continue at not less than the aforesaid limit until required to
be changed by the Lenders in writing by reason of changed economic
conditions making such protection inadequate; and (C) to cover at least
the following hazards: (1) premises and operations; (2) products and
completed operations on an "if any" basis; (3) independent contractors;
and (4) blanket contractual liability for all written and oral
contracts;
(iii) business income and rent loss insurance (A) covering all
risks required to be covered by the insurance provided for in Section
9.04(b)(B)(i); (B) containing an extended period of indemnity
endorsement which provides that from and after the physical loss to the
improvements and personal property has been repaired, the continued
loss of income will be insured until such income either returns to the
same level it was at prior to the loss, or the expiration of twelve
(12) months from the date of the loss, whichever first occurs, and
notwithstanding that the policy may expire prior to the end of such
period; and (C) in an amount equal to 100% of the projected gross
income from the Acquired Property for a period of twelve (12) months,
determined prior to the date hereof and at least once each year
thereafter based on Company's reasonable estimate of the gross income
from the Acquired Property, which estimate shall be reasonably
satisfactory to the Agent and the Lenders.
(iv) at all times during which structural construction,
repairs or alterations are being made with respect to the improvements
(A) owner's contingent or protective liability insurance covering
claims not covered by or under the terms or provisions of the above
mentioned commercial general liability insurance policy; and (B) the
insurance provided for in Section 9.04(b)(B)(i) written in a so-called
builder's risk completed value form (1) on a non-reporting basis, (2)
against all risks insured against pursuant to Section 9.04(b)(B)(i),
(3) including permission to occupy the Acquired Property, and (4) with
an agreed amount endorsement or a waiver of coinsurance provisions;
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(v) workers' compensation, subject to the statutory limits of
the state in which the Acquired Property is located, and employer's
liability insurance (A) with a limit per accident and per disease per
employee, and (B) in an amount for disease aggregate in respect of any
work or operations on or about the Acquired Property, or in connection
with the Acquired Property or its operation (if applicable), in each
case reasonably required by the Agent and the Lenders;
(vi) comprehensive boiler and machinery insurance, if
applicable, in amounts as shall be reasonably required by Lender on
terms consistent with the commercial general liability insurance policy
required under Section 9.04(b)(B)(ii);
(vii) umbrella liability insurance in an amount not less than
$50,000,000.00 per occurrence or such greater amount as may be
generally required by institutional lenders for hotels comparable to
the Acquired Property on terms consistent with the commercial general
liability insurance policy required under Section 9.04(b)(B)(ii);
(viii) motor vehicle liability coverage for all owned and
non-owned vehicles, including rented and leased vehicles containing
minimum limits per occurrence of $5,000,000;
(ix) a blanket fidelity bond and errors and omissions
insurance coverage insuring against losses resulting from dishonest or
fraudulent acts committed by (A) the Hotel Company's personnel; (B) any
employees of outside firms that provide appraisal, legal, data
processing or other services for the Hotel Company or (C) temporary
contract employees or student interns; and
(x) such other insurance and in such amounts as are required
pursuant to any franchise agreements or as the Agent and the Lenders
from time to time may reasonably request against such other insurable
hazards which are generally required by institutional lenders for
hotels comparable to the Asset or which are commonly insured against
for property similar to the Acquired Property located in or around the
region in which it is located.
(c) All insurance provided for in this Section 9.04(b)(B)
hereof shall be obtained under valid and enforceable policies (the "Policies" or
in the singular, the "Policy"), and shall be subject to the approval of the
Lenders as to insurance companies, amounts, forms, deductibles, and shall name
the Agent the loss payee thereunder. The Policies shall be issued by financially
sound and responsible insurance companies authorized to do business where the
Acquired Property is located and approved by Lenders. Not less than thirty (30)
days prior to the expiration dates of the Policies theretofore furnished to the
Agent pursuant to Section 9.04(b)(B), certified copies of the Policies marked
"premium paid" or accompanied by evidence reasonably satisfactory to
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the Agent of payment of the premiums due thereunder (the "Insurance Premiums"),
shall be delivered by Company to the Agent; provided, however, that in the case
of renewal Policies, the Company may furnish the Agent with binders therefor to
be followed by the original Policies when issued.
(d) All Policies of insurance provided for in Section
9.04(b)(B) shall contain clauses or endorsements to the effect that:
(i) the Policy shall not be materially changed (other than to
increase the coverage provided thereby) or cancelled without at least
30 days' written notice to the Agent and any other party named therein
as an insured; and
(ii) each Policy shall provide that the issuers thereof shall
give written notice to the Agent if the Policy has not been renewed
thirty (30) days prior to its expiration.
(e) The Hotel Company shall furnish, on or before thirty (30)
days after the close of such Hotel Company's Fiscal Year, a statement certified
by the Hotel Company or a duly authorized officer of the Hotel Company of the
amounts of insurance maintained in compliance herewith, of the risks covered by
such insurance and of the insurance company or companies which carry such
insurance, together with copies of the Policies, and, if requested by the Agent,
verification of the adequacy of such insurance by an independent insurance
broker or appraiser acceptable to the Agent.
(f) If the Acquired Property shall be damaged or destroyed, in
whole or in part, by fire or other casualty, or condemned or taken by eminent
domain, the Hotel Company shall give prompt notice of such damage or taking to
the Agent and (i) if at such time there is no Event of Default continuing, the
Hotel Company shall be entitled to determine whether to repair or restore the
Acquired Property, whereupon it shall promptly submit to the Agent for the
Agent's approval a plan of restoration or repair of the Acquired Property and
shall, upon the Agent's approval of such plan, promptly commence and diligently
prosecute the completion of the repair and restoration of the Acquired Property
as nearly as possible to the condition the Acquired Property was in immediately
prior to such fire or other casualty or taking (the "Restoration"), or (ii) if
at such time there is an Event of Default continuing, the Agent shall be
entitled to determine whether the Hotel Company may repair or restore the
Acquired Property. The Hotel Company shall pay all costs of such Restoration
whether or not such costs are covered by insurance or any condemnation award.
9.05 Prohibition of Fundamental Changes.
(a) The Trust and SLT will not, nor will it permit any of
their Subsidiaries (including, without limitation, the Company) to,
enter into any transaction of
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merger or consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), and will
not enter into any transaction following which the Trust or an entity
wholly owned by the Trust is no longer the sole general partner of SLT.
(b) The Trust and SLT will not, nor will it permit any of its
Subsidiaries (including, without limitation, the Company) to, acquire
any business or Property from, or capital stock of, or be a party to
any acquisition of, any Person except for purchases of inventory and
other Property to be sold or used in the ordinary course of business,
Investments permitted under Section 9.08 hereof, and Capital
Expenditures permitted under Section 9.13 hereof.
(c) The Trust and SLT will not, nor will it permit any of its
Subsidiaries (including, without limitation, the Company) to, convey,
sell, lease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or substantially all of its business or
Property, whether now owned or hereafter acquired.
(d) The Trust and SLT will not permit the Company, and the
Company shall not, convey, sell, lease, transfer or otherwise dispose
of any of its interests in: any of the Mortgages and any of the
Mortgage Notes or any of the Acquisition Loans.
9.06 Limitation on Liens. The Company will not, and the Trust and SLT
will not permit the Company to, create, incur, assume or suffer to exist any
Lien upon any of the Company's Property, including, without limitation, all of
the Mortgages and the Mortgage Notes, all of the Management Contracts and
franchise agreements assigned to it, and all of the Acquisition Loans, whether
now owned or hereafter acquired, except Liens created pursuant to the Security
Documents.
9.07 Indebtedness.
(a) The Company will not, and the Trust and SLT will not
permit the Company to, create, incur or suffer to exist any
Indebtedness except Indebtedness to the Lenders hereunder.
(b) The Trust and SLT will not create, incur or suffer to
exist Indebtedness in excess of 65% of Market Capitalization of the
Trust and SLT (without duplication).
(c) SLT and SLC will not create, incur or suffer to exist
Indebtedness in excess of 65% of Market Capitalization of SLT and SLC
(without duplication); provided, that for the purpose of determining
"Indebtedness" of SLT and SLC for this computation only, "Indebtedness"
between (a) SLT and the Trust and their Subsidiaries, and (b) SLC and
the Corporation and their Subsidiaries, shall be
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excluded.
(d) SLT and the Trust will not, and will not create, incur or
suffer to exist any Unsecured Indebtedness and/or Recourse
Indebtedness, in excess of 60% of SLT and the Trust's combined net book
value (without duplication), calculated in accordance with GAAP.
(e) SLT and SLC will not, and will not create, incur or suffer
to exist any Unsecured Indebtedness and/or Recourse Indebtedness, in
excess of 60% of SLT and SLC's combined net book value (without
duplication), calculated in accordance with GAAP.
(f) SLT and the Trust will not, and will not create, incur or
suffer to exist any Secured Indebtedness in excess of 60% of SLT and
the Trust's combined net book value (without duplication), calculated
in accordance with GAAP.
(g) SLT and SLC will not, and will not create, incur or suffer
to exist any Secured Indebtedness in excess of 60% of SLT and SLC's
combined net book value (without duplication), calculated in accordance
with GAAP; provided, that for the purpose of determining "Indebtedness"
of SLT and SLC for this computation only, "Indebtedness" between (a)
SLT and the Trust and their Subsidiaries, and (b) SLC and the
Corporation and their Subsidiaries, shall be excluded.
9.08 Investments.
(a) The Company will not, and the Trust and SLT will not
permit the Company to, make or permit to remain outstanding any
Investments of the Company except the Acquisition Loans.
(b) The Trust and SLT will not make or permit to remain
outstanding any Investments except:
(i) Investments outstanding on the date hereof;
(ii) operating deposit accounts with banks;
(iii) Permitted Investments;
(iv) Investments in the Company;
(v) Investments in the Hospitality Business and
advances to Subsidiaries in the ordinary course of
business;
(vi) Investments in businesses which are
non-Hospitality
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Businesses (without limiting clause (v) hereof) and
which support the Hospitality Business (only for so
long as the Trust is the general partner of SLT), not
to exceed 20% of the Market Capitalization of SLT and
the Trust (without duplication); and
(vii) Investments in businesses other than in the
Hospitality Business (only for so long as the Trust
is the general partner of SLT), whether or not such
businesses support the Hospitality Business, not to
exceed 5% of the Market Capitalization of SLT and the
Trust (without duplication) .
9.09 Payout Ratios.
(a) The Trust will not pay or declare Distributions in excess
of the greater of (i) 95% of Funds From Operations for the most recent
four consecutive calendar quarters, (ii) the amount necessary for the
Trust to maintain real estate investment trust status under Section 856
of the Code, and (iii) the amount necessary for the Trust to avoid the
payment of federal income or excise tax, in each case, as adjusted to
give effect to the Stock Repurchase Plan.
(b) The Trust and the Corporation will not pay or declare
Distributions in excess of the greater of (i) 95% of their combined
Funds From Operations for the most recent four consecutive calendar
quarters, (ii) the amount necessary for the Trust to maintain real
estate investment trust status under Section 856 of the Code, and (iii)
the amount necessary for the Trust and the Corporation to avoid the
payment of federal income or excise tax, in each case, as adjusted to
give effect to the Stock Repurchase Plan.
9.10 Debt Service Coverage Ratio. The Trust and SLT will not permit the
Debt Service Coverage Ratio to be less than 1.75 to 1.00 at any time.
9.11 Combined Debt Service Coverage Ratio. SLT will not permit the
Combined Debt Service Coverage Ratio to be less than 1.85 to 1.00 at any time.
9.12 Tangible Net Worth. SLT will not permit its Tangible Net Worth to
be less than the greater of (a) $585,000,000 and (b) 75% of Tangible Net Worth
at closing, plus 75% of Net Available Proceeds from equity offerings by the
Trust, calculated on a cumulative GAAP basis, as adjusted to give effect to the
Stock Repurchase Plan.
9.13 Capital Expenditures. The Company will not, and the Trust and SLT
will not permit the Company to, make any Capital Expenditures.
9.14 Governmental Approvals. The Company and each Guarantor agrees that
it will promptly obtain from time to time at its own expense all such
governmental
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licenses, authorizations, consents, permits and approvals as may be required for
the Company or such Guarantor, as the case may be, to (a) comply with its
obligations, and preserve its rights under, each Basic Document and (b) maintain
the existence, priority and perfection of the Liens purported to be created
under the Security Documents.
9.15 Subordinated Indebtedness. Neither the Guarantors nor the Company
will purchase, redeem, retire or otherwise acquire for value, or set apart any
money for a sinking, defeasance or other analogous fund for the purchase,
redemption, retirement or other acquisition of, or make any voluntary payment or
prepayment of the principal of or interest on, or any other amount owing in
respect of, any Subordinated Indebtedness, except for regularly scheduled
payments of principal and interest in respect thereof required pursuant to the
instruments evidencing such Subordinated Indebtedness.
9.16 Lines of Business. The Company will not engage in any activity
except incurring Indebtedness pursuant to this Agreement and the other
obligations under the other Basic Documents, making the Acquisition Loans and
other activities incidental thereto. The Guarantors and their Subsidiaries will
not engage to any substantial extent (subject to Section 9.08 hereof) in any
line or lines of business activity other than the businesses engaged in on the
date hereof.
9.17 Transactions with Affiliates. Except as expressly permitted by
this Agreement, the Guarantors will not, nor will they permit any of their
Subsidiaries (including, without limitation, the Company) to, directly or
indirectly: (a) make any Investment in an Affiliate; (b) transfer, sell, lease,
assign or otherwise dispose of any Property to an Affiliate; (c) merge into or
consolidate with or purchase or acquire Property from an Affiliate; or (d) enter
into any other transaction directly or indirectly with or for the benefit of an
Affiliate (including, without limitation, Guarantees and assumptions of
obligations of an Affiliate); provided that (x) any Affiliate who is an
individual may serve as a director, officer or employee of any Guarantor or any
of its Subsidiaries and receive reasonable compensation for his or her services
in such capacity and (y) the Guarantors may enter into transactions with
Affiliates if the monetary or business consideration arising therefrom would be
substantially as advantageous to the applicable Guarantor as the monetary or
business consideration that would obtain in a comparable transaction with a
Person not an Affiliate.
9.18 Use of Proceeds. The Company will use the proceeds of the Loans
hereunder solely to make the Acquisition Loans (in compliance with all
applicable legal and regulatory requirements); provided that neither the Agent
nor any Lender shall have any responsibility as to the use of any of such
proceeds.
9.19 Certain Obligations Respecting Subsidiaries. SLT and the Trust
will take such action from time to time as shall be necessary to ensure that it
owns the same percentage of the issued and outstanding voting stock of the
Company as it does on the date hereof (on a fully diluted basis). SLT and the
Trust will not permit any of its
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Subsidiaries to enter into, after the date of this Agreement, any indenture,
agreement, instrument or other arrangement that, directly or indirectly,
prohibits or restrains, or has the effect of prohibiting or restraining, or
imposes materially adverse conditions upon, the incurrence or payment of
Indebtedness, the granting of Liens, the declaration or payment of dividends,
the making of loans, advances or Investments or the sale, assignment, transfer
or other disposition of Property that would have a Material Adverse Effect on
SLT, the Trust and their Subsidiaries, taken as a whole.
9.20 Compliance with ERISA. (a) The Guarantors shall maintain each
Employee Benefit Plan in compliance with all material applicable requirements of
ERISA and the Code and with all material applicable regulations promulgated
thereunder so that no failure to so comply will cause liability to any Guarantor
in excess of $5,000,000.00 or have a Material Adverse Effect. The Guarantors
shall provide to the Agent, within ten (10) days of the Agent's request, any
document, filing or correspondence relating to an Employee Benefit Plan which
the Agent reasonably requests. The Guarantors shall also provide to the Agent,
with in ten (10) days of filing or receipt, (i) any notice from the Department
of Labor or Internal Revenue Services of assessment or investigation regarding a
prohibited transaction under Section 4975 of the Code or Section 406 of ERISA,
(ii) any notice from a Multiemployer Plan of withdrawal with respect to a
Multiemployer Plan, (iii) notice from the Internal Revenue Service of imposition
of excise tax with respect to an Employee Benefit Plan, (iv) any Form 5500 filed
by any Guarantor with respect to an Employee Benefit Plan which includes a
qualified accountant's opinion, or (v) notice regarding a proposed termination
from the PBGC; provided, however, that items in (i)-(iii) need only be provided
if the events could result in Material Adverse Effect.
(b) None of the Guarantors shall engage in any transaction
which would cause any obligation, or action taken or to be taken, hereunder (or
the exercise by the Agent on behalf of the Lenders of any of its rights under
this Agreement or the other Basic Documents) to be a non-exempt (under a
statutory or administrative class exemption) prohibited transaction under ERISA
or result in a violation of a state statute regulating governmental plans that
would subject Lender to liability for a violation of ERISA or such a state
statute.
(c) SLT and the Trust further covenant and agree to deliver to
the Agent such certifications or other evidence from time to time throughout the
term of the Loan, as reasonably requested by the Agent in its sole discretion,
that (i) none of the Guarantors is an "employee benefit plan" as defined in
Section 3(3) of ERISA, which is subject to Title I of ERISA, or a "governmental
plan" within the meaning of Section 3(3) of ERISA; (ii) none of the Guarantors
is subject to state statutes applicable to any Guarantor regulating investments
and fiduciary obligations of any Guarantor with respect to government plans; and
(iii) with respect to each Guarantor, at least one of the following
circumstances is true:
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(1) Equity interests in such Guarantor are publicly
offered securities, within the meaning of 29 C.F.R. Section
2510.3-101(b)(2);
(2) Less than 25 percent of each outstanding class of
equity interests in such Guarantor are held by "benefit plan
investors" within the meaning of 29 C.F.R. Section
2510.3-101(f)(2); or
(3) Such Guarantor qualifies as an "operating
company" or a "real estate operating company" within the
meaning of 29 C.F.R. Section 2510.3-101(c) or (e) or an
investment company registered under The Investment Company Act
of 1940.
9.21 Modifications of Certain Documents. None of the Obligors will
consent to any modification, supplement or waiver of any of the provisions of
any agreement, instrument or other document evidencing or relating to any
Acquisition Loan, any Mortgage, any Mortgage Note or any Management Contracts or
franchise agreements without the prior consent of the Agent (with the approval
of the Majority Lenders), which consent and approval will not be unreasonably
withheld).
Section 10. Events of Default. If one or more of the following events
(herein called "Events of Default") shall occur and be continuing:
(a) The Company shall default in the payment of (i) any
principal of any Loan when due (whether at stated maturity or at
mandatory prepayment) or (ii) any interest on any Loan, any fee or any
other amount payable by it hereunder or under any other Basic Document
when due, and such default shall continue unremedied for five days; or
any Hotel Company shall default in the payment of any principal of any
Acquisition Loan when due (whether at stated maturity or at mandatory
or optional prepayment) or default in the payment of any interest on
any Acquisition Loan, any fee or any other amount payable by it
hereunder or under any other the applicable Acquisition Loan documents
when due, after giving effect to applicable grace period;
(b) Any Hotel Company (as applicable) shall default in the
performance of any of its obligations under Section 8 of the
Acquisition Loan agreement to which it is a party or any other material
obligation thereunder; or
(c) The Obligors or any of their Subsidiaries (the Obligors
and such Subsidiaries herein collectively called the "Relevant
Parties") shall default in the payment when due of any principal of or
interest on any of its (i) other Recourse Indebtedness aggregating
U.S.$5,000,000 (or the equivalent in other currencies) or more, or (ii)
non-Recourse Indebtedness aggregating U.S.$50,000,000 (or the
equivalent in other currencies), or (iii) non-Recourse Indebtedness
representing in excess of three financings; or any event specified in
any note, agreement, indenture or other document evidencing or relating
to any such Indebtedness
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shall occur if the effect of such event is to cause, or (with the
giving of any notice or the lapse of time or both) to permit the holder
or holders of such Indebtedness (or a trustee or agent on behalf of
such holder or holders) to cause, such Indebtedness to become due, or
to be prepaid in full (whether by redemption, purchase, offer to
purchase or otherwise), prior to its stated maturity; or
(d) Any representation, warranty or certification made or
deemed made herein or in any other Basic Document (or in any
modification or supplement hereto or thereto) by any Relevant Party, or
any certificate furnished to any Lender or the Agent pursuant to the
provisions hereof or thereof, shall prove to have been false or
misleading in any material respect; or
(e) Any Obligor (as applicable) shall default in the
performance of any of its obligations under any of Sections 9.01(e),
9.01(h), 9.05, 9.06, 9.07, 9.08, 9.09, 9.10, 9.11, 9.12, 9.13, 9.14,
9.15, 9.16, 9.18 or 9.21; or any Obligor shall default in the
performance of any of its other obligations in this Agreement or any
other Basic Document and such default shall continue unremedied for a
period of 30 or more days after notice thereof to the Company by the
Agent or any Lender (through the Agent); or
(f) Any Obligor shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
(g) The Company shall (i) become insolvent or generally fail
to pay, or admit in writing its inability or unwillingness to pay,
debts as they become due; (ii) apply for, consent to, or acquiesce in,
the appointment of a sindico, interventor, trustee, receiver,
sequestrator or other custodian for itself or a substantial part of its
property, or make a general assignment for the benefit of creditors;
(iii) in the absence of such application, consent or acquiescence,
permit or suffer to exist the appointment of a sindico, interventor,
trustee, receiver, sequestrator or other custodian for itself or for a
substantial part of its property, and such sindico, interventor,
trustee, receiver, sequestrator or other custodian shall not be
discharged within 60 days; or (iv) permit or suffer to exist the
commencement of any bankruptcy, suspension of payments, reorganization,
debt arrangement or other case or proceeding under the Ley de Quiebras
y Suspension de Pagos of Mexico or any other bankruptcy or insolvency
law, or any dissolution, winding up or liquidation proceeding, in
respect of itself, and, if any such case or proceeding is not commenced
by such Person, such case or proceeding shall be consented to or
acquiesced in by such Person or shall result in the entry of an order
for relief or shall remain for 60 days undismissed; or
(h) A proceeding or case shall be commenced, without the
application or consent of the Company, in any court of competent
jurisdiction, seeking (i) its reorganization, liquidation, dissolution,
arrangement or winding-up, or the composition or readjustment of its
debts, (ii) the appointment of a receiver,
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custodian, trustee, examiner, liquidator or the like of the Company or
of all or any substantial part of its Property, or (iii) similar relief
in respect of the Company under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of
debts, and such proceeding or case shall continue undismissed, or an
order, judgment or decree approving or ordering any of the foregoing
shall be entered and continue unstayed and in effect, for a period of
60 or more days; or
(i) A proceeding or case shall be commenced, without the
application or consent of the affected Obligor, in any court of
competent jurisdiction, seeking (i) its reorganization, liquidation,
dissolution, arrangement or winding-up, or the composition or
readjustment of its debts, (ii) the appointment of a receiver,
custodian, trustee, examiner, liquidator or the like of such Obligor or
of all or any substantial part of its Property, or (iii) similar relief
in respect of such Obligor under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of
debts, and such proceeding or case shall continue undismissed, or an
order, judgment or decree approving or ordering any of the foregoing
shall be entered and continue unstayed and in effect, for a period of
60 or more days; or an order for relief against any Obligor shall be
entered in an involuntary case under the Bankruptcy Code; or
(j) Any Guarantor shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee, examiner or liquidator of itself or of all or a substantial
part of its Property, (ii) make a general assignment for the benefit of
its creditors, (iii) commence a voluntary case under the Bankruptcy
Code, (iv) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, liquidation,
dissolution, arrangement or winding-up, or composition or readjustment
of debts, (v) fail to controvert in a timely and appropriate manner, or
acquiesce in writing to, any petition filed against it in an
involuntary case under the Bankruptcy Code or (vi) take any corporate
action for the purpose of effecting any of the foregoing; or
(k) A proceeding or case shall be commenced, without the
application or consent of the affected Guarantor, in any court of
competent jurisdiction, seeking (i) its reorganization, liquidation,
dissolution, arrangement or winding-up, or the composition or
readjustment of its debts, (ii) the appointment of a receiver,
custodian, trustee, examiner, liquidator or the like of such Guarantor
or of all or any substantial part of its Property, or (iii) similar
relief in respect of such Guarantor under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any
of the foregoing shall be entered and continue unstayed and in effect,
for a period of 60 or more days; or an order for relief against any
Guarantor shall be entered in an involuntary case under the Bankruptcy
Code; or
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(l) A final judgment or judgments for the payment of money in
excess of U.S.$5,000,000 (or the equivalent in other currencies) in the
aggregate shall be rendered by one or more courts, administrative
tribunals or other bodies having jurisdiction against any Relevant
Party and the same shall not be discharged (or provision shall not be
made for such discharge), or a stay of execution thereof shall not be
procured, within 30 days from the date of entry thereof and such
Relevant Party shall not, within said period of 30 days, or such longer
period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during
such appeal; or
(m) A Change in Control has occurred; or
(n) The Trust fails to remain a publicly-traded real estate
investment trust or the Trust and the Corporation fail to remain in
good standing with the New York Stock Exchange and with the Securities
and Exchange Commission or (ii) their shares fail to continue to trade
as "paired shares"; or
(o) (i) Any Termination Event shall occur, or (ii) any Plan
shall incur an accumulated funding deficiency (as defined in Section
412 of the Code or Section 302 of ERISA) whether or not waived, or fail
to make a required installment payment on or before the due date under
Section 412 of the Code or Section 302 of ERISA, or (iii) any of the
Guarantors or a member of their respective ERISA Controlled Group shall
have engaged in a transaction which is prohibited under Section 4975 of
the code or Section 406 of ERISA and an exemption shall not be
applicable or have been obtained under Section 408 of ERISA or Section
4975 of the Code, or (iv) any of the Guarantors or any member of their
respective ERISA Controlled Group shall fail to pay when due an amount
which it shall have become liable to pay to the PBGC, any Plan, any
Multiemployer Plan, or a trust established under Section 4049 of ERISA,
or (v) any Guarantor shall have received a notice from the PBGC of its
intention to terminate a Plan or to appoint a trustee to administer
such Plan, or Multiemployer Plan which notice shall not have been
withdrawn within fourteen (14) days after the date thereof, or (vi) a
condition shall exist by reason of which the PBGC would be entitled to
obtain a decree adjudicating that a Plan must be terminated or have a
trustee appointed to administer any Plan, or (vii) any of the
Guarantors or a member of their respective ERISA Controlled Group
suffers a partial or complete withdrawal from a Multiemployer Plan or
is in default (as defined in Section 4219(c)(5) of ERISA) with respect
to payments to a Multiemployer Plan, or (viii) a proceeding shall be
instituted against any of the Guarantors, which proceeding is
reasonably likely to succeed, to enforce Section 515 of ERISA, or (ix)
any other event or condition shall occur or exist with respect to any
Employee Benefit Plan or Plan, any Multiemployer Plan, which could
reasonably be expected to subject any of the Guarantors or any member
of their respective ERISA Controlled Group to any tax, penalty or other
liability
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(other than annual contributions or which is not an Event of Default
otherwise under this clause) or the imposition of any lien or security
interest on any of the of the Guarantors or any member of their
respective ERISA Controlled Group, or (x) with respect to any
Multiemployer Plan, the institution of a proceeding to enforce Section
515 of ERISA, which proceeding is reasonably likely to succeed, to
terminate such Plan, the receipt of a notice of reorganization or
insolvency under Sections 4241 or 4245 of ERISA, in any event;
provided, however, that events or circumstances in subclauses (i)
through (x) shall only be an Event of Default if it results in or is
reasonably expected to result in liability to any Guarantor in excess
of $5,000,000.00 or if it has or is likely to have a Material Adverse
Effect; or (xi) the assets of any Guarantor become or are deemed to be
assets of an Employee Benefit Plan. No Event of Default under this
clause shall be deemed to have been or be waived or corrected because
of any disclosure by any Guarantor.
(p) The Liens created by the Security Documents shall at any
time not constitute a valid and, with respect to the equity interests
pledged to the Agent under the SLC Mexico Pledge Agreement or the SLT
Realty Pledge Agreement, perfected Lien on the collateral intended to
be covered thereby in favor of the Agent, free and clear of all other
Liens (other than Liens under the respective Security Documents), or,
except for expiration in accordance with its terms, any of the Security
Documents shall for whatever reason be terminated or cease to be in
full force and effect, or the enforceability thereof shall be contested
by any Obligor; or
(q) Any license, consent, authorization, registration or
approval at any time necessary to enable the Company or any Guarantor
to comply with any of its obligations under this Agreement or any other
Basic Document shall be revoked, withdrawn or withheld for a period in
excess of 30 days after the Company or any Guarantor was notified of
such revocation or withdrawal, or shall be modified or amended in a
manner prejudicial, in the opinion of the Majority Lenders, to the
interests of the Lenders hereunder; or
(r) Any governmental authority shall take any action to
condemn, seize, nationalize or appropriate any substantial portion of
the Property of the Company, SLC Mexico or any Hotel Company (either
with or without payment of compensation); or the Company, SLC Mexico or
any Hotel Company shall be prevented from exercising normal control
over all or a substantial party of its Property (and the same shall
continue for 15 or more days); or
(s) Mexico or any competent authority thereof shall declare a
moratorium on the payment of indebtedness by Mexico or any governmental
agency or authority thereof or corporations therein and as a
consequence the Company fails to pay the Loans in U.S. dollars; or
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(t) A reasonable basis shall exist for the assertion against
any Obligor or any of their Subsidiaries, or any predecessor in
interest of any Obligor or any of their Subsidiaries or Affiliates, of
(or there shall have been asserted against any Obligor or any of their
Subsidiaries) an Environmental Claim that, in the judgment of the
Majority Lenders is reasonably likely to be determined adversely to the
applicable Obligor or Subsidiary, and the amount thereof (either
individually or in the aggregate) is reasonably likely to have a
Material Adverse Effect (insofar as such amount is payable by such
Obligor or Subsidiary but after deducting any portion thereof that is
reasonably expected to be paid by other creditworthy Persons jointly
and severally liable therefor);
THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (j) or (k) of this Section 10 the Agent may, and, if so requested by the
Majority Lenders, shall, by notice to the Company, terminate the Commitments
and/or declare the principal amount then outstanding of, and the accrued
interest on, the Loans and all other amounts payable by the Obligors hereunder
and under the Notes (including, without limitation, any amounts payable under
Section 5.04 hereof) to be forthwith due and payable, whereupon such amounts
shall be immediately due and payable without presentment, demand, protest or
other formalities of any kind, all of which are hereby expressly waived by each
Obligor; and (2) in the case of the occurrence of an Event of Default referred
to in clause (j) or (k) of this Section 10 with respect to any Obligor, the
Commitments shall automatically be terminated and the principal amount then
outstanding of, and the accrued interest on, the Loans and all other amounts
payable by the Obligors hereunder and under the Notes (including, without
limitation, any amounts payable under Section 5.04 hereof) shall automatically
become immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by each
Obligor; and (3) in the case of the occurrence of an Event of Default referred
to in clauses (a), (b), (c), (d), (e) (f), (g), (h), (i), (j), (k), (m), (n),
(p), (r) or (s), the Agent may, and if so requested by the Majority Lenders,
shall, cause the Mortgages to be registered with the applicable public registry
of property, at the expense of the Obligors, and the cost and expense associated
with such registration shall be for the account of the Obligors and shall
constitute a Guaranteed Obligation hereunder.
Section 11. The Agent.
11.01 Appointment, Powers and Immunities. Each Lender hereby
irrevocably appoints and authorizes the Agent to act as its agent hereunder and
under the other Basic Documents with such powers as are specifically delegated
to the Agent by the terms of this Agreement and of the other Basic Documents,
together with such other powers as are reasonably incidental thereto. The Agent
(which term as used in this sentence and in Section 11.05 and the first sentence
of Section 11.06 hereof shall include reference to its affiliates and its own
and its affiliates' officers, directors,
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employees and agents): (a) shall have no duties or responsibilities except those
expressly set forth in this Agreement and in the other Basic Documents, and
shall not by reason of this Agreement or any other Basic Document be a trustee
for any Lender; (b) shall not be responsible to the Lenders for any recitals,
statements, representations or warranties contained in this Agreement or in any
other Basic Document, or in any certificate or other document referred to or
provided for in, or received by any of them under, this Agreement or any other
Basic Document, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, any Note or any other Basic
Document or any other document referred to or provided for herein or therein or
for any failure by the Company or any other Person to perform any of its
obligations hereunder or thereunder; (c) shall not be required to initiate or
conduct any litigation or collection proceedings hereunder or under any other
Basic Document; and (d) shall not be responsible for any action taken or omitted
to be taken by it hereunder or under any other Basic Document or under any other
document or instrument referred to or provided for herein or therein or in
connection herewith or therewith, except for its own gross negligence or willful
misconduct. The Agent may employ agents and attorneys-in-fact and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith. The Agent may deem and treat the
payee of any Note as the holder thereof for all purposes hereof unless and until
a notice of the assignment or transfer thereof shall have been filed with the
Agent.
11.02 Reliance by Agent. The Agent shall be entitled to rely upon any
certification, notice or other communication (including, without limitation, any
thereof by telephone, facsimile, telex, telegram or cable) believed by it to be
genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by the Agent. As to any
matters not expressly provided for by this Agreement or any other Basic
Document, the Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder or thereunder in accordance with instructions
given by the Majority Lenders or, if provided herein, in accordance with the
instructions given by all of the Lenders and such instructions of such Lenders
and any action taken or failure to act pursuant thereto shall be binding on all
of the Lenders.
11.03 Defaults. The Agent shall not be deemed to have knowledge or
notice of the occurrence of a Default unless the Agent has received notice from
a Lender or the Company specifying such Default and stating that such notice is
a "Notice of Default". In the event that the Agent receives such a notice of the
occurrence of a Default, the Agent shall give prompt notice thereof to the
Lenders. The Agent shall (subject to Section 11.07 hereof) take such action with
respect to such Default as shall be directed by the Majority Lenders provided
that, unless and until the Agent shall have received such directions, the Agent
may (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Default as it shall deem advisable in the best
interest of the Lenders except to the extent that this Agreement expressly
requires that such action be taken, or not be taken, only with the consent or
upon the authorization of the Majority Lenders or all of the Lenders.
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11.04 Rights as a Lender. With respect to its Commitment and the Loan
made by it, (and any successor acting as Agent) in its capacity as a Lender
hereunder shall have the same rights and powers hereunder as any other Lender
and may exercise the same as though Bancomer, S.A. were not acting as the Agent,
and the term "Lender" or "Lenders" shall, unless the context otherwise
indicates, include Bancomer, S.A. in its individual capacity. Bancomer, S.A.
(and any successor acting as Agent) and its affiliates may (without having to
account therefor to any Lender) accept deposits from, lend money to, make
investments in and generally engage in any kind of banking or other business
with the Obligors (and any of their Subsidiaries or Affiliates) as if it were
not acting as the Agent, and Bancomer, S.A. and its affiliates may accept fees
and other consideration from the Obligors for services in connection with this
Agreement or otherwise without having to account for the same to the Lenders.
11.05 Indemnification. The Lenders agree to indemnify the Agent (to the
extent not reimbursed under Section 12.03 hereof, but without limiting the
obligations of the Company under said Section 12.03) ratably in accordance with
the aggregate principal amount of the Loans held by the Lenders (or, if no Loans
are at the time outstanding, ratably in accordance with their respective
Commitments), for any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever that may be imposed on, incurred by or asserted
against the Agent (including by any Lender) arising out of or by reason of any
investigation in or in any way relating to or arising out of this Agreement or
any other Basic Document or any other documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby (including,
without limitation, the costs and expenses that the Company is obligated to pay
under Section 12.03 hereof but excluding, unless a Default has occurred and is
continuing, normal administrative costs and expenses incident to the performance
of its agency duties hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, provided that no Lender shall be liable
for any of the foregoing to the extent they arise from the gross negligence or
willful misconduct of the party to be indemnified.
11.06 Non-Reliance on Agent and Other Lenders. Each Lender agrees that
it has, independently and without reliance on the Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Parent and its Subsidiaries and decision to enter
into this Agreement and that it will, independently and without reliance upon
the 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 or under any other
Basic Document. The Agent shall not be required to keep itself informed as to
the performance or observance by any Obligor of this Agreement or any of the
other Basic Documents or any other document referred to or provided for herein
or therein or to inspect the Properties or books of the Parent or any of its
Subsidiaries. Except for notices, reports and other documents and information
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expressly required to be furnished to the Lenders by the Agent hereunder or
under the Security Documents, the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition or business of the Parent or any of
its Subsidiaries (or any of their affiliates) that may come into the possession
of the Agent or any of its affiliates.
11.07 Failure to Act. Except for action expressly required of the Agent
hereunder and under the other Basic Documents, the Agent shall in all cases be
fully justified in failing or refusing to act hereunder and thereunder unless it
shall receive further assurances to its satisfaction from the Lenders of their
indemnification obligations under Section 11.05 hereof against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action.
11.08 Resignation of Agent. Subject to the appointment and acceptance
of a successor Agent as provided below, the Agent may resign at any time by
giving notice thereof to the Lenders and the Company. Upon any such resignation,
the Majority Lenders shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Majority Lenders and shall
have accepted such appointment within 30 days after the retiring Agent's giving
of notice of resignation, then the retiring Agent may, on behalf of the Lenders,
appoint a successor Agent, that shall be a financial institution that has an
office in New York, New York. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Section 11 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as the Agent.
11.09 Consents under Other Basic Documents. Except as otherwise
provided in Section 12.05 hereof with respect to this Agreement, the Agent may,
with the prior consent of the Majority Lenders (but not otherwise), consent to
any modification, supplement or waiver under any of the Basic Documents,
provided that, without the prior consent of each Lender, the Agent shall not
(except as provided herein or in the Security Documents) release any collateral
or otherwise terminate any Lien under any Basic Document providing for
collateral security, or agree to additional obligations being secured by such
collateral security, except that no such consent shall be required, and the
Agent is hereby authorized, to release any Lien covering Property that is the
subject of a disposition of Property permitted hereunder or to which the
Majority Lenders have consented.
Section 12. Miscellaneous.
12.01 Waiver. No failure on the part of the Agent or any Lender to
exercise and
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no delay in exercising, and no course of dealing with respect to, any right,
power or privilege under this Agreement or any Note shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under this Agreement or any Note preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
12.02 Notices. All notices, requests and other communications provided
for herein and under the Security Documents (including, without limitation, any
modifications of, or waivers, requests or consents under, this Agreement) shall
be given or made in writing (including, without limitation, by facsimile)
delivered to the intended recipient at the "Address for Notices" specified below
its name on the signature pages hereof (below the name of the Company, in the
case of any Guarantor); or, as to any party, at such other address as shall be
designated by such party in a notice to each other party. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given when transmitted by facsimile or personally delivered or, in the case
of a mailed notice, upon receipt, in each case given or addressed as aforesaid.
12.03 Expenses. The Company agrees to pay or reimburse each of the
Lenders and the Agent for:
(a) all reasonable out-of-pocket costs and expenses of the
Agent (including, without limitation, the reasonable fees and expenses
of Mayer, Brown & Platt, special New York counsel to Bancomer, S.A.,
and Borbolla y Asociados, special Mexican counsel to Bancomer, S.A.) in
connection with (i) the negotiation, preparation, execution and
delivery of this Agreement and the other Basic Documents and the making
of the Loans hereunder and (ii) the negotiation or preparation of any
modification, supplement or waiver of any of the terms of this
Agreement or any of the other Basic Documents (whether or not
consummated);
(b) all reasonable out-of-pocket costs and expenses of the
Lenders and the Agent (including, without limitation, the reasonable
fees and expenses of legal counsel) in connection with (i) any Default
and any enforcement or collection proceedings resulting therefrom,
including, without limitation, all manner of participation in or other
involvement with (x) bankruptcy, insolvency, receivership, foreclosure,
winding up or liquidation proceedings, (y) judicial or regulatory
proceedings and (z) workout, restructuring or other negotiations or
proceedings (whether or not the workout, restructuring or transaction
contemplated thereby is consummated) and (ii) the enforcement of this
Section 12.03; and
(c) when required pursuant to Section 10 hereof, all transfer,
stamp, documentary or other similar taxes, assessments or charges
levied by any
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governmental or revenue authority in respect of this Agreement or any
of the other Basic Documents or any other document referred to herein
or therein and all costs, expenses, taxes, assessments and other
charges incurred in connection with any filing, registration, recording
or perfection of any security interest contemplated by any Basic
Document or any other document referred to therein.
12.04 Indemnification. Each Obligor hereby agrees to indemnify the
Agent and each Lender and their respective directors, officers, employees,
attorneys and agents from, and hold each of them harmless against, any and all
losses, liabilities, claims, damages or expenses incurred by any of them arising
out of or by reason of any investigation or litigation or other proceedings
arising from the breach, violation or non-compliance with Environmental Laws
(including any threatened investigation or litigation or other proceedings)
relating to the Loans hereunder or any actual or proposed use by the Company of
the proceeds of any of the Loans hereunder, including, without limitation, the
reasonable fees and disbursements of counsel incurred in connection with any
such investigation or litigation or other proceedings (but excluding any such
losses, liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified).
12.05 Amendments, Etc. Except as otherwise expressly provided in this
Agreement, any provision of this Agreement may be modified or supplemented only
by an instrument in writing signed by the Company, the Agent and the Majority
Lenders, or by the Company and the Agent acting with the consent of the Majority
Lenders, and any provision of this Agreement may be waived by the Majority
Lenders or by the Agent acting with the consent of the Majority Lenders;
provided that:
(a) no modification, supplement or waiver shall, unless by an
instrument signed by all of the affected Lenders or by the Agent acting
with the consent of all of the affected Lenders: (i) increase, or
extend the term of any of the Commitments, or extend the time or waive
any requirement for the reduction or termination of any of the
Commitments, (ii) extend the date fixed for the payment of principal of
or interest on any Loan or any fee hereunder, (iii) reduce the amount
of any such payment of principal, (iv) reduce the rate at which
interest is payable thereon or any fee is payable hereunder, (v) alter
the rights or obligations of the Company to prepay Loans, (vi) alter
the terms of this Section 12.05, (vii) modify the definition of the
term "Majority Lenders", or modify in any other manner the number or
percentage of the Lenders required to make any determinations or waive
any rights hereunder or to modify any provision hereof, (viii) waive
any of the conditions precedent set forth in Section 7 hereof, or (ix)
release any Guarantor from its obligations under Section 6 hereof;
(b) any modification or supplement of Section 11 hereof shall
require the consent of the Agent; and
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(c) any modification or supplement of Section 6 hereof shall
require the consent of each Guarantor.
12.06 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
12.07 Assignments and Participations.
(a) No Obligor may assign any of its rights or obligations hereunder or
under the Notes without the prior consent of all of the Lenders and the Agent.
(b) Each Lender may assign any of its Loan and its Note with the
consent of the Agent and the Company (which consent shall not be unreasonably
withheld); provided that (i) any assignment by a Lender to another Lender shall
not require the Agent's consent; (ii) any partial assignment shall be in an
amount at least equal to U.S.$10,000,000; (iii) each such assignment by a Lender
of its Loan and its Note shall be made in such manner so that the same portion
of its Loans and the Note is assigned to the respective assignee; and (iv) no
such assignment may be made except to a financial institution that is (a)
registered with the Mexican Secretaria de Hacienda y Credito Publico for
purposes of Article 154, Section I of the Mexican income tax law (Ley de
Impuesto Sobre la Renta) and (b) a resident for tax purposes of a jurisdiction
with which Mexico has in effect a treaty for the avoidance of double taxation.
Upon execution and delivery by the assignee to the Company and the Agent of an
instrument in writing pursuant to which such assignee agrees to become a
"Lender" hereunder (if not already a Lender) having the Loan specified in such
instrument, and upon notice thereof to the Company and the Agent, the assignee
shall have, to the extent of such assignment, the obligations, rights and
benefits of a Lender hereunder holding the Loan (or portions thereof) assigned
to it (in addition to the Loan, if any, theretofore held by such assignee). Upon
each such assignment the assigning Lender shall pay the Agent an assignment fee
of $3,000.
(c) A Lender may sell or agree to sell to one or more other Persons a
participation in all or any part of any Loan held by it, in which event each
purchaser of a participation (a "Participant") (which participation may not be
made to a financial institution that is not (a) registered with the Mexican
Secretaria de Hacienda y Credito Publico for purposes of Article 154, Section I
of the Mexican income tax law (Ley de Impuesto Sobre la Renta) and (b) a
resident for tax purposes of a jurisdiction with which Mexico has in effect a
treaty for the avoidance of double taxation) shall be entitled to the rights and
benefits of the provisions of Section 9.01(g) hereof with respect to its
participation in such Loan as if (and the Company shall be directly obligated to
such Participant under such provisions as if) such Participant were a "Lender"
for purposes of said Section, but, except as otherwise provided in Section
4.07(c) hereof, shall not have any other rights or benefits under this Agreement
or any Note or any other Basic
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<PAGE> 80
Document (the Participant's rights against such Lender in respect of such
participation to be those set forth in the agreements executed by such Lender in
favor of the Participant). All amounts payable by the Company to any Lender
under Section 5 hereof in respect of a Loan held by it, shall be determined as
if such Lender had not sold or agreed to sell any participations in such Loan
and as if such Lender were funding each of such Loan in the same way that it is
funding the portion of such Loan in which no participations have been sold. In
no event shall a Lender that sells a participation agree with the Participant to
take or refrain from taking any action hereunder or under any other Basic
Document except that such Lender may agree with the Participant that it will
not, without the consent of the Participant, agree to (i)) extend the date fixed
for the payment of principal of or interest on the Loan or any portion of any
fee hereunder payable to the Participant, (ii) reduce the amount of any such
payment of principal, (iii) reduce the rate at which interest is payable
thereon, or any fee hereunder payable to the Participant, to a level below the
rate at which the Participant is entitled to receive such interest or fee, (iv)
alter the rights or obligations of the Company to prepay the Loans or (v)
consent to any modification, supplement or waiver hereof or of any of the other
Basic Documents to the extent that the same, under Section 11.09 or 12.05
hereof, requires the consent of each Lender.
(d) In addition to the assignments and participations permitted under
the foregoing provisions of this Section 12.07, any Lender may (without notice
to the Company, the Agent or any other Lender and without payment of any fee)
(i) assign and pledge all or any portion of its Loan and its Note to any Federal
Reserve Bank as collateral security pursuant to Regulation A and any Operating
Circular issued by such Federal Reserve Bank and (ii) assign all or any portion
of its rights under this Agreement and its Loan and its Note to an affiliate. No
such assignment shall release the assigning Lender from its obligations
hereunder.
(e) A Lender may furnish any information concerning the Obligors in the
possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants).
(f) Anything in this Section 12.07 to the contrary notwithstanding, no
Lender may assign or participate any interest in any Loan held by it hereunder
to the Guarantors, the Company or any of their Affiliates or Subsidiaries
without the prior consent of each Lender.
12.08 Survival. The obligations of the Company under Sections 5.01,
5.03, 5.04,12.03 and 12.04 hereof, the obligations of each Guarantor under
Section 6.03 hereof, and the obligations of the Lenders under Section 11.05
hereof shall survive the repayment of the Loans and the termination of the
Commitments. In addition, each representation and warranty made, or deemed to be
made by a notice of any Loan, herein or pursuant hereto shall survive the making
of such representation and warranty, and no Lender shall be deemed to have
waived, by reason of making any Loan, any Default that may arise by reason of
such representation or warranty proving to have
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<PAGE> 81
been false or misleading, notwithstanding that such Lender or the Agent may have
had notice or knowledge or reason to believe that such representation or
warranty was false or misleading at the time such Loan was made.
12.09 Captions. The table of contents and captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.
12.10 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
12.11 Judgment Currency. This is an international loan transaction in
which the specification of Dollars and payment in New York City is of the
essence, and the obligations of the Obligors under this Agreement to make
payment to (or for the account of) a Lender in Dollars shall not be discharged
or satisfied by any tender or recovery pursuant to any judgment expressed in or
converted into any other currency or in another place except to the extent that
such tender or recovery results in the effective receipt by such Lender in New
York City of the full amount of Dollars payable to such Lender under this
Agreement. If for the purpose of obtaining judgment in any court it is necessary
to convert a sum due hereunder in Dollars into another currency (in this Section
12.11 called the "judgment currency"), the rate of exchange that shall be
applied shall be that at which in accordance with normal banking procedures the
Agent could purchase such Dollars at its New York City office with the judgment
currency on the Business Day next preceding the day on which such judgment is
rendered. The obligation of the Obligors in respect of any such sum due from it
to the Agent or any Lender hereunder or under any Basic Document (in this
Section 12.11 called an "Entitled Person") shall, notwithstanding the rate of
exchange actually applied in rendering such judgment, be discharged only to the
extent that on the Business Day following receipt by such Entitled Person of any
sum adjudged to be due hereunder in the judgment currency such Entitled Person
may in accordance with normal banking procedures purchase and transfer Dollars
to New York City with the amount of the judgment currency so adjudged to be due;
and each of the Obligors hereby, as a separate obligation and notwithstanding
any such judgment, agrees to indemnify such Entitled Person against, and to pay
such Entitled Person on demand, in Dollars, the amount (if any) by which the sum
originally due to such Entitled Person in Dollars hereunder exceeds the amount
of the Dollars so purchased and transferred.
12.12 Governing Law. Each of the parties hereto agrees that, pursuant
to New York State General Obligations Law Section 5-1401, this Agreement shall
be governed by, and construed in accordance with, the law of the State of New
York, United States of America.
12.13 Jurisdiction; Service of Process; Venue.
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<PAGE> 82
(a) Each of the parties hereto agrees that any suit, action or
proceeding with respect to this Agreement, any Note, any other Basic Document or
any judgment entered by any court in respect of any thereof may be brought in
the Supreme Court of the State of New York, County of New York or in the United
States District Court for the Southern District of New York, as the party
commencing such suit, action or proceeding may elect in its sole discretion; and
each of the parties hereto hereby irrevocably submits to the jurisdiction of
such courts for the purpose of any suit, action, proceeding or judgment.
(b) Each Obligor hereby agrees that service of all writs, process and
summonses in any such suit, action or proceeding brought in the State of New
York may be made upon CT Corporation, presently located at 1633 Broadway, New
York, New York 10019, U.S.A. (the "Process Agent"), and each Obligor hereby
confirms and agrees that the Process Agent has been duly and irrevocably
appointed as its agent and true and lawful attorney-in-fact in its name, place
and stead to accept such service of any and all such writs, process and
summonses, and agrees that the failure of the Process Agent to give any notice
of any such service of process to such Obligor shall not impair or affect the
validity of such service or of any judgment based thereon. Each Obligor hereby
further irrevocably consents to the service of process in any suit, action or
proceeding in said courts by the mailing thereof by the Agent or any Lender by
registered or certified mail, postage prepaid, at its address set forth beneath
its signature hereto.
(c) Nothing herein shall in any way be deemed to limit the ability of
the Agent or any Lender to serve any such writs, process or summonses in any
other manner permitted by applicable law or to obtain jurisdiction over any
Obligor in such other jurisdictions, and in such manner, as may be permitted by
applicable law.
(d) Each Obligor hereby irrevocably waives any objection that it may
now or hereafter have to the laying of the venue of any suit, action or
proceeding arising out of or relating to this Agreement, the Notes or any other
Basic Document brought in the Supreme Court of the State of New York, County of
New York or in the United States District Court for the Southern District of New
York, and hereby further irrevocably waives any claim that any such suit, action
or proceeding brought in any such court has been brought in an inconvenient
forum.
(e) Each Obligor irrevocably waives, to the fullest extent permitted by
applicable law, any claim that any action or proceeding commenced by the Agent
or any Lender relating in any way to this Agreement should be dismissed or
stayed by reason, or pending the resolution, of any action or proceeding
commenced by any Obligor relating in any way to this Agreement whether or not
commenced earlier. To the fullest extent permitted by applicable law, the
Obligors shall take all measures necessary for any such action or proceeding
commenced by the Agent or any Lender to proceed to judgment prior to the entry
of judgment in any such action or proceeding commenced
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<PAGE> 83
by any Obligor.
12.14 No Immunity. To the extent that any Obligor may be or become
entitled, in any jurisdiction in which judicial proceedings may at any time be
commenced with respect to this Agreement or any other Basic Document, to claim
for itself or its Property any immunity from suit, court jurisdiction,
attachment prior to judgment, attachment in aid of execution of a judgment,
execution of a judgment or from any other legal process or remedy relating to
its obligations under this Agreement or any other Basic Document, and to the
extent that in any such jurisdiction there may be attributed such an immunity
(whether or not claimed), each of the Obligors hereby irrevocably agrees not to
claim and hereby irrevocably waives such immunity to the fullest extent
permitted by the laws of such jurisdiction and agrees that the foregoing waiver
shall have the fullest extent permitted under the Foreign Sovereign Immunities
Act of 1976 of the United States of America and is intended to be irrevocable
for purposes of such Act.
12.15 Waiver of Jury Trial. EACH OF THE OBLIGORS, THE AGENT AND THE
LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
12.16 The Trustee of the Trust. The Lenders each acknowledge and agree
that the name "Starwood Lodging Trust" is a designation of the real estate
investment trust and its trustees (as trustees but not personally) under a
Declaration of Trust dated August 25, 1969, as amended and restated 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 be further amended from time to time, and all
persons dealing with the Trust shall look solely to the Trust's assets for the
enforcement of any claims against the Trust, as the trustees, officers, agents
and security holders of the Trust assume no personal liability for obligations
entered into on behalf of the Trust, and their respective individual assets
shall not be subject to the claims of any person relating to such obligations.
The foregoing shall govern all direct and indirect obligations of the Trust
under the Basic Documents.
12.17 Use of English Language. This Agreement has been negotiated and
executed in the English language. All certificates, reports, notices and other
documents and communications given or delivered pursuant to this Agreement shall
be in the English language, or accompanied by a certified English translation
thereof. Except in the case of laws of, or official communications of, Mexico,
in the case of any document originally issued in a language other than English,
the English language version of any such document shall for purposes of this
Agreement, and absent manifest error, control the meaning of the matters set
forth therein.
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<PAGE> 84
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
COMPANY
SLT MEXICO, S. de R.L. de C.V.
By:
Title:
Address for Notices:
Attention:
Facsimile No.:
Telephone No.:
-84-
<PAGE> 85
GUARANTORS
STARWOOD LODGING TRUST
By:
Title:
Address for Notices:
Attention:
Facsimile No.:
Telephone No.:
SLT REALTY LIMITED PARTNERSHIP
By:
Title:
Address for Notices:
Attention:
Facsimile No.:
Telephone No.:
-85-
<PAGE> 86
LENDERS
Commitment: BANCOMER, S.A., Cayman Islands
Branch
U.S.$118,750,000
By:
Title:
Lending Office:
Address for Notices:
Attention:
Facsimile No.:
Telephone No.:
-86-
<PAGE> 87
BANCOMER, S.A., as Agent
By:
Title:
Address for Notices to Bancomer,
S.A. as Agent:
Attention:
Facsimile No.:
Telephone No.:
-87-
<PAGE> 1
Exhibit 10.46
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is made as of the 10th
day of October, 1997, by and among Starwood Lodging Trust, a Maryland real
estate investment trust (the "Trust"), Starwood Lodging Corporation, a Maryland
corporation (the "Corporation") (the Trust and the Corporation, being
collectively referred to as the "Company"), and UBS Limited, an English
corporation ("UBS Limited") and Union Bank of Switzerland, London Branch, acting
through its agent UBS Securities LLC ("UBS-LB") (UBS Limited and UBS-LB being
hereinafter collectively called the "UBS Parties" and sometimes individually, a
"UBS Party"). References herein to the "Company" refer to the Trust and the
Corporation, and those entities respectively owned or controlled by the Trust or
the Corporation.
IN CONSIDERATION of the mutual covenants contained in this
Purchase Agreement, the Trust, the Corporation and the UBS Parties agree as
follows:
SECTION 1. Authorization of Sale of the Shares.
Subject to the terms and conditions of this Agreement, the Trust has authorized
the issuance to UBS Limited of up to an aggregate of 2,500,000 shares of
beneficial interest, $.01 par value per share, of the Trust (the "Trust Shares")
and the Corporation has authorized the issuance to UBS of up to an aggregate of
2,500,000 shares of Common Stock, par value $0.01 per share (the "Corporation
Shares"), which Trust Shares and Corporation Shares are paired and traded as a
unit consisting of one (1) Trust Share and one (1) Corporation Share
(hereinafter each such paired unit is referred to as a "Paired Share" and the
Paired Shares referred to in this sentence are herein called the "Purchase
Shares"). In addition, the Trust and the Corporation may issue to UBS-LB
additional Paired Shares in settlement of certain of its obligations under the
Forward Stock Purchase Agreement, dated October 15, 1997 (the "Forward Stock
Purchase Agreement"), among the Trust, the Corporation and UBS-LB (the
"Additional Shares"). The Purchase Shares and the Additional Shares are
hereinafter collectively called the "Shares".
SECTION 2. Agreement to Sell and Purchase the
Purchase Shares. Subject to the terms and conditions of this Agreement, on the
Closing Date (as defined in Section 3 hereof), the Company will sell to UBS
Limited the Purchase Shares, the number of which shall equal 2,185,000 shares
for a per share purchase price of $57.25 per share. Pursuant to the direction of
the Company, the purchase price per Paired Share shall be allocated 95% to the
Trust and 5% to the Corporation.
SECTION 3. Delivery of the Shares at the Closing.
3.1. Closing. The completion of the purchase and sale
of the Purchase Shares (the "Closing") shall occur as soon as practicable, on
such date to be agreed upon among the Trust, the Corporation and the UBS
Parties, but in no event later than the earlier of (i) October 15, 1997 or (ii)
three business days after the execution of this Agreement (hereinafter, the
"Closing Date").
3.2. Conditions. At Closing, the Trust and
Corporation shall deliver or
<PAGE> 2
cause to be delivered to the UBS Limited one or more stock certificates
registered in the name of UBS Limited representing the number of Purchase Shares
set forth in Section 2 above.
The obligation of the Trust and the Corporation to complete
the sale of the Purchase Shares and deliver such stock certificate(s) to UBS
Limited at the Closing shall be subject to the following conditions, any one or
more of which may be waived by both the Trust and the Corporation acting
together: (i) receipt by the Company of Federal Funds (or other mutually agreed
upon form of payment) in the full amount of the purchase price for the Purchase
Shares being purchased hereunder, (ii) the accuracy in all material respects, as
of the Closing Date, of the representations and warranties made by the UBS
Parties herein and the fulfillment, in all material respects, as of the Closing
Date, of those undertakings of the UBS Parties to be fulfilled prior to the
Closing, (iii) the Forward Stock Purchase Agreement shall have been fully
executed by the parties thereto and (iv) receipt by the Company of a
cross-receipt with respect to the Purchase Shares executed by UBS Limited.
UBS Limited's obligation to accept delivery of such stock
certificate(s) and to pay for the Purchase Shares evidenced thereby shall be
subject to the following conditions: (i) the accuracy in all material respects,
as of the Closing Date, of the representations and warranties made by the Trust
and the Corporation herein and the fulfillment in all material respects, as of
the Closing Date, of those undertakings of the Company to be fulfilled prior to
Closing; and (ii) the UBS Parties shall have received all opinions and
certificates to be delivered pursuant to this Agreement.
SECTION 4. Representations, Warranties and Covenants
of the Trust. The Trust hereby represents and warrants to, and covenants with,
the UBS Parties as follows:
4.1. Organization and Qualification. The Trust has
been formed as a real estate investment trust under Maryland law pursuant to a
Declaration of Trust filed as of August 15, 1969 in the office of the Maryland
Secretary of State, as amended and restated as of June 6, 1988 and filed in the
office of the Maryland Secretary of State on such date, and as further amended
as of February 1, 1995. The Trust's existence has not been suspended or
terminated nor have any dissolution, revocation or forfeiture proceedings
regarding the Trust been commenced. The Trust has been duly qualified to do
business in each jurisdiction (i) wherein it owns, leases or manages real
property or (ii) where the failure so to qualify to do business would have a
material adverse effect on the financial condition, business, operations or
prospects of the Company taken as a whole (a "Material Adverse Effect").
4.2. Authorized Capital Stock. The Trust has
125,000,000 authorized shares as of July 31, 1997, consisting of 100,000,000
Trust Shares, par value $0.01 per share, 20,000,000 Excess Trust Shares, par
value $0.01 per share and 5,000,000 Excess Preferred Shares, par value $0.01 per
share. As of July 31, 1997, there were 45,562,851 Paired Shares outstanding and
an aggregate of 18,296,917 Paired Shares were reserved for issuance (i) upon
exercise of all outstanding warrants, options and other rights to purchase
Paired Shares, (ii) upon conversion of all outstanding debt securities and (iii)
upon exercise all exchange and conversion rights with respect to the SLC
Operating Limited Partnership and SLT Realty
2
<PAGE> 3
Limited Partnership and all other entities the holders of equity interests in
which have the right to exchange or convert such equity interests into Paired
Shares. No preferred shares of the Trust are currently outstanding. The issued
and outstanding Paired Shares of the Company have been duly authorized and
validly issued, are fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, were not issued in violation of or
subject to any preemptive rights or other rights to subscribe for or purchase
securities, and conform to the description thereof included in the Company's SEC
Filings (as defined below). Other than as described in the Company's SEC
Filings, the Trust does not have outstanding any options to purchase, or any
preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, or any contracts or commitments to
issue or sell, shares of its capital stock or any such options, rights,
convertible securities or obligations. The description of the Trust's stock,
stock bonus and other stock plans or arrangements and the options or other
rights granted and exercised thereunder in the Company's SEC Fillings accurately
and fairly presents the information required to be shown with respect to such
plans, arrangements, options and rights.
4.3. Issuance, Sale and Delivery of the Shares. The
Purchase Shares to be sold by the Company have been duly authorized and, when
issued, delivered and paid for in the manner set forth in this Agreement, will
be duly authorized, validly issued, fully paid and nonassessable, and will
conform to the description thereof included in the Company's SEC Filings or
incorporated by reference in the Registration Statement, if available. The
Additional Shares, if and when issued pursuant to the Forward Stock Purchase
Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and will conform to the description thereof included in the
Company's SEC filings or incorporated by reference in the Registration
Statement. None of the Purchase Shares when issued and delivered to the UBS
Parties shall be subject to any lien, security interest, claim, charge or
encumbrance of any nature. No further approval or authority of the shareholders
or the Board of Trustees of the Trust will be required for the issuance and/or
sale of the Purchase Shares to be sold by the Company as contemplated herein or
in the Forward Stock Purchase Agreement, except such as shall have been obtained
on or before the Closing Date. The issuance and/or sale of the Purchase Shares
to the UBS Parties by the Company pursuant to this Agreement or the Forward
Stock Purchase Agreement (as the case may be), the compliance by the Company
with the other provisions of this Agreement or the Forward Stock Purchase
Agreement and the consummation of the other transactions contemplated hereby or
thereby do not require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as shall have
been obtained on or before the Closing Date other than the registration of the
resale of the Shares by the UBS Parties with the Securities and Exchange
Commission (the "SEC") and any required Blue Sky filings with the States. The
Company meets and will continue to meet the requirements for use of Form S-3
under the Securities Act and the rules and regulations promulgated thereunder
(the "Rules and Regulations"). The Company has filed and will file all documents
which it is required to file under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and all such documents (collectively, together with
the Company's registration statements filed under the Securities Act which have
been declared effective since January 1, 1997 and have not been withdrawn, the
"Company's SEC Filings") comply in all material respects with the requirements
of the Exchange Act and the rules and regulations thereunder, as applicable, and
3
<PAGE> 4
none of such documents, when so filed, contained or will contain any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, and any documents
so filed and incorporated by reference subsequent to the effective date of the
Registration Statement (as defined in Section 8 below) shall, when they are
filed with the SEC, conform in all material respects with the requirements of
the Securities Act and the Rules and Regulations and the Exchange Act and the
rules and regulations thereunder, as applicable. No Registration Statement filed
in respect of any of the Purchase Shares or Additional Shares, when so filed,
will contain any untrue statement of a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.4. Due Execution, Delivery and Performance of the
Agreement. The Trust has full legal right, power and authority to enter into the
Purchase Agreement and the Forward Stock Purchase Agreement and perform the
transactions contemplated hereby and thereby. The Purchase Agreement and the
Forward Stock Purchase Agreement have been duly authorized, executed and
delivered by the Trust. The making and performance of the Purchase Agreement and
the Forward Stock Purchase Agreement by the Trust and the consummation of the
transactions herein and therein contemplated will not violate any provision of
the articles of incorporation, declaration of trust, or bylaws, or other
organizational documents, of the Trust, and will not conflict with, result in
the breach or violation of, or constitute, either by itself or upon notice or
the passage of time or both, a default under any material agreement, mortgage,
deed of trust, lease, franchise, license, indenture, permit or other instrument
to which the Trust is a party or by which the Trust or its respective properties
may be bound or affected, any statute or any authorization, judgment, decree,
order, rule or regulation of any court or any regulatory body, administrative
agency or other governmental body applicable to the Trust or any of its
respective properties. No consent, approval, authorization or other order of any
court, regulatory body, administrative agency or other governmental body is
required by or on the part of the Trust for the execution and delivery of this
Agreement, the Forward Stock Purchase Agreement or the consummation of the
transactions contemplated hereby or thereby, except in connection with the
filing of any Registration Statements pursuant to Section 8 below or for
compliance with the Blue Sky laws applicable to the offering of the Shares. Upon
the execution and delivery hereof, each of this Agreement and the Forward Stock
Purchase Agreement will constitute the valid and binding obligation of the
Trust, enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as the enforceability of the indemnification
agreements of the Trust in Section 8.5 hereof may be limited by public policy.
4.5. Accountants. The Company's independent certified
public accountants, who have expressed their opinion with respect to the Most
Recent Financial Statements (as defined below) are independent accountants as
required by the Securities Act and the Rules and Regulations. The Company shall
cause its independent certified public
4
<PAGE> 5
accountants to deliver, on the effective date of Registration Statement, and
thereafter upon the request of a UBS Entity (which shall be made no more
frequently than once during any 30 day period), a letter stating that such
accountants are independent public accountants within the meaning of the
Securities Act and otherwise in customary form and covering such financial and
accounting matters as are then customarily covered by letters of independent
certified public accountants delivered in connection with secondary public
offerings of equity securities pursuant to a shelf registration statement.
4.6. No Defaults. Except as to defaults, violations
and breaches which individually or in the aggregate would not be material to the
Company (taken as a whole), the Trust is not in violation or default of any
provision of its declaration of trust or bylaws, or other organizational
documents, and is not in breach of or default with respect to any provision of
any agreement, judgment, decree, order, mortgage, deed of trust, lease,
franchise, license, indenture, permit or other instrument to which it is a party
or by which it or any of its properties are bound; and there does not exist any
state of fact which constitutes an event of default on the part of the Trust as
defined in such documents or which, with notice or lapse of time or both, would
constitute such an event of default except such defaults which individually or
in the aggregate would not be material to the Company.
4.7. Contracts. Neither the Trust, nor to the best of
the Trust's knowledge, any other party is in breach of or default under any
contracts to which the Trust is a party except such breach or default which
individually or in the aggregate would not have a Material Adverse Effect.
4.8. No Actions. There are no legal or governmental
actions, suits or proceedings pending or, to the best of the Trust's knowledge,
threatened to which the Trust is or may be a part or of which property owned or
leased by the Trust is or may be the subject, or related to environmental or
discrimination matters, which actions, suits or proceedings might, individually
or in the aggregate, prevent or adversely affect the transactions contemplated
by this Agreement or result in a material adverse change in the condition
(financial or otherwise), of the properties, business, results of operations or
prospects of the Company, and no labor disturbance by the employees of the Trust
exists or is imminent which might be expected to affect adversely such
condition, properties, business, results of operations or prospects. Except as
may be described in the Company's SEC Filings, the Trust is not a party nor
subject to the provisions of any material injunction, judgment, decree or order
of any court, regulatory body administrative agency or other governmental body.
4.9. Properties. The Trust has good and marketable
title to all the properties and assets reflected as owned by the Company in the
financial statements included in the Most Recent Financial Statements, subject
to no lien, mortgage, pledge, charge or encumbrance of any kind except (i)
those, if any, reflected in such financial statements or the Company's SEC
Filings, or (ii) those which are not material in amount and do not adversely
affect the use made and promised to be made of such property by the Trust. The
Trust holds its leased properties under valid and binding leases, with such
exceptions as are not materially significant in relation to the business of the
Trust and the Corporation. The Trust owns or leases
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<PAGE> 6
all such properties as are necessary to its operations as now conducted. The
Trust qualified as a real estate investment trust under the Internal Revenue
Code of 1986, as amended, with respect to its taxable years ended December 31,
1995 and December 31, 1996, and is organized in conformity with the requirements
for qualification as a real estate investment trust, and its manner of operation
has enabled it to meet the requirements for qualification as a real estate
investment trust as of the date hereof, and its proposed manner of operation
will enable it to meet the requirements for qualification as a real estate
investment trust in the future.
4.10. No Material Change. Since the date of the Most
Recent Financial Statements, and except as otherwise disclosed in the Company's
SEC Filings as of the Closing Date or in writing to the UBS Parties the Trust
(i) has not incurred any liabilities or obligations, indirect, or contingent,
which will have a Material Adverse Effect or entered into any material verbal or
written agreement or other material transaction which is not in the ordinary
course of business (it being agreed that for purposes of this sentence the
Trust's ordinary course of business shall include the acquisition or
disposition, directly indirectly, of real estate properties or businesses of a
type that may be owned by a "real estate investment trust" (as defined under the
Internal Revenue Code)) or which could reasonably be expected to result in a
material reduction in the future earnings of the Company; (ii) the Trust has not
sustained any loss or interference with its businesses or properties (taken as a
whole) from fire, flood, windstorm, accident or other calamity, whether or not
covered by insurance, which has had a material adverse effect on such business
or properties; (iii) the Trust is not in default in the payment of principal or
interest on any outstanding debt obligations; (iv) there has not been any change
in the authorized capital of the Trust or material increase in the principal
amount of outstanding indebtedness of the Trust (other than in the ordinary
course of business); and (v) there has not been any material adverse change in
the condition (financial or otherwise), business, properties, results of
operations or prospects of the Company.
4.11. Intellectual Property. The Trust believes it
has sufficient trademarks, trade names, patent rights, copyrights, licenses,
approvals and governmental authorizations to conduct its businesses as now
conducted; and the Trust does not have knowledge of any material infringement by
it of trademark, trade name rights, patent rights, copyrights, licenses, trade
secrets or other similar rights of others, and no claim has been made against
the Trust regarding trademark, trade name, patent, copyright, license, trade
secrecy or other infringement which could have a material adverse effect on the
condition (financial or otherwise), business, results of operations or prospects
of the Company.
4.12. Compliance. The Trust has not been advised, and
has no reason to believe, that it is not conducting business in compliance with
all applicable laws, rules and regulations of the jurisdictions in which it is
conducting business, including, without limitation, all applicable local, state
and federal environmental laws and regulations; except where failure to be so in
compliance would not materially adversely affect the condition (financial or
otherwise), business, results of operations or prospects of the Company.
4.13. Taxes. The Trust has filed all necessary
federal, state and foreign income and franchise tax returns and has paid or
accrued all taxes shown as due thereon (except
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<PAGE> 7
for those taxes which are being contested in good faith through appropriate
proceedings, for which adequate reserves have been established and which are
either reflected in the Most Recent Financial Statements or disclosed by the
Company to UBS in writing), and the Trust has no knowledge of any tax deficiency
which has been or might be asserted or threatened against the Trust which could
materially adversely affect the business condition (financial or otherwise),
results of operations or prospects of the Company.
4.14. Transfer Taxes. On the Closing Date, all stock
transfer or other taxes (other than income taxes) which are required to be paid
in connection with the sale and transfer of the Purchase Shares to be sold to
UBS Limited hereunder will be, or will have been, fully paid or provided for by
the Company and all laws imposing such taxes will be or will have been fully
complied with.
4.15. Investment Company. The Trust is not required
to register as an "investment company" as such term is defined in the Investment
Company Act of 1940, as amended.
4.16. Offering Materials. The Trust has not
distributed nor will distribute prior to the Closing Date any offering material
in connection with the offering and sale of the Purchase Shares other than the
documents provided to the UBS Parties pursuant to Section 4.18.
4.17. Insurance. The Company maintains insurance (or
insurance is maintained on its behalf) of the types and in the amounts generally
deemed adequate under customary industry standards for its business, including,
but not limited to, insurance covering all real and personal property owned or
leased by the Company against theft, damage, destruction, acts of vandalism and
all other risks customarily insured against, all of which insurance is in full
force and effect.
4.18. SEC Filings. The information contained in the
following documents, which the Company has furnished to the UBS Parties, or will
furnish prior to the Closing, is or will be true and correct in all material
respects as of their respective filing dates:
(a) Joint Annual Report on Form 10-K/A for the year ended
December 31, 1996, which Joint Annual Report includes
the Trust's and the Corporation's most recently
available audited financial statements together with
the report thereon of the independent certified
public accountants (the "Most Recent Financial
Statements");
(b) Joint Quarterly Report on Form 10-Q for the quarters
ended March 31, 1997 and June 30, 1997;
(c) the Company's joint proxy statements on Form 14A
relating to (i) the most recent Annual Meeting of the
Corporation's and the Trust's Shareholders and (ii)
any Special Meetings of the Corporation's
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<PAGE> 8
Shareholders and the Trust's Shareholders which
occurred during the 12-month period prior to the date
hereof or for which a meeting date has been fixed and
a proxy statement distributed;
(d) Prospectus dated March 21, 1997 and Supplement
thereto dated March 27, 1997 and Prospectus dated
September 29, 1997 and Supplement thereto dated
September 29, 1997;
(e) all other documents, if any, filed by or with respect
to the Trust and the Corporation with the SEC since
January 1, 1997 pursuant to Sections 13, 15(d) or
16(a) of the Exchange Act; and
(f) a covenant compliance certification stating that the
Trust and the Corporation and their respective
subsidiaries are not in default under any of its
credit agreements or other financing arrangements.
4.19. Legal Opinion. Prior to the Closing, counsel to
the Company will deliver their legal opinions to the UBS Parties in
substantially the forms of Exhibits A-1 and A-2 hereto.
4.20. ERISA. The Company and its affiliates are in
compliance in all material respects with all applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended and the rules and
regulations promulgated thereunder ("ERISA"). Neither a Reportable Event (as
defined under ERISA) nor a Prohibited Transaction (as defined under ERISA) has
occurred with respect to any Plan (as defined below) of the Company and/or its
affiliates; no notice of intent to terminate a Plan has been filed nor has any
Plan been terminated within the past five years; no circumstance exists which
constitutes grounds under Section 402 of ERISA entitling the Pension Benefit
Guaranty Corporation ("PBGC") to institute proceedings to terminate, or appoint
a trustee to administer, a Plan, nor has the PBGC instituted any such
proceedings; the Company and its affiliates have not completely or partially
withdrawn under Sections 4201 or 4202 of ERISA from any Multiemployer Plan (as
defined therein); the Company and its affiliates have met the minimum funding
requirements of Section 412 of the Internal Revenue Code of 1986, as amended
(the "Code") and Section 302 of ERISA with respect to each Plan and there is no
unfunded current liability (as defined below) with respect to any Plan; the
Company and its affiliates have not incurred any liability to the PBGC under
ERISA (other than for the payment of premiums under Section 4007 of ERISA); no
part of the funds to be used by the Company in satisfaction of its obligations
under this Purchase Agreement or the Forward Stock Purchase Agreement constitute
"plan assets" of any "employee benefit plan" within the meaning of ERISA or of
any "plan" within the meaning of Section 4975(e)(1) of the Code, as interpreted
by the Internal Revenue Service and the U.S. Department of Labor in rules,
regulations, releases and bulletins or as interpreted under applicable case law.
As used below, "Plan" means an "employee benefit plan" or "plan" as described in
Section 3(3) of ERISA; and "unfunded current liability" has the meaning provided
in Section 302(d)(8)(A) of ERISA.
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<PAGE> 9
4.21. Certificate. A certificate of the Trust
executed by the chief executive, financial or accounting officer of the Trust,
to be dated the Closing Date in form and substance satisfactory to the UBS
Parties to the effect that the representations and warranties of the Trust set
forth in this Section 4 are true and correct as of the date of this Agreement
and as of the Closing Date, and the Trust has complied with all the agreements
and satisfied all the conditions on its part to be performed or satisfied on or
prior to such Closing Date.
4.22. Environmental Protection. To the Trust's
knowledge, except as disclosed in the Company's SEC Filings, none of the Trust's
or its affiliates' properties contain any Hazardous Materials that, under any
Environmental Law, (i) would impose liability on the Trust or any affiliate that
is likely to have a material adverse effect on the condition (financial or
other), business, results of operations, or prospects, of the Company or (ii) is
likely to result in the imposition of a lien on any material asset owned,
directly or indirectly, by the Company. To the Trust's knowledge, neither it nor
any affiliate is subject to any existing, pending or threatened investigation or
proceeding by any governmental agency or authority with respect or pursuant to
any Environmental Law, except any which, if adversely determined, would not have
a material adverse effect on the condition (financial or other), business,
results of operations or prospects of the Company. As used herein,
"Environmental Laws" mean all federal, state, local and foreign environmental,
health and safety laws, codes and ordinances and all rules and regulations
promulgated thereunder, including, without limitation laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment (including, without limitation, air, surface water, ground
water, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals, or industrial,
solid, toxic or hazardous substances or wastes; and "Hazardous Material"
includes, without limitation, (i) all substances which are designated pursuant
to Section 311(b)(2)(A) of the Federal Water Pollution Control Act ("FWPCA"), 33
U.S.C "1251 et seq.; (ii) any element, compound, mixture, solution, or substance
which is designated pursuant to Section 102 of the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. "9601 et seq.;
(iii) any hazardous waste having the characteristics which are identified under
or listed pursuant to Section 3001 of the Resource Conservation and Recovery Act
("RCRA"), 42 U.S.C. "6901 et seq.; (iv) any toxic pollutant listed under Section
307(a) of the FWPCA; (v) any hazardous air pollutant which is listed under
Section 112 of the Clean Air Act, 42 U.S.C. "7401 et seq.; (vi) any imminently
hazardous chemical substance or mixture with respect to which action has been
taken pursuant to Section 7 of the Toxic Substances Control Act, 15 U.S.C. "2601
et seq.; and (vii) petroleum, petroleum products, petroleum by-products,
petroleum decomposition by-products, and waste oil.
SECTION 5. Representations, Warranties and Covenants
of the Corporation. The Corporation hereby represents and warrants to, and
covenants with, the UBS Parties as follows:
5.1. Organization and Qualification. The Corporation
has been duly organized, is validly existing and in good standing under the laws
of Mary land. The
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<PAGE> 10
Corporation's corporate existence has not been suspended or
terminated, nor have any dissolution, liquidation or forfeiture proceedings
involving the Corporation been commenced. The Corporation has been duly
qualified to do business in each jurisdiction (i) wherein such entity owns,
leases or manages real property or (ii) where the failure so to qualify to do
business would have a Material Adverse Effect.
5.2. Authorized Capital Stock. The Corporation has
authorized capital stock as of July 31, 1997 of 135,000,000 shares, consisting
of 100,000,000 shares of common stock, par value $0.01 per share, 10,000,000
shares of preferred stock, par value $0.01 per share, 20,000,000 shares of
excess common stock, par value $0.01 per share and 5,000,000 shares of excess
preferred stock, par value $0.01 per share. As of July 31, 1997, there were
45,562,851 Paired Shares outstanding and an aggregate of 18,296,917 Paired
Shares were reserved for issuance (i) upon exercise of all outstanding warrants,
options and other rights to purchase Paired Shares, (ii) upon conversion of all
outstanding debt securities and (iii) upon exercise all exchange and conversion
rights with respect to the SLC Operating Limited Partnership and SLT Realty
Limited Partnership and all other entities the holders of equity interests in
which have the right to exchange or convert such equity interests into Paired
Shares. No preferred shares of the Corporation are currently outstanding. The
issued and outstanding Paired Shares of the Company have been duly authorized
and validly issued, are fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, were not issued in
violation of or subject to any preemptive rights or other rights to subscribe
for or purchase securities, and conform to the description thereof included in
the Company's SEC Filings. Other than as described in the Company's SEC Filings,
the Corporation does not have outstanding any options to purchase, or any
preemptive rights or other rights to subscribe for or to purchase, any
securities or obligations convertible into, or any contracts or commitments to
issue or sell, shares of its capital stock or any such options, rights,
convertible securities or obligations. The description of the Corporation's
stock, stock bonus and other stock plans or arrangements and the options or
other rights granted and exercised thereunder in the Company's SEC Fillings
accurately and fairly presents the information required to be shown with respect
to such plans, arrangements, options and rights.
5.3. Issuance, Sale and Delivery of the Shares. The
Purchase Shares to be sold by the Company have been duly authorized and, when
issued, delivered and paid for in the manner set forth in this Agreement, will
be duly authorized, validly issued, fully paid and nonassessable, and will
conform to the description thereof included in the Company's SEC Filings or
incorporated by reference in the Registration Statement, if available. The
Additional Shares, if and when issued pursuant to the Forward Stock Purchase
Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and will conform to the description thereof included in the
Company's SEC filings or incorporated by reference in the Registration
Statement. None of the Purchase Shares when issued and delivered to the UBS
Parties shall be subject to any lien, security interest, claim, charge or
encumbrance of any nature. No further approval or authority of the shareholders
or the Board of Directors of the Corporation will be required for the issuance
and/or sale of the Purchase Shares to be sold by the Company as contemplated
herein or in the Forward Stock Purchase Agreement, except such as shall have
been obtained on or before the Closing Date. The issuance and/or sale of the
Purchase Shares to
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<PAGE> 11
the UBS Parties by the Company pursuant to this Agreement or the Forward Stock
Purchase Agreement (as the case may be), the compliance by the Company with the
other provisions of this Agreement or the Forward Stock Purchase Agreement and
the consummation of the other transactions contemplated hereby or thereby do not
require the consent, approval, authorization, registration or qualification of
or with any governmental authority, except such as shall have been obtained on
or before the Closing Date other than the registration of the resale of the
Shares by the UBS Parties with the Securities and Exchange Commission (the
"SEC") and any required Blue Sky filings with the States. The Company meets and
will continue to meet the requirements for use of Form S-3 under the Securities
Act and the rules and regulations promulgated thereunder (the "Rules and
Regulations"). The Company has filed and will file all documents which it is
required to file under the Exchange Act and all such documents comply in all
material respects with the requirements of the Exchange Act and the rules and
regulations thereunder, as applicable, and none of such documents, when so
filed, contained or will contain any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, and any documents so filed and incorporated by
reference subsequent to the effective date of the Registration Statement (as
defined in Section 8 below) shall, when they are filed with the SEC, conform in
all material respects with the requirements of the Securities Act and the Rules
and Regulations and the Exchange Act and the rules and regulations thereunder,
as applicable. No Registration Statement filed in respect of any of the Purchase
Shares or Additional Shares, when so filed, will contain any untrue statement of
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
5.4. Due Execution, Delivery and Performance of the
Agreement. The Corporation has full legal right, power and authority to enter
into the Purchase Agreement and the Forward Stock Purchase Agreement and perform
the transactions contemplated hereby and thereby. The Purchase Agreement and the
Forward Stock Purchase Agreement have been duly authorized, executed and
delivered by the Corporation. The making and performance of the Purchase
Agreement and the Forward Stock Purchase Agreement by the Corporation and the
consummation of the transactions herein and therein contemplated will not
violate any provision of the articles of incorporation, or bylaws, or other
organizational documents, of the Corporation, and will not conflict with, result
in the breach or violation of, or constitute, either by itself or upon notice or
the passage of time or both, a default under any material agreement, mortgage,
deed of trust, lease, franchise, license, indenture, permit or other instrument
to which the Corporation is a party or by which the Corporation or its
respective properties may be bound or affected, any statute or any
authorization, judgment, decree, order, rule or regulation of any court or any
regulatory body, administrative agency or other governmental body applicable to
the Corporation or any of its respective properties. No consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body is required by or on behalf of the Corporation
for the execution and delivery of this Agreement, the Forward Stock Purchase
Agreement or the consummation of the transactions contemplated hereby or
thereby, except in connection with the filing of any Registration Statements
pursuant to Section 8 below or for compliance with the Blue Sky laws applicable
to the offering of the Shares. Upon the execution and delivery hereof, each of
this Agreement and the Forward Stock
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<PAGE> 12
Purchase Agreement will constitute the valid and binding obligation of the
Corporation, enforceable in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' and contracting parties' rights generally
and except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as the enforceability of the indemnification
agreements of the Corporation in Section 8.5 hereof may be limited by public
policy.
5.5. Accountants. The Company's independent certified
public accountants, who have expressed their opinion with respect to the Most
Recent Financial Statements (as defined below) are independent accountants as
required by the Securities Act and the Rules and Regulations. The Company shall
cause its independent certified public accountants to deliver, on the effective
date of Registration Statement, and thereafter upon the request of a UBS Entity
(which shall be made no more frequently than once during any 30 day period), a
letter stating that such accountants are independent public accountants within
the meaning of the Securities Act and otherwise in customary form and covering
such financial and accounting matters as are then customarily covered by letters
of independent certified public accountants delivered in connection with
secondary public offerings of equity securities pursuant to a shelf registration
statement.
5.6. No Defaults. Except as to defaults, violations
and breaches which individually or in the aggregate would not be material to the
Company (taken as a whole), the Corporation is not in violation or default of
any provision of its articles of incorporation, or bylaws, or other
organizational documents, or is in breach of or default with respect to any
provision of any agreement, judgment, decree, order, mortgage, deed of trust,
lease, franchise, license, indenture, permit or other instrument to which it is
a party or by which it or any of its properties are bound; and there does not
exist any state of fact which constitutes an event of default on the part of the
Corporation as defined in such documents or which, with notice or lapse of time
or both, would constitute such an event of default except such defaults which
individually or in the aggregate would not be material to the Company.
5.7. Contracts. Neither the Corporation, nor to the
best of the Corporation's knowledge, any other party is in breach of or default
under any contracts to which the Corporation is a party except such breach or
default which individually or in the aggregate would not have a Material Adverse
Effect.
5.8. No Actions. There are no legal or governmental
actions, suits or proceedings pending or, to the best of the Corporation's
knowledge, threatened to which the Corporation is or may be a part or of which
property owned or leased by the Corporation is or may be the subject, or related
to environmental or discrimination matters, which actions, suits or proceedings
might, individually or in the aggregate, prevent or adversely affect the
transactions contemplated by this Agreement or result in a material adverse
change in the condition (financial or otherwise), of the properties, business,
results of operations or prospects of the Company, and no labor disturbance by
the employees of the Corporation exists or is imminent which might be expected
to affect adversely such condition, properties, business, results of
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<PAGE> 13
operations or prospects. Except as may be described in the Company's SEC
Filings, the Corporation is not a party nor subject to the provisions of any
material injunction, judgment, decree or order of any court, regulatory body
administrative agency or other governmental body.
5.9. Properties. The Corporation has good and
marketable title to all the properties and assets reflected as owned by the
Corporation in the financial statements included in the Most Recent Financial
Statements, subject to no lien, mortgage, pledge, charge or encumbrance of any
kind except (i) those, if any, reflected in such financial statements or the
Company's SEC Filings, or (ii) those which are not material in amount and do not
adversely affect the use made and promised to be made of such property by the
Corporation. The Corporation holds its leased properties under valid and binding
leases, with such exceptions as are not materially significant in relation to
the business of the Corporation. The Corporation owns or leases all such
properties as are necessary to its operations as now conducted.
5.10. No Material Change. Since the date of the Most
Recent Financial Statements, and except as otherwise disclosed in the Company's
SEC Filings as of the Closing Date or in writing to the UBS Parties the
Corporation (i) has not incurred any liabilities or obligations, indirect, or
contingent, which will have a Material Adverse Effect or entered into any
material verbal or written agreement or other material transaction which is not
in the ordinary course of business (it being agreed that for purposes of this
sentence the Corporation's ordinary course of business shall include the
acquisition or disposition, directly or indirectly of assets or business related
to or engaged in the lodging industry) or which could reasonably be expected to
result in a material reduction in the future earnings of the Company; (ii) the
Corporation has not sustained any loss or interference with its businesses or
properties (taken as a whole) from fire, flood, windstorm, accident or other
calamity, whether or not covered by insurance, which has had a material adverse
effect on such business or properties; (iii) the Corporation is not in default
in the payment of principal or interest on any outstanding debt obligations;
(iv) there has not been any change in the authorized capital of the Corporation
or material increase in the principal amount of outstanding indebtedness of the
Corporation (other than in the ordinary course of business); and (v) there has
not been any material adverse change in the condition (financial or otherwise),
business, properties, results of operations or prospects of the Company.
5.11. Intellectual Property. The Corporation believes
it has sufficient trademarks, trade names, patent rights, copyrights, licenses,
approvals and governmental authorizations to conduct its businesses as now
conducted; and the Corporation does not have knowledge of any material
infringement by it of trademark, trade name rights, patent rights, copyrights,
licenses, trade secrets or other similar rights of others, and no claim has been
made against the Corporation regarding trademark, trade name, patent, copyright,
license, trade secrecy or other infringement which could have a material adverse
effect on the condition (financial or otherwise), business, results of
operations or prospects of the Company.
5.12. Compliance. The Corporation has not been
advised, and has any reason to believe, that it is not conducting business in
compliance with all applicable laws, rules and regulations of the jurisdictions
in which it is conducting business, including, without
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<PAGE> 14
limitation, all applicable local, state and federal environmental laws and
regulations; except where failure to be so in compliance would not materially
adversely affect the condition (financial or otherwise), business, results of
operations or prospects of the Company.
5.13. Taxes. The Corporation has filed all necessary
federal, state and foreign income and franchise tax returns and has paid or
accrued all taxes shown as due thereon (except for those taxes which are being
contested in good faith through appropriate proceedings, for which adequate
reserves have been established and which are either reflected in the Most Recent
Financial Statements or disclosed by the Company to UBS in writing), and the
Corporation has no knowledge of any tax deficiency which has been or might be
asserted or threatened against the Corporation which could materially adversely
affect the business condition (financial or otherwise), results of operations or
prospects of the Company.
5.14. Transfer Taxes. On the Closing Date, all stock
transfer or other taxes (other than income taxes) which are required to be paid
in connection with the sale and transfer of the Purchase Shares to be sold to
UBS Limited hereunder will be, or will have been, fully paid or provided for by
the Company and all laws imposing such taxes will be or will have been fully
complied with.
5.15. Investment Company. The Corporation is not
required to register as an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
5.16. Offering Materials. Neither the Trust nor the
Corporation has distributed nor will distribute prior to the Closing Date any
offering material in connection with the offering and sale of the Purchase
Shares other than the documents provided to the UBS Parties pursuant to Section
5.18.
5.17. Insurance. The Company maintains insurance (or
insurance is maintained on its behalf) of the types and in the amounts generally
deemed adequate under customary industry standards for its business, including,
but not limited to, insurance covering all real and personal property owned or
leased by either the Company against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect.
5.18. SEC Filings. The information contained in the
following documents, which the Company has furnished to the UBS Parties, or will
furnish prior to the Closing, is or will be true and correct in all material
respects as of their respective filing dates:
(a) Joint Annual Report on Form 10-K/A for the year ended
December 31, 1996, which Joint Annual Report includes
the Trust's and the Corporation's most recently
available audited financial statements together with
the report thereon of the independent certified
public accountants (the "Most Recent Financial
Statements");
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(b) Joint Quarterly Report on Form 10-Q for the quarters
ended March 31, 1997 and June 30, 1997;
(c) the Company's joint proxy statements on Form 14A
relating to (i) the most recent Annual Meeting of the
Corporation's and the Trust's Shareholders and (ii)
any Special Meetings of the Corporation's
Shareholders and the Trust's Shareholders which
occurred during the 12-month period prior to the date
hereof or for which a meeting date has been fixed and
a proxy statement distributed;
(d) Prospectus dated March 21, 1997 and Supplement
thereto dated March 27, 1997 and Prospectus dated
September 29, 1997 and Supplement thereto dated
September 29, 1997;
(e) all other documents, if any, filed by or with respect
to the Trust and the Corporation with the SEC since
January 1, 1997 pursuant to Sections 13, 15(d) or
16(a) of the Exchange Act; and
(f) a covenant compliance certification stating that the
Trust and the Corporation and its subsidiaries are
not in default under any of its credit agreements or
other financing arrangements.
5.19. Legal Opinion. Prior to the Closing, counsel to
the Company will deliver their legal opinions to the UBS Parties in
substantially the forms of Exhibits A-1 and A-2 hereto.
5.20. ERISA. The Company and its affiliates are in
compliance in all material respects with all applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended and the rules and
regulations promulgated thereunder ("ERISA"). Neither a Reportable Event (as
defined under ERISA) nor a Prohibited Transaction (as defined under ERISA) has
occurred with respect to any Plan (as defined below) of the Company and/or its
affiliates; no notice of intent to terminate a Plan has been filed nor has any
Plan been terminated within the past five years; no circumstance exists which
constitutes grounds under Section 402 of ERISA entitling the Pension Benefit
Guaranty Corporation ("PBGC") to institute proceedings to terminate, or appoint
a trustee to administer, a Plan, nor has the PBGC instituted any such
proceedings; the Company and its affiliates have not completely or partially
withdrawn under Sections 4201 or 4202 of ERISA from any Multiemployer Plan (as
defined therein); the Company and its affiliates have met the minimum funding
requirements of Section 412 of the Internal Revenue Code of 1986, as amended
(the "Code") and Section 302 of ERISA with respect to each Plan and there is no
unfunded current liability (as defined below) with respect to any Plan; the
Company and its affiliates have not incurred any liability to the PBGC under
ERISA (other than for the payment of premiums under Section 4007 of ERISA); no
part of the funds to be used by the Company in satisfaction of its obligations
under this Purchase Agreement or the Forward Stock Purchase Agreement constitute
"plan assets" of any "employee benefit plan" within the meaning of ERISA or of
any "plan" within the meaning of Section
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<PAGE> 16
4975(e)(1) of the Code, as interpreted by the Internal Revenue Service and the
U.S. Department of Labor in rules, regulations, releases and bulletins or as
interpreted under applicable case law. As used below, "Plan" means an "employee
benefit plan" or "plan" as described in Section 3(3) of ERISA; and "unfunded
current liability" has the meaning provided in Section 302(d)(8)(A) of ERISA.
5.21. Certificate. A certificate of the Corporation
executed by the chief executive, financial or accounting officer of the
Corporation, to be dated the Closing Date in form and substance satisfactory to
the UBS Parties to the effect that the representations and warranties of the
Corporation set forth in this Section 5 are true and correct as of the date of
this Agreement and as of the Closing Date, and the Corporation has complied with
all the agreements and satisfied all the conditions on its part to be performed
or satisfied on or prior to such Closing Date.
5.22. Environmental Protection. To the Corporation's
knowledge, except as disclosed in the Company's SEC Filings, none of the
Corporation's or its affiliates' properties contain any Hazardous Materials
that, under any Environmental Law, (i) would impose liability on either the
Corporation or any affiliate that is likely to have a material adverse effect on
the condition (financial or other), business, results of operations, or
prospects, of the Company or (ii) is likely to result in the imposition of a
lien on any assets owned, directly or indirectly, by either the Company. To the
Corporation's knowledge, neither it nor any affiliate is subject to any
existing, pending or threatened investigation or proceeding by any governmental
agency or authority with respect or pursuant to any Environmental Law, except
any which, if adversely determined, would not have a material adverse effect on
the condition (financial or other), business, results of operations or prospects
of the Company. As used herein, "Environmental Laws" mean all federal, state,
local and foreign environmental, health and safety laws, codes and ordinances
and all rules and regulations promulgated thereunder, including, without
limitation laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes into the environment (including, without
limitation, air, surface water, ground water, land surface or subsurface strata)
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants,
chemicals, or industrial, solid, toxic or hazardous substances or wastes; and
"Hazardous Material" includes, without limitation, (i) all substances which are
designated pursuant to Section 311(b)(2)(A) of the Federal Water Pollution
Control Act ("FWPCA"), 33 U.S.C "1251 et seq.; (ii) any element, compound,
mixture, solution, or substance which is designated pursuant to Section 102 of
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. "9601 et seq.; (iii) any hazardous waste having the
characteristics which are identified under or listed pursuant to Section 3001 of
the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. "6901 et seq.;
(iv) any toxic pollutant listed under Section 307(a) of the FWPCA; (v) any
hazardous air pollutant which is listed under Section 112 of the Clean Air Act,
42 U.S.C. "7401 et seq.; (vi) any imminently hazardous chemical substance or
mixture with respect to which action has been taken pursuant to Section 7 of the
Toxic Substances Control Act, 15 U.S.C. "2601 et seq.; and (vii) petroleum,
petroleum products, petroleum by-products, petroleum decomposition by-products,
and waste oil.
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<PAGE> 17
SECTION 6. Representations, Warranties and Covenants
of the UBS Parties.
6.1. Investment. UBS Limited and/or UBS-LB represents
and warrants to, and covenants with, the Company that: (i) UBS Limited, taking
into account the personnel and resources it can practically bring to bear on the
purchase of the Purchase Shares contemplated hereby, is knowledgeable,
sophisticated and experienced in making, and is qualified to make, decisions
with respect to investments in shares presenting an investment decision like
that involved in the purchase of the Purchase Shares, including investments in
securities issued by the Company, and has requested, received, reviewed and
considered all information it deems relevant in making an informed decision to
purchase the Purchase Shares; (ii) UBS Limited is acquiring the number of
Purchase Shares set forth in Section 2 above in the ordinary course of its
business and for its own account for investment (as defined for purposes of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the regulations
thereunder) only and with no present intention of distributing any of such
Purchase Shares or any arrangement or understanding with any other persons
regarding the distribution of such Shares (this representation and warranty not
limiting the rights of either UBS Party to sell pursuant to any Registration
Statement); (iii) neither UBS Party will, directly or indirectly, sell or
otherwise dispose of (or solicit any offers to purchase or otherwise acquire)
any of the Shares except in compliance with the Securities Act, the Rules and
Regulations and any applicable state securities or blue sky laws or pursuant to
an available exemption or exclusion therefrom; (iv) each UBS Party has completed
or caused to be completed the Registration Statement Questionnaire and the Stock
Certificate Questionnaire, both attached hereto as Appendix I, for use in
preparation of the Registration Statement and the answers thereto are true and
correct to the best knowledge of the UBS Parties as of the date hereof and will
be true and correct as of the effective date of the Registration Statement; (v)
the UBS Parties have, in connection with their decision to purchase the number
of Purchase Shares set forth in Section 2 above, relied solely upon the
documents identified in Sections 4.18 and 5.18, the information referred to in
Section 8.7 and the representations and warranties of the Company contained
herein; (vi) each of the UBS Parties is an "accredited investor" within the
meaning of Rule 501 of Regulation D promulgated under the Securities Act and a
"qualified institutional buyer" within the meaning of Rule 144A promulgated
under the Securities Act; (vii) the UBS Parties do not directly or indirectly
have an interest of five percent or more of the Common Shares outstanding as
shown in the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1997 and (viii) the Purchaser understands that the Shares will contain a
legend to the following effect:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THESE SHARES UNDER THE SECURITIES ACT OF 1933 OR
AN OPINION OF THE COMPANY'S COUNSEL THAT REGISTRATION IS NOT
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<PAGE> 18
REQUIRED UNDER SAID ACT.
6.2. Resale. Each UBS Party acknowledges and agrees
that the Shares are not transferable on the books of either the Trust or the
Corporation unless the certificate submitted to the transfer agent evidencing
the Shares is accompanied by a separate officer's certificate: (i) in the form
of Appendix II hereto, (ii) executed by an officer of, or other authorized
person designated by, the UBS Parties, and (iii) to the effect that (A) the
Shares have been sold in accordance with the Registration Statement, the
Securities Act and the Rules and Regulations and any applicable state securities
or blue sky laws or pursuant to valid exemptions or exclusions therefrom and (B)
the requirement under the Securities Act of delivering a current prospectus has
been satisfied. Each UBS Party acknowledges that there may occasionally be times
when the Company must suspend the right of the UBS Parties to effect sales of
the Shares through use of the Prospectus forming a part of the Registration
Statement until such time as an amendment to the Registration Statement has been
filed by the Company and declared effective by the SEC, or until such time as
the Company has filed an appropriate report with the SEC pursuant to the
Exchange Act (each, a "Black-out Period"); provided that no Black-out Period
shall exceed 90 consecutive days. Each UBS Party hereby covenants that it will
not sell any Shares pursuant to said Prospectus during the period commencing at
the time at which the Company gives the UBS Parties written notice of the
suspension of the use of said Prospectus and ending at the time the Company
gives the UBS Parties written notice that the UBS Parties may thereafter effect
sales pursuant to said Prospectus. Each UBS Party further covenants to notify
the Trust and the Corporation promptly of the sale of all of its Shares.
6.3. Due Execution, Delivery and Performance of this
Agreement. The UBS Parties further represent and warrant to, and covenant with,
the Company that (i) each UBS Party has full right, power, authority and
capacity to enter into this Agreement and to consummate the transactions
contemplated hereby and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, and (ii) upon the
execution and delivery of this Agreement, this Agreement shall constitute a
valid and binding obligation of the UBS Parties enforceable in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors' and
contracting parties' rights generally and except as enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and except as
the indemnification agreements of the UBS Parties in Section 8.5 hereof may be
legally unenforceable.
6.4. Residence of UBS Limited. UBS Limited is
organized under the laws of England and has its principal place of business in
London.
SECTION 7. Survival of Representations, Warranties
and Agreements. Notwithstanding any investigation made by any party to this
Purchase Agreement, all covenants, agreements, representations and warranties
made by the Trust, the Corporation and the UBS Parties herein and in the
certificates for the Shares delivered pursuant hereto shall survive the
execution of this Purchase Agreement, the Forward Stock Purchase Agreement, the
delivery to UBS Limited of the Purchase Shares being purchased and the payment
therefor.
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<PAGE> 19
SECTION 8. Registration of the Shares; Compliance
with the Securities Act.
8.1. Registration Procedures and Expenses. The
Company shall:
(a) within 90 days after the Closing, prepare and file
with the SEC a Registration Statement (as defined
below) covering the resale by the UBS Parties, from
time to time, of the Shares (not to exceed a number
of Shares equal to 130% of the number of Purchase
Shares) through the facilities of the New York Stock
Exchange, the automated quotation system of The
Nasdaq Stock Market or the facilities of any other
national securities exchange on which the Company's
common stock is then traded or in privately
negotiated transactions (the "Initial Registration
Statement"). If the total number of Shares issued to
the UBS Parties hereunder and under the Forward Stock
Purchase Agreement exceeds the number of Shares
covered by the Initial Registration Statement, then
the Company shall prepare and file with the SEC such
additional Registration Statement or Statements as
shall be necessary to cover the resale by UBS-LB of
such excess Shares in the same manner as contemplated
by the Initial Registration Statement for the Shares
covered thereby (each, an "Additional Registration
Statement"); provided that prior to delivering
certificates evidencing any such excess Shares to
UBS-LB, the Company shall cause such Registration
Statement to have become effective. The Company
agrees that no other shareholder of the Company shall
have any right (which has not been waived or expired)
to require the Company to register the sale of any
shares owned by such shareholder under the Initial or
any Additional Registration Statement. For purposes
of this Purchase Agreement, "Registration Statement"
means a registration statement under the Securities
Act on Form S-3 covering the resale by one or both
UBS Parties of up to a specified number of Shares,
filed and maintained effective by the Company
pursuant to the provisions of this Section 8,
including the Prospectus (as defined below) contained
therein, any amendments and supplements to such
registration statement, including all post-effective
amendments thereto, and all exhibits and all material
incorporated by reference into such registration
statement;
(b) use all reasonable best efforts to cause the SEC to
notify the Company of the SEC's willingness to
declare the Initial Registration Statement effective
within 60 days after the Registration Statement is
filed by the Company; provided that the Company will
use its reasonable best efforts to cause such Initial
Registration Statement to become effective no later
than 90 days after the Closing Date;
(c) prepare and file with the SEC such amendments and
supplements to the
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<PAGE> 20
Registration Statement and the prospectus used in
connection therewith (the "Prospectus") as may be
necessary to keep the Registration Statement
effective until the date on which the Shares may be
resold by the UBS Parties without registration, by
reason of Rule 144(k) under the Securities Act or any
other rule of similar effect;
(d) furnish to the UBS Parties with respect to the Shares
registered under the Registration Statement (and to
each underwriter, if any, of such Shares) such
reasonable number of copies of Prospectuses,
including any supplements and amendments thereto,
promptly following the effectiveness of such
Registration Statement an opinion from counsel to the
Company covering the matters set forth on Exhibit B
hereto and such other documents as the UBS Parties
may reasonably request, in order to facilitate the
public sale or other disposition of all or any of the
Shares by the UBS Parties;
(e) use its reasonable best efforts to prevent the
happening of any event that would cause such
Registration Statement to contain a material
misstatement or omission or to be not effective and
usable for resale of the Shares during the period
that such Registration Statement is required to be
effective and usable; provided that this paragraph
(e) shall in no way limit the Company's right to
suspend the right of the UBS Parties to effect sales
under the Registration Statement during any Black-out
Period as specified at Section 6.2 above.
(f) file documents required of the Company for normal
blue sky clearance in states specified in writing by
the UBS Parties, provided, however, that the Company
shall not be required to qualify to do business or
consent to service of process in any jurisdiction in
which it is not now so qualified or has not so
consented; and
(g) bear all reasonable out-of-pocket expenses in
connection with the procedures in paragraphs (a)
through (f) of this Section 8.1 and the registration
of the Shares pursuant to the Registration Statement,
the enforcement (in the case of breach by the
Company) of this Agreement or the Forward Stock
Purchase Agreement or the Master Agreement referred
to in the Forward Stock Purchase Agreement, including
the reasonable fees and expenses of counsel or other
advisers to the UBS Parties, other than underwriting
discounts, brokerage fees and commissions incurred by
the UBS Parties, if any.
8.2. Covenants in Connection With Registration.
(a) The Trust and the Corporation hereby covenant with the UBS
Parties that (i) the Company shall not file any Registration Statement or
Prospectus relating to the resale of the
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<PAGE> 21
Shares or any amendment or supplement thereto, unless a copy thereof shall have
been first submitted to the UBS Parties and the UBS Parties did not object
thereto in good faith (provided that if the UBS Parties do not object within two
business days of receiving any such material, they shall be deemed to have no
objection thereto); (ii) the Company shall immediately notify the UBS Parties of
the issuance by the SEC of any stop order suspending the effectiveness of such
Registration Statement or the initiation of any proceedings for such purpose;
(iii) the Company shall make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of such Registration Statement at the
earliest possible moment; (iv) the Company shall notify the UBS Parties of the
receipt of any notification with respect to the suspension of the qualification
of the Shares for sale under the securities or blue sky laws of any jurisdiction
or the initiation of any proceeding for such purpose; and (v) the Company shall
as soon as practicable notify the UBS Parties in writing of the existence of any
fact which results in any Registration Statement, any amendment or
post-effective amendment thereto, the Prospectus, any prospectus supplement, or
any document incorporated therein by reference containing an untrue statement of
a material fact or omitting to state a material fact required to be stated
therein or necessary to make the statements therein not misleading and shall
(except during a Black-out Period) prepare a supplement or post-effective
amendment to such Registration Statement or the Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Shares, the Prospectus will not
contain an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading; provided that this
clause (v) shall in no way limit the Company's right to suspend the right of the
UBS Parties to effect sales under the Registration Statement during any
Black-out Period as specified at Section 6.2 above.
(b) The UBS Parties shall notify the Company at least two
business days prior to the date on which it intends to commence effecting any
resales of Shares under a Registration Statement and if the Company does not,
within such two-day period, advise the UBS Parties of the existence of any facts
of the type referred to in Section 8.2(a)(v) above, then the Company shall be
deemed to have certified and represented to the UBS Parties that no such facts
then exist and the UBS Parties may rely on such certificate and representation
in making such sales. The preceding sentence shall in no way limit the Company's
obligations under Section 8.2(a) above.
8.3. Extension of Required Effectiveness. In the
event that the Company shall give any notice required by Section 8.2(a)(v)
hereof, the period during which the Company is required to keep such
Registration Statement effective and useable shall be extended by the number of
days during the period from and including the date of the giving of such notice
to and including the date when the UBS Parties are advised in writing by the
Company that the use of the Prospectus may be resumed.
8.4. Transfer of Shares After Registration. Each UBS
Party agrees that it will not effect any disposition of the Shares or its right
to purchase the Shares that would constitute a sale within the meaning of the
Securities Act or pursuant to any applicable state securities or blue sky laws
except as contemplated in each Registration Statement referred to in
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<PAGE> 22
Section 8.1 or except pursuant to any exemption from the registration
requirements of the Securities Act (including, without limitation, Rule 144
promulgated thereunder and any successor thereto) and that it will promptly
notify the Company of any changes in the information set forth in any such
Registration Statement regarding the UBS Parties or its Plan of Distribution.
8.5. Indemnification. For the purpose of this Section
8.5, the term "Registration Statement" shall include any final prospectus,
exhibit, supplement or amendment included in or relating to any Registration
Statement referred to in Section 8.1.
(a) Indemnification by Company. For purposes of this Section
8.5, the Trust and the Corporation, referred to as the "Company" agree to
indemnify and hold harmless the UBS Parties and as more particularly described
herein. The Company agrees to indemnify and hold harmless the UBS Parties and
each person, if any, who controls either UBS Party within the meaning of the
Securities Act, against any losses, claims, damages, liabilities or expenses,
joint or several, to which the UBS Parties or such controlling person may become
subject (including in settlement of any litigation, if such settlement is
effected with the written consent of the Company), insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any Registration
Statement, including the Prospectus, financial statements and schedules, and all
other documents filed as a part thereof, as amended at the time of effectiveness
of such Registration Statement, including any information deemed to be a part
thereof as of the time of effectiveness pursuant to paragraph (b) of Rule 430A,
or pursuant to Rule 434, of the Rules and Regulations, or the Prospectus, in the
form first filed with the SEC pursuant to Rule 424(b) of the Regulations, or
filed as part of such Registration Statement at the time of effectiveness if no
Rule 424(b) filing is required, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state in any of
them a material fact required to be stated therein or necessary to make the
statements in any of them not misleading, and will reimburse each UBS Party and
each such controlling person for any legal and other expenses as such expenses
are reasonably incurred by the UBS Parties or such controlling person in
connection with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, expense or action. The Company will also
indemnify selling brokers, dealers and similar securities industry professionals
participating in the sale or resale of the Shares, their officers, directors and
partners and each person who controls any such person within the meaning of the
Securities Act, provided, however, that the Company will not be liable in any
such case to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such Registration Statement, such
Prospectus or any amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company (i) by or on behalf
of the UBS Parties expressly for use therein or (ii) any statement or omission
in any Prospectus that is corrected in any subsequent Prospectus that was
delivered to a UBS Party prior to the pertinent sale or sales by such UBS Party
and not delivered by such UBS Party in connection with such sale or sales.
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<PAGE> 23
(b) Indemnification by UBS Parties. The UBS Parties will
indemnify and hold harmless the Company, each of its directors, each of its
officers who signed any Registration Statement and each person, if any, who
controls the Company within the meaning of the Securities Act, against any
losses, claims, damages, liabilities or expenses, joint and several, to which
the Company, each of its directors, each of its officers who signed any
Registration Statement or any controlling person may become subject (including
in settlement of any litigation, if such settlement is effected with the written
consent of the UBS Parties) insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof as contemplated below) arise out of
or are based upon any untrue or alleged untrue statement of any material fact
contained in such Registration Statement, such Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in such Registration
Statement, such Prospectus, or any amendment or supplement thereto, in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of the UBS Parties expressly for use therein, and will reimburse the
Company, each of its directors, each of its officers who signed such
Registration Statement and each controlling person for any legal and other
expense reasonably incurred by the Company, each of its directors, each of its
officers who signed such Registration Statement or controlling person in
connection with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, expense or action.
(c) Proceedings. Promptly after receipt by an indemnified
party under this Section 8.5 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section 8.5 notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party for contribution or otherwise than under the indemnity
agreement contained in this Section 8.5 or to the extent it is not prejudiced as
a proximate result of such failure. In case any such action is brought against
any indemnified party and such indemnified party seeks or intends to seek
indemnity from an indemnifying party, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with all other
indemnifying parties similarly notified, to assume and control the defense
thereof with counsel reasonably satisfactory to such indemnified party;
provided, however, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be a conflict between the positions of
the indemnifying party and the indemnified party in conducting the defense of
any such action or that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election so to assume the defense of such action and approval by
the indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section
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<PAGE> 24
8.5 for any reasonable legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso to the preceding
sentence (it being understood, however, that the indemnifying party shall be not
liable for the expenses of more than one separate counsel, approved by such
indemnifying party in the case of paragraph (a), representing the indemnified
parties who are parties to such action) or (ii) the indemnifying party shall not
have employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of
commencement of action, in each of which cases the fees and expenses of counsel
shall be at the expense of the indemnifying party. Notwithstanding the
foregoing, without the written consent of the indemnified party, the
indemnifying party may not settle or agree to compromise of any such claim or
action for which the indemnified party intends to seek reimbursement from the
indemnifying party, and the indemnified party will permit the indemnifying party
to settle or compromise any such action or suit at the indemnifying party's sole
cost and expense if as a result thereof the indemnified party is provided a full
and unconditional release of such claim or action.
(d) Contribution. If the indemnification provided for in this
Section 8.5 is required by its terms but is for any reason held to be
unavailable to or otherwise insufficient to hold harmless an indemnified party
under paragraphs (a), (b) or (c) of this Section 8.5 in respect of any losses,
claims, damages, liabilities or expenses referred to herein, then each
applicable indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of any losses, claims, damages, liabilities
or expenses referred to herein in such proportion as is appropriate to reflect
the relative benefits received by the Company and the UBS Parties from the
purchase and sale of the Shares and the relative fault of the Company and the
UBS Parties in connection with the statements or omissions or inaccuracies in
the representations and warranties in this Agreement which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The respective relative benefits received by the
Company on the one hand and the UBS Parties on the other shall be deemed to be
in the same proportion as the amount paid by the UBS Parties to the Company
pursuant to this Agreement for the Shares purchased by the UBS Parties that were
sold pursuant to any Registration Statement bears to the difference (the
"Difference") between the amount the UBS Parties paid for the Shares that were
sold pursuant to such Registration Statement and the amount received by the UBS
Parties from such sale. The relative fault of the Company and the UBS Parties
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact or the inaccurate or the alleged inaccurate
representation and/or warranty relates to information supplied by the Company or
by the UBS Parties and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in paragraph (c) of this Section 8.5 any
reasonable legal or other fees or expenses incurred by such party in connection
with investigating or defending any action or claim. The provisions set forth in
paragraph (c) of this Section 8.5 with respect to notice of commencement of any
action shall apply if a claim for contribution is to be made under this
paragraph (d);
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<PAGE> 25
provided, however, that no additional notice shall be required with respect to
any action for which notice has been given under paragraph (c) for purposes of
indemnification. The Company and the UBS Parties agree that it would not be just
and equitable if contribution pursuant to this Section 8.5 were determined
solely by pro rata allocation or by any other method of allocation which does
not take account of the equitable considerations referred to in this paragraph.
Notwithstanding the provisions of this Section 8.5, the UBS Parties shall not be
required to contribute any amount in excess of the amount by which the aggregate
proceeds received by the UBS Parties from the transactions contemplated hereby
exceeds the amount of any damages that the UBS Parties has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) Relationship Between the Trust and the Corporation. The
obligations set forth in this Section 8.5 shall in no way limit the ability of
the parties to allocate liability between themselves.
8.6. Termination of Conditions and Obligations. The
conditions precedent imposed by Section 6 or this Section 8 upon the
transferability of the Shares shall cease and terminate as to any particular
number of the Shares when such Shares may be, and in fact are, sold under Rule
144(k) promulgated under the Securities Act. Further, as to any particular
number of Shares, the conditions precedent imposed by Section 6 or this Section
8 on the transferability of such Shares shall cease and terminate at such
earlier time as an opinion of counsel satisfactory to the Company and the UBS
Parties shall have been rendered to the effect that such conditions are not
necessary in order to comply with the Securities Act with respect to such
Shares. In each such case, the Company's obligation to maintain an effective
Registration Statement with respect to such Shares which are no longer be
subject to the restrictions and limitations of Section 6 and this Section 8
shall cease.
8.7. Information Available. So long as any
Registration Statement covering the resale of any Shares owned by either UBS
Party is effective, the Trust and the Corporation will furnish to the UBS
Parties:
(a) as soon as practicable after available, one copy of
(i) its Joint Annual Report to Shareholders, (ii) its
Joint Annual Report on Form 10-K, (iii) its joint
Quarterly Reports to Shareholders, (iv) its joint
quarterly reports on Form 10-Q, (v) a full copy of
the particular Registration Statement covering the
Shares (the foregoing, in each case, excluding
exhibits) and (vi) upon request, any or all other
public filings under the Exchange Act by the Trust
and the Corporation; and
(b) upon the reasonable request of either UBS Party, a
reasonable number of copies of the Prospectuses to
supply to any other party requiring such
Prospectuses;
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<PAGE> 26
and the Trust and the Corporation, upon the reasonable request of the UBS
Parties, will meet with the UBS Parties or a representative thereof at the
Trust's and the Corporation's headquarters to discuss all information relevant
for disclosure in such Registration Statement covering the Shares, subject to
appropriate confidentiality limitations.
8.8. Non-Exclusivity. The rights and remedies
provided under Section 8.5 hereof shall not be in limitation or exclusion of any
other rights or remedies available to a party, whether by agreement, at law, in
equity or otherwise, with respect to the inaccuracy of any representation or
warranty by, or the breach of any covenant of, the other party made herein or in
the Forward Stock Purchase Agreement.
8.9. Notice Requirement. The Trust and the
Corporation each covenant and agree that it will notify the UBS Parties at any
time it becomes aware that as a result of a change in the Trust's and the
Corporation's capital stock the UBS Parties beneficially hold more than 4.9% of
the Trust's shares of beneficial interest or the Corporation's shares of common
stock.
8.10. Transfer of Shares. The Trust and the
Corporation covenant and agree to use their best efforts to cause the transfer
agent to effect promptly any transfer of the Shares requested by the UBS Parties
and to cause the transfer agent to remove promptly the restrictive legend from
the Shares upon presentation to the transfer agent of all necessary
documentation.
SECTION 9. Registration Exemptions. For so long as
the Trust and the Corporation are subject to the reporting requirements of
Section 13 or 15 of the Exchange Act, the Trust and the Corporation covenant
that they will file the reports required to be filed by it under the Securities
Act and Section 13(a) and 15(d) of the Exchange Act and the rules and
regulations adopted by the Commission thereunder.
SECTION 10. Broker's Fee. Other than any fees payable
under or in connection with the Forward Stock Purchase Agreement, each of the
parties hereto hereby represents that, on the basis of any actions and
agreements by it, there are no brokers or finders entitled to compensation in
connection with the sale or issuance of the Shares to the UBS Parties.
SECTION 11. Notices. All notices, requests, consents
and other communications hereunder shall be in writing, shall be mailed by
first-class registered or certified airmail, by telegram or telecopy or sent by
nationally recognized overnight express courier postage prepaid, and shall be
deemed given when so mailed or for telecopies, when transmitted and receipt
confirmed, and shall be delivered as addressed as follows:
(a) if to the Trust and the Corporation, to:
Starwood Lodging Trust
Starwood Lodging Corporation
26
<PAGE> 27
2231 East Camelback Road,
Suites 400 and 410
Phoenix, Arizona 85016
Attn: Ronald Brown/Alan Schneid
Telecopier: 602-852-0115
with a copy so mailed to:
Sidley & Austin
555 West 5th Street
Suite 4000
Los Angeles, California 90013
Attn: Sherwin L. Samuels
Telecopier: 213-896-6600
or to such other person at such other place as the
Trust and the Corporation shall designate to the UBS
Parties in writing; and
(b) if to the UBS Parties, c/o UBS Securities, LLC, 299
Park Avenue, New York, New York 10171, Telecopier:
212-223-2815 or at such other address or addresses as
may have been furnished to the Trust and the
Corporation in writing.
SECTION 12. Changes. This Agreement may not be
modified or amended except pursuant to an instrument in writing signed by the
Trust and the Corporation and the UBS Parties.
SECTION 13. Headings. The headings of the various
sections of this Agreement have been inserted for convenience of reference only
and shall not be deemed to be part of this Agreement.
SECTION 14. Severability. In case any provision
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
SECTION 15. Governing Law; Jurisdiction.
15.1. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD
TO THE CONFLICTS OF LAW PRINCIPLES THEREOF) AND OF THE FEDERAL LAW OF THE UNITED
STATES OF AMERICA.
15.2. EACH OF THE TRUST AND THE CORPORATION (I)
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF, AND AGREES THAT ANY SUIT
SHALL BE BROUGHT IN, THE STATE AND FEDERAL COURTS LOCATED IN THE CITY AND COUNTY
OF NEW YORK FOR THE PURPOSE OF ANY SUIT,
27
<PAGE> 28
ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY AND (II) HEREBY WAIVES TO THE EXTENT NOT
PROHIBITED BY APPLICABLE LAW, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A
DEFENSE OR OTHERWISE, IN ANY SUCH PROCEEDING, ANY CLAIM THAT IT IS NOT SUBJECT
PERSONALLY TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, THAT ITS PROPERTY IS
EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT ANY SUCH PROCEEDING BROUGHT
IN ONE OF THE ABOVE-NAMED COURTS IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE
VENUE OF ANY SUCH PROCEEDING BROUGHT IN ONE OF THE ABOVE-NAMED COURTS IS
IMPROPER, OR THAT THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY MAY
NOT BE ENFORCED IN OR BY SUCH COURT.
SECTION 16. Transfer to Affiliate. Notwithstanding
anything herein to the contrary, UBS Limited may transfer the Purchase Shares to
any affiliate of UBS Limited, together with all of UBS Limited's rights
hereunder; provided that (i) such affiliate shall assume and be subject to all
of UBS Limited's obligations hereunder; (ii) such affiliate shall be an
"accredited investor" within the meaning of Rule 501 of Regulation D promulgated
under the Securities Act; and (iii) such transfer shall be consistent with the
investment representations set forth at Section 6.1 hereto. In the event of such
an assignment, such affiliate shall in all respects be substituted for UBS
Limited as a party hereto.
SECTION 17. Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall constitute an
original, but all of which, when taken together, shall constitute but one
instrument, and shall become effective when one or more counterparts have been
signed by each party hereto and delivered to the other parties.
SECTION 18. Waiver of Trial by Jury. EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO JURY TRIAL IN CONNECTION WITH
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
28
<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives as of the day
and year first above written.
Starwood Lodging Trust
By: /s/ Ronald Brown
----------------------------
Name: Ronald C. Brown
Title: Senior Vice President & CFO
Starwood Lodging Corporation
By: /s/ Alan M. Schnaid
----------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate
Controller
UBS Limited
By: /s/
----------------------------
Name:
Title:
By: /s/ Adam Matthews
----------------------------
Name: Adam Matthews
Title: Director
Union Bank of Switzerland
London Branch
By: /s/ C. Donegan
----------------------------
Name: C. Donegan
Title: Vice President
By: /s/ Adam Matthews
----------------------------
Name: A.J. Matthews
Title: Vice President
29
<PAGE> 30
Appendix I
(one of two)
STOCK CERTIFICATE QUESTIONNAIRE
Pursuant to Section 3 of the Agreement, please provide us with the
following information:
1. The exact name that your Shares are to be registered in (this is the
name that will appear on your stock certificate(s)). You may use a
nominee name if appropriate:
----------------------------
2. All relationships between each UBS Party and the Registered Holder
listed in response to Item 1 above:
----------------------------
----------------------------
----------------------------
3. The mailing address of the Registered Holder listed in response to item
1 above:
----------------------------
----------------------------
----------------------------
----------------------------
4. The Social Security Number or Tax Identification Number of the
Registered Holder listed in response to item 1 above:
----------------------------
C-31
<PAGE> 31
Appendix I
(two of two)
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement,
please provide us with the following information:
1. Pursuant to the "Selling Shareholders" section of the
Registration Statement, please state your or your organization's name exactly as
it should appear in the Registration Statement:
2. Please provide the number of shares that you or your
organization will own immediately after Closing, including those Shares
purchased by you or your organization pursuant to this Purchase Agreement and
those shares purchased by you or your organization through other transactions:
3. Have you or your organization had any position, office or
other material relationship within the past three years with the Trust, the
Corporation or any of their affiliates?
_____ Yes
_____ No
If yes, please indicate the nature of any such relationships
below:
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
<PAGE> 32
APPENDIX II
Attention:
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
The undersigned, [an officer of, or other person duly
authorized by] ___________________________________________________ hereby
[fill in official name of individual or institution]
certifies that he/she [said institution] is the Purchaser of the shares
evidenced by the attached certificate, and as such, sold such shares on ________
[date]
in accordance with Registration Statement number ______________________________
_______________________________________________________________________,
[fill in the number of or otherwise identify Registration Statement]
the Securities Act of 1933, as amended, and any applicable state securities or
blue sky laws and the requirement of delivering a current prospectus by the
Trust and the Corporation has been complied with in connection with such sale.
Print or Type:
Name of Purchaser
(Individual or
Institution):
Name of Individual
representing
Purchaser (if an
Institution)
Title of Individual
representing
Purchaser (if an
Institution):
Signature by:
Individual Purchaser
or Individual repre-
senting Purchaser:
<PAGE> 33
EXHIBIT A-1
[Form of Closing Opinion of Counsel to the Trust and the Corporation]
C-34
<PAGE> 34
EXHIBIT A-2
[Form of Closing Opinion of Counsel to the Trust and the Corporation]
C-35
<PAGE> 35
EXHIBIT B
Opinion Matters for Additional Registration Statements
[opinion paragraphs to be delivered in connection with resale registration
statements]
The Corporation is duly organized, validly existing
and in good standing under the laws of the State of Maryland, and the
Corporation has the requisite corporate power and authority to own its
properties and to conduct is business as presently conducted. The Trust is a
real estate investment trust duly organized, validly existing and in good
standing as a business trust under the laws of the State of Maryland, and the
Trust has the requisite trust power and authority to own its properties and to
conduct its business as is presently conducted.
The [Additional] Shares have been duly authorized and
are validly issued, nonassessable and fully paid, and are not subject to any
preemptive or similar rights.
The Registration Statement has been declared
effective under the Securities Act; to our knowledge, no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or threatened; and the
Registration Statement, the Final Prospectus, and each amendment thereof or
supplement thereto (except for the financial statements, schedules and the notes
thereto and the other financial data included or incorporated by reference
therein, as to which we express no opinion) comply as to form in all material
respects with the requirements of the Securities Act and the Exchange Act and
the respective rules of the Commission thereunder.
While we have not verified, and are not passing upon and do not assume
any responsibility for, the accuracy, completeness or fairness of the statements
contained in the Registration Statement or Final Prospectus, we have
participated in reviews and discussions in connection with the preparation of
the Registration Statement and Final Prospectus, and advise you that, in the
curse of such reviews and discussions, nothing has come tot our attention which
would lead us to believe (i) that the Registration Statement at the time it
became effective (except for the financial statements and the notes thereto and
the other financial data included or incorporated by reference therein, as to
which we express no belief) contained any untrue statement of a material fact or
omitted to state any material fact necessary to make the statements therein not
misleading or (ii)that the Final Prospectus on the date thereof or on the date
of this opinion (except for the financial statements and the notes thereto and
the other financial data included or incorporated by reference therein, as to
which we express no belief) contained any untrue statement of a material fact or
omitted to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
C-36
<PAGE> 1
Exhibit 10.47
FORWARD STOCK CONTRACT
To: Starwood Lodging Trust
2231 East Camelback Road
Suite 410
Phoenix, AZ 85016
Attn: Mr. Ronald Brown
To: Starwood Lodging Corporation
2231 East Camelback Road
Suite 400
Phoenix, AZ 85016
Attn: Mr. Alan Schnaid
From: Union Bank of Switzerland, London Branch
c/o UBS Securities LLC, as agent
299 Park Avenue
New York, NY 10171
Date: 13 October 1997
Ladies and Gentlemen,
The purpose of this letter agreement (this "Confirmation") is to confirm the
terms and conditions of the Transaction entered into between us on the Trade
Date specified below (the "Transaction"). This Confirmation constitutes a
"Confirmation" as referred to in the ISDA Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swaps and Derivatives Association, Inc.) are
incorporated into this Confirmation. In the event of any inconsistency between
those definitions and provisions and this Confirmation, this Confirmation will
govern. References herein to the "Transaction" shall be deemed to be references
to a "Swap Transaction" solely for the purposes of the 1991 ISDA Definitions.
This Confirmation supplements, forms a part of, and is subject to, the ISDA
Master Agreement dated as of 13 October 1997, as amended and supplemented from
time to time (the "Agreement"), between you and us. All provisions contained in
the Agreement govern this Confirmation except as expressly modified below. In
the event of any inconsistency between the provisions of that agreement and this
Confirmation, this Confirmation will prevail for the purposes of this
Transaction.
The Agreement and each Confirmation thereunder will be governed by and construed
in accordance with the laws of the State of New York without reference to choice
of law doctrine.
I. THE TRANSACTION
Starwood Lodging Trust, a Maryland real estate investment trust (the "Trust"),
Starwood Lodging Corporation, a Maryland corporation ("SLC") (the Trust and SLC
being sometimes collectively referred to as the Company) and Union Bank of
Switzerland, London Branch ("UBS") acting through UBS Securities LLC as its
agent for each purchase or sale of Securities ("UBS LLC"), hereby agree to
1
<PAGE> 2
FORWARD STOCK CONTRACT
make the payments and deliveries provided for in Sections III, IV and V hereof,
all on the terms more particularly specified herein (this "Confirmation").
II. DEFINITIONS
For the purposes of this Confirmation, the following terms shall have the
meanings set opposite:
Adjustments: In the event of:
(a) a subdivision, consolidation or
reclassification of the Paired Shares, or a free
distribution or dividend of any Paired Shares to
all existing holders of Paired Shares by way of
bonus, capitalization or similar issue;
(b) a distribution or dividend to all existing
holders of Paired Shares of (i) additional Paired
Shares or (ii) other share capital or securities
granting right to payment of dividends and/or the
proceeds of liquidation of the Company equally or
proportionally with such payments to holders of
Paired Shares or (iii) any other type of
securities, warrants or other assets, in any case
for payment (cash or otherwise) at less than the
prevailing market price; or
(c) any other event that has a diluting or
concentrative effect on the value of the Underlying
Shares (other than (i) the issuance by the Company
to its employees, officers and directors of options
to purchase Paired Shares, restricted Paired Shares
or limited partnership units of SLC Operating
Limited Partnership and SLT Realty Limited
Partnership or (ii) the issuance by the Company of
Paired Shares for cash or in connection with any
acquisition, merger, exchange offer or similar
transaction, in each case approved by the Boards of
Directors of SLC and the Trust).
an adjustment shall thereupon be effected to the
Forward Price and/or the Underlying Shares at the
time of such event with the intent that following
such adjustment, the value of this Transaction is
economically equivalent to the value immediately
prior to the occurrence of the event causing the
adjustment.
Calculation Agent: UBS, whose calculations and determinations shall be
made in a commercially reasonable manner and shall
be binding absent manifest error; provided that the
Company my dispute any determination, adjustment or
calculation by the Calculation Agent, or failure by
the Calculation Agent to make any determination,
adjustment or estimate required by this
Confirmation, by notice to the Calculation Agent
promptly following the day notice from the
Calculation Agent to the Company of such
determination, adjustment or calculation is
effective or at any time the Company believes that
the Calculation Agent has failed to make a
determination, adjustment or calculation required
by this Confirmation. If such dispute cannot be
resolved within three Business Days following the
day on which
2
<PAGE> 3
FORWARD STOCK CONTRACT
the Company's notice to the Calculation Agent is
effective, then (i) the relevant party shall pay
the amount, if any, that is not in dispute and (ii)
the parties shall agree upon and appoint an
independent third party to resolve the dispute, the
determination of which shall be final and binding
absent manifest error.
Calculation Period: Means each period commencing on and including:
(i) in the case of the first Calculation Period,
the Effective Date and ending on but excluding the
first Interim Settlement Date, and
(ii) for each period thereafter, an Interim
Settlement Date and ending on but excluding the
earlier of the next following Interim Settlement
Date or Day S.
If there is a Partial Settlement, then (i) the
Calculation Period for the Settlement Shares
covered by such Partial Settlement Share shall end
on Day S for such Partial Settlement and (ii) the
Calculation Period for the remaining Underlying
Shares shall be determined without regard to such
Partial Settlement.
Collateral Release Shares: Paired Shares delivered pursuant to Section V.C.
Collateral Valuation Date: In the event that the Company chooses to post cash
collateral pursuant to Section V. or VI. any day
upon which the amount of collateral required is
calculated.
Compounding Period: Means each period commencing on and including:
(i) in the case of the first Compounding Period,
the Effective Date and ending on but excluding the
first Reset Date, and
(ii) for each period thereafter, a Reset Date and
ending on (but excluding) the earlier of the next
following Reset Date or Day S.
If there is a Partial Settlement, then(i) the
Compounding Period for the Settlement Shares
covered by such Partial Settlement shall end on Day
S for such Partial Settlement and (ii) the
Compounding Period for the remaining Underlying
Shares shall be determined without regard to such
Partial Settlement.
Customer Account: the account established in favor of the Company
pursuant to the Customer Account Agreement dated
the date hereof between the Company and UBS
Securities LLC
Daycount Actual/360
Day S: For Settlement pursuant to Section III. or VI. or
Interim Net Stock Settlement pursuant to Section
IV., the day upon which settlement activities shall
begin.
3
<PAGE> 4
FORWARD STOCK CONTRACT
Dividend Amount: A) Means, on each Reset Date or Day S an amount in
U.S. Dollars equal to:
(i) the sum of all cash distributions paid on a
single Common Share during the relevant Compounding
Period; plus
(ii) an amount representing interest that could
have been earned on such distributions at the LIBOR
rate plus Spread for a Designated Maturity of 1
month for the period from the date that such
distributions would have been received by a holder
of such Paired Shares until such Reset Date, or Day
S, as the case may be.
B) Separately, and not included in Dividend Amount,
UBS will cause UBS LLC to pay to the Company on the
Business Day after the relevant dividend payment
date declared by the Company's Board of Directors,
(i) all cash dividends on Paired Shares that have
gone ex-dividend, but on which dividends have not
been paid, prior to the end of the final
Compounding Period for any settlement, based on a
number of Paired Shares equal to the number of
Settlement Shares for such settlement, (ii) all
cash dividends received by UBS at any time, on
Paired Shares delivered by the Company pursuant to
Section III. E. that have gone ex-dividend after
Day S but prior to the end of the Unwind Period for
any settlement, and (iii) all cash dividends paid
on Paired Shares held in the Customer
Account.
Effective Date: 15 October 1997
Exchange Trading Day: Each day on which the Relevant Exchange is open for
trading.
Forward Price: On each Reset Date or Day S, the Forward Price
shall be determined for such day by:
a) multiplying the Initial Price for the
Compounding Period by the sum of
1 plus (i) LIBOR; determined as of the previous
Reset Date for a Designated Maturity of 1 month,
plus (ii) Spread; and
b) subtracting the Dividend Amount at that date;
provided however that if the Company delivers
Interim Settlement Shares pursuant to Section IV.
or Collateral Release Shares pursuant to Section
V.C. during any Calculation Period, the Forward
Price for purposes of determining the Initial Price
for the first Compounding Period during such
Calculation Period, shall be adjusted to a price
equal to the closing price of the Paired Shares on
the Exchange Trading Day immediately prior to the
most recent Interim Settlement Date, adjusted up
for any positive result or down for any negative
result of the following formula:
4
<PAGE> 5
(ii) the Interim Settlement Amount for the most
recent Interim Settlement Date.
minus,
(i) (a) the number of Interim Settlement Shares or
Collateral Release Shares, as the case may be,
times (b) the average closing price of the Paired
Shares on the five (5) Exchange Trading Days
immediately following the receipt of the Interim
Settlement Shares by UBS pursuant to Section IV.A.
or the Collateral Release Shares pursuant to
Section V.C.
such result divided by,
(iii) the number of Underlying Shares.
Initial Price: Means,
a) for the Compounding Period ending on the first
Reset Date, an amount in U.S. Dollars equal to
$57.25, and
b) for each subsequent Reset Date, the Forward
Price as calculated on or adjusted as of the prior
Reset Date.
Interim Settlement Dates: 15 January 1997, 15 April 1998, 15 July 1998,
subject to adjustment in accordance with the
Modified Following Business Day convention.
Interim Settlement Amount: on any Interim Settlement Date, the product of (a)
the number of Underlying Shares, and (b) the amount
by which the Forward Price exceeds the closing
price of the Paired Shares on the Exchange Trading
Day immediately prior to such Interim Settlement
Date.
Interim Settlement Shares: (i) 110% times (ii) Interim Settlement Amount
divided by (iii) the closing price of the Paired
Shares on the Exchange Trading Day immediately
prior to such Interim Settlement Date.
LIBOR means USD-LIBOR-BBA as such term is defined in the
Agreement.
Mandatory Unwind Date: In the case of a Mandatory Unwind Event specified
in clause (i) or the definition thereof, 1 Exchange
Trading Day after such Mandatory Unwind Event
occurs. In the case of a Mandatory Unwind Event
specified in clause (ii) of such provision, the
date specified in the notice delivered to the
Company (which date shall be at least 5 Business
Days after the date such notice becomes effective).
Mandatory Unwind Mandatory
Thresholds: Unwind Thresholds Unwind Share Limit
$40.00 up to 25% of Underlying
Shares
5
<PAGE> 6
FORWARD STOCK CONTRACT
$37.00 50%
$35.50 75%
$34.00 100%
Maturity Date: One (1) year after the Effective Date, subject to
extension upon the written approval of UBS in its
sole discretion.
Paired Shares: Shares of beneficial interest, $0.01 par value per
share, of the Trust (the "Trust Shares") and shares
of Common Stock, par value $0.01 per share, of SLC
(the "SLC Shares"), which are paired and traded as
a unit consisting of one (1) Trust Share and one
(1) SLC Share.
Partial Settlement: Any contemplated settlement, pursuant to sections
III. or VI., in which the designated Settlement
Shares are less than Underlying Shares.
Preliminary Net Stock
Settlement Shares: All Paired Shares delivered by the Company pursuant
to Section III.E.2 and III.E.3(b) (other than
Paired Shares delivered after the Unwind Period).
Relevant Exchange: Means, with respect to any Exchange Trading Day,
the principal Stock Exchange on which the Paired
Shares are traded on that day.
Reset Dates: 13 November 1997, 13 December 1997, 13 January
1998, 13 February 1998, 13 March 1998, 13 April
1998, 13 May 1998, 13 June 1998, 13 July 1998, 13
August 1998, 13 September 1998, 13 October 1998,
subject to adjustment in accordance with the
Modified Following Business Day convention.
Settlement Amount: The product of the Settlement Price and the
Settlement Shares.
Settlement Disruption Event: Means an event beyond the control of the parties as
a result of which The Depository Trust Company
("DTC") or any successor depository cannot effect a
transfer of the Settlement Shares or the Paired
Shares. If there is a Settlement Disruption Event
on a Valuation Date, then the transfer of the
Paired Shares that would otherwise be due to be
made by UBS LLC for the account of UBS or the
transfer of the Paired Shares that would otherwise
be due to be made by the Company, as applicable, on
that date shall take place on the first succeeding
Exchange Trading Day on which settlement can take
place through DTC, provided that if such a
Settlement Disruption Event persists for five
consecutive Business Days, then the Party obliged
to deliver such Settlement Shares shall use its
best efforts to cause such Shares to be delivered
promptly thereafter to the other Party in any
commercially reasonable manner.
Settlement Price: If Day S is a Reset Date, the Forward Price. If Day
S is not a Reset Date, the Forward Price adjusted
for LIBOR breakage adjustments (either positive or
negative) for the Settlement Shares for the period
6
<PAGE> 7
FORWARD STOCK CONTRACT
from Day S to the next following Reset Date. Any
breakage adjustments shall be calculated by the
Calculation Agent in accordance with normal
industry standards.
Settlement Shares: The number of shares up to the full number of
Underlying Shares subject to settlement under
Section III. or VI.
Spread: 1.50% per annum.
Stock Exchange: Means the New York Stock Exchange, the American
Stock Exchange or NASDAQ.
Stock Settlement
Unwind Price: The daily average closing price of the Paired
Shares for Exchange Trading Days during the Unwind
Period.
Trade Date: 13 October 1997
UBS LLC: UBS Securities LLC
Unwind Period: In the event of Stock Settlement or Net Stock
Settlement, such number of Exchange Trading Days
(which shall not be more than 70; (subject to
change based on mutual agreement) beginning on Day
S; provided that UBS may extend such period (such
extension not to exceed 10 Exchange Trading Days)
or upon the occurrence of a Market Disruption
Event.
Underlying Shares: 2,185,000 Paired Shares of the Company (ticker
"HOT"), subject to adjustment in the event of
Partial Settlements.
Valuation Date: In the case of determining any Cash Settlement
value, Net Stock Settlement Shares or Stock
Settlement Shares, Day S, the day preceding Day S
and all Exchange Trading Days during the Unwind
Period; in the case of determining any Preliminary
Stock Settlement Shares or Preliminary Net Stock
Settlement Shares, the Exchange Trading Day
immediately preceding Day S; in the case of
determining the Interim Settlement Amount and
related calculation, the day prior to the Interim
Settlement Date, and the 5 Exchange Trading Days
following receipt of Interim Settlement Shares by
UBS.
Valuation Time: 4:00 pm EST, or in the event the Relevant Exchange
closes early, such closing time.
III. SETTLEMENT
A. NOTICE AND PROCEDURES
1. The Company may on any Exchange Trading Day up to and including the
Maturity Date, upon the giving of at least five (5) Business Days telephonic
notice to UBS (the "Settlement
7
<PAGE> 8
Notice"), settle all or part of this Transaction. The Settlement Notice shall
specify:
(i) the Settlement Shares,
(ii) the settlement method (Cash, Stock or Net Stock Settlement,
as such methods are described below);
(iii) the number of Exchange Trading Days in the Unwind Period,
and
(iv) Day S, which must be an Exchange Trading Day; provided
however, that if Cash or Net Stock Settlement is selected and in
UBS' reasonable judgement the settlement of the Settlement Shares
would potentially violate or contravene any legal or regulatory
prohibition or requirement applicable to UBS or cause UBS to
contravene any established UBS corporate policy or compliance
policy which relates to any legal or regulatory prohibition or
requirement applicable to UBS (other than any corporate policy
limiting the amount of UBS's investment in another entity) then
UBS shall at least three (3) Business Days prior to the proposed
Day S, notify the Company telephonically (confirmed by writing)
of any such impediment and its estimate of the period during
which such impediment will preclude UBS' ability to settle all or
part of this Transaction.
The Settlement Notice shall be effective only if the notice
requirements specified above are fulfilled; provided, that if no
settlement method is specified, then the settlement method shall
be deemed to be Cash Settlement and provided further that the
Company may upon telephonic notice to UBS at least one (1)
Exchange Trading Day prior to the proposed Day S withdraw any
Settlement Notice.
In the case of any Partial Settlement, following such settlement the
number of Underlying Shares to which this Transaction shall relate shall
be adjusted, as of Day S, by subtracting the number of Settlement Shares
from the number of Underlying Share (as the same may have been adjusted
prior to such Partial Settlement) immediately prior to such Day S. The
Settlement Shares shall not be subject to forward accretion and shall be
treated separately from the remaining Underlying Shares during any
Unwind Period.
2. On Day S, the Settlement Price for the Settlement Shares and the
Settlement Amount shall be determined for Day S.
3. The Settlement Amount shall be settled pursuant to the settlement method
(B, C, or D of this section III.) selected by the Company in its sole
discretion.
4. If settlement with respect to the Settlement Shares shall occur pursuant
to Section III.A1 (but not as a result of a Mandatory Unwind Event) on
or before the 180th day following the Effective Date, then the
Settlement Price for purposes of such settlement shall be increased by
any positive amount, calculated by UBS as follows:
Spread x Forward Price x (180 - calendar days since Trade Date)
-------------------------------------
360
5. It shall be a condition precedent to any right of the Company to elect
Stock Settlement (III. C. below) or Net Stock Settlement (III. D.
below), that the Company must (i) notify UBS of such
8
<PAGE> 9
election at least 5 Business Days prior to Day S and (ii) prior to Day
S, cause to be filed with the Securities and Exchange Commission (the
"Commission") and cause to become effective under the Securities Act of
1933, as amended (the "Securities Act") a registration statement that
results in UBS being able to resell all Paired Shares to be delivered by
the Company to UBS LLC for the account of UBS in effecting such Stock
Settlement or Net Stock Settlement without further registration under
the Securities Act of 1933, as amended, such registration statement to
include one or more preliminary prospectuses, prospectuses, and any
amendments and supplements thereto such that any preliminary prospectus
or prospectus, as amended or supplemented, shall not contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they are made. In
addition, the Company shall not deliver any Paired Shares to UBS LLC for
the account of UBS pursuant to Sections IV.A or IV.D. below unless at
the time of such delivery a registration statement has become effective
under the Securities Act that results in UBS being able to resell such
Paired Shares without further registration under the Securities Act,
such Registration Statement to include one or more preliminary
prospectuses, prospectus and any amendments or supplements thereto such
that any preliminary prospectus or prospectus, as amended or
supplemented, shall not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they are made. The Company further agrees that
it will cause any such Registration Statement referred to in this
paragraph 5 of Section III.A. to remain in effect until the earliest of
the date on which (i) all Paired Shares issued pursuant hereto and not
required to be delivered to the Company hereunder have been sold by UBS
LLC for the account of UBS and UBS agrees to notify the Company of such
fact, within two (2) Business Days of its occurrence, (ii) UBS LLC for
the account of UBS is able to sell the Paired Shares subject thereto
under Rule 144(k), or (iii) UBS has advised the Company that it no
longer requires that such registration statement be effective; provided,
however, that in no event shall the Company be obligated to keep such
Registration Statement effective for more than 10 Exchange Trading Days
after the end of the applicable Unwind Period.
B. CASH SETTLEMENT
If the Company elects Cash Settlement, the Company shall settle by
delivering cash in an amount equal to the Settlement Amount in exchange
for the Settlement Shares ("Cash Settlement") on the Exchange Trading
Day immediately succeeding Day S. UBS shall cause UBS LLC for the
account of UBS to deliver the Settlement Shares to the Company on the
Exchange Trading Day immediately succeeding Day S upon receipt of such
Cash Settlement.
C. STOCK SETTLEMENT
If the Company elects to settle the Settlement Amount by delivering
Paired Shares in exchange for the Settlement Shares ("Stock
Settlement"), the number of Paired Shares to be delivered (the "Stock
Settlement Shares") shall be equal to (a) the Settlement Amount divided
by (b) the Stock Settlement Unwind Price. The mechanics for settlement
are set forth in Section III. E. below and Article VI.
D. NET STOCK SETTLEMENT
If the Company elects to settle the Settlement Amount on a net stock
basis ("Net Stock
9
<PAGE> 10
Settlement"), the number of net stock settlement shares (the "Net Stock
Settlement Shares") shall equal:
i) the number of Settlement Shares, times
ii) the Settlement Price minus the Stock Settlement Unwind
Price, divided by
iii) the Stock Settlement Unwind Price.
If such calculation yields a negative number, this shall indicate the
number of Paired Shares to be delivered from UBS LLC for the account of
UBS to the Company. The mechanics for settlement are set forth in
Section III. E. below and Article VI. (This section does not apply for
purposes of Interim Net Stock Settlement.)
E. STOCK AND NET STOCK SETTLEMENT MECHANICS
1. Preliminary Stock Settlement:
If the Company has chosen Stock Settlement, the Company shall deliver
to UBS LLC for the account of UBS, by 11:00 a.m. on Day S, that
number of Paired Shares (the "Preliminary Stock Settlement Shares"),
equal to the product of (i)(a) the Settlement Amount divided by (b)
the closing price of the Paired Shares on the Exchange Trading Day
immediately preceding Day S, times (ii) 110%. Upon receipt of the
Preliminary Stock Settlement Shares, UBS will cause UBS LLC to
deposit the Settlement Shares in the Company's Customer Account.
2. Preliminary Net Stock Settlement:
If the Company has chosen Net Stock Settlement and if the Settlement
Price exceeds the closing price of the Paired Shares on the Exchange
Trading Day immediately preceding Day S, the Company shall deliver to
UBS LLC for the account of UBS by 11:00 a.m. on Day S, that number of
Paired Shares (the "Preliminary Net Stock Settlement Shares) equal to
(i)(a) the number of Settlement Shares times (b) the difference
between the Settlement Price and the closing price of the Paired
Shares on the Exchange Trading Day immediately preceding Day S
divided by (ii) the closing price of the Paired Shares on the
Exchange Trading Day immediately preceding Day S times (iii) 125%. If
the closing price of the Paired Shares on the Exchange Trading Day
immediately preceding Day S exceeds the Settlement Price, the Company
shall not be required to deliver any shares to UBS LLC for the
account of UBS under this subsection III.E.2.
3. By 11:00 a.m. on every fifth (5th) Exchange Trading Day (other than
the final Exchange Trading Day) during the Unwind Period and on the
Business Day following the final Exchange Trading Day of the Unwind
Period:
A. For Stock Settlement:
Stock Settlement Shares shall be calculated as if such Exchange
Trading Day were Day S, except that (a) there shall be no
recalculation of the Settlement Amount and (b) for purposes of
calculating the Stock Settlement Unwind Price, the Unwind
10
<PAGE> 11
Period shall be deemed to have ended on the Exchange Trading Day for
which the calculation is made.
(i) if (a) Stock Settlement Shares (calculated as set forth above)
are greater than (b) the sum of (x) Preliminary Stock Settlement
Shares plus (y) any shares previously delivered pursuant to this
subparagraph (i), then the Company shall deliver that number of
Paired Shares equal to the difference between (a) and (b) to UBS LLC
for the account of UBS, and
(ii) as of the final day of the Unwind Period, if (a) the sum of (x)
Preliminary Stock Settlement Shares plus (y) any shares previously
delivered pursuant to this settlement under subparagraph (i), above
is greater than Stock Settlement Shares, then UBS LLC, for the
account of UBS, shall deliver that number of Paired Shares equal to
the difference between (a) and (b) above to the Company's Customer
Account,
B. For Net Stock Settlement:
Net Stock Settlement Shares shall be calculated as if such Exchange
Trading Day were Day S except that (a) there shall be no
recalculation of the Settlement Amount and (b) for purposes of
calculating the Stock Settlement Unwind Price, the Unwind Period
shall be deemed to have ended on the Exchange Trading Day for which
the calculation is made.
(i) if (a) Net Stock Settlement Shares are greater than (b) the sum
of (x) Preliminary Net Stock Settlement Shares plus (y) any shares
previously delivered pursuant to this settlement under this
subparagraph (i), then the Company shall deliver Paired Shares (which
Paired Shares may be delivered from its Margin Account) equal in
number to the difference between (a) and (b) to UBS LLC for the
account of UBS, or
(ii) as of the final day of the Unwind Period, if (a) the sum of (x)
Preliminary Net Stock Settlement Shares plus (y) any shares
previously delivered pursuant to this settlement under subparagraph
(i), above is greater than (b) Net Stock Settlement Shares, then UBS
LLC, for the account of UBS, shall deliver that number of Paired
Shares equal to the difference between (a) and (b) above to the
Company's Customer Account.
4. The Company shall cause all shares delivered by it to UBS LLC for
the account of UBS to be fully and effectively registered under the
Securities Act (as provided in Section III.A.5 above).
5. On the Exchange Trading Day following the final Exchange Trading
Day of the Unwind Period, UBS LLC for the account of UBS shall
release all claims to Paired Shares held in the Company's Customer
Account, including any Settlement Shares delivered pursuant to
Preliminary Stock Settlement (Section III. E. 1. above), and deliver
all such Paired Shares to the Company with the dollar value of all
fractional shares settled in cash.
6. In the event of Stock or Net Stock Settlement pursuant to Section
III.C. or III.D., the Company shall pay an unwind accretion fee, in
cash or stock, calculated in
11
<PAGE> 12
FORWARD STOCK CONTRACT
accordance with the following formula:
Settlement Amount x (days in Unwind Period) x (1 month LIBOR + Spread)
---------------- ----------------------
2 360
7. In the event of Stock or Net Stock Settlement pursuant to Section
III.C. or III.D., the Company shall pay a placement fee to UBS LLC for
the account of UBS calculated as: Settlement Amount x 0.50%
IV. INTERIM NET STOCK SETTLEMENT
On each Interim Settlement Date, if the Forward Price exceeds the
closing price of the Paired Shares on such Interim Settlement Date, then
on the Business Day following the Fifth Exchange Trading Day thereafter
the Company shall deliver a number of Paired Shares to UBS LLC for the
account of UBS equal to the Interim Settlement Shares; provided,
however, that if the Company is restricted by law or regulation or
self-regulatory requirements or related policies and procedures, whether
or not such requirements, policies or procedures are imposed by law
directly or have been voluntarily adopted by the Company to insure
compliance with applicable laws, or in its reasonable judgement is
otherwise unable or unwilling to deliver registered Paired Shares, the
Company shall deliver Cash Collateral to UBS as described in Section
V.B. below.
V. COLLATERAL PROVISIONS
A. If the Company fails to deliver an effective resale registration
statement within 90 days of the Trade Date, then until an effective
resale registration statement is provided and an Interim Net Stock
Settlement can be effected, the Company shall deliver Cash Collateral in
an amount equal to the Interim Settlement Amount to UBS. If Cash
Collateral is delivered pursuant to this Section V.A., then until an
Interim Net Settlement can be effected or the transaction is settled on
a Cash Settlement basis or a registration statement becomes effective,
the Interim Settlement Amount shall be recalculated and the amount of
Cash Collateral shall be adjusted to equal such recalculated Interim
Settlement Amount on a biweekly (every 2 weeks) basis.
B. In the event that the Company does not deliver Paired Shares pursuant to
Paragraph IV. for one or more of the reasons described in the provision
at the end of such paragraph, then, unless Cash Collateral has been
delivered pursuant to Section V.A. above, the Company shall deliver Cash
Collateral in an amount equal to the Interim Settlement Amount to a Cash
Collateral Account at UBS.
C. If the Company has delivered Cash Collateral to UBS pursuant to
paragraphs A. or B. above, at the Company's option, the Company may
deliver freely saleable registered Paired Shares to UBS equal in
saleable market value, based on closing market prices on the Exchange
Trading Day prior to such delivery, to the value of the Cash Collateral
held in the Cash Collateral Account at UBS. On the day after such
Exchange Trading Day, UBS shall release all claims
12
<PAGE> 13
to Cash Collateral held in the Cash Collateral Account and deliver such
amounts to the Company. On any subsequent Interim Settlement Date, if
Cash Collateral is held by UBS, UBS shall deliver to the Company within
5 Business Days after such Interim Settlement Date, the amount by which
the amount of Cash Collateral exceeds the Interim Settlement Amount.
D. SECURITY INTEREST
The Company hereby pledges to UBS, as security for its obligations
herein, a first priority continuing security interest in, lien on and
right of set-off against all Cash Collateral Paid to UBS, or UBS
Securities LLC, as its agent. Upon release to the Company by UBS of such
Cash Collateral, the security interest and lien granted hereunder will
be released immediately, and, to the extent possible, without any
further action by either party.
E. REPRESENTATIONS
Each of the Trust and SLC represents to UBS (which representations will
be deemed to be repeated as of each date that the Company Pays Cash
Collateral to UBS) that:
(i) it has the power to grant a security interest in and lien on any
Cash Collateral it Pays to UBS and has taken all necessary actions to
authorize the granting of that security interest and lien;
(ii) it is the sole owner of or otherwise has the right to Pay all Cash
Collateral to UBS hereunder, free and clear of any security interest,
lien, encumbrance or other restrictions other than the security interest
and lien created hereby;
(iii) upon Payment of any Cash Collateral to UBS under the terms of this
Confirmation, UBS will have a valid and perfected first priority
security interest therein (assuming that any third-party financial
intermediary or other entity not within its control involved in the
transfer of the Cash Collateral gives the notices and takes the action
required of it under applicable law for perfection of that interest),
and
(iv) the performance by it of its obligations under this Confirmation
will not result in the creation of any security interest, lien or other
encumbrance on any Cash Collateral other than the security interest and
lien granted hereunder.
F. OTHER COLLATERAL PROVISIONS
Any Cash Collateral held by UBS during settlement of the Transaction
pursuant to Sections III. or VI. shall be held until the end of the
applicable Unwind Period and shall be released upon the final Settlement
Date for that Unwind Period.
G. DEFINITIONS RELATED TO COLLATERAL PROVISIONS
"Cash Collateral" means the amount of cash denominated in USD, if any,
Paid by the Company to or for the benefit of UBS, acting through UBS
Securities LLC as its agent, pursuant to paragraphs IV. or V. of this
Forward Stock Contract.
"Local Business Day" means a day on which commercial banks in New York,
New York are
13
<PAGE> 14
open for business (including dealings in foreign exchange)." "Paid",
"Pays" or "Payment" means payment in same day funds in the same manner
provided for payments to be made to UBS, or UBS Securities LLC as its
agent under this Forward Stock Contract.
VI. CERTAIN COVENANTS AND OTHER PROVISIONS
Ability to Settle in Stock: As of the date hereof, each of the Trust and SLC
has not, and after the date hereof, each of the
Trust and SLC will not, enter into any obligation
that would contractually prohibit the Company from
Stock Settlement of any shares under this
Agreement.
Mandatory Unwind Event: If at any time prior to the Maturity Date:
(i) the average closing price on the Relevant
Exchange of the Paired Shares on any two
consecutive Exchange Trading Days, other than a day
on which a Market Disruption Event has occurred, is
equal to or less than any of the Mandatory Unwind
Thresholds, then UBS shall have the right upon
written notice to the Company, to require the
parties to settle all or a portion of the
Transaction (up to the cumulative Unwind Share
Limit for the corresponding Mandatory Unwind
Threshold) on the Mandatory Unwind Date pursuant to
the settlement procedures set forth in Section III.
above,
Once a Mandatory Unwind Event has occurred, if the
closing price of the Paired Shares is less than a
lower Mandatory Unwind Threshold, UBS shall have
the right upon written notice to the Company, to
require the Parties to settle on the Mandatory
Unwind Date pursuant to Section III above, all or a
portion of the Transaction, up to a number of
Paired Shares equal to the number of Underlying
Shares multiplied by the corresponding cumulative
Unwind Share Limit, on the mandatory Unwind Date
pursuant to the settlement procedures set forth in
Section III. above.
or,
ii) if any of the following events occur:
(1) any Financial Covenant Default as more
particularly described in Exhibit A attached
hereto;
(2) any Event of Default that has not been cured or
waived by the respective lender(s) under the
Trust's Revolving and Term Loan Credit Facility by
and between the Trust as borrower and Bankers Trust
Company as lead agent and dated as of September
1997.
(3) any Event of Default that has not been cured or
waived by the respective lender(s) under any other
unsecured and/or recourse lending agreement
involving the Company involving Specified
14
<PAGE> 15
FORWARD STOCK CONTRACT
Indebtedness in aggregate amount of no less than
the Threshold Amount;
(4) Bankruptcy or Insolvency(as such terms are
defined in the Agreement); and/or
(5) any failure of the Company to post cash
collateral pursuant to IV.C. herein if such failure
is not remedied on or before the third Local
Business Day after notice of such failure is given
to such party.
then, UBS LLC for the account of UBS may, on giving
at least 5 Business Days prior written notice to
the Company require all or part of the Transaction
to be settled early on the Mandatory Unwind Date
pursuant to the settlement procedures set forth in
Section III.
For purposes of the settlement procedures set forth
in Section III, "Day S" shall be the Mandatory
Unwind Date and the "Settlement Shares" shall be
the number of Paired Shares to be settled pursuant
to clause (i) or (ii) above. The Company may elect
the method of settlement for such early settlement
in accordance with the settlement provisions set
forth herein; provided however, that if Stock
Settlement or Net Stock Settlement is elected, and
(1) no resale Registration Statement has been
provided and declared effective prior to Day S or
(2) any resale Registration Statement so provided
and declared effective becomes, on Day S or during
an Unwind Period, the subject of a stop order
suspending its effectiveness or is the subject of
any proceeding for that purpose or any such
proceeding is threatened by the Commission, then
the Company at its sole option may choose to (A)
cash collateralize 125% of its obligation to UBS in
a manner similar to that described in in Section
V., (B) effect Cash Settlement as to all of the
Settlement Shares in accordance with Section III.B.
hereof on the Exchange Trading Day immediately
succeeding the occurrence of one of the events
specified in (1) or (2) above or (C) effect
settlement with Paired Shares that are not subject
to a resale Registration Statement to allow UBS to
unwind the Transaction and liquidate any position
it may hold in such unregistered Settlement Shares
by means of negotiated private resales, to the
extent and in the manner permitted by applicable
federal and state securities laws. In recognition
that such negotiated private resales, if any, are
likely to be completed at prices reflective of a
discount to the prevailing open market prices for
any freely tradeable Paired Shares, the Company
agrees to deliver such number of supplemental
Paired Shares as UBS may reasonably request to
which UBS shall assign a dollar price in order to
approximate an aggregate amount equal to the
aggregate discount accepted by UBS in connection
with the resale of the Settlement Shares or the
Company shall pay an amount to UBS equal to the
aggregate discount accepted by UBS in connection
with the resale of the Settlement Shares.
15
<PAGE> 16
FORWARD STOCK CONTRACT
Upon completion of all settlement activities, UBS
LLC for the account of UBS, will promptly return
all remaining shares in the Company's Customer
Account to the Company.
Market Disruption Event: The occurrence or existence on any Exchange Trading
Day during the one-half hour period that ends at
the Valuation Time of any suspension of or
limitation imposed on trading on (i) any of the
Relevant Exchanges or (ii) any of the exchange or
boards of trade or futures contract market on which
options or future contracts on the Paired Shares of
the Company are traded if, in the reasonable
determination of the Calculation Agent, such
suspension or limitation is material. In the event
that a Market Disruption Event occurs or is
continuing on a Valuation Date, then any
determination of the closing price of the Paired
Shares shall be postponed to the first succeeding
Exchange Trading Day on which there is no Market
Disruption Event, provided that if there is a
Market Disruption Event on each of the five
Exchange Trading Days immediately following the
original Valuation Date that but for the Market
Disruption Event would have been a day on which the
closing price of the Paired Shares would have been
determined, such fifth Exchange Trading Day shall
be deemed to be such Valuation Date notwithstanding
the Market Disruption Event and the Calculation
Agent shall, in consultation with the Company,
determine the closing price for that Valuation Date
based upon the last closing price prior to such
Market Disruption Event. and if applicable, shall
effect the settlement of the Underlying Shares by
using such last closing price for the determination
of the Stock Settlement Unwind Price.
The Calculation Agent shall within one (1) Business
Day notify the other party of the existence or
occurrence of a Market Disruption Event on any day
that but for the occurrence or existence of a
Market Disruption Event would have been a Valuation
Date.
Regulatory Compliance: Each party agrees that if the delivery of shares
upon settlement is subject to any restriction
imposed by a regulatory authority, it shall not be
an event of default, and the parties will negotiate
in good faith a procedure to effect settlement of
such shares in a manner which complies with any
relevant rules of such regulatory authority and
which is satisfactory in form and substance to
their respective counsel.
Securities Law Compliance: Each party agrees that it will comply, in
connection with this T ransaction and all related
or contemporaneous sales and purchases of the
Company's Paired Shares, with the applicable
provisions of the Securities Act, the Securities
Exchange Act of 1934 (the "Exchange Act") and the
rules and regulations thereunder.
Settlement: All settlements shall occur through DTC or any
other mutually acceptable depository.
16
<PAGE> 17
Settlement Stock Delivery: Pursuant to the Stock Settlement and Net Stock
Settlement provisions under Section III. above, UBS
LLC for the account of UBS shall deliver all
Settlement Shares to the Company's Customer
Account. Such Paired Shares will serve as
collateral until released by UBS LLC for the ac
count of UBS in accordance with the settlement
mechanics noted under III.E. above, or delivered to
the Company pursuant to Section III.E.5. Paired S
hares held in the Company's Customer Account shall
not be voted.
The Company covenants and agrees with UBS that
Paired Shares delivered by the Company pursuant to
settlement events in accordance herewith will be
duly authorized, validly issued, fully paid and
non-as sessable. The issuance of such Paired Shares
will not require the con sent, approval,
authorization, registration, or qualification of
any government authority, except such as shall have
been obtained on or before the delivery date to UBS
LLC for the account of UBS in connection with any
registration statement filed with respect to any
share or otherwise.
Solvency: Immediately following the execution of this
agreement, the Company will be solvent and able to
pay its debts as they mature, will have capital
sufficient to carry on business and all businesses
in which it engages, and will have assets which
will have a present fair market valuation greater
than the amount of all of its liabilities.
Allocation between Trust
and SLC: As between the Trust and SLC, (i) any delivery to
or by the Company of the Trust Share portion of
Paired Shares pursuant to this Confirmation shall
be made by delivery to or by the Trust, (ii) any
delivery to or by the Company of the SLC share
portion of Paired Shares pursuant to this
Confirmation shall be made by delivery to or by
SLC, and (iii) any delivery to or by the Company of
cash pursuant to this Confirmation shall be
allocated between the Trust and SLC between and
among themselves 95% to or from the Trust and 5% to
or from SLC without effect on any obligation of the
Company to UBS or on any obligation of UBS to the
Company.
Trading Authorization: The following individuals and /or any individual
authorized in writing by the Treasurer of the
Company are authorized by the Company to provide
trading instructions to UBS LLC for the account of
UBS with regard to this transaction.
Starwood Lodging Trust:
Ronald Brown
Starwood Lodging Corporation:
Alan Schnaid
Nir Margalite
17
<PAGE> 18
FORWARD STOCK CONTRACT
VI. DELIVERY INSTRUCTIONS:
Party A: Chase, NYC
UBS Securities LLC
ABA 021000021
A/C No. ###-##-####
Attn: GED
Party B: Harris Bank Harris Bank
Chicago, IL 60603 Chicago, IL 60603
ABA # 071000288 ABA #071000288
credit account: credit account:
Starwood Lodging Trust Starwood Lodging Corporation
# 416-255-8 # 416-258-2
ATTN: Charles McCain ATTN: Charles McCain
Please confirm that the foregoing correctly sets forth the
terms of our agreement by executing the copy of this
Confirmation enclosed for that purpose and returning it to
Ms. Gale Herzing, 29th. Floor.
Yours faithfully,
Union Bank of Switzerland, London Branch:
By: /s/ MARK EVANS By: /s/ R. WEERASEKERA
-------------------------------- -----------------------------------
Name: MARK EVANS Name: R. WEERASEKERA
Title: Vice President Title: Vice President
Date: Date:
Starwood Lodging Trust:
By: By:
-------------------------------- -----------------------------------
Name: Name:
Title: Title:
Date: Date:
Starwood Lodging Corporation
By: By:
-------------------------------- -----------------------------------
Name: Name:
Title: Title:
Date: Date:
17
<PAGE> 19
FORWARD STOCK CONTRACT
VI. DELIVERY INSTRUCTIONS:
Party A: Chase, NYC
UBS Securities LLC
ABA 021000021
A/C No. ###-##-####
Attn: GED
Party B: Harris Bank Harris Bank
Chicago, IL 60603 Chicago, IL 60603
ABA # 071000288 ABA #071000288
credit account: credit account:
Starwood Lodging Trust Starwood Lodging Corporation
# 416-255-8 # 416-258-2
ATTN: Charles McCain ATTN: Charles McCain
Please confirm that the foregoing correctly sets forth the
terms of our agreement by executing the copy of this
Confirmation enclosed for that purpose and returning it to
Ms. Gale Herzing, 29th. Floor.
Yours faithfully,
Union Bank of Switzerland, London Branch:
By: By:
-------------------------------- -----------------------------------
Name: Name:
Title: Title:
Date: Date:
Starwood Lodging Trust:
By: /s/ RONALD C. BROWN By:
-------------------------------- -----------------------------------
Name: RONALD C. BROWN Name:
Title: SENIOR VICE PRESIDENT Title:
& CFO Date:
Date:
Starwood Lodging Corporation
By: /s/ ALAN M. SCHNAID By:
-------------------------------- -----------------------------------
Name: ALAN M. SCHNAID Name:
Title: VICE PRESIDENT AND Title:
CORPORATE CONTROLLER Date:
Date:
<PAGE> 20
[UBS LOGO & LETTERHEAD]
To: Starwood Lodging Trust
2231 East Camelback Road
Suite 410
Phoenix, AZ 85016
Attn: Mr. Ronald Brown
To: Starwood Lodging Corporation
2231 East Camelback Road
Suite 400
Phoenix, AZ 85016
Attn: Mr. Alan Schnaid
From: Union Bank of Switzerland, London Branch
c/o UBS Securities LLC, as agent
299 Park Avenue
New York, NY 10171
Date: 13 October 1997
Ladies and Gentlemen,
The purpose of this letter agreement (this "Confirmation") is to confirm the
terms and conditions of the Transaction entered into between us on the Trade
Date specified below (the "Transaction"). This Confirmation constitutes a
"Confirmation" as referred to in the ISDA Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swaps and Derivatives Association, Inc.) are
incorporated into this Confirmation. In the event of any inconsistency between
those definitions and provisions and this Confirmation, this Confirmation will
govern. References herein to the "Transaction" shall be deemed to be references
to a "Swap Transaction" solely for the purposes of the 1991 ISDA Definitions.
This Confirmation supplements, forms a part of, and is subject to, the ISDA
Master Agreement dated as of 13 October 1997, as amended and supplemented from
time to time (the "Agreement"), between you and us. All provisions contained in
the Agreement govern this Confirmation except as expressly modified below. In
the event of any inconsistency between the provisions of that agreement and this
Confirmation, this Confirmation will prevail for the purposes of this
Transaction.
The Agreement and each Confirmation thereunder will be governed by and construed
in accordance with the laws of the State of New York without reference to choice
of law doctrine.
I. THE TRANSACTION
Starwood Lodging Trust, a Maryland real estate investment trust (the "Trust"),
Starwood Lodging Corporation, a Maryland corporation ("SLC") (the Trust and SLC
being sometimes collectively referred to as the Company) and Union Bank of
Switzerland, London Branch ("UBS") acting through UBS Securities LLC as its
agent for each purchase or sale of Securities ("UBS LLC"), hereby agree to
<PAGE> 21
make the payments and deliveries provided for in Sections III, IV and V hereof,
all on the terms more particularly specified herein (this "Confirmation").
II. DEFINITIONS
For the purposes of this Confirmation, the following terms shall have the
meanings set opposite:
Adjustments: In the event of:
(a) a subdivision, consolidation or
reclassification of the Paired Shares, or a free
distribution or dividend of any Paired Shares to
all existing holders of Paired Shares by way of
bonus, capitalization or similar issue;
(b) a distribution or dividend to all existing
holders of Paired Shares of (i) additional Paired
Shares or (ii) other share capital or securities
granting right to payment of dividends and/or the
proceeds of liquidation of the Company equally or
proportionally with such payments to holders of
Paired Shares or (iii) any other type of
securities, warrants or other assets, in any case
for payment (cash or otherwise) at less than the
prevailing market price; or
(c) any other event that has a diluting or
concentrative effect on the value of the Underlying
Shares (other than (i) the issuance by the Company
to its employees, officers and directors of options
to purchase Paired Shares, restricted Paired Shares
or limited partnership units of SLC Operating
Limited Partnership and SLT Realty Limited
Partnership or (ii) the issuance by the Company of
Paired Shares for cash or in connection with any
acquisition, merger, exchange offer or similar
transaction, in each case approved by the Boards of
Directors of SLC and the Trust).
an adjustment shall thereupon be effected to the
Forward Price and/or the Underlying Shares at the
time of such event with the intent that following
such adjustment, the value of this Transaction is
economically equivalent to the value immediately
prior to the occurrence of the event causing the
adjustment.
Calculation Agent: UBS, whose calculations and determinations shall be
made in a commercially reasonable manner and shall
be binding absent manifest error; provided that the
Company my dispute any determination, adjustment or
calculation by the Calculation Agent, or failure by
the Calculation Agent to make any determination,
adjustment or estimate required by this
Confirmation, by notice to the Calculation Agent
promptly following the day notice from the
Calculation Agent to the Company of such
determination, adjustment or calculation is
effective or at any time the Company believes that
the Calculation Agent has failed to make a
determination, adjustment or calculation required
by this Confirmation. If such dispute cannot be
resolved within three Business Days following the
day on which the Company's notice to the
Calculation Agent is effective, then (i) the
relevant party shall pay the amount, if any, that
is not in dispute and (ii) the parties shall agree
upon and appoint an independent third party to
resolve the dispute, the determination of which
shall be final and binding absent manifest error.
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<PAGE> 22
Calculation Period: Means each period commencing on and including:
(i) in the case of the first Calculation Period,
the Effective Date and ending on but excluding the
first Interim Settlement Date, and
(ii) for each period thereafter, an Interim
Settlement Date and ending on but excluding the
earlier of the next following Interim Settlement
Date or Day S.
If there is a Partial Settlement, then (i) the
Calculation Period for the Settlement Shares
covered by such Partial Settlement Share shall end
on Day S for such Partial Settlement and (ii) the
Calculation Period for the remaining Underlying
Shares shall be determined without regard to such
Partial Settlement.
Collateral Release Shares: Paired Shares delivered pursuant to Section V.C.
Collateral Valuation Date: In the event that the Company chooses to post cash
collateral pursuant to Section V. or VI. any day
upon which the amount of collateral required is
calculated.
Compounding Period: Means each period commencing on and including:
(i) in the case of the first Compounding Period,
the Effective Date and ending on but excluding the
first Reset Date, and
(ii) for each period thereafter, a Reset Date and
ending on (but excluding) the earlier of the next
following Reset Date or Day S.
If there is a Partial Settlement, then(i) the
Compounding Period for the Settlement Shares
covered by such Partial Settlement shall end on Day
S for such Partial Settlement and (ii) the
Compounding Period for the remaining Underlying
Shares shall be determined without regard to such
Partial Settlement.
Customer Account: the account established in favor of the Company
pursuant to the Customer Account Agreement dated
the date hereof between the Company and UBS
Securities LLC
Daycount Fraction: Actual/360
Day S: For Settlement pursuant to Section III. or VI. or
Interim Net Stock Settlement pursuant to Section
IV., the day upon which settlement activities shall
begin.
Dividend Amount: A) Means, on each Reset Date or Day S an amount in
U.S. Dollars equal to:
(i) the sum of all cash distributions paid on a
single Common Share during the relevant Compounding
Period; plus
(ii) an amount representing interest that could
have been earned on such distributions at the LIBOR
rate plus Spread for a Designated Maturity of 1
month for the period from the date that such
distributions would have been received by a holder
of such Paired Shares until such Reset Date, or Day
S, as the case may be.
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<PAGE> 23
B) Separately, and not included in Dividend Amount,
UBS will cause UBS LLC to pay to the Company on the
Business Day after the relevant dividend payment
date declared by the Company's Board of Directors,
(i) all cash dividends on Paired Shares that have
gone ex-dividend, but on which dividends have not
been paid, prior to the end of the final
Compounding Period for any settlement, based on a
number of Paired Shares equal to the number of
Settlement Shares for such settlement, (ii) all
cash dividends received by UBS at any time, on
Paired Shares delivered by the Company pursuant to
Section III. E. that have gone ex-dividend after
Day S but prior to the end of the Unwind Period for
any settlement, and (iii) all cash dividends paid
on Paired Shares held in the Customer
Account.
Effective Date: 15 October 1997
Exchange Trading Day: Each day on which the Relevant Exchange is open for
trading.
Forward Price: On each Reset Date or Day S, the Forward Price
shall be determined for such day by:
a) multiplying the Initial Price for the
Compounding Period by the sum of
1 plus the product of (i) the appropriate Daycount
Fraction times the sum of (ii) LIBOR; determined as
of the previous Reset Date for a Designated
Maturity of 1 month, plus (ii) Spread; and
b) subtracting the Dividend Amount at that date;
provided however that if the Company delivers
Interim Settlement Shares pursuant to Section IV.
or Collateral Release Shares pursuant to Section
V.C. during any Calculation Period, the Forward
Price for purposes of determining the Initial Price
for the first Compounding Period during such
Calculation Period, shall be adjusted to a price
equal to the closing price of the Paired Shares on
the Exchange Trading Day immediately prior to the
most recent Interim Settlement Date, adjusted up
for any positive result or down for any negative
result of the following formula:
(ii) the Interim Settlement Amount for the most
recent Interim Settlement Date.
minus,
(i) (a) the number of Interim Settlement Shares or
Collateral Release Shares, as the case may be,
times (b) the average closing price of the Paired
Shares on the five (5) Exchange Trading Days
immediately following the receipt of the Interim
Settlement Shares by UBS pursuant to Section IV.A.
or the Collateral Release Shares pursuant to
Section V.C.
such result divided by,
(iii) the number of Underlying Shares.
Initial Price: Means,
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<PAGE> 24
a) for the Compounding Period ending on the first
Reset Date, an amount in U.S. Dollars equal to
$57.25, and
b) for each subsequent Reset Date, the
Forward Price as calculated on or adjusted as of
the prior Reset Date.
Interim Settlement Dates: 15 January 1997, 15 April 1998, 15 July 1998,
subject to adjustment in accordance with the
Modified Following Business Day convention.
Interim Settlement Amount: on any Interim Settlement Date, the product of (a)
the number of Underlying Shares, and (b) the amount
by which the Forward Price exceeds the closing
price of the Paired Shares on the Exchange Trading
Day immediately prior to such Interim Settlement
Date.
Interim Settlement Shares: (i) 110% times (ii) Interim Settlement Amount
divided by (iii) the closing price of the Paired
Shares on the Exchange Trading Day immediately
prior to such Interim Settlement Date.
LIBOR means USD-LIBOR-BBA as such term is defined in the
Agreement.
Mandatory Unwind Date: In the case of a Mandatory Unwind Event specified
in clause (i) or the definition thereof, 1 Exchange
Trading Day after such Mandatory Unwind Event
occurs. In the case of a Mandatory Unwind Event
specified in clause (ii) of such provision, the
date specified in the notice delivered to the
Company (which date shall be at least 5 Business
Days after the date such notice becomes effective).
Mandatory Unwind
Thresholds: Mandatory
Unwind Thresholds Unwind Share Limit
----------------- ------------------
$40.00 up to 25% of Underlying Shares
$37.00 50%
$35.50 75%
$34.00 100%
Maturity Date: One (1) year after the Effective Date, subject to
extension upon the written approval of UBS in its
sole discretion.
Paired Shares: Shares of beneficial interest, $0.01 par value per
share, of the Trust (the "Trust Shares") and shares
of Common Stock, par value $0.01 per share, of SLC
(the "SLC Shares"), which are paired and traded as
a unit consisting of one (1) Trust Share and one
(1) SLC Share.
Partial Settlement: Any contemplated settlement, pursuant to sections
III. or VI., in which the designated Settlement
Shares are less than Underlying Shares.
Preliminary Net Stock
Settlement Shares: All Paired Shares delivered by the Company pursuant
to Section III.E.2 and III.E.3(b) (other than
Paired Shares delivered after the Unwind Period).
Relevant Exchange: Means, with respect to any Exchange Trading Day,
the principal Stock Exchange on which the Paired
Shares are traded on that day.
Reset Dates: 15 November 1997, 15 December 1997, 15 January
1998, 15
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February 1998, 15 March 1998, 15 April 1998, 15 May
1998, 15 June 1998, 15 July 1998, 15 August 1998,
15 September 1998, 15 October 1998, subject to
adjustment in accordance with the Modified
Following Business Day convention.
Settlement Amount: The product of the Settlement Price and the
Settlement Shares.
Settlement Disruption Event: Means an event beyond the control of the parties as
a result of which The Depository Trust Company
("DTC") or any successor depository cannot effect a
transfer of the Settlement Shares or the Paired
Shares. If there is a Settlement Disruption Event
on a Valuation Date, then the transfer of the
Paired Shares that would otherwise be due to be
made by UBS LLC for the account of UBS or the
transfer of the Paired Shares that would otherwise
be due to be made by the Company, as applicable, on
that date shall take place on the first succeeding
Exchange Trading Day on which settlement can take
place through DTC, provided that if such a
Settlement Disruption Event persists for five
consecutive Business Days, then the Party obliged
to deliver such Settlement Shares shall use its
best efforts to cause such Shares to be delivered
promptly thereafter to the other Party in any
commercially reasonable manner.
Settlement Price: If Day S is a Reset Date, the Forward Price. If Day
S is not a Reset Date, the Forward Price adjusted
for LIBOR breakage adjustments (either positive or
negative) for the Settlement Shares for the period
from Day S to the next following Reset Date. Any
breakage adjustments shall be calculated by the
Calculation Agent in accordance with normal
industry standards.
Settlement Shares: The number of shares up to the full number of
Underlying Shares subject to settlement under
Section III. or VI.
Spread: 1.50% per annum.
Stock Exchange: Means the New York Stock Exchange, the American
Stock Exchange or NASDAQ. Stock Settlement Unwind
Price: The daily average closing price of the
Paired Shares for Exchange Trading Days during the
Unwind Period.
Trade Date: 13 October 1997
UBS LLC: UBS Securities LLC
Unwind Period: In the event of Stock Settlement or Net Stock
Settlement, such number of Exchange Trading Days
(which shall not be more than 70; (subject to
change based on mutual agreement) beginning on Day
S; provided that UBS may extend such period (such
extension not to exceed 10 Exchange Trading Days)
or upon the occurrence of a Market Disruption
Event.
Underlying Shares: 2,185,000 Paired Shares of the Company (ticker
"HOT"), subject to adjustment in the event of
Partial Settlements.
Valuation Date: In the case of determining any Cash Settlement
value, Net Stock Settlement Shares or Stock
Settlement Shares, Day S, the day
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preceding Day S and all Exchange Trading Days
during the Unwind Period; in the case of
determining any Preliminary Stock Settlement Shares
or Preliminary Net Stock Settlement Shares, the
Exchange Trading Day immediately preceding Day S;
in the case of determining the Interim Settlement
Amount and related calculation, the day prior to
the Interim Settlement Date, and the 5 Exchange
Trading Days following receipt of Interim
Settlement Shares by UBS.
Valuation Time: 4:00 pm EST, or in the event the Relevant Exchange
closes early, such closing time.
III. SETTLEMENT
A. NOTICE AND PROCEDURES
1. The Company may on any Exchange Trading Day up to and including the
Maturity Date, upon the giving of at least five (5) Business Days telephonic
notice to UBS (the "Settlement Notice"), settle all or part of this Transaction.
The Settlement Notice shall specify:
(i) the Settlement Shares,
(ii) the settlement method (Cash, Stock or Net Stock Settlement,
as such methods are described below);
(iii) the number of Exchange Trading Days in the Unwind Period,
and
(iv) Day S, which must be an Exchange Trading Day; provided
however, that if Cash or Net Stock Settlement is selected and in
UBS' reasonable judgement the settlement of the Settlement
Shares would potentially violate or contravene any legal or
regulatory prohibition or requirement applicable to UBS or cause
UBS to contravene any established UBS corporate policy or
compliance policy which relates to any legal or regulatory
prohibition or requirement applicable to UBS (other than any
corporate policy limiting the amount of UBS's investment in
another entity) then UBS shall at least three (3) Business Days
prior to the proposed Day S, notify the Company telephonically
(confirmed by writing) of any such impediment and its estimate
of the period during which such impediment will preclude UBS'
ability to settle all or part of this Transaction.
The Settlement Notice shall be effective only if the notice
requirements specified above are fulfilled; provided, that if no
settlement method is specified, then the settlement method shall
be deemed to be Cash Settlement and provided further that the
Company may upon telephonic notice to UBS at least one (1)
Exchange Trading Day prior to the proposed Day S withdraw any
Settlement Notice.
In the case of any Partial Settlement, following such settlement the
number of Underlying Shares to which this Transaction shall relate shall
be adjusted, as of Day S, by subtracting the number of Settlement Shares
from the number of Underlying Share (as the same may have been adjusted
prior to such Partial Settlement) immediately prior to such Day S. The
Settlement Shares shall not be subject to forward accretion and shall be
treated separately from the remaining Underlying Shares during any
Unwind Period.
2. On Day S, the Settlement Price for the Settlement Shares and the
Settlement Amount shall be determined for Day S.
3. The Settlement Amount shall be settled pursuant to the settlement method
(B, C, or D of this
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section III.) selected by the Company in its sole discretion.
4. If settlement with respect to the Settlement Shares shall occur pursuant
to Section III.A1 (but not as a result of a Mandatory Unwind Event) on
or before the 180th day following the Effective Date, then the
Settlement Price for purposes of such settlement shall be increased by
any positive amount, calculated by UBS as follows:
Spread x Forward Price x (180 - calendar days since Trade Date)
--------------------------------------
360
5. It shall be a condition precedent to any right of the Company to elect
Stock Settlement (III. C. below) or Net Stock Settlement (III. D.
below), that the Company must (i) notify UBS of such election at least 5
Business Days prior to Day S and (ii) prior to Day S, cause to be filed
with the Securities and Exchange Commission (the "Commission") and cause
to become effective under the Securities Act of 1933, as amended (the
"Securities Act") a registration statement that results in UBS being
able to resell all Paired Shares to be delivered by the Company to UBS
LLC for the account of UBS in effecting such Stock Settlement or Net
Stock Settlement without further registration under the Securities Act
of 1933, as amended, such registration statement to include one or more
preliminary prospectuses, prospectuses, and any amendments and
supplements thereto such that any preliminary prospectus or prospectus,
as amended or supplemented, shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in
light of the circumstances under which they are made. In addition, the
Company shall not deliver any Paired Shares to UBS LLC for the account
of UBS pursuant to Sections IV.A or IV.D. below unless at the time of
such delivery a registration statement has become effective under the
Securities Act that results in UBS being able to resell such Paired
Shares without further registration under the Securities Act, such
Registration Statement to include one or more preliminary prospectuses,
prospectus and any amendments or supplements thereto such that any
preliminary prospectus or prospectus, as amended or supplemented, shall
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under
which they are made. The Company further agrees that it will cause any
such Registration Statement referred to in this paragraph 5 of Section
III.A. to remain in effect until the earliest of the date on which (i)
all Paired Shares issued pursuant hereto and not required to be
delivered to the Company hereunder have been sold by UBS LLC for the
account of UBS and UBS agrees to notify the Company of such fact, within
two (2) Business Days of its occurrence, (ii) UBS LLC for the account of
UBS is able to sell the Paired Shares subject thereto under Rule 144(k),
or (iii) UBS has advised the Company that it no longer requires that
such registration statement be effective; provided, however, that in no
event shall the Company be obligated to keep such Registration Statement
effective for more than 10 Exchange Trading Days after the end of the
applicable Unwind Period.
B. CASH SETTLEMENT
If the Company elects Cash Settlement, the Company shall settle by
delivering cash in an amount equal to the Settlement Amount in exchange
for the Settlement Shares ("Cash Settlement") on the Exchange Trading
Day immediately succeeding Day S. UBS shall cause UBS LLC for the
account of UBS to deliver the Settlement Shares to the Company on the
Exchange Trading Day immediately succeeding Day S upon receipt of such
Cash Settlement.
C. STOCK SETTLEMENT
If the Company elects to settle the Settlement Amount by delivering
Paired Shares in exchange for the Settlement Shares ("Stock
Settlement"), the number of Paired Shares to be delivered (the "Stock
Settlement Shares") shall be equal to (a) the Settlement Amount divided
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<PAGE> 28
by (b) the Stock Settlement Unwind Price. The mechanics for settlement
are set forth in Section III. E. below and Article VI.
D. NET STOCK SETTLEMENT
If the Company elects to settle the Settlement Amount on a net stock
basis ("Net Stock Settlement"), the number of net stock settlement
shares (the "Net Stock Settlement Shares") shall equal:
i) the number of Settlement Shares, times
ii) the Settlement Price minus the Stock Settlement Unwind
Price, divided by
iii) the Stock Settlement Unwind Price.
If such calculation yields a negative number, this shall indicate the
number of Paired Shares to be delivered from UBS LLC for the account of
UBS to the Company. The mechanics for settlement are set forth in
Section III. E. below and Article VI. (This section does not apply for
purposes of Interim Net Stock Settlement.)
E. STOCK AND NET STOCK SETTLEMENT MECHANICS
1. Preliminary Stock Settlement:
If the Company has chosen Stock Settlement, the Company shall
deliver to UBS LLC for the account of UBS, by 11:00 a.m. on Day
S, that number of Paired Shares (the "Preliminary Stock
Settlement Shares"), equal to the product of (i)(a) the
Settlement Amount divided by (b) the closing price of the Paired
Shares on the Exchange Trading Day immediately preceding Day S,
times (ii) 110%. Upon receipt of the Preliminary Stock
Settlement Shares, UBS will cause UBS LLC to deposit the
Settlement Shares in the Company's Customer Account.
2. Preliminary Net Stock Settlement:
If the Company has chosen Net Stock Settlement and if the
Settlement Price exceeds the closing price of the Paired Shares
on the Exchange Trading Day immediately preceding Day S, the
Company shall deliver to UBS LLC for the account of UBS by 11:00
a.m. on Day S, that number of Paired Shares (the "Preliminary
Net Stock Settlement Shares) equal to (i)(a) the number of
Settlement Shares times (b) the difference between the
Settlement Price and the closing price of the Paired Shares on
the Exchange Trading Day immediately preceding Day S divided by
(ii) the closing price of the Paired Shares on the Exchange
Trading Day immediately preceding Day S times (iii) 125%. If the
closing price of the Paired Shares on the Exchange Trading Day
immediately preceding Day S exceeds the Settlement Price, the
Company shall not be required to deliver any shares to UBS LLC
for the account of UBS under this subsection III.E.2.
3. By 11:00 a.m. on every fifth (5th) Exchange Trading Day (other
than the final Exchange Trading Day) during the Unwind Period
and on the Business Day following the final Exchange Trading Day
of the Unwind Period:
A. For Stock Settlement:
Stock Settlement Shares shall be calculated as if such Exchange
Trading Day were Day S, except that (a) there shall be no
recalculation of the Settlement Amount and (b) for purposes of
calculating the Stock Settlement Unwind Price, the Unwind
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<PAGE> 29
Period shall be deemed to have ended on the Exchange Trading Day
for which the calculation is made.
(i) if (a) Stock Settlement Shares (calculated as set forth
above) are greater than (b) the sum of (x) Preliminary Stock
Settlement Shares plus (y) any shares previously delivered
pursuant to this subparagraph (i), then the Company shall
deliver that number of Paired Shares equal to the difference
between (a) and (b) to UBS LLC for the account of UBS, and
(ii) as of the final day of the Unwind Period, if (a) the sum of
(x) Preliminary Stock Settlement Shares plus (y) any shares
previously delivered pursuant to this settlement under
subparagraph (i), above is greater than Stock Settlement Shares,
then UBS LLC, for the account of UBS, shall deliver that number
of Paired Shares equal to the difference between (a) and (b)
above to the Company's Customer Account,
B. For Net Stock Settlement:
Net Stock Settlement Shares shall be calculated as if such
Exchange Trading Day were Day S except that (a) there shall be
no recalculation of the Settlement Amount and (b) for purposes
of calculating the Stock Settlement Unwind Price, the Unwind
Period shall be deemed to have ended on the Exchange Trading Day
for which the calculation is made.
(i) if (a) Net Stock Settlement Shares are greater than (b) the
sum of (x) Preliminary Net Stock Settlement Shares plus (y) any
shares previously delivered pursuant to this settlement under
this subparagraph (i), then the Company shall deliver Paired
Shares (which Paired Shares may be delivered from its Margin
Account) equal in number to the difference between (a) and (b)
to UBS LLC for the account of UBS, or
(ii) as of the final day of the Unwind Period, if (a) the sum of
(x) Preliminary Net Stock Settlement Shares plus (y) any shares
previously delivered pursuant to this settlement under
subparagraph (i), above is greater than (b) Net Stock Settlement
Shares, then UBS LLC, for the account of UBS, shall deliver that
number of Paired Shares equal to the difference between (a) and
(b) above to the Company's Customer Account.
4. The Company shall cause all shares delivered by it to UBS LLC
for the account of UBS to be fully and effectively registered
under the Securities Act (as provided in Section III.A.5 above).
5. On the Exchange Trading Day following the final Exchange Trading
Day of the Unwind Period, UBS LLC for the account of UBS shall
release all claims to Paired Shares held in the Company's
Customer Account, including any Settlement Shares delivered
pursuant to Preliminary Stock Settlement (Section III. E. 1.
above), and deliver all such Paired Shares to the Company with
the dollar value of all fractional shares settled in cash.
6. In the event of Stock or Net Stock Settlement pursuant to
Section III.C. or III.D., the Company shall pay an unwind
accretion fee, in cash or stock, calculated in accordance with
the following formula:
Settlement Amount x (days in Unwind Period) x (1 month LIBOR +
----------------- ----------------------- Spread)
2 360
7. In the event of Stock or Net Stock Settlement pursuant to
Section III.C. or III.D., the Company shall pay a placement fee
to UBS LLC for the account of UBS calculated
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as:
Settlement Amount x 0.50%
IV. INTERIM NET STOCK SETTLEMENT
On each Interim Settlement Date, if the Forward Price exceeds the
closing price of the Paired Shares on such Interim Settlement Date, then
on the Business Day following the Fifth Exchange Trading Day thereafter
the Company shall deliver a number of Paired Shares to UBS LLC for the
account of UBS equal to the Interim Settlement Shares; provided,
however, that if the Company is restricted by law or regulation or
self-regulatory requirements or related policies and procedures, whether
or not such requirements, policies or procedures are imposed by law
directly or have been voluntarily adopted by the Company to insure
compliance with applicable laws, or in its reasonable judgement is
otherwise unable or unwilling to deliver registered Paired Shares, the
Company shall deliver Cash Collateral to UBS as described in Section
V.B. below.
V. COLLATERAL PROVISIONS
A. If the Company fails to deliver an effective resale registration
statement within 90 days of the Trade Date, then until an effective
resale registration statement is provided and an Interim Net Stock
Settlement can be effected, the Company shall deliver Cash Collateral in
an amount equal to the Interim Settlement Amount to UBS. If Cash
Collateral is delivered pursuant to this Section V.A., then until an
Interim Net Settlement can be effected or the transaction is settled on
a Cash Settlement basis or a registration statement becomes effective,
the Interim Settlement Amount shall be recalculated and the amount of
Cash Collateral shall be adjusted to equal such recalculated Interim
Settlement Amount on a biweekly (every 2 weeks) basis.
B. In the event that the Company does not deliver Paired Shares pursuant to
Paragraph IV. for one or more of the reasons described in the provision
at the end of such paragraph, then, unless Cash Collateral has been
delivered pursuant to Section V.A. above, the Company shall deliver Cash
Collateral in an amount equal to the Interim Settlement Amount to a Cash
Collateral Account at UBS.
C. If the Company has delivered Cash Collateral to UBS pursuant to
paragraphs A. or B. above, at the Company's option, the Company may
deliver freely saleable registered Paired Shares to UBS equal in
saleable market value, based on closing market prices on the Exchange
Trading Day prior to such delivery, to the value of the Cash Collateral
held in the Cash Collateral Account at UBS. On the day after such
Exchange Trading Day, UBS shall release all claims to Cash Collateral
held in the Cash Collateral Account and deliver such amounts to the
Company. On any subsequent Interim Settlement Date, if Cash Collateral
is held by UBS, UBS shall deliver to the Company within 5 Business Days
after such Interim Settlement Date, the amount by which the amount of
Cash Collateral exceeds the Interim Settlement Amount.
D. Security Interest
The Company hereby pledges to UBS, as security for its obligations
herein, a first priority continuing security interest in, lien on and
right of set-off against all Cash Collateral Paid to UBS, or UBS
Securities LLC, as its agent. Upon release to the Company by UBS of such
Cash Collateral, the security interest and lien granted hereunder will
be released immediately, and, to the extent possible, without any
further action by either party.
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E. Representations
Each of the Trust and SLC represents to UBS (which representations will
be deemed to be repeated as of each date that the Company Pays Cash
Collateral to UBS) that:
(i) it has the power to grant a security interest in and lien on any
Cash Collateral it Pays to UBS and has taken all necessary actions to
authorize the granting of that security interest and lien;
(ii) it is the sole owner of or otherwise has the right to Pay all Cash
Collateral to UBS hereunder, free and clear of any security interest,
lien, encumbrance or other restrictions other than the security interest
and lien created hereby;
(iii) upon Payment of any Cash Collateral to UBS under the terms of this
Confirmation, UBS will have a valid and perfected first priority
security interest therein (assuming that any third-party financial
intermediary or other entity not within its control involved in the
transfer of the Cash Collateral gives the notices and takes the action
required of it under applicable law for perfection of that interest),
and
(iv) the performance by it of its obligations under this Confirmation
will not result in the creation of any security interest, lien or other
encumbrance on any Cash Collateral other than the security interest and
lien granted hereunder.
F. Other Collateral Provisions
Any Cash Collateral held by UBS during settlement of the Transaction
pursuant to Sections III. or VI. shall be held until the end of the
applicable Unwind Period and shall be released upon the final Settlement
Date for that Unwind Period.
G. Definitions related to Collateral Provisions
"Cash Collateral" means the amount of cash denominated in USD, if any,
Paid by the Company to or for the benefit of UBS, acting through UBS
Securities LLC as its agent, pursuant to paragraphs IV. or V. of this
Forward Stock Contract.
"Local Business Day" means a day on which commercial banks in New York,
New York are open for business (including dealings in foreign
exchange)."
"Paid", "Pays" or "Payment" means payment in same day funds in the same
manner provided for payments to be made to UBS, or UBS Securities LLC as
its agent under this Forward Stock Contract.
VI. CERTAIN COVENANTS AND OTHER PROVISIONS
Ability to Settle in Stock: As of the date hereof, each of the Trust and SLC
has not, and after the date hereof, each of the
Trust and SLC will not, enter into any obligation
that would contractually prohibit the Company from
Stock Settlement of any shares under this
Agreement.
Mandatory Unwind Event: If at any time prior to the Maturity Date:
(i) the average closing price on the Relevant
Exchange of the Paired Shares on any two
consecutive Exchange Trading Days, other than a day
on which a Market Disruption Event has occurred, is
equal to or less than any of the Mandatory Unwind
Thresholds, then UBS shall have the right upon
written notice to the Company, to require the
parties to settle all or a portion of the
Transaction (up to the
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<PAGE> 32
cumulative Unwind Share Limit for the corresponding
Mandatory Unwind Threshold) on the Mandatory Unwind
Date pursuant to the settlement procedures set
forth in Section III. above.
Once a Mandatory Unwind Event has occurred, if the
closing price of the Paired Shares is less than a
lower Mandatory Unwind Threshold, UBS shall have
the right upon written notice to the Company, to
require the Parties to settle on the Mandatory
Unwind Date pursuant to Section III above, all or a
portion of the Transaction, up to a number of
Paired Shares equal to the number of Underlying
Shares multiplied by the corresponding cumulative
Unwind Share Limit, on the mandatory Unwind Date
pursuant to the settlement procedures set forth in
Section III. above.
or,
ii) if any of the following events occur:
(1) any Financial Covenant Default as more
particularly described in Exhibit A attached
hereto;
(2) any Event of Default that has not been cured or
waived by the respective lender(s) under the
Trust's Revolving and Term Loan Credit Facility by
and between the Trust as borrower and Bankers Trust
Company as lead agent and dated as of September
1997.
(3) any Event of Default that has not been cured or
waived by the respective lender(s) under any other
unsecured and/or recourse lending agreement
involving the Company involving Specified
Indebtedness in aggregate amount of no less than
the Threshold Amount;
(4) Bankruptcy or Insolvency(as such terms are
defined in the Agreement); and/or
(5) any failure of the Company to post cash
collateral pursuant to IV.C. herein if such failure
is not remedied on or before the third Local
Business Day after notice of such failure is given
to such party.
then, UBS LLC for the account of UBS may, on giving
at least 5 Business Days prior written notice to
the Company require all or part of the Transaction
to be settled early on the Mandatory Unwind Date
pursuant to the settlement procedures set forth in
Section III.
For purposes of the settlement procedures set forth
in Section III, "Day S" shall be the Mandatory
Unwind Date and the "Settlement Shares" shall be
the number of Paired Shares to be settled pursuant
to clause (i) or (ii) above. The Company may elect
the method of settlement for such early settlement
in accordance with the settlement provisions set
forth herein; provided however, that if Stock
Settlement or Net Stock Settlement is elected, and
(1) no resale Registration Statement has been
provided and declared effective prior to Day S or
(2) any resale Registration Statement so provided
and declared effective becomes, on Day S or during
an Unwind Period, the subject of a stop order
suspending its effectiveness or is the subject of
any proceeding for that purpose or any such
proceeding is threatened by the Commission, then
the Company at its
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<PAGE> 33
sole option may choose to (A) cash collateralize
125% of its obligation to UBS in a manner similar
to that described in in Section V., (B) effect Cash
Settlement as to all of the Settlement Shares in
accordance with Section III.B. hereof on the
Exchange Trading Day immediately succeeding the
occurrence of one of the events specified in (1) or
(2) above or (C) effect settlement with Paired
Shares that are not subject to a resale
Registration Statement to allow UBS to unwind the
Transaction and liquidate any position it may hold
in such unregistered Settlement Shares by means of
negotiated private resales, to the extent and in
the manner permitted by applicable federal and
state securities laws. In recognition that such
negotiated private resales, if any, are likely to
be completed at prices reflective of a discount to
the prevailing open market prices for any freely
tradeable Paired Shares, the Company agrees to
deliver such number of supplemental Paired Shares
as UBS may reasonably request to which UBS shall
assign a dollar price in order to approximate an
aggregate amount equal to the aggregate discount
accepted by UBS in connection with the resale of
the Settlement Shares or the Company shall pay an
amount to UBS equal to the aggregate discount
accepted by UBS in connection with the resale of
the Settlement Shares.
Upon completion of all settlement activities, UBS
LLC for the account of UBS, will promptly return
all remaining shares in the Company's Customer
Account to the Company.
Market Disruption Event: The occurrence or existence on any Exchange Trading
Day during the one-half hour period that ends at
the Valuation Time of any suspension of or
limitation imposed on trading on (i) any of the
Relevant Exchanges or (ii) any of the exchange or
boards of trade or futures contract market on which
options or future contracts on the Paired Shares of
the Company are traded if, in the reasonable
determination of the Calculation Agent, such
suspension or limitation is material. In the event
that a Market Disruption Event occurs or is
continuing on a Valuation Date, then any
determination of the closing price of the Paired
Shares shall be postponed to the first succeeding
Exchange Trading Day on which there is no Market
Disruption Event, provided that if there is a
Market Disruption Event on each of the five
Exchange Trading Days immediately following the
original Valuation Date that but for the Market
Disruption Event would have been a day on which the
closing price of the Paired Shares would have been
determined, such fifth Exchange Trading Day shall
be deemed to be such Valuation Date notwithstanding
the Market Disruption Event and the Calculation
Agent shall, in consultation with the Company,
determine the closing price for that Valuation Date
based upon the last closing price prior to such
Market Disruption Event. and if applicable, shall
effect the settlement of the Underlying Shares by
using such last closing price for the determination
of the Stock Settlement Unwind Price.
The Calculation Agent shall within one (1) Business
Day notify the other party of the existence or
occurrence of a Market Disruption Event on any day
that but for the occurrence or existence of a
Market Disruption Event would have been a Valuation
Date.
Regulatory Compliance: Each party agrees that if the delivery of shares
upon settlement is
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<PAGE> 34
subject to any restriction imposed by a regulatory
authority, it shall not be an event of default, and
the parties will negotiate in good faith a
procedure to effect settlement of such shares in a
manner which complies with any relevant rules of
such regulatory authority and which is satisfactory
in form and substance to their respective counsel.
Securities Law Compliance: Each party agrees that it will comply, in
connection with this T ransaction and all related
or contemporaneous sales and purchases of the
Company's Paired Shares, with the applicable
provisions of the Securities Act, the Securities
Exchange Act of 1934 (the "Exchange Act") and the
rules and regulations thereunder.
Settlement: All settlements shall occur through DTC or any
other mutually acceptable depository.
Settlement Stock Delivery: Pursuant to the Stock Settlement and Net Stock
Settlement provisions under Section III. above, UBS
LLC for the account of UBS shall deliver all
Settlement Shares to the Company's Customer
Account. Such Paired Shares will serve as
collateral until released by UBS LLC for the ac
count of UBS in accordance with the settlement
mechanics noted under III.E. above, or delivered to
the Company pursuant to Section III.E.5. Paired S
hares held in the Company's Customer Account shall
not be voted.
The Company covenants and agrees with UBS that
Paired Shares delivered by the Company pursuant to
settlement events in accordance herewith will be
duly authorized, validly issued, fully paid and
non-as sessable. The issuance of such Paired Shares
will not require the con sent, approval,
authorization, registration, or qualification of
any government authority, except such as shall have
been obtained on or before the delivery date to UBS
LLC for the account of UBS in connection with any
registration statement filed with respect to any
share or otherwise.
Solvency: Immediately following the execution of this
agreement, the Company will be solvent and able to
pay its debts as they mature, will have capital
sufficient to carry on business and all businesses
in which it engages, and will have assets which
will have a present fair market valuation greater
than the amount of all of its liabilities.
Allocation between Trust
and SLC: As between the Trust and SLC, (i) any delivery to
or by the Company of the Trust Share portion of
Paired Shares pursuant to this Confirmation shall
be made by delivery to or by the Trust, (ii) any
delivery to or by the Company of the SLC share
portion of Paired Shares pursuant to this
Confirmation shall be made by delivery to or by
SLC, and (iii) any delivery to or by the Company of
cash pursuant to this Confirmation shall be
allocated between the Trust and SLC between and
among themselves 95% to or from the Trust and 5% to
or from SLC without effect on any obligation of the
Company to UBS or on any obligation of UBS to the
Company.
Trading Authorization: The following individuals and /or any individual
authorized in writing by the Treasurer of the
Company are authorized by the Company to provide
trading instructions to UBS LLC for the account
Page 15
<PAGE> 35
of UBS with regard to this transaction.
Starwood Lodging Trust:
Ronald Brown
Starwood Lodging Corporation:
Alan Schnaid
Nir Margalite
Page 16
<PAGE> 36
VI. DELIVERY INSTRUCTIONS:
Party A: Chase, NYC
UBS Securities LLC
ABA 021000021
A/C No. ###-##-####
Attn: GED
Party B: Harris Bank Harris Bank
Chicago, IL 60603 Chicago, IL 60603
ABA # 071000288 ABA #071000288
credit account: credit account:
Starwood Lodging Trust Starwood Lodging Corporation
# 416-255-8 # 416-258-2
ATTN: Charles McCain ATTN: Charles McCain
Please confirm that the foregoing correctly sets
forth the terms of our agreement by executing the
copy of this Confirmation enclosed for that purpose
and returning it to Ms. Gale Herzing, 29th. Floor.
Yours faithfully,
Union Bank of Switzerland, London Branch:
By: /s/ R. WEERASEKERA By: /s/ ADAM MATTHEWS
-------------------------------- -----------------------------------
Name: R. WEERASEKERA Name: ADAM MATTHEWS
Title: Vice President Title: VICE PRESIDENT
Date: Date:
Starwood Lodging Trust:
By: By:
-------------------------------- -----------------------------------
Name: Name:
Title: Title:
Date: Date:
Starwood Lodging Corporation
By: By:
-------------------------------- -----------------------------------
Name: Name:
Title: Title:
Date: Date:
Page 17
<PAGE> 37
SCHEDULE
TO THE
MASTER AGREEMENT (THE "AGREEMENT")
DATED AS OF OCTOBER 13, 1997 BETWEEN
UNION BANK OF SWITZERLAND, LONDON BRANCH ("PARTY A") A
BANK REGISTERED UNDER THE LAWS OF SWITZERLAND,
AND
STARWOOD LODGING TRUST, A MARYLAND REAL ESTATE INVESTMENT TRUST ("TRUST") AND
STARWOOD LODGING CORPORATION ("SLC"), A MARYLAND CORPORATION, (TRUST AND SLC
SOMETIMES HEREAFTER REFERRED TO AS "COUNTERPARTY" AND COLLECTIVELY AS "PARTY B")
The parties intend that the only Transaction that shall be subject to this
Agreement is the Transaction as provided for in the Forward Stock Contract dated
October 13, 1997 Party A and Party B (the "Sole Transaction"), which Forward
Stock Contract also constitutes a Confirmation hereunder.
PART 1
TERMINATION PROVISIONS
(a) "SPECIFIED ENTITY" means (i) in relation to Party A - none; and (ii) in
relation to Party B: - none.
(b) "SPECIFIED TRANSACTION" will have the meaning specified in Section 14 of
this Agreement.
(c) The "CROSS DEFAULT" provisions of Section 5(a)(vi) of this Agreement, as
modified by Part 5(d) herein, will apply to Party A and to Party B.
Notwithstanding the provisions of Section 6 of the Agreement, any Cross
Default with respect to Party B shall constitute a Mandatory Unwind
Event in accordance with the Forward Stock Contract. During any
Mandatory Unwind Period resulting from a Cross Default, Party A may not
exercise it's "Right to Terminate Following an Event of Default"
pursuant to Section 6 of the Agreement unless and until:
(i) Party B fails to fulfill its obligations to deliver an effective
resale Registration Statement as required under the Forward Stock
Contract; or
(ii) any effective resale Registration Statement provided by Party B as
required under the Forward Stock Contract is subject to a stop order on
Day S or during the Unwind Period; or
(iii) any event of default under any other unsecured and /or recourse
lending agreement involving Party B has occurred and the obligations
under such lending agreement have been accelerated;
provided that the foregoing shall in no way limit Party A's rights upon
the occurrence of any other Event of Default by Party B
"SPECIFIED INDEBTEDNESS" means (i) with respect to Party A, any
obligation (whether present or future, contingent or otherwise as
principal or surety or otherwise) for the payment or repayment of any
money but shall not include obligations in respect of deposits received
in the ordinary course of a party's banking business and (ii) with
respect to Party B, any obligation (whether present or future,
contingent or otherwise, as principal or surety or otherwise) for the
payment or repayment of any money under any unsecured and/or recourse
lending agreement and involving the Trust and/or SLC.
"THRESHOLD AMOUNT" means USD10,000,000 (or the equivalent in any other
currency or currencies).
(d) The "CREDIT EVENT UPON MERGER" provisions of Section 5(b)(iv) of this
Agreement will apply to Party A and Party B, as modified by Part 5(a) of
this Agreement.
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<PAGE> 38
(e) The "AUTOMATIC EARLY TERMINATION" provision of Section 6(a) of this
Agreement will not apply to Party A or to Party B.
(f) PAYMENTS ON EARLY TERMINATION for the purpose of Section 6(e) of this
Agreement: (i) Loss shall apply; and (ii) the Second Method shall apply.
(g) "TERMINATION CURRENCY" means one of the currencies in which payments are
required to be made pursuant to a Confirmation in respect of a
Terminated Transaction selected by the non-Defaulting Party or the
non-Affected Party, as the case may be, or , in the circumstances where
there are two Affected Parties, as agreed between the parties, or,
failing such agreement as aforesaid, or if the currency so selected is
not freely available, the Termination Currency shall be U.S. Dollars.
(h) ADDITIONAL TERMINATION EVENT. Not applicable.
PART 2
TAX REPRESENTATIONS
(a) PAYER TAX REPRESENTATIONS. For the purpose of Section 3(e) of this
Agreement, Party A and Party B each make the following representation:
It is not required by any applicable law, as modified by the practice of
any relevant governmental revenue authority, of any Relevant
Jurisdiction to make any deduction or withholding for or on account of
any Tax from any payment (other than interest under Section 2(e),
6(d)(ii) or 6(e) of this Agreement) to be made by it to the other party
under this Agreement. In making this representation, it may rely on (i)
the accuracy of any representations made by the other party pursuant to
Section 3(f) of this Agreement, (ii) the satisfaction of the agreement
contained in Section 4(a)(i) or 4(a)(iii) of this Agreement and the
accuracy and effectiveness of any document provided by the other party
pursuant to Section 4(a)(i) or 4(a)(iii) of this Agreement and (iii) the
satisfaction of the agreement of the other party contained in Section
4(d) of this Agreement, PROVIDED that it shall not be a breach of this
representation where reliance is placed on sub-clause (ii) above and the
other party does not deliver a form or document under Section 4(a)(iii)
by reason of material prejudice to its legal or commercial position.
(b) PAYEE TAX REPRESENTATIONS. For the purpose of Section 3(f) of this
Agreement, Party A and Party B make the representations specified below,
if any:
(i) The following representation will apply to Party A (except when
acting through an Office in the United States) and will apply to Party
B:
It is fully eligible for the benefits of the "Business Profits"
or "Industrial and Commercial Profits" provision, as the case may be,
the "Interest" provision or the "Other Income" provision (if any) of the
Specified Treaty with respect to any payment described in such
provisions and received or to be received by it in connection with this
Agreement and no such payment is attributable to a trade or business
carried on by it through a permanent establishment in the Specified
Jurisdiction. "Specified Treaty" means: Income Tax Convention between
the United States of America and Switzerland. "Specified Jurisdiction"
means with respect to Party A: the United States of America. "Specified
Jurisdiction" means with respect to Party B: Switzerland.
(ii) The following representation will apply to Party A when acting
through an Office in the United States and will apply to Party B:
Each payment received or to be received by it in connection with
this Agreement will be effectively connected with its conduct of trade
or business in the Specified Jurisdiction. "Specified Jurisdiction"
means: the United States of America.
(iii) The following representation will apply to Party A when acting
through an Office in the United Kingdom and will not apply to Party B:
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<PAGE> 39
(A) It is entering into each Transaction in the ordinary course
of its trade as, and is, either (1) a recognized U.K. bank or (2) a
recognized U.K. swaps dealer (in either case (1) or (2), for the
purposes of the United Kingdom Inland Revenue extra statutory concession
C17 on interest and currency swaps dated March 14, 1989), and (B) it
will bring into account payments made and received in respect of each
Transaction in computing its income for United Kingdom tax purposes.
PART 3
AGREEMENT TO DELIVER DOCUMENTS
For the purposes of Sections 3(d), 4(a)(i) and (ii) of this Agreement, each
party agrees to supply the following documents:
(a) Tax forms, documents or certificates to be delivered are:
Each party agrees to complete, accurately and in a manner reasonably
satisfactory to the other party (or any Specified Entity of the other
party), and to execute, arrange for any required certification of, and
deliver to the other party (or such Specified Entity) (or to such
government or taxing authority as the other party (or such Specified
Entity) reasonably directs), any form or document that may be required
or reasonably requested in order to allow the other party (or such
Specified Entity) to make a payment under this Agreement (or a Credit
Support Document of the other party or a Specified Entity thereof)
without any deduction or withholding for or on account of any Tax or
with such deduction or withholding at a reduced rate, promptly upon the
earlier of (i) reasonable demand by the other party (or such Specified
Entity) and (ii) learning that the form or document is required.
(b) Other documents to be delivered and covered by the Section 3(d)
representation are:
PARTY A: None;
PARTY B: Opinion of Party B's legal counsel in a form
satisfactory to Party A; and
PARTY A AND PARTY B: Each party shall provide to the other party
evidence of the authority and true
signatures of each official or
representative signing this Agreement.
PART 4
MISCELLANEOUS
(a) ADDRESS FOR NOTICES. For the purpose of Section 12(a) of this Agreement:
ADDRESS FOR NOTICES OR COMMUNICATIONS TO PARTY A: To the office(s)
specified in the relevant Confirmation with a copy of any notice or
other communication under Section 5 or 6 to both the London and Zurich
Branches of Party A as set out below:
ZURICH BRANCH LONDON BRANCH
Union Bank of Switzerland Union Bank of Switzerland
Bahnhofstrasse 45 100 Liverpool Street
8021 Zurich London EC2M 2RH
Attn: HADP - Derivative Operations Attn: Derivative Legal Group - DELG
Telex: 814449 UB CH Telex: 923333 UBSPDW G
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<PAGE> 40
Address for notices or communications to Party B:
Starwood Lodging Trust Starwood Lodging Corporation
2231 East Camelback Road 2231 East Camelback Road
Suite 400 Suite 400
Phoenix, AZ 85016 Phoenix, AZ 85016
Attn: Mr. Ron Brown Attn: Mr. Alan Schnaid
Telecopier: 602-852-0115 Telecopier: 602-852-0115
Phone: 602-852-3351 Phone: 602-852-3326
(b) PROCESS AGENT. For the purpose of Section 13(c) of this Agreement: Party
A appoints as its Process Agent: UBS Securities LLC, 299 Park Avenue,
New York, NY 10171, Attention: Legal Department. Party B makes no
appointment of Process Agent.
(c) OFFICES. The provisions of Section 10(a) to this Agreement will apply to
this Agreement.
(d) MULTIBRANCH PARTY. For the purpose of Section 10(c) of this Agreement:
Neither Party A or Party B is a Multibranch Party.
(e) CALCULATION AGENT. The Calculation Agent is Party A, unless otherwise
specified in a Confirmation in relation to the relevant Transaction.
(f) CREDIT SUPPORT DOCUMENT. Details of any Credit Support Document in
relation to Party A: - not applicable, and in relation to Party B: - The
Forward Stock Contract for the Sole Transaction.
(g) CREDIT SUPPORT PROVIDER. Credit Support Provider means in relation to
Party A and Party B: Not Applicable.
(h) GOVERNING LAW. This Agreement will be governed by, and construed in
accordance with, the laws of the State of New York (without reference to
choice of law doctrine).
(i) NETTING OF PAYMENTS. Subparagraph (ii) of Section 2(c) of this Agreement
does not apply.
(j) "AFFILIATE" will have the meaning set out in Section 14 of this
Agreement.
PART 5
OTHER PROVISIONS
(a) MODIFICATIONS TO THE AGREEMENT.
(i) MODIFICATIONS TO CERTAIN EVENTS OF DEFAULT AND TERMINATION
EVENTS. For the Events of Default and Termination Events listed
below, including any modifications in this Schedule, the "Right
to Terminate Following an Event of Default", or "Right to
Terminate Following Termination Event" shall be modified so
that, in lieu of the remedies detailed in Section 6 for Early
Termination, settlement shall instead, after any applicable
grace period, be effected as if a Mandatory Unwind Event has
occurred pursuant to Section VI of the Forward Stock Contract
for the Sole Transaction:
A. Events of Default:
(1) Section 5(a)(ii), Breach of Agreement
(2) Section 5(a)(iv), Misrepresentation
(3) Section 5(a)(viii) - Merger Without Assumption
B. Termination Events:
(1) Section 5(b)(i), Illegality
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<PAGE> 41
(2) Section 5(b)(ii), Tax Event
(3) Section 5(b)(iii), Tax Event Upon Merger
(4) Section 5(b)(iv), Credit Event Upon Merger
(ii) RELATIONSHIP BETWEEN THE PARTIES. This Agreement is hereby
amended by the addition of a new Section 15 as follows:
"15. RELATIONSHIP BETWEEN THE PARTIES.
Each party will be deemed to represent to the other party on the
date on which it enters into a Transaction (absent a written
agreement between the parties that expressly imposes affirmative
obligations to the contrary for that Transaction):
(a) NON RELIANCE. It is acting for its own account, and it
has made its own independent decisions to enter into that
transaction and as to whether that Transaction is
appropriate or proper for it based upon its own judgment
and upon advice from such advisers as it has deemed
necessary. It is not relying on any communication (written
or oral) of the other party as investment advice or as a
recommendation to enter into that Transaction; it being
understood that information and explanations related to
the terms and conditions of a Transaction shall not be
considered investment advice or a recommendation to enter
into that Transaction. No communication (written or oral)
received from the other party shall be deemed to be an
assurance or guarantee as to the expected results of that
Transaction.
(b) ASSESSMENT AND UNDERSTANDING. It is capable of
assessing the merits of and understanding (on its own
behalf or through independent professional advice), and
understands and accepts, the terms, conditions and risks
of that Transaction.
(c) STATUS OF PARTIES. The other party is not acting as a
fiduciary for or an adviser to it in respect of that
Transaction."
(iii) BASIC REPRESENTATIONS. Section 3(a) of this Agreement is hereby
amended by the deletion of "and" at the end of Section 3(a)(iv);
the substitution of a comma for the period at the end of Section
3(a)(v) and the addition of Sections 3(a)(vi) to (ix) as
follows:
"(vi) ELIGIBLE SWAP PARTICIPANT; LINE OF BUSINESS. It is
an "eligible swap participant" as defined in Commodity
Futures Trading Commission Rule 35.1(b)(2) (17 C.F.R.
35.1(b)(2)) and it has entered into this Agreement and the
Transactions in connection with its business or a line of
business (including financial intermediation);
(vii) COMPLIANCE WITH INTERNAL INVESTMENT POLICIES. In the
case of each Counterparty, each Transaction entered into
under this Agreement will be entered into in accordance
with, and will at all times comply with, applicable
internal investment policies and guidelines from time to
time adopted by such Counterparty; and
(viii) PURPOSE. In the case of Party B, it has entered
into this Agreement (and it will enter into each
Transaction hereunder) in connection with exchange rate,
interest rate or other price exposures arising in the
conduct or financing of its business or in order to manage
its assets or liabilities.
(iv) AGREEMENTS. Section 4 of this Agreement is hereby amended by the
addition of Sections 4(f) as follows:
"(f) PHYSICAL DELIVERY. In respect of any physically
settled Transactions, it will, at the time of delivery, be
the legal and beneficial owner, free of liens and other
encumbrances, of any securities or commodities it delivers
to the other Party."
(v) EVENTS OF DEFAULT: Section 5 of this Agreement is hereby amended
as follows:
23
<PAGE> 42
(1) FAILURE TO PAY OR DELIVER. Section 5(a)(i) of this
Agreement is hereby amended by the substitution of the
following therefor:
"FAILURE TO PAY OR DELIVER. Failure by a party to make,
when due, any payment under Section 2(a)(i) or 2(e) of
this Agreement required to be made by it if such failure
is not remedied on or before the third Local Business Day
after notice of such failure is given to the party.
Failure by a party to make, when due, any delivery under
Section 2(a)(i) of this Agreement required to be made by
it if such failure is not remedied on or before the first
day that the relevant settlement or clearance system is
open for the acceptance and execution of settlement
instructions after notice of such failure is given to the
party."
(2) BANKRUPTCY. Section 5(a)(vii) of this Agreement is hereby
amended as follows:
(A) Section 5(a)(vii)(4) of this Agreement is hereby
amended by the insertion of a semi-colon after
"liquidation" the first time it appears in such Section
and by the deletion of the remainder of such Section; and
(B) Section 5(a)(vii)(7) of this Agreement is hereby
amended by the substitution of "10" for "30".
(v) TAX EVENT. Section 5(b)(ii) of this Agreement is hereby amended
by the deletion of "or there is a substantial likelihood that it
will," from line four thereof.
(b) SET-OFF.
(i) In addition to any rights of set-off a party may have as a
matter of law or otherwise, upon the occurrence of an Event of
Default with respect to Party ("X") hereof (or a provision
analogous thereto) or a Termination Event where X is the sole
Affected Party, the other party ("Y") shall have the right (but
shall not be obliged) without prior notice to X or any other
person to set off any obligation of X owing to Y (whether or not
arising under this Agreement, whether or not matured, whether or
not contingent and regardless of the currency, place of payment
or booking office of the obligation) against any obligations of
Y owing to X (whether or not arising under this Agreement,
whether or not matured, whether or not contingent and regardless
of the currency, place of payment or booking office of the
obligation).
(ii) For the purpose of cross-currency set off, Y may convert any
obligation to another currency at a market rate determined by Y.
(iii) Nothing in this paragraph will have the effect of creating a
charge or other security interest. This paragraph shall be
without prejudice and in addition to any right of set-off,
combination of accounts, lien or other right to which any party
is at any time otherwise entitled (whether by operation of law,
contract or otherwise).
(c) CONSENT TO RECORDING.
Each Party (i) consents to the recording of the telephone conversations
of trading and marketing personnel of the Parties and their Affiliates
in connection with this Agreement or any potential Transaction and (ii)
agrees to obtain any necessary consent of, and give notice of such
recording to, such personnel of it and its Affiliates.
(d) MODIFICATION TO CROSS DEFAULT.
Section 5(a)(vi) of this Agreement is hereby amended by the addition of
the following subparagraph at the end thereof:
Any event of default in accordance with the "Credit Agreement"
or "Purchase Agreement", as defined below, shall constitute an
Event of Default with respect to Party B. "Credit Agreement"
means the
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<PAGE> 43
Revolving and Term Loan Credit Facility dated as of September,
1997 among the Trust, as borrower, the Lenders identified
therein, and Bankers Trust N.A., as lead agent, as amended,
supplemented or restated from time to time. "Purchase Agreement"
shall mean the Purchase Agreement dated October 13, 1997 between
Party B, Party A and UBS Securities (Portfolio) LLC; or
Any FINANCIAL COVENANT DEFAULT as more particularly described in
Exhibit A attached hereto and incorporated by reference herein.
(e) ADDITIONAL AGREEMENTS.
Party B further agrees that Party B will deliver to Party A at
the address for notices to Party A provided in Part 4 of this
Schedule each notice, document, certificate or other writing as
Party B is obligated to furnish to any party in accordance with
the terms of the Credit Agreement until all of both parties'
obligations under this Agreement (whether absolute or
contingent) are fully performed.
IN WITNESS WHEREOF the parties have executed this Schedule on the respective
dates specified below with effect from the date specified on the first page of
this document.
UNION BANK OF SWITZERLAND, STARWOOD LODGING TRUST
LONDON BRANCH
BY: BY: /s/ RONALD C. BROWN
----------------------------- -----------------------------
NAME: NAME: RONALD C. BROWN
TITLE : TITLE: SENIOR VICE PRESIDENT & CFO
DATE: DATE:
STARWOOD LODGING CORPORATION
BY: BY: /s/ ALAN M. SCHNAID
----------------------------- -----------------------------
NAME: NAME: ALAN M. SCHNAID
TITLE : TITLE: VICE PRESIDENT AND
CORPORATE CONTROLLER
DATE: DATE:
25
<PAGE> 44
Revolving and Term Loan Credit Facility dated as of September,
1997 among the Trust, as borrower, the Lenders identified
therein, and Bankers Trust N.A., as lead agent, as amended,
supplemented or restated from time to time. "Purchase Agreement"
shall mean the Purchase Agreement dated October 13, 1997 between
Party B, Party A and UBS Securities (Portfolio) LLC; or
Any FINANCIAL COVENANT DEFAULT as more particularly described in
Exhibit A attached hereto and incorporated by reference herein.
(e) ADDITIONAL AGREEMENTS.
Party B further agrees that Party B will deliver to Party A at
the address for notices to Party A provided in Part 4 of this
Schedule each notice, document, certificate or other writing as
Party B is obligated to furnish to any party in accordance with
the terms of the Credit Agreement until all of both parties'
obligations under this Agreement (whether absolute or
contingent) are fully performed.
IN WITNESS WHEREOF the parties have executed this Schedule on the respective
dates specified below with effect from the date specified on the first page of
this document.
UNION BANK OF SWITZERLAND, STARWOOD LODGING TRUST
LONDON BRANCH
BY: BY:
----------------------------- ----------------------------
NAME: NAME:
TITLE: TITLE:
DATE: DATE:
STARWOOD LODGING CORPORATION
BY: BY:
----------------------------- -----------------------------
NAME: NAME:
TITLE: TITLE:
DATE: DATE:
25
<PAGE> 45
EXHIBIT A
The Company's financial covenant compliance below is based on the Company's 12
months rolling financial data:
<TABLE>
<S> <C>
FINANCIAL COVENANTS
($ MILLION WHERE APPROPRIATE) Threshold
Total Outstanding Debt/Total Value(1)
9 Months after Closing < 60%
-
Thereafter < 50%
-
Secured Debt/Total Value(1) < 30%
Secured Recourse Debt < 15% of Total Value, or < $300 mio. (greater of two)(3)
- -
Unsecured Debt < Facility plus (greater of 15% of Total Value or $300 mio.)(4)
-
Unencumbered Assets/Unsecured Debt
9 Months after Closing > 1.67x
-
Thereafter > 2.00x
-
Unencumbered Assets plus Secured Recourse Assets/
Unsecured Debt plus Secured Recourse Debt
9 Months after Closing > 1.63x
-
Thereafter > 2.00x
-
EBITDA/Interest Expense
9 Months after Closing > 2.00x
-
Thereafter > 2.50x
-
Unencumbered EBITDA/Unsecured Interest Expense
9 Months after Closing > 2.00x
-
Thereafter > 2.50x
-
EBITDA/Fixed Charges(2)
9 Months after Closing > 2.00x
-
Thereafter > 2.25x
-
Unencumbered EBITDA/Unsecured Fixed Charges(2)
9 Months after Closing > 2.00x
-
Thereafter > 2.25x
-
Minmum Equity Value > $591.5 mio. plus 75% of new equity
-
Dividends (both Preferred and < 85% of FFO or min. amount for REIT status(whichever greater)
Common) re Starwood Lodging -
Dividends (both Preferred < 85% of FFO or min. amount for REIT status (whichever greater)
and Common) re the REIT -
</TABLE>
26
<PAGE> 46
<TABLE>
<S> <C>
FINANCIAL COVENANTS (CONTINUED)
($ MILLION WHERE APPROPRIATE) Threshold
Investment Restrictions
a) Mortgage Notes/Total Value < 10%
-
b) Unimproved Land/Total Value < 2.5%
-
c) Hotel Stock Acquistions/Total Value < 5%
-
d) Operation Costs of Hotels/Total Value < 15%
-
e) Non-Hotel Assets/Total Value < 2.5%
-
f) Lines a) through e)/Total Value < 20%
-
g) Joint Ventures/Total Value < 20%
-
</TABLE>
1) Total Value defined as the sum of (a) EBITDA capped at 10% for
properties owned more than 4 qtrs; plus 95% of cost of subsequent
acquisitions;(b) Mortgage Notes;(c) Available Cash; (d) Hotel
Renovations; (e) Properties under Construction; (f) Unimproved Land; and
(g) Eligible Management Assets.
2) Fixed Charges include Interest Expense, Amortization and Preferred
Dividends.
Any above capitalized term shall be defined pursuant to the Company's $ 1.2
billion unsecured credit line, evidenced by that certain Credit Agreement by and
between the Company as borrower and Bankers Trust as lead agent and dated as of
September 10, 1997.
The Financial Covenants will be tested quarterly, only at the end of each fiscal
quarter, during the term of the Transaction.
27
<PAGE> 1
Exhibit 10.48
LOAN AGREEMENT
among
WOODSTAR INVESTOR PARTNERSHIP,
VARIOUS LENDING INSTITUTIONS,
BT ALEX. BROWN INCORPORATED and CHASE SECURITIES, INC.,
AS ARRANGING AGENTS,
and
BANKERS TRUST COMPANY AND THE CHASE MANHATTAN BANK,
AS ADMINISTRATIVE AGENTS
-----------------------------
Dated as of December 29, 1997
-----------------------------
$57,285,881.62
<PAGE> 2
TABLE OF CONTENTS
Page
----
SECTION 1. Amount and Terms of Credit........................................ 1
1.01 Loan......................................................... 1
1.02 Minimum Borrowing Amounts, etc............................... 1
1.03 Notice of Borrowing.......................................... 1
1.04 Disbursement of Funds........................................ 2
1.05 Notes........................................................ 2
1.06 Conversions.................................................. 3
1.07 Pro Rata Borrowings.......................................... 3
1.08 Interest..................................................... 3
1.09 Interest Periods............................................. 4
1.10 Increased Costs, Illegality, etc............................. 5
1.11 Compensation................................................. 7
1.12 Change of Lending Office..................................... 7
1.13 Replacement of Lenders....................................... 8
SECTION 2. Fees; Commitments................................................. 8
2.01 Fees......................................................... 8
2.02 Mandatory Adjustments of Commitments, etc.................... 9
SECTION 3. Payments.......................................................... 9
3.01 Voluntary Prepayments........................................ 9
3.02 Mandatory Prepayments........................................ 9
3.03 Method and Place of Payment..................................10
3.04 Net Payments.................................................11
SECTION 4. Conditions Precedent..............................................13
4.01 Conditions Precedent to Loans................................13
SECTION 5. Representations, Warranties and Agreements........................15
5.01 Status.......................................................16
5.02 Power and Authority..........................................16
5.03 No Violation.................................................16
5.04 Litigation...................................................16
5.05 Use of Proceeds; Margin Regulations..........................16
5.06 Governmental Approvals.......................................17
5.07 Investment Company Act.......................................17
5.08 Public Utility Holding Company Act...........................17
5.09 True and Complete Disclosure.................................17
<PAGE> 3
Page
----
5.10 Financial Condition; Financial Statements....................17
5.11 Security Interests...........................................18
5.12 Tax Liability................................................18
5.13 Compliance with ERISA........................................18
5.14 Subsidiaries.................................................18
5.15 Properties...................................................18
5.16 Compliance with Statutes, etc................................19
SECTION 6. Affirmative Covenants.............................................19
6.01 Information Covenants........................................19
6.02 Books, Records and Inspections...............................20
6.03 Insurance....................................................20
6.04 Payment of Taxes.............................................20
6.05 Franchises...................................................21
6.06 Compliance with Statutes, etc................................21
6.07 Proceeds.....................................................21
SECTION 7. Negative Covenants................................................21
7.01 Changes in Business..........................................21
7.02 Consolidation, Merger, Sale or Purchase of Assets, etc.......21
7.03 Liens........................................................22
7.04 Indebtedness.................................................22
7.05 Capital Expenditures.........................................22
7.06 Advances, Investments and Loans..............................22
7.07 Amendments, etc..............................................22
7.08 Dividends, Distributions, etc................................23
7.09 Transactions with Affiliates.................................23
7.10 Creation of Subsidiaries.....................................23
SECTION 8. Events of Default.................................................23
8.01 Payments.....................................................24
8.02 Representations, etc.........................................24
8.03 Covenants....................................................24
8.04 Default Under Other Agreements...............................24
8.05 Bankruptcy, etc..............................................24
8.06 Pledge Agreement.............................................25
8.07 Judgments....................................................25
8.08 Change of Control............................................25
8.09 Other Defaults...............................................25
SECTION 9. Definitions.......................................................26
SECTION 10. The Agents.......................................................38
10.01 Appointment.................................................38
10.02 Nature of Duties............................................39
<PAGE> 4
10.03 Lack of Reliance on the Agents..............................39
10.04 Certain Rights of the Agents................................39
10.05 Reliance....................................................40
10.06 Indemnification.............................................40
10.07 The Agents in Their Individual Capacities...................40
10.08 Holders.....................................................40
10.09 Resignation by an Agent.....................................40
SECTION 11. Miscellaneous....................................................41
11.01 Payment of Expenses, etc....................................41
11.02 Right of Setoff.............................................42
11.03 Notices.....................................................42
11.04 Benefit of Agreement........................................42
11.05 No Waiver; Remedies Cumulative..............................44
11.06 Payments Pro Rata...........................................45
11.07 Calculations; Computations..................................45
11.08 Governing Law; Submission to Jurisdiction; Venue; Waiver of
Jury Trial.............................................45
11.09 Counterparts................................................46
11.10 Assumption Date.............................................46
11.11 Headings Descriptive........................................46
11.12 Amendment or Waiver.........................................46
11.13 Survival....................................................47
11.14 Domicile of Loans...........................................47
11.15 Confidentiality.............................................47
11.16 Lender Register.............................................48
11.17 No Liability for General Partners...........................48
ANNEX I -- Commitments
ANNEX II -- Lenders and Agents Addresses
ANNEX III -- Shares
ANNEX IV -- Hines Ground Leases
EXHIBIT A -- Form of Notice of Borrowing
EXHIBIT B -- Form of Note
EXHIBIT C -- Form of Section 3.04 Certificate
EXHIBIT D-1 -- Form of Opinion of Sullivan & Cromwell
EXHIBIT D-2 -- Form of Opinion of Rinaldi & Associates
EXHIBIT D-3 -- Form of Opinion of White & Case
EXHIBIT E -- Form of Officers' Certificate
<PAGE> 5
EXHIBIT F -- Form of Pledge Agreement
EXHIBIT G -- Form of Affiliate Indemnification
EXHIBIT H -- Form of Assignment Agreement
EXHIBIT I-1 -- Form of Assumption Agreement (Starwood Realty
Partnership)
EXHIBIT I-2 -- Form of Assumption Agreement (Starwood Operating
Partnership)
EXHIBIT J -- Form of Consent Letter
<PAGE> 6
LOAN AGREEMENT, dated as of December 29, 1997, among WOODSTAR
INVESTOR PARTNERSHIP, a Delaware general partnership, the lenders from time to
time party hereto (each, a "Lender" and, collectively, the "Lenders"), BANKERS
TRUST COMPANY AND THE CHASE MANHATTAN BANK, as Administrative Agents (each, an
"Administrative Agent" and, collectively, the "Administrative Agents" and,
together with the Payments Administrator, collectively, the "Agents"). Unless
otherwise defined herein, all capitalized terms used herein and defined in
Section 9 are used herein as so defined.
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions herein
set forth, the Lenders are willing to make available to the Borrower the credit
facility provided herein;
NOW, THEREFORE, it is agreed:
SECTION 1. Amount and Terms of Credit.
1.01 Loan. Subject to and upon the terms and conditions herein
set forth, each Lender severally agrees to make a loan (each a "Loan" and,
collectively, the "Loans") to the Borrower, which Loans (i) shall be made
pursuant to a single drawing on the Closing Date, (ii) except as hereinafter
provided, may, at the option of the Borrower, be incurred and maintained as,
and/or converted into, Base Rate Loans or Eurodollar Loans, provided that all
Loans made as part of the same Borrowing shall, unless otherwise specifically
provided herein, consist of Loans of the same Type and (iii) shall not exceed in
aggregate principal amount for any Lender at the time of incurrence thereof the
Commitment of such Lender as in effect on such date. Once repaid, Loans may not
be reborrowed.
1.02 Minimum Borrowing Amounts, etc. The aggregate principal
amount of each Borrowing shall not be less than the Minimum Borrowing Amount.
More than one Borrowing may be incurred on any day, provided that at no time
shall there be outstanding more than two Borrowings of Eurodollar Loans.
1.03 Notice of Borrowing. (a) The Borrower shall give the
Payments Administrator at its Notice Office, prior to 12:00 Noon (New York
time), at least two Business Days' (or, in the case where the Loans are to be
incurred as Base Rate Loans, one Business Day's) prior written confirmation (or
telephonic confirmation promptly confirmed in writing) in the form of Exhibit A
of its desire to make Loans on the Closing Date (the "Notice of Borrowing"),
which notice shall be irrevocable and shall specify (i) the aggregate principal
amount of the Loans to be made on the Closing Date and (ii) whether the Loans
shall consist of Base Rate Loans or Eurodollar Loans and, if Eurodollar Loans,
the Interest Period to be
<PAGE> 7
initially applicable thereto. The Payments Administrator shall promptly give
each Lender written notice (or telephonic notice promptly confirmed in writing)
of the proposed Loans, of such Lender's proportionate share thereof and of the
other matters specified in the Notice of Borrowing.
(b) Without in any way limiting the obligation of the Borrower
to confirm in writing any telephonic notice permitted to be given hereunder, the
Payments Administrator may prior to receipt of written confirmation act without
liability upon the basis of such telephonic notice, believed by the Payments
Administrator in good faith to be from an Authorized Officer of the Borrower. In
each such case, the Borrower hereby waives the right to dispute the Payments
Administrator's record of the terms of such telephonic notice.
1.04 Disbursement of Funds. (a) No later than 12:00 Noon (New
York time) on the Closing Date, each Lender will make available its pro rata
share of the Loans requested to be made on such date in the manner provided
below. All such amounts shall be made available to the Payments Administrator in
U.S. dollars and immediately available funds at the Payment Office and the
Payments Administrator promptly will make available to the Borrower by
depositing in the Specified Accounts (50-50 between them) the aggregate of the
amounts so made available in the type of funds received.
(b) Nothing herein shall be deemed to relieve any Lender from
its obligation to fulfill its commitment hereunder or to prejudice any rights
which the Borrower may have against any Lender as a result of any default by
such Lender hereunder.
1.05 Notes. (a) To the extent any Lender requests same, the
Borrower's obligation to pay the principal of, and interest on, the Loans made
to it by each Lender shall be evidenced by a promissory note substantially in
the form of Exhibit B, with blanks appropriately completed in conformity
herewith (each, a "Note" and, collectively, the "Notes").
(b) The Note issued to each Lender shall (i) be executed by
the Borrower, (ii) be payable to the order of such Lender and be dated the
Closing Date, (iii) be payable in the aggregate principal amount of Loans
evidenced thereby from time to time, (iv) mature on the Final Maturity Date, (v)
bear interest as provided in the appropriate clause of Section 1.08 in respect
of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced
thereby, (vi) be subject to mandatory repayment as provided in Section 3.02 and
(vii) be entitled to the benefits of this Agreement and the other Credit
Documents.
(c) Each Lender will note on its internal records the amount
of each Loan made by it and each payment in respect thereof and will, prior to
any transfer of its Note, endorse on the reverse side thereof the outstanding
principal amount of Loans evidenced thereby. Failure to make any such notation
shall not affect a Borrower's obligations in respect of such Loans.
<PAGE> 8
1.06 Conversions. The Borrower shall have the option to
convert on any Business Day all or a portion at least equal to the applicable
Minimum Borrowing Amount of the outstanding principal amount of the Loans into a
Borrowing or Borrowings of another Type of Loan, provided that (i) no conversion
of Base Rate Loans into Eurodollar Loans may be made prior to the Syndication
Date except for a conversion made on the first day of a PSD Interest Period,
(ii) no partial conversion of a Borrowing of Eurodollar Loans shall reduce the
outstanding principal amount of the Eurodollar Loans made pursuant to such
Borrowing to less than the Minimum Borrowing Amount applicable thereto, (iii)
Base Rate Loans may only be converted into Eurodollar Loans if no Default under
Section 8.01 or Event of Default is then in existence, or if such Default or
Event of Default exists, the Required Lenders shall have determined in its or
their sole discretion to permit such conversion and (iv) Borrowings of
Eurodollar Loans resulting from this Section 1.06 shall be limited in number as
provided in Section 1.02. Each such conversion shall be effected by the Borrower
giving the Payments Administrator at its Notice Office, prior to 12:00 Noon (New
York time), at least three Business Days' (or two Business Days', in the case of
a conversion into Base Rate Loans) prior written notice (or telephonic notice
promptly confirmed in writing) (each, a "Notice of Conversion") specifying the
Loans to be so converted, the Type of Loans to be converted into and, if to be
converted into a Borrowing of Eurodollar Loans, the Interest Period to be
initially applicable thereto. The Payments Administrator shall give each Lender
prompt notice of any such proposed conversion affecting any of its Loans.
1.07 Pro Rata Borrowings. All Loans under this Agreement shall
be made by the Lenders pro rata on the basis of their Commitments. No Lender
shall be responsible for any default by any other Lender in its obligation to
make Loans hereunder and that each Lender shall be obligated to make the Loans
provided to be made by it pursuant to its respective Commitments, regardless of
the failure of any other Lender to fulfill its commitments hereunder.
1.08 Interest. (a) The unpaid principal amount of each Base
Rate Loan shall bear interest from the date of the Borrowing thereof until
maturity (whether by acceleration or otherwise) at a rate per annum which shall
at all times be the Base Rate Margin plus the Base Rate in effect from time to
time.
(b) The unpaid principal amount of each Eurodollar Loan shall
bear interest from the date of the Borrowing thereof until maturity (whether by
acceleration or otherwise) at a rate per annum which shall at all times be the
Eurodollar Margin plus the relevant Eurodollar Rate.
(c) All overdue principal and, to the extent permitted by law,
overdue interest in respect of each Loan and any other overdue amount payable
hereunder shall bear interest at a rate per annum equal to the Base Rate in
effect from time to time plus the sum of (i) 2% and (ii) the Base Rate Margin,
provided that each Eurodollar Loan shall bear interest after maturity (whether
by
<PAGE> 9
acceleration or otherwise) until the end of the Interest Period applicable to
it at such maturity at a rate per annum equal to 2% in excess of the rate of
interest applicable thereto at such maturity.
(d) Interest shall accrue from and including the date of any
Borrowing to but excluding the date of any repayment thereof and shall be
payable (i) in respect of each Base Rate Loan, monthly in arrears on the first
Business Day of each calendar month, (ii) in respect of each Eurodollar Loan, on
the last day of each Interest Period applicable thereto and, in the case of an
Interest Period in excess of three months, on each date occurring at three month
intervals after the first day of such Interest Period and (iii) in respect of
each Loan, (A) on any prepayment or conversion (other than the prepayment or
conversion of any Base Rate Loan) on the amount prepaid or converted, (B) at
maturity (whether by acceleration or otherwise) and (C) after such maturity, on
demand.
(e) All computations of interest hereunder shall be made in
accordance with Section 11.07(b).
(f) The Payments Administrator, upon determining the interest
rate for any Borrowing of Eurodollar Loans for any Interest Period, shall
promptly notify the applicable Borrower and the Lenders thereof.
1.09 Interest Periods. (a) At the time the Borrower gives the
Notice of Borrowing or a Notice of Conversion in respect of the making of, or
conversion into, a Borrowing of Eurodollar Loans (in the case of the initial
Interest Period applicable thereto) or prior to 12:00 Noon (New York time) on
the third Business Day prior to the expiration of an Interest Period applicable
to a Borrowing of Eurodollar Loans, it shall have the right to elect by giving
the Payments Administrator written notice (or telephonic notice promptly
confirmed in writing) of the Interest Period applicable to such Borrowing, which
Interest Period shall, at the option of such Borrower, be (x) prior to the
Interim Date, a seven day period and (y) thereafter (but subject to clause (iv)
below), a one, two or three month period. Notwithstanding anything to the
contrary contained above:
(i) the initial Interest Period for any Borrowing of
Eurodollar Loans shall commence on the date of such Borrowing
(including the date of any conversion from a Borrowing of Base Rate
Loans) and each Interest Period occurring thereafter in respect of such
Borrowing shall commence on the day on which the next preceding
Interest Period expires;
(ii) if any Interest Period begins on a day for which there is
no numerically corresponding day in the calendar month at the end of
such Interest Period, such Interest Period shall end on the last
Business Day of such calendar month;
(iii) if any Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on the
next
<PAGE> 10
succeeding Business Day, provided that if any Interest Period would
otherwise expire on a day which is not a Business Day but is a day of
the month after which no further Business Day occurs in such month,
such Interest Period shall expire on the next preceding Business Day;
(iv) subject to the foregoing clauses (i) through (iii),
inclusive, (x) only a seven day Interest Period shall be available to
be selected prior to the Interim Date and (y) thereafter until the
Syndication Date, only a one month Interest Period shall be available
to be selected, with all Loans constituting Eurodollar Loans during
each such period to be outstanding pursuant to a single Borrowing;
(v) no Interest Period with respect to any Borrowing may be
elected that would extend beyond the Final Maturity Date; and
(vi) no Interest Period may be elected at any time when a
Default under Section 8.01 or an Event of Default is then in existence
if either Agent or the Required Lenders shall have determined in its or
their sole discretion not to permit such election.
(b) If upon the expiration of any Interest Period, the
Borrower has failed to (or may not) elect a new Interest Period to be applicable
to the respective Borrowing of Eurodollar Loans as provided above, the Borrower
shall be deemed to have elected to convert such Borrowing into a Borrowing of
Base Rate Loans effective as of the expiration date of such current Interest
Period.
1.10 Increased Costs, Illegality, etc. (a) In the event that
(x) in the case of clause (i) below, the Payments Administrator or (y) in the
case of clauses (ii) and (iii) below, any Lender shall have determined (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto):
(i) on any date for determining the Eurodollar Rate for any
Interest Period that, by reason of any changes arising after the date
of this Agreement affecting the interbank Eurodollar market, adequate
and fair means do not exist for ascertaining the applicable interest
rate on the basis provided for in the definition of Eurodollar Rate; or
(ii) at any time, that such Lender shall incur increased costs
or reductions in the amounts received or receivable hereunder with
respect to any Eurodollar Loans (other than any increased cost or
reduction in the amount received or receivable resulting from the
imposition of or a change in the rate of taxes or similar charges)
because of (x) any change since the Closing Date in any applicable law,
governmental rule, regulation, guideline or order (or in the
interpretation or administration thereof and including the introduction
of any new law or governmental rule, regulation, guideline or order)
(such as, for example, but not limited to, a change in official reserve
requirements, but, in all events, excluding reserves required under
<PAGE> 11
Regulation D to the extent included in the computation of the
Eurodollar Rate) and/or (y) other circumstances arising since the
Closing Date affecting such Lender or the interbank Eurodollar market;
or
(iii) at any time, that the making or continuance of any
Eurodollar Loan has become unlawful by compliance by such Lender in
good faith with any law, governmental rule, regulation, guideline (or
would conflict with any such governmental rule, regulation, guideline
or order not having the force of law but with which such Lender
customarily complies even though the failure to comply therewith would
not be unlawful), or has become impracticable as a result of a
contingency occurring after the Closing Date which materially and
adversely affects the interbank Eurodollar market;
then, and in any such event, such Lender (or the Payments Administrator in the
case of clause (i) above) shall (x) on such date and (y) within ten Business
Days of the date on which such event no longer exists give notice (by telephone
confirmed in writing) to the Borrower and to the Payments Administrator of such
determination (which notice the Payments Administrator shall promptly transmit
to each of the other Lenders). Thereafter (x) in the case of clause (i) above,
Eurodollar Loans shall no longer be available until such time as the Payments
Administrator notifies the Borrower and the Lenders that the circumstances
giving rise to such notice by the Payments Administrator no longer exist, and
any Notice of Borrowing or Notice of Conversion given by the Borrower with
respect to Eurodollar Loans which have not yet been incurred shall be deemed
rescinded by the Borrower, (y) in the case of clause (ii) above, the Borrower
shall pay to such Lender, upon written demand therefor, such additional amounts
(in the form of an increased rate of, or a different method of calculating,
interest or otherwise as such Lender in its sole discretion shall determine) as
shall be required to compensate such Lender for such increased costs or
reductions in amounts receivable hereunder (a written notice as to the
additional amounts owed to such Lender, showing the basis for the calculation
thereof, submitted to the Borrower by such Lender shall, absent manifest error,
be final and conclusive and binding upon all parties hereto) and (z) in the case
of clause (iii) above, the Borrower shall take one of the actions specified in
Section 1.10(b) as promptly as possible and, in any event, within the time
period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the applicable Borrower
may (and in the case of a Eurodollar Loan affected pursuant to Section
1.10(a)(iii), the Borrower shall) either (i) if the affected Eurodollar Loan is
then being made pursuant to a Borrowing, cancel said Borrowing by giving the
Payments Administrator telephonic notice (confirmed promptly in writing) thereof
on the same date that the Borrower was notified by a Lender pursuant to Section
1.10(a)(ii) or (iii), or (ii) if the affected Eurodollar Loan is then
outstanding, upon at least three Business Days' notice to the Payments
Administrator, require the affected Lender to convert each such Eurodollar Loan
into a Base Rate Loan, provided that if more than one Lender is affected at any
time, then all affected
<PAGE> 12
Lenders must be treated the same pursuant to this Section 1.10(b).
1.11 Compensation. (a) The Borrower shall compensate each
Lender, upon its written request (which request shall set forth the basis for
requesting such compensation), for all reasonable losses, expenses and
liabilities (including, without limitation, any loss, expense or liability
incurred by reason of the liquidation or reemployment of deposits or other funds
required by such Lender to fund its Eurodollar Loans but excluding in any event
the loss of anticipated profits) which such Lender may sustain: (i) if for any
reason (other than a default by such Lender or the Payments Administrator) a
Borrowing of Eurodollar Loans does not occur on a date specified therefor in a
Notice of Borrowing or Notice of Conversion (whether or not withdrawn by the
Borrower or deemed withdrawn pursuant to Section 1.10(a)); (ii) if any
prepayment, repayment or conversion of any of its Eurodollar Loans occurs on a
date which is not the last day of an Interest Period applicable thereto; (iii)
if any prepayment of any of its Eurodollar Loans is not made on any date
specified in a notice of prepayment given by the Borrower; or (iv) as a
consequence of (x) any other default by the Borrower to repay its Eurodollar
Loans when required by the terms of this Agreement or (y) an election made
pursuant to Section 1.10(b).
(b) Notwithstanding anything in this Agreement to the
contrary, to the extent any notice required by Section 1.10 or 3.04 is given by
any Lender more than 120 days after such Lender obtained, or reasonably should
have obtained, knowledge of the occurrence of the event giving rise to the
additional costs of the type described in such Section, such Lender shall not be
entitled to compensation under Section 1.10 or 3.04 for any amounts incurred or
accruing prior to the giving of such notice to the Borrower.
1.12 Change of Lending Office. Each Lender agrees that, upon
the occurrence of any event giving rise to the operation of Section 1.10(a)(ii)
or (iii) or 3.04 with respect to such Lender, it will, if requested by the
applicable Borrower, use reasonable efforts (subject to overall policy
considerations of such Lender) to designate another lending office for any Loans
affected by such event, provided that such designation is made on such terms
that such Lender and its lending office suffer no economic, legal or regulatory
disadvantage, with the object of avoiding the consequence of the event giving
rise to the operation of any such Section. Nothing in this Section 1.12 shall
affect or postpone any of the obligations of any Borrower or the right of any
Lender provided in Section 1.10 or 3.04.
1.13 Replacement of Lenders. (x) Upon the occurrence of any
event giving rise to the operation of Section 1.10(a)(ii) or (iii) or Section
3.04 with respect to any Lender which results in such Lender charging to the
Borrower increased costs in excess of those being generally charged by the other
Lenders and/or (y) in the case of a refusal by a Lender to consent to a proposed
change, waiver, discharge or termination with respect to this Agreement which
has been approved by the Required Lenders, the Borrower shall have the right, if
no Default
<PAGE> 13
or Event of Default then exists, to replace such Lender (the
"Replaced Lender") with one or more other Eligible Transferee or Transferees
(collectively, the "Replacement Lender") reasonably acceptable to the
Administrative Agents, provided that (i) at the time of any replacement pursuant
to this Section 1.13, the Replacement Lender shall enter into one or more
Assignment Agreements pursuant to Section 11.04(b) (and with all fees payable
pursuant to said Section 11.04(b) to be paid by the Replacement Lender) pursuant
to which the Replacement Lender shall acquire all of the outstanding Loans of
the Replaced Lender and, in connection therewith, shall pay to the Replaced
Lender in respect thereof an amount equal to the principal of, and all accrued
interest on, all outstanding Loans of the Replaced Lender and (ii) all
obligations of the Borrower owing to the Replaced Lender (other than those
specifically described in clause (i) above in respect of which the assignment
purchase price has been, or is concurrently being, paid) shall be paid in full
to such Replaced Lender concurrently with such replacement. Upon the execution
of the respective Assignment Agreements, the payment of amounts referred to
above and, if so requested by the Replacement Lender, delivery to the
Replacement Lender of the appropriate Note executed by the Borrower, the
Replacement Lender shall become a Lender hereunder and the Replaced Lender shall
cease to constitute a Lender hereunder, except with respect to indemnification
provisions applicable to the Replaced Lender under this Agreement, which shall
survive as to such Replaced Lender.
SECTION 2. Fees; Commitments.
2.01 Fees. The Borrower shall pay to (x) each Agent on the
Closing Date, for its own account and/or for distribution to the Lenders, such
fees as heretofore agreed by the Borrower and the Agents and (y) the Payments
Administrator, for its own account, such administrative fees as agreed to
between the Borrower and the Payments Administrator, when and as due.
2.02 Mandatory Adjustments of Commitments, etc. (a) The Total
Commitment shall terminate on January 15, 1998 if the Loans have not been made
by such date.
(b) The Total Commitment shall terminate in its entirety on
the Closing Date (after giving effect to the making of Loans on such date).
SECTION 3. Payments.
3.01 Voluntary Prepayments. The Borrower shall have the right
to prepay Loans in whole or in part, without premium or penalty, from time to
time on the following terms and conditions: (i) the Borrower shall give the
Payments Administrator at the Payment Office written notice (or telephonic
notice promptly confirmed in writing) of its intent to prepay the Loans, the
amount of such prepayment and (in the case of Eurodollar Loans) the specific
Borrowing(s)
<PAGE> 14
pursuant to which made, which notice shall be given by such Borrower at least
one Business Day prior to the date of such prepayment with respect to Base Rate
Loans and at least two Business Days prior to the date of such prepayment with
respect to Eurodollar Loans, which notice shall promptly be transmitted by the
Payments Administrator to each of the Lenders; (ii) each partial prepayment of
any Borrowing shall be in an aggregate principal amount of at least $1,000,000,
provided that no partial prepayment of Eurodollar Loans made pursuant to a
Borrowing shall reduce the aggregate principal amount of the Loans outstanding
pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount
applicable thereto; and (iii) each prepayment in respect of any Loans made
pursuant to a Borrowing shall be applied pro rata among such Loans.
3.02 Mandatory Prepayments.
(A) Requirements:
(a) If the Assumption Date has not then occurred, on the third
Business Day following the date of receipt thereof by the Borrower of the Cash
Proceeds from any Asset Sale or of any Distribution, an amount equal to 100% of
the Net Cash Proceeds from such Asset Sale or of such Distribution shall be
applied as a mandatory repayment of principal of the then outstanding Loans.
(b) If the Assumption Date has not then occurred, on the third
Business Day following the date of receipt thereof by the Borrower, an amount
equal to 100% of the proceeds (net of underwriting discounts and commissions and
other reasonable costs associated therewith) of the incurrence of Indebtedness
by the Borrower (other than Indebtedness permitted by Section 7.04 as such
Section is in effect on the Closing Date), shall be applied as a mandatory
repayment of principal of the then outstanding Loans.
(c) If the Assumption Date has not then occurred, on the third
Business Day following the date of receipt thereof by the Borrower, an amount
equal to 100% of the proceeds (net of underwriting discounts and commissions and
other reasonable costs associated therewith) of any sale or issuance of its
equity or of any equity contribution shall be applied as a mandatory repayment
of principal of the then outstanding Loans.
(d) All outstanding Loans shall be repaid in full on June 30,
1998 if the Assumption Date has not then occurred.
(e) All outstanding Loans shall be repaid in full on the Final
Maturity Date.
(B) Application:
(a) With respect to each prepayment of Loans required by
Section 3.02, the Borrower may designate the Types of Loans which are to be
prepaid and
<PAGE> 15
the specific Borrowing(s) pursuant to which made, provided that (i) if any
prepayment of Eurodollar Loans made pursuant to a single Borrowing shall reduce
the outstanding Loans made pursuant to such Borrowing to an amount less than the
Minimum Borrowing Amount for such Borrowing, such Borrowing shall be immediately
converted into Base Rate Loans; and (ii) each prepayment of any Loans made
pursuant to a Borrowing shall be applied pro rata among such Loans. In the
absence of a designation by a Borrower as described in the preceding sentence,
the Payments Administrator shall, subject to the above, make such designation in
its sole discretion with a view, but no obligation, to minimize breakage costs
owing under Section 1.11.
3.03 Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement shall be made to
the Payments Administrator for the ratable (based on its pro rata share) account
of the Lenders entitled thereto, not later than 1:00 P.M. (New York time) on the
date when due and shall be made in immediately available funds and in lawful
money of the United States of America at the Payment Office, it being understood
that written notice by the Borrower to the Payments Administrator to make a
payment from the funds in the Borrower's account at the Payment Office shall
constitute the making of such payment to the extent of such funds held in such
account. Any payments under this Agreement which are made later than 1:00 P.M.
(New York time) shall be deemed to have been made on the next succeeding
Business Day. Whenever any payment to be made hereunder shall be stated to be
due on a day which is not a Business Day, the due date thereof shall be extended
to the next succeeding Business Day and, with respect to payments of principal,
interest shall be payable during such extension at the applicable rate in effect
immediately prior to such extension.
3.04 Net Payments. (a) All payments made by the Borrower
hereunder or under any Note will be made without setoff, counterclaim or other
defense. Except as provided in Section 3.04(b) and except to the extent required
by applicable law, all such payments will be made free and clear of, and without
deduction or withholding for, any present or future taxes, levies, imposts,
duties, fees, assessments or other charges of whatever nature now or hereafter
imposed by any jurisdiction (or by any political subdivision or taxing authority
thereof or therein) with respect to such payments (but excluding, except as
provided in the second succeeding sentence, any tax imposed on or measured by
the net income, net profits or franchise taxes measured by net income or net
profits of a Lender (or any office or branch of such Lender, in each case)
pursuant to the laws of the jurisdiction in which it is organized or the
jurisdiction in which the principal office or applicable lending office of such
Lender is located (or any subdivision or taxing authority thereof or therein))
and all interest, penalties or similar liabilities with respect to such
non-excluded taxes, levies, imposts, duties, fees, assessments or other charges
(all such non-excluded taxes, levies, imposts, duties, fees, assessments or
other charges being referred to collectively as "Taxes"). If any Taxes are so
levied or imposed, the Borrower agrees to pay the full amount of such Taxes, and
such additional amounts as may be necessary so that every
<PAGE> 16
payment of all amounts due under this Agreement or under any Note, after
withholding or deduction for or on account of any Taxes, will not be less than
the amount provided for herein or in such Note. If any amounts are payable in
respect of Taxes pursuant to the preceding sentence, the Borrower agrees to
reimburse each Lender, upon the written request of such Lender, for taxes
imposed on or measured by the net income or net profits of such Lender pursuant
to the laws of the jurisdiction in which such Lender is organized or in which
the principal office or applicable lending office of such Lender is located (or
of any subdivision or taxing authority therein or thereof) and for any
withholding of taxes as such Lender shall determine are payable by, or withheld
from, such Lender in respect of such amounts so paid to or on behalf of such
Lender pursuant to the preceding sentence and in respect of any amounts paid to
or on behalf of such Lender pursuant to this sentence. The Borrower will furnish
to the Payments Administrator within 45 days after the date the payment of any
Taxes is made pursuant to applicable law certified copies of tax receipts
evidencing such payment by the Borrower. The Borrower agrees to indemnify and
hold harmless each Lender, and reimburse such Lender upon its written request,
for the amount of any Taxes so levied or imposed and paid by such Lender.
(b) Each Lender that is not a United States person (as such
term is defined in Section 7701(a)(30) of the Code) for Federal income tax
purposes agrees to deliver to the Borrower and the Payments Administrator on or
prior to the Closing Date, or in the case of a Lender that is an assignee or
transferee of an interest under this Agreement pursuant to Section 1.13 or 11.04
(unless the respective Lender was already a Lender hereunder immediately prior
to such assignment or transfer), on the date of such assignment or transfer to
such Lender, (i) two accurate and complete original signed copies of Internal
Revenue Service Form 4224 or 1001 (or successor forms) certifying to such
Lender's entitlement to a complete exemption from United States withholding tax
with respect to payments to be made under this Agreement and under any Note or
(ii) if the Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of
the Code and cannot deliver either Internal Revenue Service Form 1001 or 4224
pursuant to clause (i) above, (x) a certificate substantially in the form of
Exhibit C (any such certificate, a "Section 3.04 Certificate") and (y) two
accurate and complete original signed copies of Internal Revenue Service Form
W-8 (or successor form) certifying to such Lender's entitlement to a complete
exemption from United States withholding tax with respect to payments of
interest to be made under this Agreement and under any Note. In addition, each
such Lender agrees that, from time to time after the Closing Date, when a lapse
in time or change in circumstances renders the previous certification obsolete
or inaccurate in any material respect, it will deliver to the Borrower and the
Payments Administrator two new accurate and complete original signed copies of
Internal Revenue Service Form 4224 or 1001, or Form W-8 (or successor forms) and
a Section 3.04 Certificate, as the case may be, and such other forms as may be
required in order to confirm or establish the entitlement of such Lender to a
continued exemption from or reduction in United States withholding tax with
respect to payments under this Agreement and any Note, or it shall immediately
notify the Borrower and the
<PAGE> 17
Payments Administrator of its inability to deliver any such Form or Certificate
in which case such Lender shall not be required to deliver any such Form or
Certificate pursuant to this Section 3.04(b). Notwithstanding anything to the
contrary contained in Section 3.04(a), but subject to Section 11.04(b) and the
immediately succeeding sentence, (x) the Borrower shall be entitled, to the
extent it is required to do so by law, to deduct or withhold income or similar
taxes imposed by the United States from interest, fees or other amounts payable
hereunder for the account of any Lender which is not a United States person (as
such term is defined in Section 7701(a)(30) of the Code) for Federal income tax
purposes to the extent that such Lender has not provided to the Borrower
Internal Revenue Service Forms that establish a complete exemption from such
deduction or withholding and (y) the Borrower shall not be obligated pursuant to
Section 3.04(a) hereof to gross-up payments to be made to any such Lender in
respect of income or similar taxes imposed by the United States if (I) such
Lender has not provided to the Borrower the Internal Revenue Service Forms
required to be provided to the Borrower pursuant to this Section 3.04(b) or (II)
in the case of a payment, other than interest, to a Lender described in clause
(ii) of the last sentence of this Section 3.04(b) above, to the extent that such
Forms do not establish a complete exemption from withholding of such taxes.
Notwithstanding anything to the contrary contained in the preceding sentence or
elsewhere in this Section 3.04 and except as set forth in Section 11.04(b), the
Borrower agrees to pay additional amounts and to indemnify each Lender in the
manner set forth in Section 3.04(a) (without regard to the identity of the
jurisdiction requiring the deduction or withholding) in respect of any Taxes
deducted or withheld by it as described in the immediately preceding sentence as
a result of any changes after the Closing Date in any applicable law, treaty,
governmental rule, regulation, guideline or order, or in the interpretation
thereof, relating to the deducting or withholding of such Taxes.
(c) If the Borrower pays any additional amount under this
Section 3.04 to a Lender and such Lender determines in its sole discretion that
it has actually received or realized in connection therewith any refund or any
reduction of, or credit against, its Tax liabilities in or with respect to the
taxable year in which the additional amount is paid, such Lender shall pay to
the Borrower an amount that the Lender shall, in its sole discretion, determine
is equal to the net benefit, after tax, which was obtained by the Lender in such
year as a consequence of such refund, reduction or credit.
SECTION 4. Conditions Precedent.
4.01 Conditions Precedent to Loans. The obligation of each
Lender to make its Loans on the Closing Date is subject, at the time of the
making of such Loans, to the satisfaction of the following conditions:
(a) Notice of Borrowing. The Payments Administrator shall have
received a Notice of Borrowing meeting the requirements of Section
1.03.
<PAGE> 18
(b) No Default; Representations and Warranties. At the time of
the making of the Loans and also after giving effect thereto, (i) there
shall exist no Default or Event of Default and (ii) all representations
and warranties made by the Borrower contained herein or in the other
Credit Documents shall be true and correct in all material respects
with the same effect as though such representations and warranties had
been made on and as of the date of the making of such Loans, except to
the extent that such representations and warranties expressly relate to
an earlier date.
(c) Effectiveness; Notes. (i) The Borrower and each of the
Lenders shall have signed a copy of this Agreement (whether the same or
different copies) and shall have delivered the same to the Payments
Administrator at its Notice Office or, in the case of the Lenders,
shall have given to the Payments Administrator telephonic (confirmed in
writing), written, telex or facsimile transmitted notice (actually
received) at its Notice Office that the same has been signed and mailed
to it and (ii) there shall have been delivered to the Payments
Administrator for the account of each Lender a Note executed by the
Borrower in the amount, maturity and as otherwise provided herein.
(d) Opinions of Counsel. On the Closing Date, the
Administrative Agents shall have received opinions, addressed to each
Agent and each of the Lenders and dated the Closing Date, from (i)
Sullivan & Cromwell, special New York counsel to the Borrower, which
opinion shall cover the matters contained in Exhibit D-1 hereto, (ii)
Rinaldi & Associates, special counsel to the Borrower, which opinion
shall cover the matters contained in Exhibit D-2 hereto and (iii) White
& Case, special counsel to the Agents, which opinion shall cover the
matters contained in Exhibit D-3 hereto.
(e) Partnership Proceedings. (I) On the Closing Date, the
Administrative Agents shall have received from the Borrower a
certificate, dated the Closing Date, signed by the President, any
Vice-President or the Secretary (or any person holding an equivalent
position) of the Borrower, in the form of Exhibit E with appropriate
insertions and deletions, together with (x) copies of the
organizational documents of the Borrower, (y) the resolutions or other
administrative approval of the Borrower referred to in such certificate
and (z) a statement that all of the applicable conditions set forth in
Section 4.01(b) have been satisfied (or waived with the consent of the
Required Lenders) as of such date, and all of the foregoing shall be
reasonably satisfactory to the Agents.
(II) On the Closing Date, all partnership and legal
proceedings and all instruments and agreements in connection with the
transactions contemplated by this Agreement and the other Credit
Documents shall be reasonably satisfactory in form and substance to the
Agents, and the Administrative Agents shall have received all
information and copies of all
<PAGE> 19
certificates, documents and papers, including good standing
certificates and any other records of company proceedings and
governmental approvals, if any, which the Agents may have requested in
connection therewith, such documents and papers, where appropriate, to
be certified by proper company or governmental authorities.
(f) Adverse Change, etc. Since November 1, 1997, nothing shall
have occurred (and neither any Lender nor any Agent shall have become
aware of any facts or conditions not previously known) which either
Agent or the Required Lenders shall determine has had, or is reasonably
likely to have, (i) a Material Adverse Effect or (ii) a material
adverse effect on the rights or remedies of the Lenders or the Agents
hereunder or under any other Credit Document, or on the ability of the
Borrower to perform its obligations to the Lenders and the Agents.
(g) Litigation. On the Closing Date, there shall be no
actions, suits or proceedings pending or threatened (a) with respect to
this Agreement or any other Credit Document or (b) which either Agent
or the Required Lenders shall determine has had, or is reasonably
likely to have (i) a Material Adverse Effect or (ii) a material adverse
effect on the rights or remedies of the Lenders or the Agents hereunder
or under any other Credit Document or on the ability of the Borrower to
perform its obligations to the Lenders and the Agents.
(h) Pledge Agreement. On the Closing Date, the Borrower shall
have duly authorized, executed and delivered a Pledge Agreement in the
form of Exhibit F (as modified, amended or supplemented from time to
time in accordance with the terms thereof and hereof, the "Pledge
Agreement") and shall have delivered to the Collateral Agent, as
pledgee thereunder, all of the certificates representing the Pledged
Securities endorsed in blank or accompanied by executed and undated
stock powers, and the Pledge Agreement shall be in full force and
effect.
(i) Fees. On the Closing Date, the Borrower shall have paid to
the Agents and the Lenders all Fees and expenses agreed upon by such
parties to be paid on or prior to such date.
(j) Starwood Acquisition. The Administrative Agents shall be
satisfied that (x) all requisite shareholder consent has been obtained
to consummate the Starwood Acquisition and (y) all other conditions to
the Starwood Acquisition are reasonably likely to be satisfied on the
date then scheduled for consummation of the Starwood Acquisition. In
addition, there shall be in effect on the Closing Date no injunction,
stay or similar order that would materially delay, impose materially
burdensome conditions on or otherwise materially adversely affect the
Starwood Acquisition.
(k) Affiliate Indemnification. On the Closing Date, the
<PAGE> 20
Administrative Agents shall have received a counterpart of the
Affiliate Indemnification executed by the parties thereto.
(l) Consent Letter. On the Closing Date, the Administrative
Agent shall have received a letter from CT Corporation System
substantially in the form of Exhibit J hereto with respect to service
of process.
The acceptance of the benefits of the Loans shall constitute a
representation and warranty by the Borrower to the Agents and each of the
Lenders that all of the applicable conditions specified in Section 4.01 have
been satisfied (or waived with the consent of the Required Lenders) as of that
time. All of the certificates, legal opinions and other documents and papers
referred to in Section 4.01, unless otherwise specified, shall be delivered to
the Payments Administrator at its Notice Office for the account of each of the
Lenders and, except for the Notes, in sufficient counterparts for each of the
Lenders and shall be reasonably satisfactory in form and substance to the
Agents.
SECTION 5. Representations, Warranties and Agreements. In
order to induce the Lenders to enter into this Agreement and to make the Loans
provided for herein, the Borrower makes the following representations and
warranties to, and agreements with, the Lenders, all of which shall survive the
execution and delivery of this Agreement and the making of the Loans:
5.01 Status. Each Credit Party (i) is a duly organized and
validly existing corporation, limited liability company, limited partnership or
general partnership, as the case may be, in good standing under the laws of the
jurisdiction of its organization and has the power and authority to own its
property and assets and to transact the business in which it is engaged and
presently proposes to engage and (ii) has duly qualified and is authorized to do
business and is in good standing in all jurisdictions where it is required to be
so qualified and where the failure to be so qualified would have a Material
Adverse Effect. On the Closing Date, the Borrower is engaged in no business
other than the ownership of the Shares and the Other Shares, investments in
Permitted Investments and activities incidental thereto as permitted by Section
7.01.
5.02 Power and Authority. Each Credit Party has the power and
authority to execute, deliver and carry out the terms and provisions of the
Credit Documents to which a party and has taken all necessary action to
authorize the execution, delivery and performance of the Credit Documents to
which a party. Each Credit Party has duly executed and delivered each Credit
Document to which a party and each such Credit Document constitutes the legal,
valid and binding obligation of such Person enforceable in accordance with its
terms.
5.03 No Violation. Neither the execution, delivery and
performance by any Credit Party of the Credit Documents to which a party nor
compliance with the terms and provisions thereof, nor the consummation of the
transactions contemplated therein (i) will contravene any applicable provision
of any law,
<PAGE> 21
statute, rule, regulation, order, writ, injunction or decree of any court or
governmental instrumentality, (ii) will conflict or be inconsistent with or
result in any breach of, any of the terms, covenants, conditions or provisions
of, or constitute a default under, or (other than pursuant to the Pledge
Agreement) result in the creation or imposition of (or the obligation to create
or impose) any Lien upon any of the property or assets of any Credit Party
pursuant to the terms of any indenture, mortgage, deed of trust, agreement or
other instrument to which any Credit Party is a party or by which it or any of
its property or assets are bound or to which it may be subject or (iii) will
violate any provision of the certificate of incorporation, certificate of
formation, certificate of partnership, by-laws, limited liability company
agreement or partnership agreement of any Credit Party.
5.04 Litigation. There are no actions, suits or proceedings
pending or, to the knowledge of the Borrower, threatened with respect to any
Credit Party that are reasonably likely to have (i) a Material Adverse Effect or
(ii) a material adverse effect on the rights or remedies of the Lenders or on
the ability of any Credit Party to perform its respective obligations to them
hereunder and under the other Credit Documents to which a party.
5.05 Use of Proceeds; Margin Regulations. (a) The proceeds of
all Loans shall be utilized on and after the Assumption Date as the Borrower may
elect, subject to Section 5.05(b) below, including to pay Dividends, provided
that prior to the Assumption Date the Borrower will comply with the provisions
of Section 6.07.
(b) Neither the making of any Loan hereunder, nor the use of
the proceeds thereof, will violate or be inconsistent with the provisions of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System
and no part of the proceeds of any Loan will be used to purchase or carry any
Margin Stock or to extend credit for the purpose of purchasing or carrying any
Margin Stock.
5.06 Governmental Approvals. No order, consent, approval,
license, authorization, or validation of, or filing, recording or registration
with, or exemption by, any foreign or domestic governmental or public body or
authority, or any subdivision thereof, is required to authorize or is required
in connection with (i) the execution, delivery and performance of any Credit
Document or (ii) the legality, validity, binding effect or enforceability of any
Credit Document.
5.07 Investment Company Act. No Credit Party is required to be
registered as an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
5.08 Public Utility Holding Company Act. No Credit Party is a
"holding company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
<PAGE> 22
as amended.
5.09 True and Complete Disclosure. All factual information
(taken as a whole) heretofore or contemporaneously furnished by or on behalf of
the Borrower in writing to the Agents for purposes of or in connection with this
Agreement or any transaction contemplated herein is true and accurate in all
material respects on the date as of which such information is dated or certified
and not incomplete by omitting to state any material fact necessary to make such
information (taken as a whole) not misleading at such time in light of the
circumstances under which such information was provided. There is no fact known
to the Borrower which has had, or is reasonably likely to have, a Material
Adverse Effect, which has not been disclosed herein or in such other documents,
certificates and statements furnished to the Lenders (or to the Agents for
distribution to the Lenders) for use in connection with the transactions
contemplated hereby.
5.10 Financial Condition; Financial Statements. (a) On and as
of the Closing Date, on a pro forma basis after giving effect to all
Indebtedness incurred, and to be incurred (including, without limitation, the
Loans), and Liens created, and to be created, by the Borrower in connection
therewith, (x) the sum of the assets, at a fair valuation, of the Borrower will
exceed its debts, (y) the Borrower will not have incurred or intended to, or
believe that it will, incur debts beyond its ability to pay such debts as such
debts mature and (z) the Borrower will not have unreasonably small capital with
which to conduct its business. For purposes of this Section 5.10, "debt" means
any liability on a claim, and "claim" means (i) right to payment whether or not
such a right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured
or unsecured; or (ii) right to an equitable remedy for breach of performance if
such breach gives rise to a payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured or unsecured.
(b) The financial statements of the Borrower which have
heretofore been furnished to each Lender present fairly, on the basis presented,
the financial position of the Borrower at the dates of said statements. Nothing
has occurred since December 31, 1996 that has had or is reasonably likely to
have a Material Adverse Effect.
(c) Except as reflected in the financial statements and the
notes thereto described in Section 5.10(b), there were as of the Closing Date no
liabilities or obligations with respect to the Borrower of a nature (whether
absolute, accrued, contingent or otherwise and whether or not due) which, either
individually or in aggregate, would be material to the Borrower, except as
incurred in the ordinary course of business consistent with past practices
subsequent to December 31, 1996 and as incurred hereunder on such date.
5.11 Security Interests. On and after the Closing Date, the
Pledge Agreement creates, as security for the obligations purported to be
secured
<PAGE> 23
thereby, a valid and enforceable perfected security interest in and Lien on all
of the Collateral subject thereto, superior to and prior to the rights of all
third Persons and subject to no other Liens, in favor of the Collateral Agent
for the benefit of the Lenders. No filings or recordings are required in order
to perfect the security interests created under the Pledge Agreement.
5.12 Tax Liability. The Borrower has not been obligated to pay
federal or state income taxes.
5.13 Compliance with ERISA. The Borrower has no obligation to
contribute to any Plan.
5.14 Subsidiaries. The Borrower has no Subsidiaries.
5.15 Properties. The Borrower owns no property or asset other
than the Shares, Other Shares and, after the Closing Date, the amounts on
deposit in the Specified Accounts, and has good and marketable title thereto.
Annex III sets forth a listing of the Shares by issuer and a listing of the
shares of common stock of such issuer received by the Borrower upon the
liquidation of LLC.
5.16 Compliance with Statutes, etc. Each Credit Party is in
compliance with all applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, all governmental bodies, domestic or
foreign, in respect of the conduct of its business and the ownership of its
property, except such non-compliance as is not likely to, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 6. Affirmative Covenants. The Borrower hereby
covenants and agrees that on the Closing Date and thereafter for so long as this
Agreement is in effect and until the Commitments have terminated, no Notes are
outstanding and the Loans, together with interest, Fees and all other
Obligations incurred hereunder, are paid in full:
6.01 Information Covenants. The Borrower will furnish to each
Lender:
(a) Annual Financial Statements. Within 105 days after the
close of each of its fiscal years, its balance sheet, as at the end of
such fiscal year and the related statements of income, changes in
financial position and cash flows for such fiscal year, in each case
setting forth comparative figures for the preceding fiscal year, and
examined by independent certified public accountants of recognized
national standing whose opinion shall not be qualified as to the scope
of audit and as to the status of the Borrower as a going concern,
together with a certificate of such accounting firm stating that in the
course of its regular audit of the business of the Borrower, which
audit was conducted in accordance with generally accepted auditing
<PAGE> 24
standards, such accounting firm has obtained no knowledge of any
Default or Event of Default which has occurred and is continuing or, if
in the opinion of such accounting firm such a Default or Event of
Default has occurred and is continuing, a statement as to the nature
thereof.
(b) Quarterly Financial Statements. As soon as available and
in any event within 45 days after the close of each of the first three
quarterly accounting periods in each of its fiscal years, its balance
sheet, as at the end of such quarterly period and the related
statements of income, changes in financial position and cash flows for
such quarterly period and for the elapsed portion of the fiscal year
ended with the last day of such quarterly period, and in each case
setting forth comparative figures for the related periods in the prior
fiscal year and certified by the chief financial officer of the
Borrower, subject to changes resulting from audit and normal year-end
audit adjustments.
(c) Officer's Certificates. At the time of the delivery of the
financial statements provided for in Sections 6.01(a) and (b), a
certificate of the chief financial officer, controller or other
Authorized Officer of the Borrower to the effect that no Default or
Event of Default exists or, if any Default or Event of Default does
exist, specifying the nature and extent thereof.
(d) Notice of Default or Litigation. Promptly, and in any
event within three Business Days after any officer of the Borrower
obtains knowledge thereof, notice of (x) the occurrence of any event
which constitutes a Default or Event of Default which notice shall
specify the nature thereof, the period of existence thereof and what
action the Borrower proposes to take with respect thereto and (y) the
commencement of or any significant development in any litigation or
governmental proceeding pending against the Borrower which is likely to
have a Material Adverse Effect or is likely to have a material adverse
effect on the ability of the Borrower to perform its obligations
hereunder or under any other Credit Document.
(e) Auditors' Reports. Promptly upon receipt thereof, a copy
of each other final report or "management letter" submitted to the
Borrower by its independent accountants in connection with any annual,
interim or special audit made by it of the books of LLC or such
Borrower.
(f) Other Information. Promptly (i) upon transmission thereof,
copies of any filings and registrations with, and reports to, the
Securities and Exchange Commission or any successor thereto (the "SEC")
by the Borrower, and (ii) with reasonable promptness, such other
material information or documents (financial or otherwise) as either
Agent on its own behalf or on behalf of the Required Lenders may
reasonably request from time to time, subject in all cases, to any
requirement, contractual, fiduciary or otherwise, applicable to the
Borrower not to disclose such information.
6.02 Books, Records and Inspections. The Borrower will permit,
<PAGE> 25
upon reasonable notice to the chief financial officer, controller or any other
Authorized Officer of the Borrower, officers and designated representatives of
either Agent or the Required Lenders to visit and inspect any of the properties
or assets of the Borrower in whomsoever's possession, and to examine the books
of account of the Borrower and discuss the affairs, finances and accounts of the
Borrower with, and be advised as to the same by, its officers and independent
accountants, all at such reasonable times and intervals and to such reasonable
extent as the Agents or the Required Lenders may desire.
6.03 Insurance. The Borrower will at all times maintain in
full force and effect insurance in such amounts, covering such risks and
liabilities and with such deductibles or self-insured retentions as are in
accordance with normal industry practice.
6.04 Payment of Taxes. The Borrower will pay and discharge all
material taxes, assessments and governmental charges or levies imposed upon it
or upon its income or profits, or upon any properties belonging to it, prior to
the date on which penalties attach thereto, and all lawful claims which, if
unpaid, might become a Lien or charge upon any properties of the Borrower,
provided that the Borrower shall not be required to pay any such tax,
assessment, charge, levy or claim which is being contested in good faith and by
proper proceedings if it has maintained adequate reserves with respect thereto
in accordance with GAAP.
6.05 Franchises. The Borrower will do, or cause to be done,
all things necessary to preserve and keep in full force and effect its
existence, material rights, franchises and authority, provided that any
transaction permitted by Section 7.02 will not constitute a breach of this
Section 6.05.
6.06 Compliance with Statutes, etc. The Borrower will comply
with all applicable statutes, regulations and orders of, and all applicable
restrictions imposed by, all governmental bodies, domestic or foreign, in
respect of the conduct of its business and the ownership of its property other
than those the non-compliance with which would not have a Material Adverse
Effect or would not have a material adverse effect on the ability of the
Borrower to perform its obligations under any Credit Document.
6.07 Proceeds. The Borrower will deposit all proceeds of the
Loans into the Specified Accounts (50-50 between them) and, prior to the
Assumption Date, will not withdraw, or take any action to withdraw, any amounts
from the Specified Accounts, it being agreed that all amounts in the Specified
Accounts may be invested at the Borrower's direction in Permitted Investments
acceptable to the Agents.
Notwithstanding anything to the contrary contained in this Section 6, upon the
Assumption Date (but only if the Existing Starwood Credit Agreement is then in
effect), all of the foregoing provisions of this Section 6 shall be deleted and
thereafter shall be of no further force or effect.
<PAGE> 26
SECTION 7. Negative Covenants. The Borrower hereby covenants
and agrees that on the Closing Date and thereafter for so long as this Agreement
is in effect and until the Commitments have terminated, no Notes are outstanding
and the Loans, together with interest, Fees and all other Obligations incurred
hereunder, are paid in full:
7.01 Changes in Business. The Borrower will not alter the
character of its business from that conducted by it on the Closing Date (i.e.,
the ownership of the Shares and Other Shares and investment in Permitted
Investments), it being understood that the Borrower may engage in those
activities that are incidental to (x) the maintenance of its corporate existence
in compliance with applicable law, (y) legal, tax and accounting matters in
connection with any of the foregoing activities and (z) the entering into, and
performing its obligations under, this Agreement and the other Credit Documents.
7.02 Consolidation, Merger, Sale or Purchase of Assets, etc.
The Borrower will not wind up, liquidate or dissolve its affairs, or enter into
any transaction of merger or consolidation, or sell or otherwise dispose of all
or any part of its property or assets (other than inventory or obsolete
equipment or excess equipment in the ordinary course of business) or purchase,
lease or otherwise acquire all or any part of the property or assets of any
Person, except that a Permitted Transaction will be permitted.
7.03 Liens. The Borrower will not create, incur, assume or
suffer to exist any Lien upon or with respect to any of its property or assets
of any kind (real or personal, tangible or intangible) whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such property
or assets (including sales of accounts receivable or notes with recourse to the
Borrower) or assign any right to receive income, or file or permit the filing of
any financing statement under the UCC or any other similar notice of Lien under
any similar recording or notice statute, except:
(a) Liens (other than Liens in excess of $100,000 in the
aggregate arising pursuant to Section 412 of the Code or Title IV of
ERISA) for taxes, assessments or governmental charges not yet due and
payable and for which adequate reserves have been established in
accordance with GAAP; and
(b) Liens created by or pursuant to this Agreement, the other
Credit Documents or the Westin Credit Documents.
7.04 Indebtedness. The Borrower will not contract, create,
incur, assume or suffer to exist any Indebtedness, except Indebtedness incurred
pursuant to this Agreement and the other Credit Documents.
7.05 Capital Expenditures. The Borrower will not incur any
<PAGE> 27
Consolidated Capital Expenditures.
7.06 Advances, Investments and Loans. The Borrower will not
lend money or credit or make advances to any Person, or purchase or acquire any
stock, obligations or securities of, or any other interest in, or make any
capital contribution to any Person, except:
(a) investments in cash and Permitted Investments;
(b) the Borrower may acquire and own investments (including
debt obligations) received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business; and
(c) pursuant to a Permitted Transaction.
7.07 Amendments, etc. The Borrower will not:
(a) amend, modify, or change in any manner adverse to the
interests of the Lenders its partnership agreement or enter into any
new agreement in any manner adverse to the interests of the Lenders
with respect to its partnership interests;
(b) amend or modify or agree to the amendment or modification
of, any organization document of any Specified Subsidiary in any manner
adverse to the interests of the Lenders; and
(c) amend or modify, or agree to the amendment or modification
of, the Starwood Acquisition Agreement in any manner adverse to the
interests of the Lenders.
7.08 Dividends, Distributions, etc. The Borrower will not
declare or pay any dividends (other than dividends payable solely in its
partnership interests) or return any capital to, its partners or authorize or
make any other distribution, payment or delivery of property or cash to its
partners as such, or redeem, retire, purchase or otherwise acquire, directly or
indirectly, for a consideration, any partnership interests now or hereafter
outstanding (or any warrants for or options or stock appreciation rights in
respect of any of such shares), or set aside any funds for any of the foregoing
purposes (all of the foregoing "Dividends"), provided that the Borrower may pay
Dividends with the proceeds of a dividend and/or distribution received from W&S
Atlanta that is paid by W&S Atlanta with the proceeds of Indebtedness it has
incurred as permitted by the Westin Credit Agreement.
7.09 Transactions with Affiliates. The Borrower will not enter
into any transaction or series of transactions after the Closing Date whether or
not in the ordinary course of business, with any Affiliate other than on terms
and
<PAGE> 28
conditions substantially as favorable to the Borrower as would be obtainable by
the Borrower at the time in a comparable arm's-length transaction with a Person
other than an Affiliate.
7.10 Creation of Subsidiaries. The Borrower will not create or
acquire any Subsidiary.
Notwithstanding anything to the contrary contained in this Section 7, upon the
Assumption Date (but only if the Existing Starwood Credit Agreement is then in
effect), all of the foregoing provisions of this Section 7 shall be deleted and
thereafter shall be of no force or effect.
SECTION 8. Events of Default. Upon the occurrence of any of
the following specified events (each, an "Event of Default"):
8.01 Payments. The Borrower shall (i) default in the payment
when due of any principal of the Loans or (ii) default, and such default shall
continue for five or more days, in the payment when due of any interest on the
Loans or any Fees or any other amounts owing hereunder or under any other Credit
Document; or
8.02 Representations, etc. Any material representation,
warranty or statement made by the Borrower herein or in any other Credit
Document or in any statement or certificate delivered or required to be
delivered pursuant hereto or thereto shall prove to be untrue in any material
respect on the date as of which made or deemed made provided that after the
Assumption Date no Event of Default shall arise under this Section 8.02 as a
result of any such representation, warranty or agreement made by Woodstar on the
Closing Date proving untrue except to the extent such would have a material
adverse effect on the Starwood Assumption and Guaranties; or
8.03 Covenants. The Borrower shall (a) default in the due
performance or observance by it of any term, covenant or agreement contained in
Section 6.07 or 7, or (b) default in the due performance or observance by it of
any term, covenant or agreement (other than those referred to in Section 8.01,
8.02 or clause (a) of this Section 8.03) contained in this Agreement and such
default under this clause (b) shall continue unremedied for a period of at least
30 days after notice to the defaulting party by either Agent or the Required
Lenders; or
8.04 Default Under Other Agreements. (a) Prior to the
Assumption Date, the Borrower or, after the Assumption Date, any Starwood Party
(each, a "Designated Party") shall (i) default in any payment with respect to
any Indebtedness (other than the Obligations) beyond the period of grace, if
any, applicable thereto or (ii) default in the observance or performance of any
agreement or condition relating to any such Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other event
or
<PAGE> 29
condition is to cause, or to permit the holder or holders of such Indebtedness
(or a trustee or agent on behalf of such holder or holders) to cause any such
Indebtedness to become due prior to its stated maturity (other than the failure
to obtain the required consents under the Securitized Debt and the Hines Ground
Leases); or (b) any such Indebtedness of any Designated Party shall be declared
to be due and payable (other than to the extent the Designated Party promptly
denies in writing to the applicable creditor the validity of such declaration
and is contesting same in good faith), or required to be prepaid other than by a
regularly scheduled required prepayment, prior to the stated maturity thereof
(including, without limitation, as a result of the failure to obtain the
required consents under the Securitized Debt or the Hines Ground Leases),
provided that after the Assumption Date it shall not constitute an Event of
Default pursuant to this Section 8.04 unless the principal amount of
Indebtedness referred to in clauses (a) and (b) above exceeds $5,000,000,
individually or in the aggregate; or
8.05 Bankruptcy, etc. Any Designated Party shall commence a
voluntary case concerning itself under Title 11 of the United States Code
entitled "Bankruptcy," as now or hereafter in effect, or any successor thereto
(the "Bankruptcy Code"); or an involuntary case is commenced against any
Designated Party and the petition is not controverted within 20 days, or is not
dismissed within 60 days, after commencement of the case; or a custodian (as
defined in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of any Designated Party; or any Designated
Party commences any other proceeding under any reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or
similar law of any jurisdiction whether now or hereafter in effect relating to
any Designated Party; or there is commenced against any Designated Party any
such proceeding which is not controverted within 20 days or remains undismissed
for a period of 60 days; or any Designated Party is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or any Designated Party suffers any appointment of any
custodian or the like for it or any substantial part of its property to continue
undischarged or unstayed for a period of 60 days; or any Designated Party makes
a general assignment for the benefit of creditors; or any corporate action is
taken by any Designated Party for the purpose of effecting any of the foregoing;
or
8.06 Pledge Agreement. Prior to the Assumption Date, (a) the
Pledge Agreement shall cease to be in full force and effect, or shall cease to
give the Collateral Agent the Liens, rights, powers and privileges purported to
be created thereby in favor of the Collateral Agent, or (b) the Borrower shall
default in the due performance or observance of any material term, covenant or
agreement on its part to be performed or observed pursuant to the Pledge
Agreement; or
8.07 Judgments. One or more judgments or decrees shall be
entered against any Credit Party involving a liability of $10,000 ($5,000,000 on
and after the Assumption Date) or more in the aggregate for all such judgments
and decrees for the Credit Parties (not paid or to the extent not covered by
insurance) and any such judgments or decrees shall not have been vacated,
discharged or
<PAGE> 30
stayed or bonded pending appeal within 60 days from the entry thereof; or
8.08 Change of Control. A Change of Control shall occur at any
time prior to the Assumption Date; or
8.09 Other Defaults. On and after the Assumption Date, a
Starwood Event of Default shall occur;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Payments Administrator shall, upon the written
request of the Required Lenders, by written notice to the Borrower, take any or
all of the following actions, without prejudice to the rights of any
Administrative Agent or any Lender to enforce its claims against the Borrower
and its other rights hereunder, except as otherwise specifically provided for in
this Agreement (provided that, if an Event of Default specified in Section 8.05
shall occur with respect to any Borrower, the result which would occur upon the
giving of written notice by the Payments Administrator as specified in clauses
(i) and (ii) below shall occur automatically without the giving of any such
notice): (i) declare the Total Commitment terminated, whereupon the Commitment
of each Lender shall forthwith terminate immediately; (ii) declare the principal
of and any accrued interest in respect of all Loans and all obligations owing
hereunder and thereunder to be, whereupon the same shall become, forthwith due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by each Borrower; and (iii) enforce, as
Collateral Agent (or direct the Collateral Agent to enforce), any or all of the
Liens and security interests created pursuant to the Pledge Agreement.
SECTION 9. Definitions. As used herein, the following terms
shall have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
"Administrative Agents" shall have the meaning provided in the
first paragraph of this Agreement and shall include any successor to the
Administrative Agents appointed pursuant to Section 10.09.
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited to all
directors and officers of such Person), controlled by, or under direct or
indirect common control with such Person. A Person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the power (i) to
vote 10% or more of the securities having ordinary voting power for the election
of directors of such corporation or (ii) to direct or cause the direction of the
management and policies of such corporation, whether through the ownership of
voting securities, by contract or otherwise.
"Affiliate Indemnification" shall mean an Indemnification
Agreement
<PAGE> 31
(which shall be in form and substance satisfactory to the Administrative Agents)
executed by certain Affiliates of the Borrower acceptable to the Administrative
Agents.
"Agents" shall have the meaning provided in the first
paragraph of this Agreement.
"Agreement" shall mean this Loan Agreement, as the same may be
from time to time further modified, amended and/or supplemented.
"Asset Sale" shall mean and include the sale, transfer or
other disposition by the Borrower to any other Person of any asset of the
Borrower.
"Assignment Agreement" shall mean the Assignment Agreement in
the form of Exhibit H (appropriately completed).
"Assumption Agreements" shall mean the Assumption Agreements
in the form of Exhibit I-1 and I-2 hereto.
"Assumption Date" shall mean the date on which the Starwood
Assumptions and Guarantees become effective.
"Authorized Officer" shall mean any senior officer of the
Borrower designated as such in writing to the Payments Administrator by the
Borrower, in each case to the extent acceptable to the Payments Administrator.
"Bankruptcy Code" shall have the meaning provided in Section
8.05.
"Base Rate" shall mean the higher of (i) the Prime Lending
Rate and (ii) the Federal Funds Effective Rate plus 1/2 of 1%.
"Base Rate Loan" shall mean each Loan bearing interest at the
rates provided in Section 1.08(a).
"Base Rate Margin" shall mean 0.625%, provided that if the
Assumption Date has not occurred by March 31, 1998, the Base Rate Margin shall
equal 3.625% on and after such date.
"Borrower" shall mean Woodstar, provided that on the
Assumption Date Woodstar shall be released as the Borrower and replaced by
Starwood Realty Partnership as the Borrower with respect to 96.08355% of the
principal of the Loans (and all accrued but unpaid interest thereon) and by
Starwood Operating Partnership as Borrower with respect to the remaining
principal of the Loans (and all accrued but unpaid interest thereon), with
Starwood Realty Partnership and Starwood Operating Partnership to thereafter
constitute the "Borrower" for purposes of this Agreement. Woodstar may, upon
such release, execute and deliver to the Administrative Agents a guaranty of the
Obligations pursuant to a Guaranty Agreement heretofore agreed upon among the
parties
<PAGE> 32
hereto.
"Borrowing" shall mean the incurrence of one Type of Loan by
the Borrower from all of the Lenders on a pro rata basis on a given date (or
resulting from conversions on a given date), having in the case of Eurodollar
Loans the same Interest Period; provided that Base Rate Loans incurred pursuant
to Section 1.10(b) shall be considered part of any related Borrowing of
Eurodollar Loans.
"BTCo" shall mean Bankers Trust Company.
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day excluding Saturday, Sunday and any day
which shall be in the City of New York a legal holiday or a day on which banking
institutions are authorized by law or other governmental actions to close and
(ii) with respect to all notices and determinations in connection with, and
payments of principal and interest on, Eurodollar Loans, any day which is a
Business Day described in clause (i) and which is also a day for trading by and
between banks in U.S. dollar deposits in the interbank Eurodollar market.
"Capital Lease" as applied to any Person shall mean any lease
of any property (whether real, personal or mixed) by that Person as lessee
which, in conformity with GAAP, is accounted for as a capital lease on the
balance sheet of that Person.
"Capitalized Lease Obligations" of any Person shall mean all
obligations under Capital Leases of such Person in each case taken at the amount
thereof accounted for as liabilities in accordance with GAAP.
"Cash Proceeds" shall mean, with respect to any Asset Sale or
Distribution (x) the aggregate cash payments (including any cash received by way
of deferred payment pursuant to a note receivable issued in connection with such
Asset Sale, other than the portion of such deferred payment constituting
interest, but only as and when so received) received by the Borrower from any
such Asset Sale or (y) all amounts received by the Borrower pursuant to a
Distribution (including the cash fair market value of any Distribution made
other than in cash).
"Change of Control" shall mean at any time, and for any reason
whatsoever, Marswood Investors L.P. ceases to own at least 80% of the
partnership interests of the Borrower.
"Chase" shall mean The Chase Manhattan Bank.
"Closing Date" shall mean December 29, 1997 unless otherwise
agreed by the Borrower and the Lenders.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time and the regulations promulgated and the rulings issued
thereunder. Section references to the Code are to the Code, as in effect at the
<PAGE> 33
Closing Date and any subsequent provisions of the Code, amendatory thereof,
supplemental thereto or substituted therefor.
"Collateral" shall mean all of the Collateral as defined in
the Pledge Agreement.
"Collateral Agent" shall mean Bankers Trust Company acting as
collateral agent for the Lenders.
"Commitment" shall mean, with respect to each Lender, the
amount, set forth opposite such Lender's name on Annex I hereto directly below
the column entitled "Commitment" as the same may be terminated pursuant to
Section 2.02.
"Consolidated Capital Expenditures" shall mean, for any
period, the aggregate of all expenditures (whether paid in cash or accrued as
liabilities and including in all events all amounts expended or capitalized
under Capital Leases but excluding any amount representing capitalized interest)
by the Borrower during that period that, in conformity with GAAP, are or are
required to be included in the property, plant or equipment reflected in the
consolidated balance sheet of LLC and its consolidated Subsidiaries.
"Contingent Obligations" shall mean as to any Person any
obligation of such Person guaranteeing or intending to guarantee any
Indebtedness, leases, dividends or other obligations ("primary obligations") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (d) otherwise to assure or hold
harmless the owner of such primary obligation against loss in respect thereof,
provided that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Credit Documents" shall mean this Agreement, the Notes and
the Pledge Agreement.
"Credit Parties" shall mean (x) prior to the Assumption Date,
<PAGE> 34
Woodstar and (y) on and after the Assumption Date, the Starwood Parties.
"Default" shall mean any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default.
"Designated Party" shall have the meaning provided in Section
8.04.
"Distribution" shall mean any dividend or other distribution
received by the Borrower in respect of the Shares and Other Shares other than
the dividend and/or distribution from W&S Atlanta referred to in Section 7.08.
"Dividends" shall have the meaning provided in Section 7.08.
"Eligible Transferee" shall mean and include a commercial
bank, financial institution or other qualified institutional buyer (as defined
under Rule 144A promulgated under the Securities Act of 1933, as amended) that
is not a competitor in the hospitality business of the Credit Parties.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA Affiliate" shall mean each person (as defined in
Section 3(9) of ERISA) which together with the Borrower would be deemed to be a
"single employer" within the meaning of Sections 414(b), (c), (m) and (o) of the
Code.
"Eurodollar Loans" shall mean each Loan bearing interest at
the rates provided in Section 1.08(b).
"Eurodollar Margin" shall mean 1.625%, provided that if the
Assumption Date has not occurred by March 31, 1998, the Eurodollar Margin shall
equal 4.625% on and after such date.
"Eurodollar Rate" shall mean with respect to each Interest
Period for a Eurodollar Loan, (i) the offered quotation to first-class banks in
the interbank Eurodollar market by the Payments Administrator for dollar
deposits of amounts in same day funds comparable to the outstanding principal
amount of the Eurodollar Loan of the Payments Administrator for which an
interest rate is then being determined with maturities comparable to the
Interest Period to be applicable to such Eurodollar Loan, determined as of 10:00
A.M. (New York time) on the date which is two Business Days prior to the
commencement of such Interest Period divided (and rounded upward to the next
whole multiple of 1/16 of 1%) by (ii) a percentage equal to 100% minus the then
stated maximum rate of all reserve requirements (including, without limitation,
any marginal, emergency, supplemental, special or other reserves) applicable to
any member bank of the Federal Reserve System in respect of Eurocurrency
liabilities as defined in Regulation D (or any successor category of liabilities
under Regulation D).
<PAGE> 35
"Event of Default" shall have the meaning provided in Section
8.
"Existing Starwood Credit Agreement" shall mean the Credit
Agreement, dated as of September 10, 1997, among Starwood Trust, Starwood Realty
Partnership, Bankers Trust Company, Lehman Brothers Holdings Inc., BankBoston,
N.A. and Bank of Montreal, as in effect on the Closing Date and as amended or
replaced prior to the Assumption Date in a manner acceptable to the
Administrative Agents and to Starwood Lodging to permit the Starwood Acquisition
and the Starwood Assumptions and Guaranties, without giving effect to any other
amendment, modification or other change thereto not consented to by the Required
Lenders, and regardless of whether such agreement is terminated.
"Federal Funds Effective Rate" shall mean for any period, a
fluctuating interest rate equal for each day during such period to the weighted
average of the rates on overnight Federal Funds transactions with members of the
Federal Reserve System arranged by Federal Funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions received by the Payments Administrator from three Federal
Funds brokers of recognized standing selected by the Payments Administrator.
"Final Maturity Date" shall mean January 31, 2000.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect on the date of this Agreement.
"Hines Ground Leases" shall mean the two ground leases with
respect to the Westin Hotel, Houston (Galleria) and the Westin Hotel, Houston
(Oaks) as more particularly described on Annex IV hereto.
"Indebtedness" of any Person shall mean, without duplication,
(a) all obligations of such Person for borrowed money or with respect to
deposits or advances of any kind, (b) all obligations of such Person evidenced
by bonds, debentures, notes or similar instruments, (c) all obligations of such
Person upon which interest charges are customarily paid, (d) all obligations of
such Person under conditional sale or other title retention agreements relating
to assets purchased by such Person, (e) all obligations of such Person issued or
assumed as the deferred purchase price of property or services (excluding trade
accounts payable and accrued expenses arising in the ordinary course of business
in accordance with customary trade terms), (f) all Indebtedness of others
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the obligations secured thereby have
been assumed by such Person, (g) all Contingent Obligations of such Person, (h)
all Capital Lease Obligations of such Person, (i) all obligations of such Person
in respect of interest rate protection agreements, foreign currency exchange
agreements or other interest or exchange rate hedging arrangements, (j) all
obligations of such Person
<PAGE> 36
as an account party to reimburse any bank or any other person in respect of
letters of credit and bankers' acceptances, whether or not drawn or accepted,
(k) all obligations of such Person to pay a specified purchase price for goods
or services whether or not delivered or accepted (i.e., take-or-pay and similar
obligations) and (l) all obligations (including repurchase obligations) relating
to Property Financing Lender Equity. The Indebtedness of any Person shall
include the Indebtedness of any partnership or joint venture in which such
person is a general partner or member, other than to the extent that the
instrument or agreement evidencing such Indebtedness expressly limits the
liability of such person in respect thereof pursuant to provisions and terms
reasonably satisfactory to the Required Lenders.
"Interest Period" with respect to any Loan shall mean the
interest period applicable thereto, as determined pursuant to Section 1.09.
"Interest Rate Agreement" shall mean any interest rate swap
agreement, any interest rate cap agreement, any interest rate collar agreement
or other similar agreement or arrangement designed to protect the Borrower
against fluctuations in interest rates.
"Interim Date" shall mean the date on which a Permitted
Transaction is consummated.
"Lender" shall have the meaning provided in the first
paragraph of this Agreement.
"Lender Register" shall have the meaning provided in Section
11.16.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement or any
lease in the nature thereof).
"Loan" shall have the meaning provided in Section 1.01(a).
"LLC" shall mean W&S Hotel L.L.C., formerly a Delaware limited
liability company.
"Margin Stock" shall have the meaning provided in Regulation
U.
"Material Adverse Effect" shall mean a material adverse effect
on the business, property, assets, liabilities, operations, condition (financial
or otherwise), prospects or business plans of the Borrower.
"Minimum Borrowing Amount" shall mean (i) for Base Rate Loans,
$2,000,000 and (ii) for Eurodollar Loans, $10,000,000.
"Net Cash Proceeds" shall mean with respect to (x) any Asset
Sale,
<PAGE> 37
the Cash Proceeds resulting therefrom net of expenses of such sale and
incremental taxes paid or payable as a result thereof and (y) any Distribution,
the Cash Proceeds resulting therefrom.
"Nomura" shall mean Nomura Asset Capital Corporation, a
Delaware corporation.
"Note" shall have the meaning provided in Section 1.05(a).
"Notice of Borrowing" shall have the meaning provided in
Section 1.03.
"Notice of Conversion" shall have the meaning provided in
Section 1.06.
"Notice Office" shall mean the office of the Payments
Administrator at 130 Liberty Street, New York, New York or such other office as
the Payments Administrator may designate to the Borrower from time to time.
"Obligations" shall mean all amounts, direct or indirect,
contingent or absolute, of every type or description, and at any time existing,
owing to the Payments Administrator, the Documentation Agent, the Collateral
Agent or any Lender pursuant to the terms of this Agreement or any other Credit
Document.
"Other Shares" shall mean the shares of common stock of
Worldwide and W&S Atlanta owned by the Borrower on the Closing Date.
"Payment Office" shall mean the office of the Payments
Administrator at 130 Liberty Street, New York, New York or such other office as
the Payments Administrator may designate to the Borrowers from time to time.
"Payments Administrator" shall mean BTCo.
"Permitted Investments" shall mean (i) securities issued or
directly and fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States of America is pledged in support thereof) having maturities of
not more than six months from the date of acquisition, (ii) U.S. dollar
denominated time deposits, certificates of deposit and bankers' acceptances of
(x) any Lender or (y) any bank (or the parent company of such bank) whose short-
term commercial paper rating from Standard & Poor's Ratings Services, a division
of McGraw-Hill, Inc. ("S&P") is at least A-1 or the equivalent thereof or from
Moody's Investors Service, Inc. ("Moody's") is at least P-1 or the equivalent
thereof (any such bank, an "Approved Bank"), in each case with maturities of not
more than six months from the date of acquisition, (iii) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (ii) above, (iv) commercial paper issued by
any Lender or Approved Bank or by the parent company of any
<PAGE> 38
Lender or Approved Bank and commercial paper issued by, or guaranteed by, any
industrial or financial company with a short-term commercial paper rating of at
least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent
thereof by Moody's (any such company, an "Approved Company"), or guaranteed by
any industrial company with a long term unsecured debt rating of at least A or
A2, or the equivalent of each thereof, from S&P or Moody's, as the case may be,
and in each case maturing within six months after the date of acquisition and
(v) investments in money market funds substantially all of whose assets are
comprised of securities of the type described in clauses (i) through (iv) above
but only to the extent such funds are acceptable to the Agents.
"Permitted Liens" shall mean Liens described in clauses (a),
(d) and (i) of Section 7.03.
"Permitted Transaction" shall mean (i) Woodstar, WHWE, Nomura
and Jurgen Bartels (the "LLC Successors") exchanging all shares of Worldwide
they own for preferred stock of Starwood Trust and cash pursuant to the Starwood
Acquisition Agreement, (ii) the LLC Successors contributing all shares of W&S
Atlanta they own to Starwood Operating Partnership pursuant to the Starwood
Acquisition Agreement, (iii) the LLC Successors contributing all shares of W&S
Seattle, W&S Lauderdale and W&S Denver to Starwood Realty Partnership pursuant
to the Starwood Acquisition Agreement and (iv) the LLC Successors contributing
all shares they own of Westin St. John to Starwood Operating Partnership
pursuant to the Starwood Acquisition Agreement if and only if Starwood Realty
Partnership concurrently assumes the LLC Successors' obligations with respect to
96.08355% of the Loans made to the LLC Successors by the Agents on the Closing
Date and Starwood Operating Partnership concurrently assumes the remaining
3.91645% of the Loans made to the LLC Successors by the Agents on the Closing
Date (and all such assumptions to be guaranteed by the Starwood Guarantors),
with such assumptions and guarantees with respect to the Loans to be reflected
by the issuance of the Starwood Assumptions and Guaranties.
"Person" shall mean any individual, partnership, joint
venture, firm, corporation, limited liability company, association, trust or
other enterprise or any government or political subdivision or any agency,
department or instrumentality thereof.
"Plan" shall mean any pension plan as defined in Section 3(2)
of ERISA, which is maintained or contributed to by (or to which there is an
obligation to contribute of) the Borrower or an ERISA Affiliate, and each such
plan for the five-year period immediately following the latest date on which the
Borrower or an ERISA Affiliate maintained, contributed to or had an obligation
to contribute to such plan.
"Pledge Agreement" shall have the meaning provided in Section
4.01(h).
<PAGE> 39
"Pledged Securities" shall mean all the Shares.
"Prime Lending Rate" shall mean the rate which BTCo announces
from time to time as its prime lending rate, the Prime Lending Rate to change
when and as such prime lending rate changes. The Prime Lending Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. BTCo may make commercial loans or other loans
at rates of interest at, above or below the Prime Lending Rate.
"PSD Interest Period" shall mean any Interest Period commenced
prior to the Syndication Date, each of which Interest Periods must satisfy the
requirements of Section 1.09(iv).
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing reserve requirements.
"Regulation U" shall mean Regulation U of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing margin requirements.
"Related Fund" shall mean, with respect to any Lender that is
a fund that invests in bank loans, any other fund that invests in bank loans and
is managed by the same investment advisor as such Lender or by an Affiliate of
such investment advisor.
"Required Lenders" shall mean Lenders whose outstanding Loans
constitute greater than 50% of the total outstanding principal of Loans.
"SEC" shall have the meaning provided in Section 6.01(j).
"Section 3.04 Certificate" shall have the meaning provided in
Section 3.04(b)(ii).
"Securitized Debt" shall mean, collectively, all Indebtedness
under the loan documents evidencing (i) the $41,700,000 loan from Nomura to
Westin Indianapolis, L.L.C., secured by a first mortgage loan on the Westin
Indianapolis Hotel and (ii) the $75,000,000 loan from Nomura to The Peachtree
Hotel Company and assumed by Westin Portman Peachtree II L.L.C., secured by a
first deed to secure debt on the Westin Peachtree Plaza.
"Shares" shall mean the shares of the common stock of each of
the Specified Subsidiaries owned by the Borrower on the Closing Date.
"Specified Accounts" shall mean Account No. 44102746
maintained at BTCo's office at 130 Liberty Street, New York, New York 10006 and
Account No. 9102726438 maintained at Chase's office at 270 Park Avenue, New
York, New York.
<PAGE> 40
"Specified Subsidiaries" shall mean W&S Seattle, W&S
Lauderdale, W&S Denver and Westin St. John.
"Starwood Acquisition" shall mean and include (i) the merger
of Worldwide with and into Starwood Trust in accordance with the terms of the
Starwood Acquisition Agreement, (ii) the Subsidiary Contributions pursuant to,
and as defined in, the Starwood Acquisition Agreement and (iii) the related
transactions described in the Starwood Acquisition Agreement.
"Starwood Acquisition Agreement" shall mean the Transaction
Agreement, dated as of September 8, 1997, among WHWE, Nomura, Juergen Bartels,
LLC, Worldwide, W&S Lauderdale, W&S Seattle, St. John Company, Westin St. John,
W&S Denver, W&S Atlanta, Starwood Trust, Starwood Realty Partnership, Starwood
Lodging Corporation and Starwood Operating Partnership, as in effect on
September 8, 1997.
"Starwood Assumptions" shall mean (x) the assumption as
Borrower by Starwood Realty Partnership of 96.08355% of the Loans pursuant to an
Assumption Agreement in the form of Exhibit I-1 hereto and (y) the assumption as
Borrower by Starwood Operating Partnership of the remainder of the Loans
pursuant to an Assumption Agreement in the form of Exhibit I-2 hereto.
"Starwood Assumptions and Guaranties" shall mean the
consummation of the Starwood Assumptions and the issuance of the Starwood
Guaranty by the Starwood Guarantors.
"Starwood Event of Default" shall mean (i) a default shall
occur with respect to any covenant contained in the Existing Starwood Credit
Agreement (as defined herein) and/or incorporated by reference in any Assumption
Agreement and (in the case of any default of any covenant that would require
notice to Starwood Lodging and Starwood Realty Trust by the Administrative Agent
or a Lender under the Existing Starwood Credit Agreement before such default
shall constitute an Event of Default thereunder) continuance of such default
unremedied for 30 days after written notice thereof to Starwood Lodging by
either Administrative Agent or any Lender hereunder and (ii) the failure to
deliver to the Lenders all financial information when and as required under the
Existing Starwood Credit Agreement to be delivered to the lenders party thereto
and such failure shall continue unremedied for 30 days after notice to Starwood
Lodging by the Administrative Agents or the Required Lenders.
"Starwood Guarantors" shall mean Starwood Trust, Starwood
Realty Partnership, Starwood Lodging Corporation, Starwood Operating Partnership
and their respective Subsidiaries (except to the extent any such Subsidiary is
not a guarantor under the Existing Starwood Credit Agreement) except to the
extent any thereof is the Borrower under any of the Loans as a result of the
Starwood Assumptions.
<PAGE> 41
"Starwood Guaranty" shall mean the guaranty by the Starwood
Guarantors of all Obligations hereunder, which guaranty shall be delivered on
the Assumption Date and shall be substantially in the form of the Guaranty set
forth in Section 12 of the Westin Credit Agreement (except that Section 12.07 of
the Westin Credit Agreement will not be included in the Starwood Guaranty).
"Starwood Lodging" shall mean and include Starwood Trust and
Starwood Lodging Corporation.
"Starwood Operating Partnership" shall mean SLC Operating
Limited Partnership, a Delaware limited partnership.
"Starwood Parties" shall mean Starwood Lodging, Starwood
Operating Partnership and Starwood Realty Partnership and any other entity that
is a Starwood Guarantor.
"Starwood Realty Partnership" shall mean SLT Realty Limited
Partnership, a Delaware limited partnership.
"Starwood Trust" shall mean Starwood Lodging Trust, a Maryland
real estate investment trust.
"Subsidiary" of any Person shall mean and include (i) any
corporation more than 50% of whose stock of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time owned by such Person directly
or indirectly through Subsidiaries and (ii) any partnership, association, joint
venture, limited liability company or other entity in which such Person directly
or indirectly through Subsidiaries has more than a 50% equity interest at the
time.
"Syndication Date" shall mean the earlier of June 1, 1998 and
the date specified in writing to the Borrower or Borrowers by the Administrative
Agents as the date on which the primary syndication of the Loans and Commitments
has been completed to the satisfaction of the Administrative Agents.
"Taxes" shall have the meaning provided in Section 3.04(a).
"Total Commitment" shall mean the sum of the Commitments of
each of the Lenders.
"Type" shall mean any type of Loan determined with respect to
the interest option applicable thereto, i.e., a Base Rate Loan or Eurodollar
Loan.
"UCC" shall mean the Uniform Commercial Code.
"W&S Atlanta" shall mean W&S Atlanta Corp., a Delaware
<PAGE> 42
corporation.
"W&S Denver" shall mean W&S Denver Corp., a Delaware
corporation.
"W&S Lauderdale" shall mean W&S Lauderdale Corp., a Delaware
corporation.
"W&S Seattle" shall mean W&S Seattle Corp., a Delaware
corporation.
"Westin Credit Agreement" shall mean the Amended and Restated
Credit Agreement, dated as of December 2, 1997, among LLC, various of its
Subsidiaries and the Agents as in effect on the Closing Date.
"Westin Credit Documents" shall have the meaning provided in
the Westin Credit Agreement.
"Westin St. John" shall mean Westin St. John Hotel Company,
Inc., a corporation organized under the laws of the U.S. Virgin Islands.
"WHWE" shall mean WHWE L.L.C., a Delaware limited liability
company.
"Woodstar" shall mean Woodstar Investor Partnership, a
Delaware general partnership.
"Worldwide" shall mean Westin Hotels & Resorts Worldwide,
Inc., a Delaware corporation, formerly known as W&S Arizona Corp.
"Written" or "in writing" shall mean any form of written
communication or a communication by means of telex, facsimile transmission,
telegraph or cable.
SECTION 10. The Agents.
10.01 Appointment. The Lenders hereby designate each of BTCo
and Chase as Administrative Agent (for purposes of this Section 10, the term
"Administrative Agent" shall include BTCo in its capacity as Collateral Agent
pursuant to the Pledge Agreement and as Payments Administrator hereunder) to act
as specified herein and in the other Credit Documents. Each Lender hereby
irrevocably authorizes, and each holder of any Note by the acceptance of such
Note shall be deemed irrevocably to authorize, each Agent to take such action on
its behalf under the provisions of this Agreement, the other Credit Documents
and any other instruments and agreements referred to herein or therein and to
exercise such powers and to perform such duties hereunder and thereunder as are
specifically delegated to or required of such Agent by the terms hereof and
<PAGE> 43
thereof and such other powers as are reasonably incidental thereto. The Agents
may perform any of their duties hereunder by or through their respective
officers, directors, agents, employees or affiliates.
10.02 Nature of Duties. No Agent shall have any duties or
responsibilities except those expressly set forth in this Agreement and the
Security Documents. No Agent or any of its respective officers, directors,
agents, employees or affiliates shall be liable for any action taken or omitted
by them hereunder or under any other Credit Document or in connection herewith
or therewith, unless caused by their gross negligence or willful misconduct. The
duties of each Agent shall be mechanical and administrative in nature; no Agent
shall have by reason of this Agreement or any other Credit Document a fiduciary
relationship in respect of any Lender or the holder of any Note; and nothing in
this Agreement or any other Credit Document, expressed or implied, is intended
to or shall be so construed as to impose upon either Agent any obligation in
respect of this Agreement or any other Credit Document except as expressly set
forth herein or therein with respect to such Agent.
10.03 Lack of Reliance on the Agents. Independently and
without reliance upon either Agent, each Lender and the holder of each Note, to
the extent it deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of any Borrower
or Starwood Party in connection with the making and the continuance of the Loans
and the taking or not taking of any action in connection herewith and (ii) its
own appraisal of the creditworthiness of any Borrower or Starwood Party and,
except as expressly provided in this Agreement, no Agent shall have any duty or
responsibility, either initially or on a continuing basis, to provide any Lender
or the holder of any Note with any credit or other information with respect
thereto, whether coming into its possession before the making of the Loans or at
any time or times thereafter. No Agent shall be responsible to any Lender or the
holder of any Note for any recitals, statements, information, representations or
warranties herein or in any document, certificate or other writing delivered in
connection herewith or for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, priority or sufficiency of this
Agreement or any other Credit Document or the financial condition of any
Borrower or Starwood Party or be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or conditions of
this Agreement or any other Credit Document, or the financial condition of any
Borrower or Starwood Party or the existence or possible existence of any Default
or Event of Default.
10.04 Certain Rights of the Agents. If an Agent shall request
instructions from the Required Lenders with respect to any act or action
(including failure to act) in connection with this Agreement or any other Credit
Document, such Agent shall be entitled to refrain from such act or taking such
action unless and until such Agent shall have received instructions from the
Required Lenders; and no Agent shall incur liability to any Person by reason of
so refraining. Without limiting the foregoing, neither any Lender nor the holder
of any Note shall have any right of action whatsoever against an Agent as a
result of such Agent acting or
<PAGE> 44
refraining from acting hereunder or under any other Credit Document in
accordance with the instructions of the Required Lenders.
10.05 Reliance. Each Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype, facsimile or telecopier message,
cablegram, radiogram, order or other document or telephone message signed, sent
or made by any Person that such Agent believed to be the proper Person, and,
with respect to all legal matters pertaining to this Agreement and any other
Credit Document and its duties hereunder and thereunder, upon advice of counsel
selected by such Agent.
10.06 Indemnification. To the extent an Agent is not
reimbursed and indemnified by the Borrower, the Lenders will reimburse and
indemnify such Agent, in proportion to their Loans, for and against any and all
liabilities, obligations, losses, damages, penalties, claims, actions,
judgments, costs, expenses or disbursements of whatsoever kind or nature which
may be imposed on, asserted against or incurred by such Agent in performing its
respective duties hereunder or under any other Credit Document, in any way
relating to or arising out of this Agreement or any other Credit Document
provided that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the gross negligence or willful
misconduct of such Agent.
10.07 The Agents in Their Individual Capacities. With respect
to its obligation to make Loans under this Agreement, each Agent shall have the
rights and powers specified herein for a "Lender" and may exercise the same
rights and powers as though it were not performing the duties specified herein;
and the term "Lenders," "Required Lenders," "holders of Notes" or any similar
terms shall, unless the context clearly otherwise indicates, include the Agents
in their individual capacities. Each Agent may accept deposits from, lend money
to, and generally engage in any kind of banking, trust or other business with
any Credit Party or any Affiliate of any Credit Party as if they were not
performing the duties specified herein, and may accept fees and other
consideration from any Borrower or any Starwood Party for services in connection
with this Agreement and otherwise without having to account for the same to the
Lenders.
10.08 Holders. The Payments Administrator may deem and treat
the payee of any Note as the owner thereof for all purposes hereof unless and
until a written notice of the assignment, transfer or endorsement thereof, as
the case may be, shall have been filed with the Payments Administrator. Any
request, authority or consent of any Person who, at the time of making such
request or giving such authority or consent, is the holder of any Note shall be
conclusive and binding on any subsequent holder, transferee, assignee or
indorsee, as the case may be, of such Note or of any Note or Notes issued in
exchange therefor.
10.09 Resignation by an Agent. (a) Either Administrative Agent
may resign from the performance of all its functions and duties hereunder and/or
under the other Credit Documents at any time by giving 15 Business Days' prior
<PAGE> 45
written notice to the other Administrative Agent (if any), the Borrower and the
Lenders. Upon such resignation, any remaining Administrative Agent shall perform
all the duties of such resigning Administrative Agent hereunder, provided that
if, at the time of such resignation, such Administrative Agent is the only
Administrative Agent, such resignation shall take effect upon the appointment of
a successor Administrative Agent pursuant to clauses (b) and (c) below or as
otherwise provided below.
(b) Upon any such notice of resignation, the Required Lenders
shall appoint a successor Administrative Agent hereunder or thereunder who shall
be a commercial bank or trust company reasonably acceptable to the Borrower.
(c) If a successor Administrative Agent shall not have been so
appointed within such 15 Business Day period, the resigning Administrative
Agent, with the reasonable consent of the Borrower, shall then appoint a
successor Administrative Agent who shall serve as Administrative Agent hereunder
or thereunder until such time, if any, as the Lenders appoint a successor
Administrative Agent as provided above.
(d) If no successor Administrative Agent has been appointed
pursuant to clause (b) or (c) above by the 20th Business Day after the date such
notice of resignation was given by the resigning Administrative Agent, such
Administrative Agent's resignation shall become effective and the Required
Lenders shall thereafter perform all the duties of such Administrative Agent
hereunder and/or under any other Credit Document until such time, if any, as the
Lenders appoint a successor Administrative Agent as provided above.
SECTION 11. Miscellaneous.
11.01 Payment of Expenses, etc. The Borrower agrees to: (i)
whether or not the transactions herein contemplated are consummated, pay all
reasonable out-of-pocket costs and expenses of the Agents in connection with the
negotiation, preparation, execution and delivery of the Credit Documents and the
documents and instruments referred to therein and any amendment, waiver or
consent relating thereto (including, without limitation, the reasonable fees and
disbursements of White & Case, Simpson Thacher & Bartlett and of the Agents and
each of the Lenders) in connection with the enforcement of the Credit Documents
and the documents and instruments referred to therein (including, without
limitation, the reasonable fees and disbursements of counsel for each Agent and
for each of the Lenders); (ii) pay and hold each of the Agents and Lenders
harmless from and against any and all present and future stamp and other similar
taxes with respect to the foregoing matters and save each of the Lenders
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission (other than to the extent attributable to such
Lender) to pay such taxes; and (iii) indemnify each Agent and each Lender, its
officers, directors, employees, representatives and agents from and hold each of
them harmless against any and all losses, liabilities, claims, damages or
expenses
<PAGE> 46
incurred by any of them as a result of, or arising out of, or in any
way related to, or by reason of, an investigation, litigation or other
proceeding (whether or not an Agent or any Lender is a party thereto) related to
the entering into and/or performance of any Document or the use of the proceeds
of any Loans hereunder or the consummation of any transaction contemplated in
any Credit Document, in each case including, without limitation, the reasonable
fees and disbursements of counsel incurred in connection with any such
investigation, litigation or other proceeding (but excluding any such losses,
liabilities, claims, damages to the extent incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified).
11.02 Right of Setoff. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, if an Event of Default then exists, each Lender
is hereby authorized at any time or from time to time, without presentment,
demand, protest or other notice of any kind to any Credit Party or to any other
Person, any such notice being hereby expressly waived, to set off and to
appropriate and apply any and all deposits (general or special) and any other
Indebtedness at any time held or owing by such Lender (including, without
limitation, by branches and agencies of such Lender wherever located) to or for
the credit or the account of any Credit Party against and on account of the
Obligations and liabilities of any Credit Party owing to such Lender under this
Agreement or under any of the other Credit Documents, including, without
limitation, all interests in Obligations purchased by such Lender pursuant to
Section 11.06(b), and all other claims of any nature or description arising out
of or connected with this Agreement or any other Credit Document, irrespective
of whether or not such Lender shall have made any demand hereunder and although
said Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.
11.03 Notices. Except as otherwise expressly provided herein,
all notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier, facsimile or cable communication) and
mailed, telegraphed, telexed, telecopied, faxed, cabled or delivered, if to a
Credit Party, at the address specified opposite its signature below or in the
other relevant Credit Documents, as the case may be; if to any Lender or Agent,
at its address specified for such Lender or Agent on Annex II hereto; or at such
other address as shall be designated by any party in a written notice to the
other parties hereto. All such notices and communications shall be mailed,
telegraphed, telexed, telecopied, or cabled or sent by overnight courier, and
shall be effective when received.
11.04 Benefit of Agreement. (a) This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto, provided that the Borrower (or
after the Assumption Date no Borrower or any Starwood Guarantor) may assign or
transfer any of its rights or obligations hereunder without the prior written
consent of the Lenders. Each Lender may at any time grant participations in any
of its rights hereunder or under any of the Notes to another financial
institution, provided that
<PAGE> 47
(x) in the case of any such participation, the participant shall not have any
rights under this Agreement or any of the other Credit Documents (the
participant's rights against such Lender in respect of such participation to be
those set forth in the agreement executed by such Lender in favor of the
participant relating thereto) and all amounts payable by the Borrower hereunder
shall be determined as if such Lender had not sold such participation, except
that the participant shall be entitled to the benefits of Sections 1.10 and 3.04
of this Agreement to the extent that such Lender would be entitled to such
benefits if the participation had not been entered into or sold and (y) no
Lender shall transfer, grant or assign any participation under which the
participant shall have rights to approve any amendment to or waiver of this
Agreement or any other Credit Document except to the extent such amendment or
waiver would (i) extend the final scheduled maturity of any Loan or Note in
which such participant is participating (it being understood that any waiver of
the application of any prepayment or the method of any application of any
prepayment to, the Loans shall not constitute an extension of the final maturity
date), or reduce the rate or extend the time of payment of interest (except in
connection with a waiver of the applicability of any post-default increase in
interest rates), or reduce the principal amount thereof, or increase such
participant's participating interest in any commitment over the amount thereof
then in effect (it being understood that a waiver of any Default or Event of
Default or of a mandatory reduction in the Total Commitment, or a mandatory
prepayment, shall not constitute a change in the terms of any commitment), (ii)
release all or substantially all of the Collateral or (iii) consent to the
assignment or transfer by any Credit Party of any of its rights and obligations
under this Agreement or any other Credit Document.
(b) Notwithstanding the foregoing, (x) any Lender may assign
all or a portion of its outstanding Loans and its rights and obligations
hereunder to another Lender (or an Affiliate or Related Fund of such assigning
Lender), and (y) with the consent of the Administrative Agents and (if no Event
of Default exists) the Borrower (which consents shall not be unreasonably
withheld), any Lender may assign all or a portion of its outstanding Loans and
its rights and obligations hereunder to one or more Eligible Transferees. No
assignment pursuant to the immediately preceding sentence by a Lender (or by
Lenders which are Affiliates and/or Related Funds of each other) shall, to the
extent such assignment represents an assignment to an institution other than one
or more Lenders hereunder (or to an Affiliate or a Related Fund of an assigning
Lender), be in an aggregate amount less than $5,000,000 unless the entire Loans
of the assigning Lender (or group of Lenders which are Affiliates and/or Related
Funds) are so assigned. If any Lender so sells or assigns all or a part of its
rights hereunder or under the Notes, any reference in this Agreement or the
Notes to such assigning Lender shall thereafter refer to such Lender and to the
respective assignee to the extent of their respective interests and the
respective assignee shall have, to the extent of such assignment (unless
otherwise provided therein), the same rights and benefits as it would if it were
such assigning Lender. Each assignment pursuant to this Section 11.04(b) shall
be effected by the assigning Lender and the assignee Lender executing an
Assignment Agreement (appropriately completed). At the time of any such
assignment, (i) either the assigning or the assignee Lender
<PAGE> 48
shall pay to the Payments Administrator a nonrefundable assignment fee of $500
(if such assignment is between Lenders already party to this Agreement (or
Affiliates or Related Funds of such Lenders) or $2,000 (if otherwise), and (ii)
if requested, the Borrower will issue new Notes to the respective assignee and
to the assigning Lender in conformity with the requirements of Section 1.05. To
the extent of any assignment pursuant to this Section 11.04(b) to a Person which
is not already a Lender hereunder and which is not a United States Person (as
such term is defined in Section 7701(a)(30) of the Code) for Federal income tax
purposes, the respective assignee Lender shall provide to the Borrower and the
Payments Administrator the appropriate Internal Revenue Service Forms (and, if
applicable, a Section 3.04 Certificate) described in Section 3.04(b). To the
extent that an assignment of all or any portion of a Lender's Loans and related
Obligations pursuant to this Section 11.04(b) would, at the time of such
assignment, result in increased costs under Section 1.10 or 3.04 from those
being charged by the respective assigning bank prior to such assignment, then
the Borrower shall not be obligated to pay such increased costs (although the
Borrower shall be obligated to pay any other increased costs of the type
described above resulting from the changes specified in said Section 1.10 or
3.04 after the date of the respective assignment). Each Lender and the Borrower
agree to execute such documents (including, without limitation, amendments to
this Agreement and the other Credit Documents) as shall be necessary to effect
the foregoing. Nothing in this clause (b) shall prevent or prohibit any Lender
from pledging its Notes or Loans to a Federal Reserve Bank in support of
borrowings made by such Lender from such Federal Reserve Bank.
(c) Notwithstanding any other provision of this Section 11.04,
no transfer or assignment of the interests or obligations of any Lender
hereunder or any grant of participation therein shall be permitted if such
transfer, assignment or grant would require the Borrower to file a registration
statement with the SEC or to qualify the Loans under the "Blue Sky" laws of any
State.
(d) Each Lender initially party to this Agreement hereby
represents, and each Person that became a Lender pursuant to an assignment
permitted by this Section 11 will, upon its becoming party to this Agreement,
represent that it is an Eligible Transferee which makes loans in the ordinary
course of its business and that it will make or acquire Loans for its own
account in the ordinary course of such business, provided that subject to the
preceding clauses (a) and (b), the disposition of any promissory notes or other
evidences of or interests in Indebtedness held by such Lender shall at all times
be within its exclusive control.
11.05 No Waiver; Remedies Cumulative. No failure or delay on
the part of any Agent or any Lender in exercising any right, power or privilege
hereunder or under any other Credit Document and no course of dealing between
any Credit Party and either Agent or any Lender shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or under any other Credit Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights and remedies herein expressly provided are
cumulative and not exclusive of
<PAGE> 49
any rights or remedies which either Agent or any Lender would otherwise have. No
notice to or demand on any Credit Party in any case shall entitle any Credit
Party to any other or further notice or demand in similar or other circumstances
or constitute a waiver of the rights of the Agents or the Lenders to any other
or further action in any circumstances without notice or demand.
11.06 Payments Pro Rata. (a) The Payments Administrator agrees
that promptly after its receipt of each payment from or on behalf of any Credit
Party in respect of any Obligations, it shall distribute such payment to the
Lenders (other than any Lender that has expressly waived its right to receive
its pro rata share thereof) pro rata based upon their respective shares, if any,
of the Obligations with respect to which such payment was received.
(b) Each of the Lenders agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon security, by
the exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans, of a sum which with respect to the related sum or sums received
by other Lenders is in a greater proportion than the total of such Obligation
then owed and due to such Lender bears to the total of such Obligation then owed
and due to all of the Lenders immediately prior to such receipt, then such
Lender receiving such excess payment shall purchase for cash without recourse or
warranty from the other Lenders an interest in the Obligations of the respective
Credit Party to such Lenders in such amount as shall result in a proportional
participation by all of the Lenders in such amount, provided that if all or any
portion of such excess amount is thereafter recovered from such Lender, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest.
11.07 Calculations; Computations. (a) The financial statements
to be furnished to the Lenders pursuant hereto shall be made and prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by the Borrower to the Lenders).
(b) All computations of interest and Fees hereunder shall be
made on the actual number of days elapsed over a year of 360 days.
11.08 Governing Law; Submission to Jurisdiction; Venue; Waiver
of Jury Trial. (a) This Agreement and the other Credit Documents and the rights
and obligations of the parties hereunder and thereunder shall be construed in
accordance with and be governed by the law of the state of New York. Any legal
action or proceeding with respect to this Agreement or any other Credit Document
may be brought in the courts of the State of New York or of the United States
for the Southern District of New York in the Borough of Manhattan, and, by
execution and delivery of this Agreement, the Borrower hereby irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The Borrower further
irrevocably consents to the service of
<PAGE> 50
process out of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to it, to the extent located outside New York City, or by hand, to the
extent located within New York City, at its address for notices pursuant to
Section 11.03, such service to become effective 30 days after such mailing. The
Borrower hereby irrevocably designates, appoints and empowers CT Corporation
System, with offices on the date hereof located at 1633 Broadway, New York, New
York 10019, as its agent for service of process in respect of any such action or
proceeding. Nothing herein shall affect the right of any Agent or any Lender to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against any Credit Party in any other
jurisdiction.
(b) The Borrower hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement or
any other Credit Document brought in the courts referred to in clause (a) above
and hereby further irrevocably waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
(c) Each of the parties to this Agreement hereby irrevocably
waives all right to a trial by jury in any action, proceeding or counterclaim
arising out of or relating to this Agreement, the other Credit Documents or the
transactions contemplated hereby or thereby.
11.09 Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Administrative Agents.
11.10 Assumption Date. The Payments Administrator shall give
each Lender prompt written notice of the occurrence of the Assumption Date.
11.11 Headings Descriptive. The headings of the several
sections and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.
11.12 Amendment or Waiver. Neither this Agreement nor any
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing and signed by the Borrower and the Required Lenders, provided that no
such change, waiver, discharge or termination shall, without the consent of each
Lender directly affected thereby, (i) extend the Final Maturity Date (it being
understood that any waiver of any prepayment of, or the method of application of
any prepayment to, the Loans shall not constitute any such extension), or reduce
the rate or extend the time of payment of interest (other than as a result of
waiving
<PAGE> 51
the applicability of any post-default increase in interest rates) thereon, or
reduce the principal amount thereof, or increase the commitment of any Lender
over the amount thereof then in effect (it being understood that a waiver of any
Default or Event of Default or of a mandatory reduction in the Total Commitment
shall not constitute a change in the terms of any commitment of any Lender),
(ii) amend, modify or waive any provision of this Section 11.12, (iii) reduce
the percentage specified in, or (except to give effect to any additional
facilities hereunder) otherwise modify, the definition of Required Lenders, (iv)
consent to the assignment or transfer by any Credit Party of any of its rights
and obligations under the Credit Documents or (v) release all or substantially
all of the Collateral. No provision of Section 10 may be amended without the
consent of the Agents.
11.13 Survival. All indemnities set forth herein including,
without limitation, in Section 1.10, 1.11, 3.04, 10.06 or 11.01 shall survive
the execution and delivery of this Agreement and the making and repayment of the
Loans.
11.14 Domicile of Loans. Each Lender may transfer and carry
its Loans at, to or for the account of any branch office, subsidiary or
affiliate of such Lender, provided that the Borrower shall not be responsible
for costs arising under Section 1.10, or 3.04 resulting from any such transfer
(other than a transfer pursuant to Section 1.12 or 1.13) to the extent not
otherwise applicable to such Lender prior to such transfer.
11.15 Confidentiality. Subject to Section 11.04, the Lenders
shall hold all non-public information obtained pursuant to the requirements of
this Agreement which has been identified as such by the Borrower in accordance
with its customary procedure for handling confidential information of this
nature and in accordance with safe and sound banking practices and in any event
may make disclosure to its Affiliates, employees, auditors, advisors or counsel
or as reasonably required by any bona fide transferee or participant in
connection with the contemplated transfer of any Loans or participation therein
(so long as such transferee or participant agrees to be bound by the provisions
of this Section 11.15) or as required or requested by any governmental agency or
representative thereof or pursuant to legal process, provided that, unless
specifically prohibited by applicable law or court order, each Lender shall
notify the Borrower of any request by any governmental agency or representative
thereof or any requested or required disclosure pursuant to legal process (other
than any such request in connection with an examination of the financial
condition of such Lender by such governmental agency) for disclosure of any such
non-public information reasonably promptly after receipt of such request (and
prior to responding thereto) so as to give time to the Borrower to, if it so
chooses, contest such request and/or to seek an appropriate protective order,
and provided further that in no event shall any Lender be obligated or required
to return any materials furnished by any Westin Entity.
11.16 Lender Register. The Borrower hereby designates the
Payments Administrator to serve as its agent, solely for purposes of this
Section 11.16, to maintain a register (the "Lender Register") on which it will
record the
<PAGE> 52
Loans made by each of the Lenders and each repayment in respect of the principal
amount of the Loans of each Lender. Failure to make any such recordation, or any
error in such recordation, shall not affect any Borrower's obligations in
respect of such Loans. With respect to any Lender, the transfer of the rights to
the principal of, and interest on any Loan made shall not be effective until
such transfer is recorded on the Lender Register maintained by the Payments
Administrator with respect to ownership of such Loans and prior to such
recordation all amounts owing to the transferor with respect to such Loans shall
remain owing to the transferor. The registration of assignment or transfer of
all or part of any Loan shall be recorded by the Payments Administrator on the
Lender Register only upon the acceptance by the Payments Administrator of a
properly executed and delivered Assignment Agreement pursuant to Section
11.04(b). The Borrower agrees to indemnify the Payments Administrator from and
against any and all losses, claims, damages and liabilities of whatsoever nature
which may be imposed on, asserted against or incurred by the Payments
Administrator in performing its duties under this Section 11.16 other than those
resulting from the Payments Administrator's willful misconduct or gross
negligence.
11.17 No Liability for General Partners. No past, present or
future general partner of the Borrower shall have any liability as a result of
its being a general partner for any Obligations under this Agreement or any of
the other Credit Documents or for any claim based on, in respect of, or by
reason of such Obligations or their creation. Each Lender hereby waives and
releases all such liability.
* * *
<PAGE> 53
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.
Address: WOODSTAR INVESTOR PARTNERSHIP
By: Marswood Investors, L.P.,
General Partner
By: Starwood Capital Group, L.P.,
General Partner
By: BSS Capital Partners, L.P.,
General Partner
By: Sternlicht Holdings II, Inc.,
General Partner
By
---------------------------------------
Title:
BANKERS TRUST COMPANY,
Individually and as Administrative Agent
By
---------------------------------------
Title:
THE CHASE MANHATTAN BANK, Individually
and as Administrative Agent
By
---------------------------------------
Title:
<PAGE> 54
ANNEX I
COMMITMENTS
Lender Commitment
- ------ ----------
Bankers Trust Company $28,642,940.81
The Chase Manhattan
Bank $28,642,940.81
Total $57,285,881.62
<PAGE> 55
ANNEX II
LENDERS AND AGENTS ADDRESSES
Bankers Trust Company 130 Liberty Street
New York, New York 10006
Attention: Laura Burwick
Tel: (212) 250-2568
Fax: (212) 250-7200
The Chase Manhattan Bank 270 Park Avenue
New York, New York 10017
Attention: James Rolison
Tel: (212) 270-6000
Fax: (212)
<PAGE> 56
ANNEX III
SHARES
[ON FILE WITH WHITE & CASE]
<PAGE> 1
Exhibit 10.49
LOAN AGREEMENT
among
WHWE L.L.C.,
VARIOUS LENDING INSTITUTIONS,
BT ALEX. BROWN INCORPORATED and CHASE SECURITIES, INC.,
AS ARRANGING AGENTS,
and
BANKERS TRUST COMPANY AND THE CHASE MANHATTAN BANK,
AS ADMINISTRATIVE AGENTS
------------------------------------
Dated as of December 29, 1997
------------------------------------
$30,325,939.25
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Amount and Terms of Credit............................................................... 1
1.01 Loan................................................................................ 1
1.02 Minimum Borrowing Amounts, etc...................................................... 1
1.03 Notice of Borrowing................................................................. 1
1.04 Disbursement of Funds............................................................... 2
1.05 Notes............................................................................... 2
1.06 Conversions......................................................................... 3
1.07 Pro Rata Borrowings................................................................. 3
1.08 Interest............................................................................ 3
1.09 Interest Periods.................................................................... 4
1.10 Increased Costs, Illegality, etc.................................................... 5
1.11 Compensation........................................................................ 7
1.12 Change of Lending Office............................................................ 7
1.13 Replacement of Lenders.............................................................. 8
SECTION 2. Fees; Commitments........................................................................ 8
2.01 Fees................................................................................ 8
2.02 Mandatory Adjustments of Commitments, etc........................................... 9
SECTION 3. Payments................................................................................. 9
3.01 Voluntary Prepayments............................................................... 9
3.02 Mandatory Prepayments............................................................... 9
3.03 Method and Place of Payment......................................................... 10
3.04 Net Payments........................................................................ 11
SECTION 4. Conditions Precedent..................................................................... 13
4.01 Conditions Precedent to Loans....................................................... 13
SECTION 5. Representations, Warranties and Agreements............................................... 15
5.01 Status.............................................................................. 15
5.02 Power and Authority................................................................. 16
5.03 No Violation........................................................................ 16
5.04 Litigation.......................................................................... 16
5.05 Use of Proceeds; Margin Regulations................................................. 16
5.06 Governmental Approvals.............................................................. 17
5.07 Investment Company Act.............................................................. 17
5.08 Public Utility Holding Company Act.................................................. 17
5.09 True and Complete Disclosure........................................................ 17
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C>
5.10 Financial Condition; Financial Statements........................................... 17
5.11 Security Interests.................................................................. 18
5.12 Tax Liability....................................................................... 18
5.13 Compliance with ERISA............................................................... 18
5.14 Subsidiaries........................................................................ 18
5.15 Properties.......................................................................... 18
5.16 Compliance with Statutes, etc....................................................... 18
SECTION 6. Affirmative Covenants.................................................................... 19
6.01 Information Covenants............................................................... 19
6.02 Books, Records and Inspections...................................................... 20
6.03 Insurance........................................................................... 20
6.04 Payment of Taxes.................................................................... 20
6.05 Franchises.......................................................................... 20
6.06 Compliance with Statutes, etc....................................................... 21
6.07 Proceeds............................................................................ 21
SECTION 7. Negative Covenants....................................................................... 21
7.01 Changes in Business................................................................. 21
7.02 Consolidation, Merger, Sale or Purchase of Assets, etc.............................. 21
7.03 Liens............................................................................... 22
7.04 Indebtedness........................................................................ 22
7.05 Capital Expenditures................................................................ 22
7.06 Advances, Investments and Loans..................................................... 22
7.07 Amendments, etc..................................................................... 22
7.08 Dividends, Distributions, etc....................................................... 23
7.09 Transactions with Affiliates........................................................ 23
7.10 Creation of Subsidiaries............................................................ 23
SECTION 8. Events of Default........................................................................ 23
8.01 Payments............................................................................ 23
8.02 Representations, etc................................................................ 24
8.03 Covenants........................................................................... 24
8.04 Default Under Other Agreements...................................................... 24
8.05 Bankruptcy, etc..................................................................... 24
8.06 Pledge Agreement.................................................................... 25
8.07 Judgments........................................................................... 25
8.08 Change of Control................................................................... 25
8.09 Other Defaults...................................................................... 25
SECTION 9. Definitions.............................................................................. 26
SECTION 10. The Agents.............................................................................. 38
10.01 Appointment........................................................................ 38
10.02 Nature of Duties................................................................... 38
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C>
10.03 Lack of Reliance on the Agents..................................................... 39
10.04 Certain Rights of the Agents....................................................... 39
10.05 Reliance........................................................................... 39
10.06 Indemnification.................................................................... 40
10.07 The Agents in Their Individual Capacities.......................................... 40
10.08 Holders............................................................................ 40
10.09 Resignation by an Agent............................................................ 40
SECTION 11. Miscellaneous........................................................................... 41
11.01 Payment of Expenses, etc........................................................... 41
11.02 Right of Setoff.................................................................... 42
11.03 Notices............................................................................ 42
11.04 Benefit of Agreement............................................................... 42
11.05 No Waiver; Remedies Cumulative..................................................... 44
11.06 Payments Pro Rata.................................................................. 45
11.07 Calculations; Computations......................................................... 45
11.08 Governing Law; Submission to Jurisdiction; Venue; Waiver of
Jury Trial.................................................................... 45
11.09 Counterparts....................................................................... 46
11.10 Assumption Date.................................................................... 46
11.11 Headings Descriptive............................................................... 46
11.12 Amendment or Waiver................................................................ 46
11.13 Survival........................................................................... 47
11.14 Domicile of Loans.................................................................. 47
11.15 Confidentiality.................................................................... 47
11.16 Lender Register.................................................................... 47
11.17 No Liability for General Partners.................................................. 48
</TABLE>
ANNEX I -- Commitments
ANNEX II -- Lenders and Agents Addresses
ANNEX III -- Shares
EXHIBIT A -- Form of Notice of Borrowing
EXHIBIT B -- Form of Note
EXHIBIT C -- Form of Section 3.04 Certificate
EXHIBIT D-1 -- Form of Opinion of Borrower's Counsel
EXHIBIT D-2 -- Form of Opinion of White & Case
EXHIBIT E -- Form of Officers' Certificate
EXHIBIT F -- Form of Pledge Agreement
EXHIBIT G -- Form of Affiliate Indemnification
(iii)
<PAGE> 5
EXHIBIT H -- Form of Assignment Agreement
EXHIBIT I-1 -- Form of Assumption Agreement (Starwood Realty
Partnership)
EXHIBIT I-2 -- Form of Assumption Agreement (Starwood Operating
Partnership)
(iv)
<PAGE> 6
LOAN AGREEMENT, dated as of December 29, 1997, among WHWE
L.L.C., a Delaware limited liability company, the lenders from time to time
party hereto (each, a "Lender" and, collectively, the "Lenders"), BANKERS TRUST
COMPANY AND THE CHASE MANHATTAN BANK, as Administrative Agents (each, an
"Administrative Agent" and, collectively, the "Administrative Agents" and,
together with the Payments Administrator, collectively, the "Agents"). Unless
otherwise defined herein, all capitalized terms used herein and defined in
Section 9 are used herein as so defined.
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions herein
set forth, the Lenders are willing to make available to the Borrower the credit
facility provided herein;
NOW, THEREFORE, it is agreed:
SECTION 1. Amount and Terms of Credit.
1.01 Loan. Subject to and upon the terms and conditions herein
set forth, each Lender severally agrees to make a loan (each a "Loan" and,
collectively, the "Loans") to the Borrower, which Loans (i) shall be made
pursuant to a single drawing on the Closing Date, (ii) except as hereinafter
provided, may, at the option of the Borrower, be incurred and maintained as,
and/or converted into, Base Rate Loans or Eurodollar Loans, provided that all
Loans made as part of the same Borrowing shall, unless otherwise specifically
provided herein, consist of Loans of the same Type and (iii) shall not exceed in
aggregate principal amount for any Lender at the time of incurrence thereof the
Commitment of such Lender as in effect on such date. Once repaid, Loans may not
be reborrowed.
1.02 Minimum Borrowing Amounts, etc. The aggregate principal
amount of each Borrowing shall not be less than the Minimum Borrowing Amount.
More than one Borrowing may be incurred on any day, provided that at no time
shall there be outstanding more than two Borrowings of Eurodollar Loans.
1.03 Notice of Borrowing. (a) The Borrower shall give the
Payments Administrator at its Notice Office, prior to 12:00 Noon (New York
time), at least two Business Days' (or, in the case where the Loans are to be
incurred as Base Rate Loans, one Business Day's) prior written confirmation (or
telephonic confirmation promptly confirmed in writing) in the form of Exhibit A
of its desire to make Loans on the Closing Date (the "Notice of Borrowing"),
which notice shall be irrevocable and shall specify (i) the aggregate principal
amount of the Loans to be made on the Closing Date and (ii) whether the Loans
shall consist of Base Rate Loans or Eurodollar Loans and, if Eurodollar Loans,
the Interest Period to be
-1-
<PAGE> 7
initially applicable thereto. The Payments Administrator shall promptly give
each Lender written notice (or telephonic notice promptly confirmed in writing)
of the proposed Loans, of such Lender's proportionate share thereof and of the
other matters specified in the Notice of Borrowing.
(b) Without in any way limiting the obligation of the Borrower
to confirm in writing any telephonic notice permitted to be given hereunder, the
Payments Administrator may prior to receipt of written confirmation act without
liability upon the basis of such telephonic notice, believed by the Payments
Administrator in good faith to be from an Authorized Officer of the Borrower. In
each such case, the Borrower hereby waives the right to dispute the Payments
Administrator's record of the terms of such telephonic notice.
1.04 Disbursement of Funds. (a) No later than 12:00 Noon (New
York time) on the Closing Date, each Lender will make available its pro rata
share of the Loans requested to be made on such date in the manner provided
below. All such amounts shall be made available to the Payments Administrator in
U.S. dollars and immediately available funds at the Payment Office and the
Payments Administrator promptly will make available to the Borrower by
depositing in the Specified Accounts (50-50 between them) the aggregate of the
amounts so made available in the type of funds received.
(b) Nothing herein shall be deemed to relieve any Lender from
its obligation to fulfill its commitment hereunder or to prejudice any rights
which the Borrower may have against any Lender as a result of any default by
such Lender hereunder.
1.05 Notes. (a) To the extent any Lender requests same, the
Borrower's obligation to pay the principal of, and interest on, the Loans made
to it by each Lender shall be evidenced by a promissory note substantially in
the form of Exhibit B, with blanks appropriately completed in conformity
herewith (each, a "Note" and, collectively, the "Notes").
(b) The Note issued to each Lender shall (i) be executed by
the Borrower, (ii) be payable to the order of such Lender and be dated the
Closing Date, (iii) be payable in the aggregate principal amount of Loans
evidenced thereby from time to time, (iv) mature on the Final Maturity Date, (v)
bear interest as provided in the appropriate clause of Section 1.08 in respect
of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced
thereby, (vi) be subject to mandatory repayment as provided in Section 3.02 and
(vii) be entitled to the benefits of this Agreement and the other Credit
Documents.
(c) Each Lender will note on its internal records the amount
of each Loan made by it and each payment in respect thereof and will, prior to
any transfer of its Note, endorse on the reverse side thereof the outstanding
principal amount of Loans evidenced thereby. Failure to make any such notation
shall not affect a Borrower's obligations in respect of such Loans.
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1.06 Conversions. The Borrower shall have the option to
convert on any Business Day all or a portion at least equal to the applicable
Minimum Borrowing Amount of the outstanding principal amount of the Loans into a
Borrowing or Borrowings of another Type of Loan, provided that (i) no conversion
of Base Rate Loans into Eurodollar Loans may be made prior to the Syndication
Date except for a conversion made on the first day of a PSD Interest Period,
(ii) no partial conversion of a Borrowing of Eurodollar Loans shall reduce the
outstanding principal amount of the Eurodollar Loans made pursuant to such
Borrowing to less than the Minimum Borrowing Amount applicable thereto, (iii)
Base Rate Loans may only be converted into Eurodollar Loans if no Default under
Section 8.01 or Event of Default is then in existence, or if such Default or
Event of Default exists, the Required Lenders shall have determined in its or
their sole discretion to permit such conversion and (iv) Borrowings of
Eurodollar Loans resulting from this Section 1.06 shall be limited in number as
provided in Section 1.02. Each such conversion shall be effected by the Borrower
giving the Payments Administrator at its Notice Office, prior to 12:00 Noon (New
York time), at least three Business Days' (or two Business Days', in the case of
a conversion into Base Rate Loans) prior written notice (or telephonic notice
promptly confirmed in writing) (each, a "Notice of Conversion") specifying the
Loans to be so converted, the Type of Loans to be converted into and, if to be
converted into a Borrowing of Eurodollar Loans, the Interest Period to be
initially applicable thereto. The Payments Administrator shall give each Lender
prompt notice of any such proposed conversion affecting any of its Loans.
1.07 Pro Rata Borrowings. All Loans under this Agreement shall
be made by the Lenders pro rata on the basis of their Commitments. No Lender
shall be responsible for any default by any other Lender in its obligation to
make Loans hereunder and that each Lender shall be obligated to make the Loans
provided to be made by it pursuant to its respective Commitments, regardless of
the failure of any other Lender to fulfill its commitments hereunder.
1.08 Interest. (a) The unpaid principal amount of each Base
Rate Loan shall bear interest from the date of the Borrowing thereof until
maturity (whether by acceleration or otherwise) at a rate per annum which shall
at all times be the Base Rate Margin plus the Base Rate in effect from time to
time.
(b) The unpaid principal amount of each Eurodollar Loan shall
bear interest from the date of the Borrowing thereof until maturity (whether by
acceleration or otherwise) at a rate per annum which shall at all times be the
Eurodollar Margin plus the relevant Eurodollar Rate.
(c) All overdue principal and, to the extent permitted by law,
overdue interest in respect of each Loan and any other overdue amount payable
hereunder shall bear interest at a rate per annum equal to the Base Rate in
effect from time to time plus the sum of (i) 2% and (ii) the Base Rate Margin,
provided that each Eurodollar Loan shall bear interest after maturity (whether
by
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<PAGE> 9
acceleration or otherwise) until the end of the Interest Period applicable to it
at such maturity at a rate per annum equal to 2% in excess of the rate of
interest applicable thereto at such maturity.
(d) Interest shall accrue from and including the date of any
Borrowing to but excluding the date of any repayment thereof and shall be
payable (i) in respect of each Base Rate Loan, monthly in arrears on the first
Business Day of each calendar month, (ii) in respect of each Eurodollar Loan, on
the last day of each Interest Period applicable thereto and, in the case of an
Interest Period in excess of three months, on each date occurring at three month
intervals after the first day of such Interest Period and (iii) in respect of
each Loan, (A) on any prepayment or conversion (other than the prepayment or
conversion of any Base Rate Loan) on the amount prepaid or converted, (B) at
maturity (whether by acceleration or otherwise) and (C) after such maturity, on
demand.
(e) All computations of interest hereunder shall be made in
accordance with Section 11.07(b).
(f) The Payments Administrator, upon determining the interest
rate for any Borrowing of Eurodollar Loans for any Interest Period, shall
promptly notify the applicable Borrower and the Lenders thereof.
1.09 Interest Periods. (a) At the time the Borrower gives the
Notice of Borrowing or a Notice of Conversion in respect of the making of, or
conversion into, a Borrowing of Eurodollar Loans (in the case of the initial
Interest Period applicable thereto) or prior to 12:00 Noon (New York time) on
the third Business Day prior to the expiration of an Interest Period applicable
to a Borrowing of Eurodollar Loans, it shall have the right to elect by giving
the Payments Administrator written notice (or telephonic notice promptly
confirmed in writing) of the Interest Period applicable to such Borrowing, which
Interest Period shall, at the option of such Borrower, be (x) prior to the
Interim Date, a seven day period and (y) thereafter (but subject to clause (iv)
below), a one, two or three month period. Notwithstanding anything to the
contrary contained above:
(i) the initial Interest Period for any Borrowing of
Eurodollar Loans shall commence on the date of such Borrowing
(including the date of any conversion from a Borrowing of Base Rate
Loans) and each Interest Period occurring thereafter in respect of such
Borrowing shall commence on the day on which the next preceding
Interest Period expires;
(ii) if any Interest Period begins on a day for which there is
no numerically corresponding day in the calendar month at the end of
such Interest Period, such Interest Period shall end on the last
Business Day of such calendar month;
(iii) if any Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on the
next
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succeeding Business Day, provided that if any Interest Period would
otherwise expire on a day which is not a Business Day but is a day of
the month after which no further Business Day occurs in such month,
such Interest Period shall expire on the next preceding Business Day;
(iv) subject to the foregoing clauses (i) through (iii),
inclusive, (x) only a seven day Interest Period shall be available to
be selected prior to the Interim Date and (y) thereafter until the
Syndication Date, only a one month Interest Period shall be available
to be selected, with all Loans constituting Eurodollar Loans during
each such period to be outstanding pursuant to a single Borrowing;
(v) no Interest Period with respect to any Borrowing may be
elected that would extend beyond the Final Maturity Date; and
(vi) no Interest Period may be elected at any time when a
Default under Section 8.01 or an Event of Default is then in existence
if either Agent or the Required Lenders shall have determined in its or
their sole discretion not to permit such election.
(b) If upon the expiration of any Interest Period, the
Borrower has failed to (or may not) elect a new Interest Period to be applicable
to the respective Borrowing of Eurodollar Loans as provided above, the Borrower
shall be deemed to have elected to convert such Borrowing into a Borrowing of
Base Rate Loans effective as of the expiration date of such current Interest
Period.
1.10 Increased Costs, Illegality, etc. (a) In the event that
(x) in the case of clause (i) below, the Payments Administrator or (y) in the
case of clauses (ii) and (iii) below, any Lender shall have determined (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto):
(i) on any date for determining the Eurodollar Rate for any
Interest Period that, by reason of any changes arising after the date
of this Agreement affecting the interbank Eurodollar market, adequate
and fair means do not exist for ascertaining the applicable interest
rate on the basis provided for in the definition of Eurodollar Rate; or
(ii) at any time, that such Lender shall incur increased costs
or reductions in the amounts received or receivable hereunder with
respect to any Eurodollar Loans (other than any increased cost or
reduction in the amount received or receivable resulting from the
imposition of or a change in the rate of taxes or similar charges)
because of (x) any change since the Closing Date in any applicable law,
governmental rule, regulation, guideline or order (or in the
interpretation or administration thereof and including the introduction
of any new law or governmental rule, regulation, guideline or order)
(such as, for example, but not limited to, a change in official reserve
requirements, but, in all events, excluding reserves required under
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<PAGE> 11
Regulation D to the extent included in the computation of the
Eurodollar Rate) and/or (y) other circumstances arising since the
Closing Date affecting such Lender or the interbank Eurodollar market;
or
(iii) at any time, that the making or continuance of any
Eurodollar Loan has become unlawful by compliance by such Lender in
good faith with any law, governmental rule, regulation, guideline (or
would conflict with any such governmental rule, regulation, guideline
or order not having the force of law but with which such Lender
customarily complies even though the failure to comply therewith would
not be unlawful), or has become impracticable as a result of a
contingency occurring after the Closing Date which materially and
adversely affects the interbank Eurodollar market;
then, and in any such event, such Lender (or the Payments Administrator in the
case of clause (i) above) shall (x) on such date and (y) within ten Business
Days of the date on which such event no longer exists give notice (by telephone
confirmed in writing) to the Borrower and to the Payments Administrator of such
determination (which notice the Payments Administrator shall promptly transmit
to each of the other Lenders). Thereafter (x) in the case of clause (i) above,
Eurodollar Loans shall no longer be available until such time as the Payments
Administrator notifies the Borrower and the Lenders that the circumstances
giving rise to such notice by the Payments Administrator no longer exist, and
any Notice of Borrowing or Notice of Conversion given by the Borrower with
respect to Eurodollar Loans which have not yet been incurred shall be deemed
rescinded by the Borrower, (y) in the case of clause (ii) above, the Borrower
shall pay to such Lender, upon written demand therefor, such additional amounts
(in the form of an increased rate of, or a different method of calculating,
interest or otherwise as such Lender in its sole discretion shall determine) as
shall be required to compensate such Lender for such increased costs or
reductions in amounts receivable hereunder (a written notice as to the
additional amounts owed to such Lender, showing the basis for the calculation
thereof, submitted to the Borrower by such Lender shall, absent manifest error,
be final and conclusive and binding upon all parties hereto) and (z) in the case
of clause (iii) above, the Borrower shall take one of the actions specified in
Section 1.10(b) as promptly as possible and, in any event, within the time
period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the applicable Borrower
may (and in the case of a Eurodollar Loan affected pursuant to Section
1.10(a)(iii), the Borrower shall) either (i) if the affected Eurodollar Loan is
then being made pursuant to a Borrowing, cancel said Borrowing by giving the
Payments Administrator telephonic notice (confirmed promptly in writing) thereof
on the same date that the Borrower was notified by a Lender pursuant to Section
1.10(a)(ii) or (iii), or (ii) if the affected Eurodollar Loan is then
outstanding, upon at least three Business Days' notice to the Payments
Administrator, require the affected Lender to convert each such Eurodollar Loan
into a Base Rate Loan, provided that if more than one Lender is affected at any
time, then all affected
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<PAGE> 12
Lenders must be treated the same pursuant to this Section 1.10(b).
1.11 Compensation. (a) The Borrower shall compensate each
Lender, upon its written request (which request shall set forth the basis for
requesting such compensation), for all reasonable losses, expenses and
liabilities (including, without limitation, any loss, expense or liability
incurred by reason of the liquidation or reemployment of deposits or other funds
required by such Lender to fund its Eurodollar Loans but excluding in any event
the loss of anticipated profits) which such Lender may sustain: (i) if for any
reason (other than a default by such Lender or the Payments Administrator) a
Borrowing of Eurodollar Loans does not occur on a date specified therefor in a
Notice of Borrowing or Notice of Conversion (whether or not withdrawn by the
Borrower or deemed withdrawn pursuant to Section 1.10(a)); (ii) if any
prepayment, repayment or conversion of any of its Eurodollar Loans occurs on a
date which is not the last day of an Interest Period applicable thereto; (iii)
if any prepayment of any of its Eurodollar Loans is not made on any date
specified in a notice of prepayment given by the Borrower; or (iv) as a
consequence of (x) any other default by the Borrower to repay its Eurodollar
Loans when required by the terms of this Agreement or (y) an election made
pursuant to Section 1.10(b).
(b) Notwithstanding anything in this Agreement to the
contrary, to the extent any notice required by Section 1.10 or 3.04 is given by
any Lender more than 120 days after such Lender obtained, or reasonably should
have obtained, knowledge of the occurrence of the event giving rise to the
additional costs of the type described in such Section, such Lender shall not be
entitled to compensation under Section 1.10 or 3.04 for any amounts incurred or
accruing prior to the giving of such notice to the Borrower.
1.12 Change of Lending Office. Each Lender agrees that, upon
the occurrence of any event giving rise to the operation of Section 1.10(a)(ii)
or (iii) or 3.04 with respect to such Lender, it will, if requested by the
applicable Borrower, use reasonable efforts (subject to overall policy
considerations of such Lender) to designate another lending office for any Loans
affected by such event, provided that such designation is made on such terms
that such Lender and its lending office suffer no economic, legal or regulatory
disadvantage, with the object of avoiding the consequence of the event giving
rise to the operation of any such Section. Nothing in this Section 1.12 shall
affect or postpone any of the obligations of any Borrower or the right of any
Lender provided in Section 1.10 or 3.04.
1.13 Replacement of Lenders. (x) Upon the occurrence of any
event giving rise to the operation of Section 1.10(a)(ii) or (iii) or Section
3.04 with respect to any Lender which results in such Lender charging to the
Borrower increased costs in excess of those being generally charged by the other
Lenders and/or (y) in the case of a refusal by a Lender to consent to a proposed
change, waiver, discharge or termination with respect to this Agreement which
has been approved by the Required Lenders, the Borrower shall have the right, if
no Default
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<PAGE> 13
or Event of Default then exists, to replace such Lender (the "Replaced Lender")
with one or more other Eligible Transferee or Transferees (collectively, the
"Replacement Lender") reasonably acceptable to the Administrative Agents,
provided that (i) at the time of any replacement pursuant to this Section 1.13,
the Replacement Lender shall enter into one or more Assignment Agreements
pursuant to Section 11.04(b) (and with all fees payable pursuant to said Section
11.04(b) to be paid by the Replacement Lender) pursuant to which the Replacement
Lender shall acquire all of the outstanding Loans of the Replaced Lender and, in
connection therewith, shall pay to the Replaced Lender in respect thereof an
amount equal to the principal of, and all accrued interest on, all outstanding
Loans of the Replaced Lender and (ii) all obligations of the Borrower owing to
the Replaced Lender (other than those specifically described in clause (i) above
in respect of which the assignment purchase price has been, or is concurrently
being, paid) shall be paid in full to such Replaced Lender concurrently with
such replacement. Upon the execution of the respective Assignment Agreements,
the payment of amounts referred to above and, if so requested by the Replacement
Lender, delivery to the Replacement Lender of the appropriate Note executed by
the Borrower, the Replacement Lender shall become a Lender hereunder and the
Replaced Lender shall cease to constitute a Lender hereunder, except with
respect to indemnification provisions applicable to the Replaced Lender under
this Agreement, which shall survive as to such Replaced Lender.
SECTION 2. Fees; Commitments.
2.01 Fees. The Borrower shall pay to (x) each Agent on the
Closing Date, for its own account and/or for distribution to the Lenders, such
fees as heretofore agreed by the Borrower and the Agents and (y) the Payments
Administrator, for its own account, such administrative fees as agreed to
between the Borrower and the Payments Administrator, when and as due.
2.02 Mandatory Adjustments of Commitments, etc. (a) The Total
Commitment shall terminate on January 15, 1998 if the Loans have not been made
by such date.
(b) The Total Commitment shall terminate in its entirety on
the Closing Date (after giving effect to the making of Loans on such date).
SECTION 3. Payments.
3.01 Voluntary Prepayments. The Borrower shall have the right
to prepay Loans in whole or in part, without premium or penalty, from time to
time on the following terms and conditions: (i) the Borrower shall give the
Payments Administrator at the Payment Office written notice (or telephonic
notice promptly confirmed in writing) of its intent to prepay the Loans, the
amount of such prepayment and (in the case of Eurodollar Loans) the specific
Borrowing(s)
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<PAGE> 14
pursuant to which made, which notice shall be given by such Borrower at least
one Business Day prior to the date of such prepayment with respect to Base Rate
Loans and at least two Business Days prior to the date of such prepayment with
respect to Eurodollar Loans, which notice shall promptly be transmitted by the
Payments Administrator to each of the Lenders; (ii) each partial prepayment of
any Borrowing shall be in an aggregate principal amount of at least $1,000,000,
provided that no partial prepayment of Eurodollar Loans made pursuant to a
Borrowing shall reduce the aggregate principal amount of the Loans outstanding
pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount
applicable thereto; and (iii) each prepayment in respect of any Loans made
pursuant to a Borrowing shall be applied pro rata among such Loans.
3.02 Mandatory Prepayments.
(A) Requirements:
(a) If the Assumption Date has not then occurred, on the
third Business Day following the date of receipt thereof by the Borrower of the
Cash Proceeds from any Asset Sale or of any Distribution, an amount equal to
100% of the Net Cash Proceeds from such Asset Sale or of such Distribution
shall be applied as a mandatory repayment of principal of the then outstanding
Loans.
(b) If the Assumption Date has not then occurred, on the
third Business Day following the date of receipt thereof by the Borrower, an
amount equal to 100% of the proceeds (net of underwriting discounts and
commissions and other reasonable costs associated therewith) of the incurrence
of Indebtedness by the Borrower (other than Indebtedness permitted by Section
7.04 as such Section is in effect on the Closing Date), shall be applied as a
mandatory repayment of principal of the then outstanding Loans.
(c) If the Assumption Date has not then occurred, on the
third Business Day following the date of receipt thereof by the Borrower, an
amount equal to 100% of the proceeds (net of underwriting discounts and
commissions and other reasonable costs associated therewith) of any sale or
issuance of its equity or of any equity contribution shall be applied as a
mandatory repayment of principal of the then outstanding Loans.
(d) All outstanding Loans shall be repaid in full on June 30,
1998 if the Assumption Date has not then occurred.
(e) All outstanding Loans shall be repaid in full on the
Final Maturity Date.
(B) Application:
(a) With respect to each prepayment of Loans required by
Section 3.02, the Borrower may designate the Types of Loans which are to be
prepaid and
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the specific Borrowing(s) pursuant to which made, provided that (i) if any
prepayment of Eurodollar Loans made pursuant to a single Borrowing shall reduce
the outstanding Loans made pursuant to such Borrowing to an amount less than the
Minimum Borrowing Amount for such Borrowing, such Borrowing shall be immediately
converted into Base Rate Loans; and (ii) each prepayment of any Loans made
pursuant to a Borrowing shall be applied pro rata among such Loans. In the
absence of a designation by a Borrower as described in the preceding sentence,
the Payments Administrator shall, subject to the above, make such designation in
its sole discretion with a view, but no obligation, to minimize breakage costs
owing under Section 1.11.
3.03 Method and Place of Payment. Except as otherwise
specifically provided herein, all payments under this Agreement shall be made to
the Payments Administrator for the ratable (based on its pro rata share) account
of the Lenders entitled thereto, not later than 1:00 P.M. (New York time) on the
date when due and shall be made in immediately available funds and in lawful
money of the United States of America at the Payment Office, it being understood
that written notice by the Borrower to the Payments Administrator to make a
payment from the funds in the Borrower's account at the Payment Office shall
constitute the making of such payment to the extent of such funds held in such
account. Any payments under this Agreement which are made later than 1:00 P.M.
(New York time) shall be deemed to have been made on the next succeeding
Business Day. Whenever any payment to be made hereunder shall be stated to be
due on a day which is not a Business Day, the due date thereof shall be extended
to the next succeeding Business Day and, with respect to payments of principal,
interest shall be payable during such extension at the applicable rate in effect
immediately prior to such extension.
3.04 Net Payments. (a) All payments made by the Borrower
hereunder or under any Note will be made without setoff, counterclaim or other
defense. Except as provided in Section 3.04(b) and except to the extent required
by applicable law, all such payments will be made free and clear of, and without
deduction or withholding for, any present or future taxes, levies, imposts,
duties, fees, assessments or other charges of whatever nature now or hereafter
imposed by any jurisdiction (or by any political subdivision or taxing authority
thereof or therein) with respect to such payments (but excluding, except as
provided in the second succeeding sentence, any tax imposed on or measured by
the net income, net profits or franchise taxes measured by net income or net
profits of a Lender (or any office or branch of such Lender, in each case)
pursuant to the laws of the jurisdiction in which it is organized or the
jurisdiction in which the principal office or applicable lending office of such
Lender is located (or any subdivision or taxing authority thereof or therein))
and all interest, penalties or similar liabilities with respect to such
non-excluded taxes, levies, imposts, duties, fees, assessments or other charges
(all such non-excluded taxes, levies, imposts, duties, fees, assessments or
other charges being referred to collectively as "Taxes"). If any Taxes are so
levied or imposed, the Borrower agrees to pay the full amount of such Taxes, and
such additional amounts as may be necessary so that every
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<PAGE> 16
payment of all amounts due under this Agreement or under any Note, after
withholding or deduction for or on account of any Taxes, will not be less than
the amount provided for herein or in such Note. If any amounts are payable in
respect of Taxes pursuant to the preceding sentence, the Borrower agrees to
reimburse each Lender, upon the written request of such Lender, for taxes
imposed on or measured by the net income or net profits of such Lender pursuant
to the laws of the jurisdiction in which such Lender is organized or in which
the principal office or applicable lending office of such Lender is located (or
of any subdivision or taxing authority therein or thereof) and for any
withholding of taxes as such Lender shall determine are payable by, or withheld
from, such Lender in respect of such amounts so paid to or on behalf of such
Lender pursuant to the preceding sentence and in respect of any amounts paid to
or on behalf of such Lender pursuant to this sentence. The Borrower will furnish
to the Payments Administrator within 45 days after the date the payment of any
Taxes is made pursuant to applicable law certified copies of tax receipts
evidencing such payment by the Borrower. The Borrower agrees to indemnify and
hold harmless each Lender, and reimburse such Lender upon its written request,
for the amount of any Taxes so levied or imposed and paid by such Lender.
(b) Each Lender that is not a United States person (as such
term is defined in Section 7701(a)(30) of the Code) for Federal income tax
purposes agrees to deliver to the Borrower and the Payments Administrator on or
prior to the Closing Date, or in the case of a Lender that is an assignee or
transferee of an interest under this Agreement pursuant to Section 1.13 or 11.04
(unless the respective Lender was already a Lender hereunder immediately prior
to such assignment or transfer), on the date of such assignment or transfer to
such Lender, (i) two accurate and complete original signed copies of Internal
Revenue Service Form 4224 or 1001 (or successor forms) certifying to such
Lender's entitlement to a complete exemption from United States withholding tax
with respect to payments to be made under this Agreement and under any Note or
(ii) if the Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of
the Code and cannot deliver either Internal Revenue Service Form 1001 or 4224
pursuant to clause (i) above, (x) a certificate substantially in the form of
Exhibit C (any such certificate, a "Section 3.04 Certificate") and (y) two
accurate and complete original signed copies of Internal Revenue Service Form
W-8 (or successor form) certifying to such Lender's entitlement to a complete
exemption from United States withholding tax with respect to payments of
interest to be made under this Agreement and under any Note. In addition, each
such Lender agrees that, from time to time after the Closing Date, when a lapse
in time or change in circumstances renders the previous certification obsolete
or inaccurate in any material respect, it will deliver to the Borrower and the
Payments Administrator two new accurate and complete original signed copies of
Internal Revenue Service Form 4224 or 1001, or Form W-8 (or successor forms) and
a Section 3.04 Certificate, as the case may be, and such other forms as may be
required in order to confirm or establish the entitlement of such Lender to a
continued exemption from or reduction in United States withholding tax with
respect to payments under this Agreement and any Note, or it shall immediately
notify the Borrower and the
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<PAGE> 17
Payments Administrator of its inability to deliver any such Form or Certificate
in which case such Lender shall not be required to deliver any such Form or
Certificate pursuant to this Section 3.04(b). Notwithstanding anything to the
contrary contained in Section 3.04(a), but subject to Section 11.04(b) and the
immediately succeeding sentence, (x) the Borrower shall be entitled, to the
extent it is required to do so by law, to deduct or withhold income or similar
taxes imposed by the United States from interest, fees or other amounts payable
hereunder for the account of any Lender which is not a United States person (as
such term is defined in Section 7701(a)(30) of the Code) for Federal income tax
purposes to the extent that such Lender has not provided to the Borrower
Internal Revenue Service Forms that establish a complete exemption from such
deduction or withholding and (y) the Borrower shall not be obligated pursuant to
Section 3.04(a) hereof to gross-up payments to be made to any such Lender in
respect of income or similar taxes imposed by the United States if (I) such
Lender has not provided to the Borrower the Internal Revenue Service Forms
required to be provided to the Borrower pursuant to this Section 3.04(b) or (II)
in the case of a payment, other than interest, to a Lender described in clause
(ii) of the last sentence of this Section 3.04(b) above, to the extent that such
Forms do not establish a complete exemption from withholding of such taxes.
Notwithstanding anything to the contrary contained in the preceding sentence or
elsewhere in this Section 3.04 and except as set forth in Section 11.04(b), the
Borrower agrees to pay additional amounts and to indemnify each Lender in the
manner set forth in Section 3.04(a) (without regard to the identity of the
jurisdiction requiring the deduction or withholding) in respect of any Taxes
deducted or withheld by it as described in the immediately preceding sentence as
a result of any changes after the Closing Date in any applicable law, treaty,
governmental rule, regulation, guideline or order, or in the interpretation
thereof, relating to the deducting or withholding of such Taxes.
(c) If the Borrower pays any additional amount under this
Section 3.04 to a Lender and such Lender determines in its sole discretion that
it has actually received or realized in connection therewith any refund or any
reduction of, or credit against, its Tax liabilities in or with respect to the
taxable year in which the additional amount is paid, such Lender shall pay to
the Borrower an amount that the Lender shall, in its sole discretion, determine
is equal to the net benefit, after tax, which was obtained by the Lender in such
year as a consequence of such refund, reduction or credit.
SECTION 4. Conditions Precedent.
4.01 Conditions Precedent to Loans. The obligation of each
Lender to make its Loans on the Closing Date is subject, at the time of the
making of such Loans, to the satisfaction of the following conditions:
(a) Notice of Borrowing. The Payments Administrator shall have
received a Notice of Borrowing meeting the requirements of Section
1.03.
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<PAGE> 18
(b) No Default; Representations and Warranties. At the time of
the making of the Loans and also after giving effect thereto, (i) there
shall exist no Default or Event of Default and (ii) all representations
and warranties made by the Borrower contained herein or in the other
Credit Documents shall be true and correct in all material respects
with the same effect as though such representations and warranties had
been made on and as of the date of the making of such Loans, except to
the extent that such representations and warranties expressly relate to
an earlier date.
(c) Effectiveness; Notes. (i) The Borrower and each of the
Lenders shall have signed a copy of this Agreement (whether the same or
different copies) and shall have delivered the same to the Payments
Administrator at its Notice Office or, in the case of the Lenders,
shall have given to the Payments Administrator telephonic (confirmed in
writing), written, telex or facsimile transmitted notice (actually
received) at its Notice Office that the same has been signed and mailed
to it and (ii) there shall have been delivered to the Payments
Administrator for the account of each Lender a Note executed by the
Borrower in the amount, maturity and as otherwise provided herein.
(d) Opinions of Counsel. On the Closing Date, the
Administrative Agents shall have received opinions, addressed to each
Agent and each of the Lenders and dated the Closing Date, from (i)
special counsel to the Borrower (who shall be satisfactory to the
Agents), which opinion shall cover the matters contained in Exhibit D-1
hereto and (ii) White & Case, special counsel to the Agents, which
opinion shall cover the matters contained in Exhibit D-2 hereto.
(e) Company Proceedings. (I) On the Closing Date, the
Administrative Agents shall have received from the Borrower a
certificate, dated the Closing Date, signed by the President, any
Vice-President or the Secretary (or any person holding an equivalent
position) of the Borrower, in the form of Exhibit E with appropriate
insertions and deletions, together with (x) copies of the
organizational documents of the Borrower, (y) the resolutions or other
administrative approval of the Borrower referred to in such certificate
and (z) a statement that all of the applicable conditions set forth in
Section 4.01(b) have been satisfied (or waived with the consent of the
Required Lenders) as of such date, and all of the foregoing shall be
reasonably satisfactory to the Agents.
(II) On the Closing Date, all company and legal proceedings
and all instruments and agreements in connection with the transactions
contemplated by this Agreement and the other Credit Documents shall be
reasonably satisfactory in form and substance to the Agents, and the
Administrative Agents shall have received all information and copies of
all certificates, documents and papers, including good standing
certificates
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and any other records of company proceedings and governmental
approvals, if any, which the Agents may have requested in connection
therewith, such documents and papers, where appropriate, to be
certified by proper company or governmental authorities.
(f) Adverse Change, etc. Since November 1, 1997, nothing shall
have occurred (and neither any Lender nor any Agent shall have become
aware of any facts or conditions not previously known) which either
Agent or the Required Lenders shall determine has had, or is reasonably
likely to have, (i) a Material Adverse Effect or (ii) a material
adverse effect on the rights or remedies of the Lenders or the Agents
hereunder or under any other Credit Document, or on the ability of the
Borrower to perform its obligations to the Lenders and the Agents.
(g) Litigation. On the Closing Date, there shall be no
actions, suits or proceedings pending or threatened (a) with respect to
this Agreement or any other Credit Document or (b) which either Agent
or the Required Lenders shall determine has had, or is reasonably
likely to have (i) a Material Adverse Effect or (ii) a material adverse
effect on the rights or remedies of the Lenders or the Agents hereunder
or under any other Credit Document or on the ability of the Borrower to
perform its obligations to the Lenders and the Agents.
(h) Pledge Agreement. On the Closing Date, the Borrower shall
have duly authorized, executed and delivered a Pledge Agreement in the
form of Exhibit F (as modified, amended or supplemented from time to
time in accordance with the terms thereof and hereof, the "Pledge
Agreement") and shall have delivered to the Collateral Agent, as
pledgee thereunder, all of the certificates representing the
Pledged Securities endorsed in blank or accompanied by executed and
undated stock powers, and the Pledge Agreement shall be in full force
and effect.
(i) Fees. On the Closing Date, the Borrower shall have paid to
the Agents and the Lenders all Fees and expenses agreed upon by such
parties to be paid on or prior to such date.
(j) Starwood Acquisition. The Administrative Agents shall be
satisfied that (x) all requisite shareholder consent has been obtained
to consummate the Starwood Acquisition and (y) all other conditions to
the Starwood Acquisition are reasonably likely to be satisfied on the
date then scheduled for consummation of the Starwood Acquisition. In
addition, there shall be in effect on the Closing Date no injunction,
stay or similar order that would materially delay, impose materially
burdensome conditions on or otherwise materially adversely affect the
Starwood Acquisition.
(k) Affiliate Indemnification. On the Closing Date, the
Administrative Agents shall have received a counterpart of the
Affiliate
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Indemnification executed by the parties thereto.
The acceptance of the benefits of the Loans shall constitute a
representation and warranty by the Borrower to the Agents and each of the
Lenders that all of the applicable conditions specified in Section 4.01 have
been satisfied (or waived with the consent of the Required Lenders) as of that
time. All of the certificates, legal opinions and other documents and papers
referred to in Section 4.01, unless otherwise specified, shall be delivered to
the Payments Administrator at its Notice Office for the account of each of the
Lenders and, except for the Notes, in sufficient counterparts for each of the
Lenders and shall be reasonably satisfactory in form and substance to the
Agents.
SECTION 5. Representations, Warranties and Agreements. In
order to induce the Lenders to enter into this Agreement and to make the Loans
provided for herein, the Borrower makes the following representations and
warranties to, and agreements with, the Lenders, all of which shall survive the
execution and delivery of this Agreement and the making of the Loans:
5.01 Status. Each Credit Party (i) is a duly organized and
validly existing corporation, limited liability company, limited partnership or
general partnership, as the case may be, in good standing under the laws of the
jurisdiction of its organization and has the power and authority to own its
property and assets and to transact the business in which it is engaged and
presently proposes to engage and (ii) has duly qualified and is authorized to do
business and is in good standing in all jurisdictions where it is required to be
so qualified and where the failure to be so qualified would have a Material
Adverse Effect. On the Closing Date, the Borrower is engaged in no business
other than the ownership of the Shares and the Other Shares, investments in
Permitted Investments and activities incidental thereto as permitted by Section
7.01.
5.02 Power and Authority. Each Credit Party has the power and
authority to execute, deliver and carry out the terms and provisions of the
Credit Documents to which a party and has taken all necessary action to
authorize the execution, delivery and performance of the Credit Documents to
which a party. Each Credit Party has duly executed and delivered each Credit
Document to which a party and each such Credit Document constitutes the legal,
valid and binding obligation of such Person enforceable in accordance with its
terms.
5.03 No Violation. Neither the execution, delivery and
performance by any Credit Party of the Credit Documents to which a party nor
compliance with the terms and provisions thereof, nor the consummation of the
transactions contemplated therein (i) will contravene any applicable provision
of any law, statute, rule, regulation, order, writ, injunction or decree of any
court or governmental instrumentality, (ii) will conflict or be inconsistent
with or result in any breach of, any of the terms, covenants, conditions or
provisions of, or constitute a default under, or (other than pursuant to the
Pledge Agreement) result in the creation or imposition of (or the obligation to
create or impose) any Lien upon any
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of the property or assets of any Credit Party pursuant to the terms of any
indenture, mortgage, deed of trust, agreement or other instrument to which any
Credit Party is a party or by which it or any of its property or assets are
bound or to which it may be subject or (iii) will violate any provision of the
certificate of incorporation, certificate of formation, certificate of
partnership, by-laws, limited liability company agreement or partnership
agreement of any Credit Party.
5.04 Litigation. There are no actions, suits or proceedings
pending or, to the knowledge of the Borrower, threatened with respect to any
Credit Party that are reasonably likely to have (i) a Material Adverse Effect or
(ii) a material adverse effect on the rights or remedies of the Lenders or on
the ability of any Credit Party to perform its respective obligations to them
hereunder and under the other Credit Documents to which a party.
5.05 Use of Proceeds; Margin Regulations. (a) The proceeds of
all Loans shall be utilized on and after the Assumption Date as the Borrower may
elect, subject to Section 5.05(b) below, including to pay Dividends, provided
that prior to the Assumption Date the Borrower will comply with the provisions
of Section 6.07.
(b) Neither the making of any Loan hereunder, nor the use of
the proceeds thereof, will violate or be inconsistent with the provisions of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System
and no part of the proceeds of any Loan will be used to purchase or carry any
Margin Stock or to extend credit for the purpose of purchasing or carrying any
Margin Stock.
5.06 Governmental Approvals. No order, consent, approval,
license, authorization, or validation of, or filing, recording or registration
with, or exemption by, any foreign or domestic governmental or public body or
authority, or any subdivision thereof, is required to authorize or is required
in connection with (i) the execution, delivery and performance of any Credit
Document or (ii) the legality, validity, binding effect or enforceability of any
Credit Document.
5.07 Investment Company Act. No Credit Party is required to be
registered as an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
5.08 Public Utility Holding Company Act. No Credit Party is a
"holding company," or a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
5.09 True and Complete Disclosure. All factual information
(taken as a whole) heretofore or contemporaneously furnished by or on behalf of
the Borrower in writing to the Agents for purposes of or in connection with this
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Agreement or any transaction contemplated herein is true and accurate in all
material respects on the date as of which such information is dated or certified
and not incomplete by omitting to state any material fact necessary to make such
information (taken as a whole) not misleading at such time in light of the
circumstances under which such information was provided. There is no fact known
to the Borrower which has had, or is reasonably likely to have, a Material
Adverse Effect, which has not been disclosed herein or in such other documents,
certificates and statements furnished to the Lenders (or to the Agents for
distribution to the Lenders) for use in connection with the transactions
contemplated hereby.
5.10 Financial Condition; Financial Statements. (a) On and as
of the Closing Date, on a pro forma basis after giving effect to all
Indebtedness incurred, and to be incurred (including, without limitation, the
Loans), and Liens created, and to be created, by the Borrower in connection
therewith, (x) the sum of the assets, at a fair valuation, of the Borrower will
exceed its debts, (y) the Borrower will not have incurred or intended to, or
believe that it will, incur debts beyond its ability to pay such debts as such
debts mature and (z) the Borrower will not have unreasonably small capital with
which to conduct its business. For purposes of this Section 5.10, "debt" means
any liability on a claim, and "claim" means (i) right to payment whether or not
such a right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured
or unsecured; or (ii) right to an equitable remedy for breach of performance if
such breach gives rise to a payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured or unsecured.
(b) The financial statements of the Borrower which have
heretofore been furnished to each Lender present fairly, on the basis presented,
the financial position of the Borrower at the dates of said statements. Nothing
has occurred since December 31, 1996 that has had or is reasonably likely to
have a Material Adverse Effect.
(c) Except as reflected in the financial statements and the
notes thereto described in Section 5.10(b), there were as of the Closing Date no
liabilities or obligations with respect to the Borrower of a nature (whether
absolute, accrued, contingent or otherwise and whether or not due) which, either
individually or in aggregate, would be material to the Borrower, except as
incurred in the ordinary course of business consistent with past practices
subsequent to December 31, 1996 and as incurred hereunder on such date.
5.11 Security Interests. On and after the Closing Date, the
Pledge Agreement creates, as security for the obligations purported to be
secured thereby, a valid and enforceable perfected security interest in and Lien
on all of the Collateral subject thereto, superior to and prior to the rights of
all third Persons and subject to no other Liens, in favor of the Collateral
Agent for the benefit of the Lenders. No filings or recordings are required in
order to perfect the security interests created under the Pledge Agreement.
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5.12 Tax Liability. The Borrower has not been obligated to pay
federal or state income taxes.
5.13 Compliance with ERISA. The Borrower has no obligation to
contribute to any Plan.
5.14 Subsidiaries. The Borrower has no Subsidiaries.
5.15 Properties. The Borrower owns no property or asset other
than the Shares, Other Shares and, after the Closing Date, the amounts on
deposit in the Specified Accounts, and has good and marketable title thereto.
Annex III sets forth a listing of the Shares by issuer and a listing of the
shares of common stock of such issuer received by the Borrower upon the
liquidation of LLC.
5.16 Compliance with Statutes, etc. Each Credit Party is in
compliance with all applicable statutes, regulations and orders of, and all
applicable restrictions imposed by, all governmental bodies, domestic or
foreign, in respect of the conduct of its business and the ownership of its
property, except such non-compliance as is not likely to, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 6. Affirmative Covenants. The Borrower hereby
covenants and agrees that on the Closing Date and thereafter for so long as this
Agreement is in effect and until the Commitments have terminated, no Notes are
outstanding and the Loans, together with interest, Fees and all other
Obligations incurred hereunder, are paid in full:
6.01 Information Covenants. The Borrower will furnish to each
Lender:
(a) Annual Financial Statements. Within 105 days after the
close of each of its fiscal years, its balance sheet, as at the end of
such fiscal year and the related statements of income, changes in
financial position and cash flows for such fiscal year, in each case
setting forth comparative figures for the preceding fiscal year, and
examined by independent certified public accountants of recognized
national standing whose opinion shall not be qualified as to the scope
of audit and as to the status of the Borrower as a going concern,
together with a certificate of such accounting firm stating that in the
course of its regular audit of the business of the Borrower, which
audit was conducted in accordance with generally accepted auditing
standards, such accounting firm has obtained no knowledge of any
Default or Event of Default which has occurred and is continuing or, if
in the opinion of such accounting firm such a Default or Event of
Default has occurred and is continuing, a statement as to the nature
thereof.
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(b) Quarterly Financial Statements. As soon as available and
in any event within 45 days after the close of each of the first three
quarterly accounting periods in each of its fiscal years, its balance
sheet, as at the end of such quarterly period and the related
statements of income, changes in financial position and cash flows for
such quarterly period and for the elapsed portion of the fiscal year
ended with the last day of such quarterly period, and in each case
setting forth comparative figures for the related periods in the prior
fiscal year and certified by the chief financial officer of the
Borrower, subject to changes resulting from audit and normal year-end
audit adjustments.
(c) Officer's Certificates. At the time of the delivery of the
financial statements provided for in Sections 6.01(a) and (b), a
certificate of the chief financial officer, controller or other
Authorized Officer of the Borrower to the effect that no Default or
Event of Default exists or, if any Default or Event of Default does
exist, specifying the nature and extent thereof.
(d) Notice of Default or Litigation. Promptly, and in any
event within three Business Days after any officer of the Borrower
obtains knowledge thereof, notice of (x) the occurrence of any event
which constitutes a Default or Event of Default which notice shall
specify the nature thereof, the period of existence thereof and what
action the Borrower proposes to take with respect thereto and (y) the
commencement of or any significant development in any litigation or
governmental proceeding pending against the Borrower which is likely to
have a Material Adverse Effect or is likely to have a material adverse
effect on the ability of the Borrower to perform its obligations
hereunder or under any other Credit Document.
(e) Auditors' Reports. Promptly upon receipt thereof, a copy
of each other final report or "management letter" submitted to the
Borrower by its independent accountants in connection with any annual,
interim or special audit made by it of the books of LLC or such
Borrower.
(f) Other Information. Promptly (i) upon transmission thereof,
copies of any filings and registrations with, and reports to, the
Securities and Exchange Commission or any successor thereto (the "SEC")
by the Borrower, and (ii) with reasonable promptness, such other
material information or documents (financial or otherwise) as either
Agent on its own behalf or on behalf of the Required Lenders may
reasonably request from time to time, subject in all cases, to any
requirement, contractual, fiduciary or otherwise, applicable to the
Borrower not to disclose such information.
6.02 Books, Records and Inspections. The Borrower will permit,
upon reasonable notice to the chief financial officer, controller or any other
Authorized Officer of the Borrower, officers and designated representatives of
either Agent or the Required Lenders to visit and inspect any of the properties
or assets of the Borrower in whomsoever's possession, and to examine the books
of account of the Borrower and discuss the affairs, finances and accounts of the
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Borrower with, and be advised as to the same by, its officers and independent
accountants, all at such reasonable times and intervals and to such reasonable
extent as the Agents or the Required Lenders may desire.
6.03 Insurance. The Borrower will at all times maintain in
full force and effect insurance in such amounts, covering such risks and
liabilities and with such deductibles or self-insured retentions as are in
accordance with normal industry practice.
6.04 Payment of Taxes. The Borrower will pay and discharge all
material taxes, assessments and governmental charges or levies imposed upon it
or upon its income or profits, or upon any properties belonging to it, prior to
the date on which penalties attach thereto, and all lawful claims which, if
unpaid, might become a Lien or charge upon any properties of the Borrower,
provided that the Borrower shall not be required to pay any such tax,
assessment, charge, levy or claim which is being contested in good faith and by
proper proceedings if it has maintained adequate reserves with respect thereto
in accordance with GAAP.
6.05 Franchises. The Borrower will do, or cause to be done,
all things necessary to preserve and keep in full force and effect its
existence, material rights, franchises and authority, provided that any
transaction permitted by Section 7.02 will not constitute a breach of this
Section 6.05.
6.06 Compliance with Statutes, etc. The Borrower will comply
with all applicable statutes, regulations and orders of, and all applicable
restrictions imposed by, all governmental bodies, domestic or foreign, in
respect of the conduct of its business and the ownership of its property other
than those the non-compliance with which would not have a Material Adverse
Effect or would not have a material adverse effect on the ability of the
Borrower to perform its obligations under any Credit Document.
6.07 Proceeds. The Borrower will deposit all proceeds of the
Loans into the Specified Accounts (50-50 between them) and, prior to the
Assumption Date, will not withdraw, or take any action to withdraw, any amounts
from the Specified Accounts, it being agreed that all amounts in the Specified
Accounts may be invested at the Borrower's direction in Permitted Investments
acceptable to the Agents.
Notwithstanding anything to the contrary contained in this Section 6, upon the
Assumption Date (but only if the Existing Starwood Credit Agreement is then in
effect), all of the foregoing provisions of this Section 6 shall be deleted and
thereafter shall be of no further force or effect.
SECTION 7. Negative Covenants. The Borrower hereby covenants
and agrees that on the Closing Date and thereafter for so long as this Agreement
is in effect and until the Commitments have terminated, no Notes are outstanding
and the Loans, together with interest, Fees and all other Obligations incurred
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hereunder, are paid in full:
7.01 Changes in Business. The Borrower will not alter the
character of its business from that conducted by it on the Closing Date (i.e.,
the ownership of the Shares and Other Shares and investment in Permitted
Investments), it being understood that the Borrower may engage in those
activities that are incidental to (x) the maintenance of its corporate existence
in compliance with applicable law, (y) legal, tax and accounting matters in
connection with any of the foregoing activities and (z) the entering into, and
performing its obligations under, this Agreement and the other Credit Documents.
7.02 Consolidation, Merger, Sale or Purchase of Assets, etc.
The Borrower will not wind up, liquidate or dissolve its affairs, or enter into
any transaction of merger or consolidation, or sell or otherwise dispose of all
or any part of its property or assets (other than inventory or obsolete
equipment or excess equipment in the ordinary course of business) or purchase,
lease or otherwise acquire all or any part of the property or assets of any
Person, except that a Permitted Transaction will be permitted.
7.03 Liens. The Borrower will not create, incur, assume or
suffer to exist any Lien upon or with respect to any of its property or assets
of any kind (real or personal, tangible or intangible) whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such property
or assets (including sales of accounts receivable or notes with recourse to the
Borrower) or assign any right to receive income, or file or permit the filing of
any financing statement under the UCC or any other similar notice of Lien under
any similar recording or notice statute, except:
(a) Liens (other than Liens in excess of $100,000 in the
aggregate arising pursuant to Section 412 of the Code or Title IV of
ERISA) for taxes, assessments or governmental charges not yet due and
payable and for which adequate reserves have been established in
accordance with GAAP; and
(b) Liens created by or pursuant to this Agreement, the other
Credit Documents or the Westin Credit Documents.
7.04 Indebtedness. The Borrower will not contract, create,
incur, assume or suffer to exist any Indebtedness, except Indebtedness incurred
pursuant to this Agreement and the other Credit Documents.
7.05 Capital Expenditures. The Borrower will not incur any
Consolidated Capital Expenditures.
7.06 Advances, Investments and Loans. The Borrower will not
lend money or credit or make advances to any Person, or purchase or acquire any
stock, obligations or securities of, or any other interest in, or make any
capital
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contribution to any Person, except:
(a) investments in cash and Permitted Investments;
(b) the Borrower may acquire and own investments (including
debt obligations) received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business; and
(c) pursuant to a Permitted Transaction.
7.07 Amendments, etc. The Borrower will not:
(a) amend, modify, or change in any manner adverse to the
interests of the Lenders its partnership agreement or enter into any
new agreement in any manner adverse to the interests of the Lenders
with respect to its partnership interests;
(b) amend or modify or agree to the amendment or modification
of, any organization document of any Specified Subsidiary in any manner
adverse to the interests of the Lenders; and
(c) amend or modify, or agree to the amendment or modification
of, the Starwood Acquisition Agreement in any manner adverse to the
interests of the Lenders.
7.08 Dividends, Distributions, etc. The Borrower will not
declare or pay any dividends (other than dividends payable solely in its
partnership interests) or return any capital to, its partners or authorize or
make any other distribution, payment or delivery of property or cash to its
partners as such, or redeem, retire, purchase or otherwise acquire, directly or
indirectly, for a consideration, any partnership interests now or hereafter
outstanding (or any warrants for or options or stock appreciation rights in
respect of any of such shares), or set aside any funds for any of the foregoing
purposes (all of the foregoing "Dividends"), provided that the Borrower may pay
Dividends with the proceeds of a dividend and/or distribution received from W&S
Atlanta that is paid by W&S Atlanta with the proceeds of Indebtedness it has
incurred as permitted by the Westin Credit Agreement.
7.09 Transactions with Affiliates. The Borrower will not enter
into any transaction or series of transactions after the Closing Date whether or
not in the ordinary course of business, with any Affiliate other than on terms
and conditions substantially as favorable to the Borrower as would be obtainable
by the Borrower at the time in a comparable arm's-length transaction with a
Person other than an Affiliate.
7.10 Creation of Subsidiaries. The Borrower will not create or
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acquire any Subsidiary.
Notwithstanding anything to the contrary contained in this Section 7, upon the
Assumption Date (but only if the Existing Starwood Credit Agreement is then in
effect), all of the foregoing provisions of this Section 7 shall be deleted and
thereafter shall be of no force or effect.
SECTION 8. Events of Default. Upon the occurrence of any of
the following specified events (each, an "Event of Default"):
8.01 Payments. The Borrower shall (i) default in the payment
when due of any principal of the Loans or (ii) default, and such default shall
continue for five or more days, in the payment when due of any interest on the
Loans or any Fees or any other amounts owing hereunder or under any other Credit
Document; or
8.02 Representations, etc. Any material representation,
warranty or statement made by the Borrower herein or in any other Credit
Document or in any statement or certificate delivered or required to be
delivered pursuant hereto or thereto shall prove to be untrue in any material
respect on the date as of which made or deemed made provided that after the
Assumption Date no Event of Default shall arise under this Section 8.02 as a
result of any such representation, warranty or agreement made by Woodstar on the
Closing Date proving untrue except to the extent such would have a material
adverse effect on the Starwood Assumption and Guaranties; or
8.03 Covenants. The Borrower shall (a) default in the due
performance or observance by it of any term, covenant or agreement contained in
Section 6.07 or 7, or (b) default in the due performance or observance by it of
any term, covenant or agreement (other than those referred to in Section 8.01,
8.02 or clause (a) of this Section 8.03) contained in this Agreement and such
default under this clause (b) shall continue unremedied for a period of at least
30 days after notice to the defaulting party by either Agent or the Required
Lenders; or
8.04 Default Under Other Agreements. (a) Prior to the
Assumption Date, the Borrower or, after the Assumption Date, any Starwood Party
(each, a "Designated Party") shall (i) default in any payment with respect to
any Indebtedness (other than the Obligations) beyond the period of grace, if
any, applicable thereto or (ii) default in the observance or performance of any
agreement or condition relating to any such Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause any such Indebtedness to become due prior to its stated maturity; or (b)
any such Indebtedness of any Designated Party shall be declared to be due and
payable (other than to the extent the Designated Party promptly denies in
writing to the
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applicable creditor the validity of such declaration and is contesting same in
good faith), or required to be prepaid other than by a regularly scheduled
required prepayment, prior to the stated maturity thereof, provided that after
the Assumption Date it shall not constitute an Event of Default pursuant to this
Section 8.04 unless the principal amount of Indebtedness referred to in clauses
(a) and (b) above exceeds $5,000,000, individually or in the aggregate; or
8.05 Bankruptcy, etc. Any Designated Party shall commence a
voluntary case concerning itself under Title 11 of the United States Code
entitled "Bankruptcy," as now or hereafter in effect, or any successor thereto
(the "Bankruptcy Code"); or an involuntary case is commenced against any
Designated Party and the petition is not controverted within 20 days, or is not
dismissed within 60 days, after commencement of the case; or a custodian (as
defined in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of any Designated Party; or any Designated
Party commences any other proceeding under any reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or
similar law of any jurisdiction whether now or hereafter in effect relating to
any Designated Party; or there is commenced against any Designated Party any
such proceeding which is not controverted within 20 days or remains undismissed
for a period of 60 days; or any Designated Party is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or any Designated Party suffers any appointment of any
custodian or the like for it or any substantial part of its property to continue
undischarged or unstayed for a period of 60 days; or any Designated Party makes
a general assignment for the benefit of creditors; or any corporate action is
taken by any Designated Party for the purpose of effecting any of the foregoing;
or
8.06 Pledge Agreement. Prior to the Assumption Date, (a) the
Pledge Agreement shall cease to be in full force and effect, or shall cease to
give the Collateral Agent the Liens, rights, powers and privileges purported to
be created thereby in favor of the Collateral Agent, or (b) the Borrower shall
default in the due performance or observance of any material term, covenant or
agreement on its part to be performed or observed pursuant to the Pledge
Agreement; or
8.07 Judgments. One or more judgments or decrees shall be
entered against any Credit Party involving a liability of $10,000 ($5,000,000 on
and after the Assumption Date) or more in the aggregate for all such judgments
and decrees for the Credit Parties (not paid or to the extent not covered by
insurance) and any such judgments or decrees shall not have been vacated,
discharged or stayed or bonded pending appeal within 60 days from the entry
thereof; or
8.08 Change of Control. A Change of Control shall occur at any
time prior to the Assumption Date; or
8.09 Other Defaults. On and after the Assumption Date, a
Starwood Event of Default shall occur;
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then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Payments Administrator shall, upon the written
request of the Required Lenders, by written notice to the Borrower, take any or
all of the following actions, without prejudice to the rights of any
Administrative Agent or any Lender to enforce its claims against the Borrower
and its other rights hereunder, except as otherwise specifically provided for in
this Agreement (provided that, if an Event of Default specified in Section 8.05
shall occur with respect to any Borrower, the result which would occur upon the
giving of written notice by the Payments Administrator as specified in clauses
(i) and (ii) below shall occur automatically without the giving of any such
notice): (i) declare the Total Commitment terminated, whereupon the Commitment
of each Lender shall forthwith terminate immediately; (ii) declare the principal
of and any accrued interest in respect of all Loans and all obligations owing
hereunder and thereunder to be, whereupon the same shall become, forthwith due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by each Borrower; and (iii) enforce, as
Collateral Agent (or direct the Collateral Agent to enforce), any or all of the
Liens and security interests created pursuant to the Pledge Agreement.
SECTION 9. Definitions. As used herein, the following terms
shall have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
"Administrative Agents" shall have the meaning provided in the
first paragraph of this Agreement and shall include any successor to the
Administrative Agents appointed pursuant to Section 10.09.
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited to all
directors and officers of such Person), controlled by, or under direct or
indirect common control with such Person. A Person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the power (i) to
vote 10% or more of the securities having ordinary voting power for the election
of directors of such corporation or (ii) to direct or cause the direction of the
management and policies of such corporation, whether through the ownership of
voting securities, by contract or otherwise.
"Affiliate Indemnification" shall mean an Indemnification
Agreement (which shall be in form and substance satisfactory to the
Administrative Agents) executed by certain Affiliates of the Borrower acceptable
to the Administrative Agents.
"Agents" shall have the meaning provided in the first
paragraph of this Agreement.
"Agreement" shall mean this Loan Agreement, as the same may be
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from time to time further modified, amended and/or supplemented.
"Asset Sale" shall mean and include the sale, transfer or
other disposition by the Borrower to any other Person of any asset of the
Borrower.
"Assignment Agreement" shall mean the Assignment Agreement in
the form of Exhibit H (appropriately completed).
"Assumption Agreements" shall mean the Assumption Agreements
in the form of Exhibit I-1 and I-2 hereto.
"Assumption Date" shall mean the date on which the Starwood
Assumptions and Guarantees become effective.
"Authorized Officer" shall mean any senior officer of the
Borrower designated as such in writing to the Payments Administrator by the
Borrower, in each case to the extent acceptable to the Payments Administrator.
"Bankruptcy Code" shall have the meaning provided in Section
8.05.
"Base Rate" shall mean the higher of (i) the Prime Lending
Rate and (ii) the Federal Funds Effective Rate plus 1/2 of 1%.
"Base Rate Loan" shall mean each Loan bearing interest at the
rates provided in Section 1.08(a).
"Base Rate Margin" shall mean 0.625%, provided that if the
Assumption Date has not occurred by March 31, 1998, the Base Rate Margin shall
equal 3.625% on and after such date.
"Borrower" shall mean WHWE, provided that on the Assumption
Date WHWE shall be released as the Borrower and replaced by Starwood Realty
Partnership as the Borrower with respect to 96.08355% of the principal of the
Loans (and all accrued but unpaid interest thereon) and by Starwood Operating
Partnership as Borrower with respect to the remaining principal of the Loans
(and all accrued but unpaid interest thereon), with Starwood Realty Partnership
and Starwood Operating Partnership to thereafter constitute the "Borrower" for
purposes of this Agreement. WHWE may, upon such release, execute and deliver to
the Administrative Agents a guaranty of the Obligations pursuant to a Guaranty
Agreement heretofore agreed upon among the parties hereto.
"Borrowing" shall mean the incurrence of one Type of Loan by
the Borrower from all of the Lenders on a pro rata basis on a given date (or
resulting from conversions on a given date), having in the case of Eurodollar
Loans the same Interest Period; provided that Base Rate Loans incurred pursuant
to Section 1.10(b) shall be considered part of any related Borrowing of
Eurodollar Loans.
"BTCo" shall mean Bankers Trust Company.
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"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day excluding Saturday, Sunday and any day
which shall be in the City of New York a legal holiday or a day on which banking
institutions are authorized by law or other governmental actions to close and
(ii) with respect to all notices and determinations in connection with, and
payments of principal and interest on, Eurodollar Loans, any day which is a
Business Day described in clause (i) and which is also a day for trading by and
between banks in U.S. dollar deposits in the interbank Eurodollar market.
"Capital Lease" as applied to any Person shall mean any lease
of any property (whether real, personal or mixed) by that Person as lessee
which, in conformity with GAAP, is accounted for as a capital lease on the
balance sheet of that Person.
"Capitalized Lease Obligations" of any Person shall mean all
obligations under Capital Leases of such Person in each case taken at the amount
thereof accounted for as liabilities in accordance with GAAP.
"Cash Proceeds" shall mean, with respect to any Asset Sale or
Distribution (x) the aggregate cash payments (including any cash received by way
of deferred payment pursuant to a note receivable issued in connection with such
Asset Sale, other than the portion of such deferred payment constituting
interest, but only as and when so received) received by the Borrower from any
such Asset Sale or (y) all amounts received by the Borrower pursuant to a
Distribution (including the cash fair market value of any Distribution made
other than in cash).
"Change of Control" shall mean at any time, and for any reason
whatsoever, Whitehall Street Real Estate Limited Partnership V and/or GS Capital
Partners, L.P. shall cease to own collectively or individually at least 70% of
the membership interests of the Borrower.
"Chase" shall mean The Chase Manhattan Bank.
"Closing Date" shall mean December 29, 1997 unless otherwise
agreed by the Borrower and the Lenders.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time and the regulations promulgated and the rulings issued
thereunder. Section references to the Code are to the Code, as in effect at the
Closing Date and any subsequent provisions of the Code, amendatory thereof,
supplemental thereto or substituted therefor.
"Collateral" shall mean all of the Collateral as defined in
the Pledge Agreement.
"Collateral Agent" shall mean Bankers Trust Company acting as
collateral agent for the Lenders.
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"Commitment" shall mean, with respect to each Lender, the
amount, set forth opposite such Lender's name on Annex I hereto directly below
the column entitled "Commitment" as the same may be terminated pursuant to
Section 2.02.
"Consolidated Capital Expenditures" shall mean, for any
period, the aggregate of all expenditures (whether paid in cash or accrued as
liabilities and including in all events all amounts expended or capitalized
under Capital Leases but excluding any amount representing capitalized interest)
by the Borrower during that period that, in conformity with GAAP, are or are
required to be included in the property, plant or equipment reflected in the
consolidated balance sheet of LLC and its consolidated Subsidiaries.
"Contingent Obligations" shall mean as to any Person any
obligation of such Person guaranteeing or intending to guarantee any
Indebtedness, leases, dividends or other obligations ("primary obligations") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (d) otherwise to assure or hold
harmless the owner of such primary obligation against loss in respect thereof,
provided that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Credit Documents" shall mean this Agreement, the Notes and
the Pledge Agreement.
"Credit Parties" shall mean (x) prior to the Assumption Date,
Woodstar and (y) on and after the Assumption Date, the Starwood Parties.
"Default" shall mean any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default.
"Designated Party" shall have the meaning provided in Section
8.04.
"Distribution" shall mean any dividend or other distribution
received
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by the Borrower in respect of the Shares and Other Shares other than the
dividend and/or distribution from W&S Atlanta referred to in Section 7.08.
"Dividends" shall have the meaning provided in Section 7.08.
"Eligible Transferee" shall mean and include a commercial
bank, financial institution or other qualified institutional buyer (as defined
under Rule 144A promulgated under the Securities Act of 1933, as amended) that
is not a competitor in the hospitality business of the Credit Parties.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA Affiliate" shall mean each person (as defined in
Section 3(9) of ERISA) which together with the Borrower would be deemed to be a
"single employer" within the meaning of Sections 414(b), (c), (m) and (o) of the
Code.
"Eurodollar Loans" shall mean each Loan bearing interest at
the rates provided in Section 1.08(b).
"Eurodollar Margin" shall mean 1.625%, provided that if the
Assumption Date has not occurred by March 31, 1998, the Eurodollar Margin shall
equal 4.625% on and after such date.
"Eurodollar Rate" shall mean with respect to each Interest
Period for a Eurodollar Loan, (i) the offered quotation to first-class banks in
the interbank Eurodollar market by the Payments Administrator for dollar
deposits of amounts in same day funds comparable to the outstanding principal
amount of the Eurodollar Loan of the Payments Administrator for which an
interest rate is then being determined with maturities comparable to the
Interest Period to be applicable to such Eurodollar Loan, determined as of 10:00
A.M. (New York time) on the date which is two Business Days prior to the
commencement of such Interest Period divided (and rounded upward to the next
whole multiple of 1/16 of 1%) by (ii) a percentage equal to 100% minus the then
stated maximum rate of all reserve requirements (including, without limitation,
any marginal, emergency, supplemental, special or other reserves) applicable to
any member bank of the Federal Reserve System in respect of Eurocurrency
liabilities as defined in Regulation D (or any successor category of liabilities
under Regulation D).
"Event of Default" shall have the meaning provided in Section
8.
"Existing Starwood Credit Agreement" shall mean the Credit
Agreement, dated as of September 10, 1997, among Starwood Trust, Starwood Realty
Partnership, Bankers Trust Company, Lehman Brothers Holdings Inc., BankBoston,
N.A. and Bank of Montreal, as in effect on the Closing Date and as amended or
replaced prior to the Assumption Date in a manner acceptable to the
Administrative Agents and to Starwood Lodging to permit the Starwood Acquisition
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and the Starwood Assumptions and Guaranties, without giving effect to any other
amendment, modification or other change thereto not consented to by the Required
Lenders, and regardless of whether such agreement is terminated.
"Federal Funds Effective Rate" shall mean for any period, a
fluctuating interest rate equal for each day during such period to the weighted
average of the rates on overnight Federal Funds transactions with members of the
Federal Reserve System arranged by Federal Funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions received by the Payments Administrator from three Federal
Funds brokers of recognized standing selected by the Payments Administrator.
"Final Maturity Date" shall mean January 31, 2000.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect on the date of this Agreement.
"Indebtedness" of any Person shall mean, without duplication,
(a) all obligations of such Person for borrowed money or with respect to
deposits or advances of any kind, (b) all obligations of such Person evidenced
by bonds, debentures, notes or similar instruments, (c) all obligations of such
Person upon which interest charges are customarily paid, (d) all obligations of
such Person under conditional sale or other title retention agreements relating
to assets purchased by such Person, (e) all obligations of such Person issued or
assumed as the deferred purchase price of property or services (excluding trade
accounts payable and accrued expenses arising in the ordinary course of business
in accordance with customary trade terms), (f) all Indebtedness of others
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the obligations secured thereby have
been assumed by such Person, (g) all Contingent Obligations of such Person, (h)
all Capital Lease Obligations of such Person, (i) all obligations of such Person
in respect of interest rate protection agreements, foreign currency exchange
agreements or other interest or exchange rate hedging arrangements, (j) all
obligations of such Person as an account party to reimburse any bank or any
other person in respect of letters of credit and bankers' acceptances, whether
or not drawn or accepted, (k) all obligations of such Person to pay a specified
purchase price for goods or services whether or not delivered or accepted (i.e.,
take-or-pay and similar obligations) and (l) all obligations (including
repurchase obligations) relating to Property Financing Lender Equity. The
Indebtedness of any Person shall include the Indebtedness of any partnership or
joint venture in which such person is a general partner or member, other than to
the extent that the instrument or agreement evidencing such Indebtedness
expressly limits the liability of such person in respect thereof pursuant to
provisions and terms reasonably satisfactory to the Required Lenders.
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"Interest Period" with respect to any Loan shall mean the
interest period applicable thereto, as determined pursuant to Section 1.09.
"Interest Rate Agreement" shall mean any interest rate swap
agreement, any interest rate cap agreement, any interest rate collar agreement
or other similar agreement or arrangement designed to protect the Borrower
against fluctuations in interest rates.
"Interim Date" shall mean the date on which a Permitted
Transaction is consummated.
"Lender" shall have the meaning provided in the first
paragraph of this Agreement.
"Lender Register" shall have the meaning provided in Section
11.16.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement or any
lease in the nature thereof).
"Loan" shall have the meaning provided in Section 1.01(a).
"LLC" shall mean W&S Hotel L.L.C., formerly a Delaware limited
liability company.
"Margin Stock" shall have the meaning provided in Regulation
U.
"Material Adverse Effect" shall mean a material adverse effect
on the business, property, assets, liabilities, operations, condition (financial
or otherwise), prospects or business plans of the Borrower.
"Minimum Borrowing Amount" shall mean (i) for Base Rate Loans,
$2,000,000 and (ii) for Eurodollar Loans, $10,000,000.
"Net Cash Proceeds" shall mean with respect to (x) any Asset
Sale, the Cash Proceeds resulting therefrom net of expenses of such sale and
incremental taxes paid or payable as a result thereof and (y) any Distribution,
the Cash Proceeds resulting therefrom.
"Nomura" shall mean Nomura Asset Capital Corporation, a
Delaware corporation.
"Note" shall have the meaning provided in Section 1.05(a).
"Notice of Borrowing" shall have the meaning provided in
Section 1.03.
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"Notice of Conversion" shall have the meaning provided in
Section 1.06.
"Notice Office" shall mean the office of the Payments
Administrator at 130 Liberty Street, New York, New York or such other office as
the Payments Administrator may designate to the Borrower from time to time.
"Obligations" shall mean all amounts, direct or indirect,
contingent or absolute, of every type or description, and at any time existing,
owing to the Payments Administrator, the Documentation Agent, the Collateral
Agent or any Lender pursuant to the terms of this Agreement or any other Credit
Document.
"Other Shares" shall mean the shares of common stock of
Worldwide and W&S Atlanta owned by the Borrower on the Closing Date.
"Payment Office" shall mean the office of the Payments
Administrator at 130 Liberty Street, New York, New York or such other office as
the Payments Administrator may designate to the Borrowers from time to time.
"Payments Administrator" shall mean BTCo.
"Permitted Investments" shall mean (i) securities issued or
directly and fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States of America is pledged in support thereof) having maturities of
not more than six months from the date of acquisition, (ii) U.S. dollar
denominated time deposits, certificates of deposit and bankers' acceptances of
(x) any Lender or (y) any bank (or the parent company of such bank) whose short-
term commercial paper rating from Standard & Poor's Ratings Services, a division
of McGraw-Hill, Inc. ("S&P") is at least A-1 or the equivalent thereof or from
Moody's Investors Service, Inc. ("Moody's") is at least P-1 or the equivalent
thereof (any such bank, an "Approved Bank"), in each case with maturities of not
more than six months from the date of acquisition, (iii) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (ii) above, (iv) commercial paper issued by
any Lender or Approved Bank or by the parent company of any Lender or Approved
Bank and commercial paper issued by, or guaranteed by, any industrial or
financial company with a short-term commercial paper rating of at least A-1 or
the equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's (any such company, an "Approved Company"), or guaranteed by any
industrial company with a long term unsecured debt rating of at least A or A2,
or the equivalent of each thereof, from S&P or Moody's, as the case may be, and
in each case maturing within six months after the date of acquisition and (v)
investments in money market funds substantially all of whose assets are
comprised of securities of the type described in clauses (i) through (iv) above
but only to the extent such funds are acceptable to the Agents.
"Permitted Liens" shall mean Liens described in clauses (a),
(d) and
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(i) of Section 7.03.
"Permitted Transaction" shall mean (i) Woodstar, WHWE, Nomura
and Jurgen Bartels (the "LLC Successors") exchanging all shares of Worldwide
they own for preferred stock of Starwood Trust and cash pursuant to the Starwood
Acquisition Agreement, (ii) the LLC Successors contributing all shares of W&S
Atlanta they own to Starwood Operating Partnership pursuant to the Starwood
Acquisition Agreement, (iii) the LLC Successors contributing all shares of W&S
Seattle, W&S Lauderdale and W&S Denver to Starwood Realty Partnership pursuant
to the Starwood Acquisition Agreement and (iv) the LLC Successors contributing
all shares they own of Westin St. John to Starwood Operating Partnership
pursuant to the Starwood Acquisition Agreement if and only if Starwood Realty
Partnership concurrently assumes the LLC Successors' obligations with respect to
96.08355% of the Loans made to the LLC Successors by the Agents on the Closing
Date and Starwood Operating Partnership concurrently assumes the remaining
3.91645% of the Loans made to the LLC Successors by the Agents on the Closing
Date (and all such assumptions to be guaranteed by the Starwood Guarantors),
with such assumptions and guarantees with respect to the Loans to be reflected
by the issuance of the Starwood Assumptions and Guaranties.
"Person" shall mean any individual, partnership, joint
venture, firm, corporation, limited liability company, association, trust or
other enterprise or any government or political subdivision or any agency,
department or instrumentality thereof.
"Plan" shall mean any pension plan as defined in Section 3(2)
of ERISA, which is maintained or contributed to by (or to which there is an
obligation to contribute of) the Borrower or an ERISA Affiliate, and each such
plan for the five-year period immediately following the latest date on which the
Borrower or an ERISA Affiliate maintained, contributed to or had an obligation
to contribute to such plan.
"Pledge Agreement" shall have the meaning provided in Section
4.01(h).
"Pledged Securities" shall mean all the Shares.
"Prime Lending Rate" shall mean the rate which BTCo announces
from time to time as its prime lending rate, the Prime Lending Rate to change
when and as such prime lending rate changes. The Prime Lending Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. BTCo may make commercial loans or other loans
at rates of interest at, above or below the Prime Lending Rate.
"PSD Interest Period" shall mean any Interest Period commenced
prior to the Syndication Date, each of which Interest Periods must satisfy the
requirements of Section 1.09(iv).
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"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing reserve requirements.
"Regulation U" shall mean Regulation U of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing margin requirements.
"Related Fund" shall mean, with respect to any Lender that is
a fund that invests in bank loans, any other fund that invests in bank loans and
is managed by the same investment advisor as such Lender or by an Affiliate of
such investment advisor.
"Required Lenders" shall mean Lenders whose outstanding Loans
constitute greater than 50% of the total outstanding principal of Loans.
"SEC" shall have the meaning provided in Section 6.01(j).
"Section 3.04 Certificate" shall have the meaning provided in
Section 3.04(b)(ii).
"Shares" shall mean the shares of the common stock of each of
the Specified Subsidiaries owned by the Borrower on the Closing Date.
"Specified Accounts" shall mean Account No. 44102738
maintained at BTCo's office at 130 Liberty Street, New York, New York 10006 and
Account No. 9102726438 maintained at Chase's office at 270 Park Avenue, New
York, New York.
"Specified Subsidiaries" shall mean W&S Seattle, W&S
Lauderdale, W&S Denver and Westin St. John.
"Starwood Acquisition" shall mean and include (i) the merger
of Worldwide with and into Starwood Trust in accordance with the terms of the
Starwood Acquisition Agreement, (ii) the Subsidiary Contributions pursuant to,
and as defined in, the Starwood Acquisition Agreement and (iii) the related
transactions described in the Starwood Acquisition Agreement.
"Starwood Acquisition Agreement" shall mean the Transaction
Agreement, dated as of September 8, 1997, among WHWE, Nomura, Juergen Bartels,
LLC, Worldwide, W&S Lauderdale, W&S Seattle, St. John Company, Westin St. John,
W&S Denver, W&S Atlanta, Starwood Trust, Starwood Realty Partnership, Starwood
Lodging Corporation and Starwood Operating Partnership, as in effect on
September 8, 1997.
"Starwood Assumptions" shall mean (x) the assumption as
Borrower by Starwood Realty Partnership of 96.08355% of the Loans pursuant to an
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Assumption Agreement in the form of Exhibit I-1 hereto and (y) the assumption as
Borrower by Starwood Operating Partnership of the remainder of the Loans
pursuant to an Assumption Agreement in the form of Exhibit I-2 hereto.
"Starwood Assumptions and Guaranties" shall mean the
consummation of the Starwood Assumptions and the issuance of the Starwood
Guaranty by the Starwood Guarantors.
"Starwood Event of Default" shall mean (i) a default shall
occur with respect to any covenant contained in the Existing Starwood Credit
Agreement (as defined herein) and/or incorporated by reference in any Assumption
Agreement and (in the case of any default of any covenant that would require
notice to Starwood Lodging and Starwood Realty Trust by the Administrative Agent
or a Lender under the Existing Starwood Credit Agreement before such default
shall constitute an Event of Default thereunder) continuance of such default
unremedied for 30 days after written notice thereof to Starwood Lodging by
either Administrative Agent or any Lender hereunder and (ii) the failure to
deliver to the Lenders all financial information when and as required under the
Existing Starwood Credit Agreement to be delivered to the lenders party thereto
and such failure shall continue unremedied for 30 days after notice to Starwood
Lodging by the Administrative Agents or the Required Lenders.
"Starwood Guarantors" shall mean Starwood Trust, Starwood
Realty Partnership, Starwood Lodging Corporation, Starwood Operating Partnership
and their respective Subsidiaries (except to the extent any such Subsidiary is
not a guarantor under the Existing Starwood Credit Agreement) except to the
extent any thereof is the Borrower under any of the Loans as a result of the
Starwood Assumptions.
"Starwood Guaranty" shall mean the guaranty by the Starwood
Guarantors of all Obligations hereunder, which guaranty shall be delivered on
the Assumption Date and shall be substantially in the form of the Guaranty set
forth in Section 12 of the Westin Credit Agreement (except that Section 12.07 of
the Westin Credit Agreement will not be included in the Starwood Guaranty).
"Starwood Lodging" shall mean and include Starwood Trust and
Starwood Lodging Corporation.
"Starwood Operating Partnership" shall mean SLC Operating
Limited Partnership, a Delaware limited partnership.
"Starwood Parties" shall mean Starwood Lodging, Starwood
Operating Partnership and Starwood Realty Partnership and any other entity that
is a Starwood Guarantor.
"Starwood Realty Partnership" shall mean SLT Realty Limited
Partnership, a Delaware limited partnership.
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"Starwood Trust" shall mean Starwood Lodging Trust, a Maryland
real estate investment trust.
"Subsidiary" of any Person shall mean and include (i) any
corporation more than 50% of whose stock of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time owned by such Person directly
or indirectly through Subsidiaries and (ii) any partnership, association, joint
venture, limited liability company or other entity in which such Person directly
or indirectly through Subsidiaries has more than a 50% equity interest at the
time.
"Syndication Date" shall mean the earlier of June 1, 1998 and
the date specified in writing to the Borrower or Borrowers by the Administrative
Agents as the date on which the primary syndication of the Loans and Commitments
has been completed to the satisfaction of the Administrative Agents.
"Taxes" shall have the meaning provided in Section 3.04(a).
"Total Commitment" shall mean the sum of the Commitments of
each of the Lenders.
"Type" shall mean any type of Loan determined with respect to
the interest option applicable thereto, i.e., a Base Rate Loan or Eurodollar
Loan.
"UCC" shall mean the Uniform Commercial Code.
"W&S Atlanta" shall mean W&S Atlanta Corp., a Delaware
corporation.
"W&S Denver" shall mean W&S Denver Corp., a Delaware
corporation.
"W&S Lauderdale" shall mean W&S Lauderdale Corp., a Delaware
corporation.
"W&S Seattle" shall mean W&S Seattle Corp., a Delaware
corporation.
"Westin Credit Agreement" shall mean the Amended and Restated
Credit Agreement, dated as of December 2, 1997, among LLC, various of its
Subsidiaries and the Agents as in effect on the Closing Date.
"Westin Credit Documents" shall have the meaning provided in
the Westin Credit Agreement.
"Westin St. John" shall mean Westin St. John Hotel Company,
Inc.,
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a corporation organized under the laws of the U.S. Virgin Islands.
"WHWE" shall mean WHWE L.L.C., a Delaware limited liability
company.
"Woodstar" shall mean Woodstar Investor Partnership, a
Delaware general partnership.
"Worldwide" shall mean Westin Hotels & Resorts Worldwide,
Inc., a Delaware corporation, formerly known as W&S Arizona Corp.
"Written" or "in writing" shall mean any form of written
communication or a communication by means of telex, facsimile transmission,
telegraph or cable.
SECTION 10. The Agents.
10.01 Appointment. The Lenders hereby designate each of BTCo
and Chase as Administrative Agent (for purposes of this Section 10, the term
"Administrative Agent" shall include BTCo in its capacity as Collateral Agent
pursuant to the Pledge Agreement and as Payments Administrator hereunder) to act
as specified herein and in the other Credit Documents. Each Lender hereby
irrevocably authorizes, and each holder of any Note by the acceptance of such
Note shall be deemed irrevocably to authorize, each Agent to take such action on
its behalf under the provisions of this Agreement, the other Credit Documents
and any other instruments and agreements referred to herein or therein and to
exercise such powers and to perform such duties hereunder and thereunder as are
specifically delegated to or required of such Agent by the terms hereof and
thereof and such other powers as are reasonably incidental thereto. The Agents
may perform any of their duties hereunder by or through their respective
officers, directors, agents, employees or affiliates.
10.02 Nature of Duties. No Agent shall have any duties or
responsibilities except those expressly set forth in this Agreement and the
Security Documents. No Agent or any of its respective officers, directors,
agents, employees or affiliates shall be liable for any action taken or omitted
by them hereunder or under any other Credit Document or in connection herewith
or therewith, unless caused by their gross negligence or willful misconduct. The
duties of each Agent shall be mechanical and administrative in nature; no Agent
shall have by reason of this Agreement or any other Credit Document a fiduciary
relationship in respect of any Lender or the holder of any Note; and nothing in
this Agreement or any other Credit Document, expressed or implied, is intended
to or shall be so construed as to impose upon either Agent any obligation in
respect of this Agreement or any other Credit Document except as expressly set
forth herein or therein with respect to such Agent.
10.03 Lack of Reliance on the Agents. Independently and
without
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reliance upon either Agent, each Lender and the holder of each Note, to the
extent it deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of any Borrower
or Starwood Party in connection with the making and the continuance of the Loans
and the taking or not taking of any action in connection herewith and (ii) its
own appraisal of the creditworthiness of any Borrower or Starwood Party and,
except as expressly provided in this Agreement, no Agent shall have any duty or
responsibility, either initially or on a continuing basis, to provide any Lender
or the holder of any Note with any credit or other information with respect
thereto, whether coming into its possession before the making of the Loans or at
any time or times thereafter. No Agent shall be responsible to any Lender or the
holder of any Note for any recitals, statements, information, representations or
warranties herein or in any document, certificate or other writing delivered in
connection herewith or for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, priority or sufficiency of this
Agreement or any other Credit Document or the financial condition of any
Borrower or Starwood Party or be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or conditions of
this Agreement or any other Credit Document, or the financial condition of any
Borrower or Starwood Party or the existence or possible existence of any Default
or Event of Default.
10.04 Certain Rights of the Agents. If an Agent shall request
instructions from the Required Lenders with respect to any act or action
(including failure to act) in connection with this Agreement or any other Credit
Document, such Agent shall be entitled to refrain from such act or taking such
action unless and until such Agent shall have received instructions from the
Required Lenders; and no Agent shall incur liability to any Person by reason of
so refraining. Without limiting the foregoing, neither any Lender nor the holder
of any Note shall have any right of action whatsoever against an Agent as a
result of such Agent acting or refraining from acting hereunder or under any
other Credit Document in accordance with the instructions of the Required
Lenders.
10.05 Reliance. Each Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype, facsimile or telecopier message,
cablegram, radiogram, order or other document or telephone message signed, sent
or made by any Person that such Agent believed to be the proper Person, and,
with respect to all legal matters pertaining to this Agreement and any other
Credit Document and its duties hereunder and thereunder, upon advice of counsel
selected by such Agent.
10.06 Indemnification. To the extent an Agent is not
reimbursed and indemnified by the Borrower, the Lenders will reimburse and
indemnify such Agent, in proportion to their Loans, for and against any and all
liabilities, obligations, losses, damages, penalties, claims, actions,
judgments, costs, expenses or disbursements of whatsoever kind or nature which
may be imposed on, asserted against or incurred by such Agent in performing its
respective duties hereunder or under any other Credit Document, in any way
relating to or arising out of this Agreement or any other Credit Document
provided that no Lender shall
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be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the gross negligence or willful misconduct of such Agent.
10.07 The Agents in Their Individual Capacities. With respect
to its obligation to make Loans under this Agreement, each Agent shall have the
rights and powers specified herein for a "Lender" and may exercise the same
rights and powers as though it were not performing the duties specified herein;
and the term "Lenders," "Required Lenders," "holders of Notes" or any similar
terms shall, unless the context clearly otherwise indicates, include the Agents
in their individual capacities. Each Agent may accept deposits from, lend money
to, and generally engage in any kind of banking, trust or other business with
any Credit Party or any Affiliate of any Credit Party as if they were not
performing the duties specified herein, and may accept fees and other
consideration from any Borrower or any Starwood Party for services in connection
with this Agreement and otherwise without having to account for the same to the
Lenders.
10.08 Holders. The Payments Administrator may deem and treat
the payee of any Note as the owner thereof for all purposes hereof unless and
until a written notice of the assignment, transfer or endorsement thereof, as
the case may be, shall have been filed with the Payments Administrator. Any
request, authority or consent of any Person who, at the time of making such
request or giving such authority or consent, is the holder of any Note shall be
conclusive and binding on any subsequent holder, transferee, assignee or
indorsee, as the case may be, of such Note or of any Note or Notes issued in
exchange therefor.
10.09 Resignation by an Agent. (a) Either Administrative Agent
may resign from the performance of all its functions and duties hereunder and/or
under the other Credit Documents at any time by giving 15 Business Days' prior
written notice to the other Administrative Agent (if any), the Borrower and the
Lenders. Upon such resignation, any remaining Administrative Agent shall perform
all the duties of such resigning Administrative Agent hereunder, provided that
if, at the time of such resignation, such Administrative Agent is the only
Administrative Agent, such resignation shall take effect upon the appointment of
a successor Administrative Agent pursuant to clauses (b) and (c) below or as
otherwise provided below.
(b) Upon any such notice of resignation, the Required Lenders
shall appoint a successor Administrative Agent hereunder or thereunder who shall
be a commercial bank or trust company reasonably acceptable to the Borrower.
(c) If a successor Administrative Agent shall not have been so
appointed within such 15 Business Day period, the resigning Administrative
Agent, with the reasonable consent of the Borrower, shall then appoint a
successor Administrative Agent who shall serve as Administrative Agent hereunder
or thereunder until such time, if any, as the Lenders appoint a successor
Administrative Agent as provided above.
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(d) If no successor Administrative Agent has been appointed
pursuant to clause (b) or (c) above by the 20th Business Day after the date such
notice of resignation was given by the resigning Administrative Agent, such
Administrative Agent's resignation shall become effective and the Required
Lenders shall thereafter perform all the duties of such Administrative Agent
hereunder and/or under any other Credit Document until such time, if any, as the
Lenders appoint a successor Administrative Agent as provided above.
SECTION 11. Miscellaneous.
11.01 Payment of Expenses, etc. The Borrower agrees to: (i)
whether or not the transactions herein contemplated are consummated, pay all
reasonable out-of-pocket costs and expenses of the Agents in connection with the
negotiation, preparation, execution and delivery of the Credit Documents and the
documents and instruments referred to therein and any amendment, waiver or
consent relating thereto (including, without limitation, the reasonable fees and
disbursements of White & Case, Simpson Thacher & Bartlett and of the Agents and
each of the Lenders) in connection with the enforcement of the Credit Documents
and the documents and instruments referred to therein (including, without
limitation, the reasonable fees and disbursements of counsel for each Agent and
for each of the Lenders); (ii) pay and hold each of the Agents and Lenders
harmless from and against any and all present and future stamp and other similar
taxes with respect to the foregoing matters and save each of the Lenders
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission (other than to the extent attributable to such
Lender) to pay such taxes; and (iii) indemnify each Agent and each Lender, its
officers, directors, employees, representatives and agents from and hold each of
them harmless against any and all losses, liabilities, claims, damages or
expenses incurred by any of them as a result of, or arising out of, or in any
way related to, or by reason of, an investigation, litigation or other
proceeding (whether or not an Agent or any Lender is a party thereto) related to
the entering into and/or performance of any Document or the use of the proceeds
of any Loans hereunder or the consummation of any transaction contemplated in
any Credit Document, in each case including, without limitation, the reasonable
fees and disbursements of counsel incurred in connection with any such
investigation, litigation or other proceeding (but excluding any such losses,
liabilities, claims, damages or expenses to the extent incurred by reason of the
gross negligence or willful misconduct of the Person to be indemnified).
11.02 Right of Setoff. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, if an Event of Default then exists, each Lender
is hereby authorized at any time or from time to time, without presentment,
demand, protest or other notice of any kind to any Credit Party or to any other
Person, any such notice being hereby expressly waived, to set off and to
appropriate and apply any and all deposits (general or special) and any other
Indebtedness at any time held or owing by such Lender (including, without
limitation, by branches and agencies of such Lender
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wherever located) to or for the credit or the account of any Credit Party
against and on account of the Obligations and liabilities of any Credit Party
owing to such Lender under this Agreement or under any of the other Credit
Documents, including, without limitation, all interests in Obligations purchased
by such Lender pursuant to Section 11.06(b), and all other claims of any nature
or description arising out of or connected with this Agreement or any other
Credit Document, irrespective of whether or not such Lender shall have made any
demand hereunder and although said Obligations, liabilities or claims, or any of
them, shall be contingent or unmatured.
11.03 Notices. Except as otherwise expressly provided herein,
all notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier, facsimile or cable communication) and
mailed, telegraphed, telexed, telecopied, faxed, cabled or delivered, if to a
Credit Party, at the address specified opposite its signature below or in the
other relevant Credit Documents, as the case may be; if to any Lender or Agent,
at its address specified for such Lender or Agent on Annex II hereto; or at such
other address as shall be designated by any party in a written notice to the
other parties hereto. All such notices and communications shall be mailed,
telegraphed, telexed, telecopied, or cabled or sent by overnight courier, and
shall be effective when received.
11.04 Benefit of Agreement. (a) This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto, provided that the Borrower (or
after the Assumption Date no Borrower or any Starwood Guarantor) may assign or
transfer any of its rights or obligations hereunder without the prior written
consent of the Lenders. Each Lender may at any time grant participations in any
of its rights hereunder or under any of the Notes to another financial
institution, provided that (x) in the case of any such participation, the
participant shall not have any rights under this Agreement or any of the other
Credit Documents (the participant's rights against such Lender in respect of
such participation to be those set forth in the agreement executed by such
Lender in favor of the participant relating thereto) and all amounts payable by
the Borrower hereunder shall be determined as if such Lender had not sold such
participation, except that the participant shall be entitled to the benefits of
Sections 1.10 and 3.04 of this Agreement to the extent that such Lender would be
entitled to such benefits if the participation had not been entered into or sold
and (y) no Lender shall transfer, grant or assign any participation under which
the participant shall have rights to approve any amendment to or waiver of this
Agreement or any other Credit Document except to the extent such amendment or
waiver would (i) extend the final scheduled maturity of any Loan or Note in
which such participant is participating (it being understood that any waiver of
the application of any prepayment or the method of any application of any
prepayment to, the Loans shall not constitute an extension of the final maturity
date), or reduce the rate or extend the time of payment of interest (except in
connection with a waiver of the applicability of any post-default increase in
interest rates), or reduce the principal amount thereof, or increase such
participant's participating interest in any commitment over the amount thereof
then in effect (it
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being understood that a waiver of any Default or Event of Default or of a
mandatory reduction in the Total Commitment, or a mandatory prepayment, shall
not constitute a change in the terms of any commitment), (ii) release all or
substantially all of the Collateral or (iii) consent to the assignment or
transfer by any Credit Party of any of its rights and obligations under this
Agreement or any other Credit Document.
(b) Notwithstanding the foregoing, (x) any Lender may assign
all or a portion of its outstanding Loans and its rights and obligations
hereunder to another Lender (or an Affiliate or Related Fund of such assigning
Lender), and (y) with the consent of the Administrative Agents and (if no Event
of Default exists) the Borrower (which consents shall not be unreasonably
withheld), any Lender may assign all or a portion of its outstanding Loans and
its rights and obligations hereunder to one or more Eligible Transferees. No
assignment pursuant to the immediately preceding sentence by a Lender (or by
Lenders which are Affiliates and/or Related Funds of each other) shall, to the
extent such assignment represents an assignment to an institution other than one
or more Lenders hereunder (or to an Affiliate or a Related Fund of an assigning
Lender), be in an aggregate amount less than $5,000,000 unless the entire Loans
of the assigning Lender (or group of Lenders which are Affiliates and/or Related
Funds) are so assigned. If any Lender so sells or assigns all or a part of its
rights hereunder or under the Notes, any reference in this Agreement or the
Notes to such assigning Lender shall thereafter refer to such Lender and to the
respective assignee to the extent of their respective interests and the
respective assignee shall have, to the extent of such assignment (unless
otherwise provided therein), the same rights and benefits as it would if it were
such assigning Lender. Each assignment pursuant to this Section 11.04(b) shall
be effected by the assigning Lender and the assignee Lender executing an
Assignment Agreement (appropriately completed). At the time of any such
assignment, (i) either the assigning or the assignee Lender shall pay to the
Payments Administrator a nonrefundable assignment fee of $500 (if such
assignment is between Lenders already party to this Agreement (or Affiliates or
Related Funds of such Lenders) or $2,000 (if otherwise), and (ii) if requested,
the Borrower will issue new Notes to the respective assignee and to the
assigning Lender in conformity with the requirements of Section 1.05. To the
extent of any assignment pursuant to this Section 11.04(b) to a Person which is
not already a Lender hereunder and which is not a United States Person (as such
term is defined in Section 7701(a)(30) of the Code) for Federal income tax
purposes, the respective assignee Lender shall provide to the Borrower and the
Payments Administrator the appropriate Internal Revenue Service Forms (and, if
applicable, a Section 3.04 Certificate) described in Section 3.04(b). To the
extent that an assignment of all or any portion of a Lender's Loans and related
Obligations pursuant to this Section 11.04(b) would, at the time of such
assignment, result in increased costs under Section 1.10 or 3.04 from those
being charged by the respective assigning bank prior to such assignment, then
the Borrower shall not be obligated to pay such increased costs (although the
Borrower shall be obligated to pay any other increased costs of the type
described above resulting from the changes specified in said Section 1.10 or
3.04 after the date of the respective assignment). Each Lender and the Borrower
agree to
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execute such documents (including, without limitation, amendments to this
Agreement and the other Credit Documents) as shall be necessary to effect the
foregoing. Nothing in this clause (b) shall prevent or prohibit any Lender from
pledging its Notes or Loans to a Federal Reserve Bank in support of borrowings
made by such Lender from such Federal Reserve Bank.
(c) Notwithstanding any other provision of this Section 11.04,
no transfer or assignment of the interests or obligations of any Lender
hereunder or any grant of participation therein shall be permitted if such
transfer, assignment or grant would require the Borrower to file a registration
statement with the SEC or to qualify the Loans under the "Blue Sky" laws of any
State.
(d) Each Lender initially party to this Agreement hereby
represents, and each Person that became a Lender pursuant to an assignment
permitted by this Section 11 will, upon its becoming party to this Agreement,
represent that it is an Eligible Transferee which makes loans in the ordinary
course of its business and that it will make or acquire Loans for its own
account in the ordinary course of such business, provided that subject to the
preceding clauses (a) and (b), the disposition of any promissory notes or other
evidences of or interests in Indebtedness held by such Lender shall at all times
be within its exclusive control.
11.05 No Waiver; Remedies Cumulative. No failure or delay on
the part of any Agent or any Lender in exercising any right, power or privilege
hereunder or under any other Credit Document and no course of dealing between
any Credit Party and either Agent or any Lender shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or under any other Credit Document preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder or thereunder. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which either Agent or any
Lender would otherwise have. No notice to or demand on any Credit Party in any
case shall entitle any Credit Party to any other or further notice or demand in
similar or other circumstances or constitute a waiver of the rights of the
Agents or the Lenders to any other or further action in any circumstances
without notice or demand.
11.06 Payments Pro Rata. (a) The Payments Administrator agrees
that promptly after its receipt of each payment from or on behalf of any Credit
Party in respect of any Obligations, it shall distribute such payment to the
Lenders (other than any Lender that has expressly waived its right to receive
its pro rata share thereof) pro rata based upon their respective shares, if any,
of the Obligations with respect to which such payment was received.
(b) Each of the Lenders agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon security, by
the exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or interest
on, the Loans, of a sum which with respect to the related sum or sums received
by other Lenders is in a
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greater proportion than the total of such Obligation then owed and due to such
Lender bears to the total of such Obligation then owed and due to all of the
Lenders immediately prior to such receipt, then such Lender receiving such
excess payment shall purchase for cash without recourse or warranty from the
other Lenders an interest in the Obligations of the respective Credit Party to
such Lenders in such amount as shall result in a proportional participation by
all of the Lenders in such amount, provided that if all or any portion of such
excess amount is thereafter recovered from such Lender, such purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but
without interest.
11.07 Calculations; Computations. (a) The financial statements
to be furnished to the Lenders pursuant hereto shall be made and prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by the Borrower to the Lenders).
(b) All computations of interest and Fees hereunder shall be
made on the actual number of days elapsed over a year of 360 days.
11.08 Governing Law; Submission to Jurisdiction; Venue; Waiver
of Jury Trial. (a) This Agreement and the other Credit Documents and the rights
and obligations of the parties hereunder and thereunder shall be construed in
accordance with and be governed by the law of the state of New York. Any legal
action or proceeding with respect to this Agreement or any other Credit Document
may be brought in the courts of the State of New York or of the United States
for the Southern District of New York in the Borough of Manhattan, and, by
execution and delivery of this Agreement, the Borrower hereby irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The Borrower further
irrevocably consents to the service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to it, to the extent located
outside New York City, or by hand, to the extent located within New York City,
at its address for notices pursuant to Section 11.03, such service to become
effective 30 days after such mailing. The Borrower hereby irrevocably
designates, appoints and empowers CT Corporation System, with offices on the
date hereof located at 1633 Broadway, New York, New York 10019, as its agent for
service of process in respect of any such action or proceeding. Nothing herein
shall affect the right of any Agent or any Lender to serve process in any other
manner permitted by law or to commence legal proceedings or otherwise proceed
against any Credit Party in any other jurisdiction.
(b) The Borrower hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement or
any other Credit Document brought in the courts referred to in clause (a) above
and hereby further irrevocably waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
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(c) Each of the parties to this Agreement hereby irrevocably
waives all right to a trial by jury in any action, proceeding or counterclaim
arising out of or relating to this Agreement, the other Credit Documents or the
transactions contemplated hereby or thereby.
11.09 Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Administrative Agents.
11.10 Assumption Date. The Payments Administrator shall give
each Lender prompt written notice of the occurrence of the Assumption Date.
11.11 Headings Descriptive. The headings of the several
sections and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.
11.12 Amendment or Waiver. Neither this Agreement nor any
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing and signed by the Borrower and the Required Lenders, provided that no
such change, waiver, discharge or termination shall, without the consent of each
Lender directly affected thereby, (i) extend the Final Maturity Date (it being
understood that any waiver of any prepayment of, or the method of application of
any prepayment to, the Loans shall not constitute any such extension), or reduce
the rate or extend the time of payment of interest (other than as a result of
waiving the applicability of any post-default increase in interest rates)
thereon, or reduce the principal amount thereof, or increase the commitment of
any Lender over the amount thereof then in effect (it being understood that a
waiver of any Default or Event of Default or of a mandatory reduction in the
Total Commitment shall not constitute a change in the terms of any commitment of
any Lender), (ii) amend, modify or waive any provision of this Section 11.12,
(iii) reduce the percentage specified in, or (except to give effect to any
additional facilities hereunder) otherwise modify, the definition of Required
Lenders, (iv) consent to the assignment or transfer by any Credit Party of any
of its rights and obligations under the Credit Documents or (v) release all or
substantially all of the Collateral. No provision of Section 10 may be amended
without the consent of the Agents.
11.13 Survival. All indemnities set forth herein including,
without limitation, in Section 1.10, 1.11, 3.04, 10.06 or 11.01 shall survive
the execution and delivery of this Agreement and the making and repayment of the
Loans.
11.14 Domicile of Loans. Each Lender may transfer and carry
its Loans at, to or for the account of any branch office, subsidiary or
affiliate of such Lender, provided that the Borrower shall not be responsible
for costs arising under
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Section 1.10, or 3.04 resulting from any such transfer (other than a transfer
pursuant to Section 1.12 or 1.13) to the extent not otherwise applicable to such
Lender prior to such transfer.
11.15 Confidentiality. Subject to Section 11.04, the Lenders
shall hold all non-public information obtained pursuant to the requirements of
this Agreement which has been identified as such by the Borrower in accordance
with its customary procedure for handling confidential information of this
nature and in accordance with safe and sound banking practices and in any event
may make disclosure to its Affiliates, employees, auditors, advisors or counsel
or as reasonably required by any bona fide transferee or participant in
connection with the contemplated transfer of any Loans or participation therein
(so long as such transferee or participant agrees to be bound by the provisions
of this Section 11.15) or as required or requested by any governmental agency or
representative thereof or pursuant to legal process, provided that, unless
specifically prohibited by applicable law or court order, each Lender shall
notify the Borrower of any request by any governmental agency or representative
thereof or any requested or required disclosure pursuant to legal process (other
than any such request in connection with an examination of the financial
condition of such Lender by such governmental agency) for disclosure of any such
non-public information reasonably promptly after receipt of such request (and
prior to responding thereto) so as to give time to the Borrower to, if it so
chooses, contest such request and/or to seek an appropriate protective order,
and provided further that in no event shall any Lender be obligated or required
to return any materials furnished by any Westin Entity.
11.16 Lender Register. The Borrower hereby designates the
Payments Administrator to serve as its agent, solely for purposes of this
Section 11.16, to maintain a register (the "Lender Register") on which it will
record the Loans made by each of the Lenders and each repayment in respect of
the principal amount of the Loans of each Lender. Failure to make any such
recordation, or any error in such recordation, shall not affect any Borrower's
obligations in respect of such Loans. With respect to any Lender, the transfer
of the rights to the principal of, and interest on any Loan made shall not be
effective until such transfer is recorded on the Lender Register maintained by
the Payments Administrator with respect to ownership of such Loans and prior to
such recordation all amounts owing to the transferor with respect to such Loans
shall remain owing to the transferor. The registration of assignment or transfer
of all or part of any Loan shall be recorded by the Payments Administrator on
the Lender Register only upon the acceptance by the Payments Administrator of a
properly executed and delivered Assignment Agreement pursuant to Section
11.04(b). The Borrower agrees to indemnify the Payments Administrator from and
against any and all losses, claims, damages and liabilities of whatsoever nature
which may be imposed on, asserted against or incurred by the Payments
Administrator in performing its duties under this Section 11.16 other than those
resulting from the Payments Administrator's willful misconduct or gross
negligence.
11.17 No Liability for General Partners. No past, present or
future
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general partner of the Borrower shall have any liability as a result of its
being a general partner for any Obligations under this Agreement or any of the
other Credit Documents or for any claim based on, in respect of, or by reason of
such Obligations or their creation. Each Lender hereby waives and releases all
such liability.
* * *
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IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.
Address: WHWE L.L.C.
By: WHITEHALL STREET REAL ESTATE
LIMITED PARTNERSHIP V
Member and Manager
By:
--------------------------------
Title:
By: GS CAPITAL PARTNERS, L.P.
Member and Manager
By: GS Advisors, L.P.,
General Partner
By: GS Advisors, Inc.,
General Partner
By:
--------------------------------
Title:
BANKERS TRUST COMPANY,
Individually and as Administrative Agent
By:
--------------------------------
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Title:
THE CHASE MANHATTAN BANK, Individually
and as Administrative Agent
By:
--------------------------------
Title:
-48-
<PAGE> 55
ANNEX I
COMMITMENTS
<TABLE>
<CAPTION>
Lender Commitment
- ------ ----------
<S> <C>
Bankers Trust Company $15,162,969.63
The Chase Manhattan
Bank $15,162,969.62
Total $30,325,939.25
</TABLE>
-49-
<PAGE> 56
ANNEX II
LENDERS AND AGENTS ADDRESSES
Bankers Trust Company 130 Liberty Street
New York, New York 10006
Attention: Laura Burwick
Tel: (212) 250-2568
Fax: (212) 250-7200
The Chase Manhattan Bank 270 Park Avenue
New York, New York 10017
Attention: James Rolison
Tel: (212) 270-6000
Fax: (212)
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<PAGE> 57
ANNEX III
SHARES
[ON FILE WITH WHITE & CASE]
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<PAGE> 1
Exhibit 10.50
EXCHANGE RIGHTS AGREEMENT
(CLASS A REALTY PARTNERSHIP UNITS)
THIS EXCHANGE RIGHTS AGREEMENT (this "Agreement") is made as
of January 2, 1998 among STARWOOD LODGING TRUST, a Maryland real estate
investment trust (the "Trust"), SLT REALTY LIMITED PARTNERSHIP, a Delaware
limited partnership (the "Realty Partnership"), and certain limited partners of
the Realty Partnership listed on the signature pages hereto (the "Westin Limited
Partners"). Unless otherwise indicated, capitalized terms used herein are used
herein as defined in Section 1.
WHEREAS, pursuant to a Transaction Agreement dated as of
September 8, 1997 (the "Transaction Agreement") among WHWE L.L.C., Woodstar
Investor Partnership, Nomura Asset Capital Corporation, Juergen Bartels, W&S
Hotel L.L.C., Westin Hotels & Resorts Worldwide, Inc., W&S Lauderdale Corp., W&S
Seattle Corp., Westin St. John Hotel Company, Inc., W&S Denver Corp., W&S
Atlanta Corp., the Trust, SLT Realty Limited Partnership, Starwood Lodging
Corporation and SLC Operating Limited Partnership, the Westin Limited Partners
are making capital contributions to the Realty Partnership in return for the
issuance of Class A Limited Partnership Units ("Class A RP Units");
WHEREAS, pursuant to the Transaction Agreement the parties
hereto are entering into this Agreement to provide for: (a) certain rights of
the Westin Limited Partners to tender Class A RP Units to the Trust on or prior
to the Cross-Over Date (as defined herein) in exchange for shares of Class B EPS
(as defined herein) and (b) certain rights of the Westin Limited Partners to
tender Class A RP Units to the Trust at any time in exchange for Paired Shares
(as defined herein), subject in either such case to certain rights of the Trust
to substitute cash or other forms of consideration for such shares of Class B
EPS or Paired Shares or to cause the Realty Partnership to redeem the Class A RP
Units being tendered for cash, all on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants set forth herein, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
"Board of Trustees" shall mean the Board of Trustees of the
Trust or any committee authorized by the Board of Trustees from time to
time to exercise any of its powers or perform any of its
responsibilities with respect to this Agreement.
<PAGE> 2
"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which state or federally chartered banking
institutions in New York, New York are not required to be open.
"Cash Equivalent" of Paired Shares as of any date shall mean
an amount of cash equal to (i) the average of the daily Current Market
Prices per unit of such Paired Shares during the five (5) consecutive
Trading Days immediately preceding such date or (ii) if the Paired
Shares are not publicly traded on such date, the fair market value of
such Paired Shares as of such date as determined by the Board of
Trustees in good faith.
"Certificate of Admission" shall mean the Certificate of
Admission of SLT Realty Limited Partnership dated as of January 1, 1998
pursuant to which the Class A RP Units were authorized.
"Class A Articles Supplementary" shall mean Article 6.15 of
the Declaration pursuant to which the Trust has classified and
designated 30,000,000 shares of beneficial interest in the Trust as
"Class A Exchangeable Preferred Shares", as hereafter amended from time
to time.
"Class A EPS" means the Class A Exchangeable Preferred Shares,
par value $0.01 per share, created by the Class A Articles
Supplementary.
"Class B Articles Supplementary" shall mean Article 6.16 of
the Declaration pursuant to which the Trust has classified and
designated 15,000,000 shares of beneficial interest in the Trust as
"Class B Exchangeable Preferred Shares", as hereafter amended from time
to time.
"Class B EPS" shall mean the Class B Exchangeable Preferred
Shares, par value $0.01 per share, of the Trust created pursuant to the
Class B Articles Supplementary.
"Class B EPS Cash Option" shall have the meaning set forth in
paragraph (a)(ii) of Section 3 hereof.
"Class B EPS Delivery Option" shall have the meaning set forth
in paragraph (a)(ii) of Section 3 hereof.
"Class B EPS Redemption Option" shall have the meaning set
forth in paragraph (a)(ii) of Section 3 hereof.
"Class B EPS Request" shall have the meaning set forth in
paragraph (a) of Section 2 hereof.
"Class B Liquidation Preference" shall have the meaning
-2-
<PAGE> 3
set forth in paragraph (b) of Article 6.16.4 of the Declaration.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Corporation" shall mean Starwood Lodging Corporation,
a Maryland corporation, and any successor.
"Corporation Shares" shall mean the shares of common stock,
par value $.01 per share, of the Corporation or any stock of the
Corporation into which such common stock may hereafter be changed.
"Cross-Over Date" shall mean the fifth anniversary of the
Issue Date; provided that in the event that the CrossOver Date referred
to in the Declaration is extended pursuant to Article 6.16.9 thereof,
the Cross-Over Date for the purposes of this Agreement shall be
similarly extended.
"Current Market Price" of publicly traded Paired Shares or any
other shares of beneficial interest or other securities of the Trust or
any other issuer as of any Trading Day shall mean the last reported
sales price, regular way, on such day, or, if no sale takes place on
such day, the average of the reported closing bid and asked prices on
such day, regular way, in either case as reported on the NYSE or, if
such shares or other securities are not listed or admitted for trading
on the NYSE, on the principal national securities exchange on which
such shares or other securities are listed or admitted for trading or,
if not listed or admitted for trading on any national securities
exchange, on the NASDAQ National Market or, if such shares or other
securities are not quoted on such NASDAQ National Market, the average
of the closing bid and asked prices on such day in the over-the-counter
market as reported by NASDAQ or, if bid and asked prices for such
shares or other securities on such day shall not have been reported
through NASDAQ, the average of the bid and asked prices on such day as
furnished by any NYSE member firm regularly making a market in such
security selected for such purpose by the Chief Executive Officer or
Chief Financial Officer of the Trust or the Board of Trustees.
"Declaration" shall mean the Amended and Restated Declaration
of Trust of the Trust, as amended from time to time.
"Delivered Shares" shall have the meaning set forth in
paragraph (e) of Section 3 hereof.
"Disinterested Members" when used with respect to the
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<PAGE> 4
Trust has the meaning set forth in the Code of Regulations of the Trust
and, when used with respect to the Corporation, has the meaning set
forth in the By-Laws of the Corporation, in each case as amended from
time to time.
"Election Notice" shall have the meaning set forth in
paragraph (a) of Section 3 hereof.
"Excess Shares" shall have the meaning set forth in paragraph
(e) of Section 3 hereof.
"Exchange Promissory Note" shall mean an unsecured promissory
note of the Trust in such form as the Trust shall reasonably prescribe
with a maturity date ninety (90) days after the date of issuance of
such note. Such Exchange Promissory Note shall bear interest in a
amount equal to (i) in the case of the substitution of an Exchange
Promissory Note for Paired Shares constituting Excess Shares pursuant
to Section 3(e) hereof, the amount of any dividends paid during the
period that such note remains outstanding on a number of Paired Shares
equal to the number of Paired Shares for which such Exchange Promissory
Note is being substituted and (ii) in the case of the substitution of
an Exchange Promissory Note for any shares of Class B EPS constituting
Excess Shares pursuant to such Section, the amount of any dividends
accrued (whether or not paid) during the period that such note remains
outstanding on a number of shares of Class B EPS equal to the number of
shares of Class B EPS for which such Exchange Promissory Note is being
substituted, which interest shall be payable on the dates of payment of
the corresponding dividends.
"Exchange Ratio" shall have the meaning set forth in paragraph
(b) of Section 3 hereof.
"Issue Date" shall mean the first date on which shares of
Class A EPS and Class B EPS are issued by the Trust pursuant to the
Transaction Agreement.
"Letter of Transmittal" shall have the meaning set forth in
paragraph (a) of Section 2 hereof.
"NYSE" shall mean the New York Stock Exchange.
"Offered Shares" shall have the meaning set forth in paragraph
(e) of Section 3 hereof.
"Ownership Limit" shall have the meaning set forth in
Section 6.12 of the Declaration.
"Paired Shares" shall mean units consisting of one Trust Share
paired with one Corporation Share and
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<PAGE> 5
represented by a single share certificate, as provided in the Pairing
Agreement dated as of June 25, 1980, between the Trust and the
Corporation, as amended from time to time, subject to any changes in
the securities constituting a unit of Paired Shares under such Pairing
Agreement from time to time.
"Paired Shares Delivery Option" shall have the meaning set
forth in paragraph (a)(i) of Section 3 hereof.
"Paired Shares Cash Option" shall have the meaning set forth
in paragraph (a)(i) of Section 3 hereof.
"Paired Shares Redemption Option" shall have the meaning set
forth in paragraph (a)(i) of Section 3 hereof.
"Paired Shares Request" shall have the meaning set forth in
paragraph (a) of Section 2 hereof.
"Person" shall mean any individual, firm, partnership,
corporation, limited liability company or other entity, and shall
include any successor (by merger or otherwise) of such entity.
"Registered Sale Option" shall have the meaning set forth in
paragraph (e) of Section 3 hereof.
"REIT Rules" shall mean the requirements (i) for the Trust to
qualify as a real estate investment trust under the Code as set forth
in Sections 856(a)(5) and 856(a)(6) of the Code and (ii) for the
Corporation or any affiliate of the Corporation which is a tenant of
the Trust to not be treated as a related party pursuant to Section
856(d)(2)(B) of the Code.
"Requested Shares" shall have the meaning set forth in
paragraph (e) of Section 3 hereof.
"RP Special Distribution" shall have the meaning set forth in
paragraph (f) of Section 3 hereof.
"Securities Act" shall mean the Securities Act of 1933,
as amended.
"Trading Day" with respect to publicly traded Paired Shares or
any other shares of beneficial interest or other securities of the
Trust or any other issuer shall mean any day on which the securities in
question are traded on the NYSE, or if such securities are not listed
or admitted for trading on the NYSE, on the principal national
securities exchange on which such securities are listed or admitted, or
if not listed or admitted for trading on any national
-5-
<PAGE> 6
securities exchange, on the NASDAQ National Market, or if such
securities are not quoted on such NASDAQ National Market, in the
applicable securities market in which such securities are traded.
"Transaction Agreement" shall have the meaning set forth in
the Recitals.
"Transfer Agent" shall mean ChaseMellon Shareholder Services,
L.L.C. (or any successor thereof), or such other agent or agents of the
Trust as may be designated by the Board of Trustees or their designee
as the transfer agent for the Class B EPS and/or the Paired Shares.
"Trust" shall mean Starwood Lodging Trust, a Maryland real
estate investment trust, and any successor.
"Trust Shares" shall mean the common shares of beneficial
interest in the Trust, par value $.01 per share, or any shares of
beneficial interest in the Trust into which such common shares may be
changed.
"Westin Transaction Securities" shall mean, with respect to a
holder of Class A RP Units or an affiliate thereof, any shares of Class
A EPS, shares of Class B EPS, Class A RP Units and Starwood Operating
Partnership Units (as defined in the Transaction Agreement) received by
such holder or affiliate pursuant to the Transaction Agreement,
together with any shares of Class B EPS, Class A EPS or Paired Shares
(or other securities) issued upon exchange or conversion of any such
Westin Transaction Securities.
SECTION 2. RIGHT TO TENDER CLASS A RP UNITS. (a) Upon the
terms and subject to the conditions of this Agreement, each registered holder of
Class A RP Units will have the right to tender outstanding Class A RP Units to
the Trust. In order for Class A RP Units to be validly tendered pursuant to this
Agreement, the registered holder thereof shall deliver to the Trust, at the
address provided pursuant to Section 9 , (i) a completed and duly executed
Letter of Transmittal in the form attached hereto as Exhibit A (the "Letter of
Transmittal") and any other documents required by the Letter of Transmittal and
(ii) a certificate (duly executed on behalf of such holder by an officer,
partner, manager or other duly authorized representative of such holder, if such
holder is not an individual) setting forth (A) the number of Trust Shares and
Corporation Shares held directly by such holder, and in the case of WHWE L.L.C.
("WHWE"), held by Whitehall Real Estate Limited Partnership ("Whitehall"), GS
Capital Partners, L.P. ("GSCP") or The Goldman Sachs Group, L.P. (other than
shares held in "street name" for third parties or shares held in accounts for
unaffiliated third parties) and
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<PAGE> 7
(B) the number of partners in Whitehall or GSCP with a 25% or greater interest
in the profits or capital of Whitehall or GSCP, respectively. In addition, in
the event of a tender of Class A RP Units by WHWE, the Trust may deliver to WHWE
a list of the Trust's ten largest shareholders, in which event, WHWE shall
certify to the Trust the identity of any such shareholders that are directly
partners of Whitehall or GSCP in a partnership in which WHWE or GSCP and such
shareholder are both partners with a 25% or greater interest in the profits and
capital of such partnership. In such Letter of Transmittal, the registered
holder of the Class A RP Units being tendered shall specify which Class A RP
Units such holder desires to exchange for Paired Shares (a "Paired Shares
Request") and which Class A RP Units such holder desires to exchange for shares
of Class B EPS (a "Class B EPS Request"); provided that no Class B EPS Request
may be made unless the Letter of Transmittal is delivered to the Trust on or
prior to the Cross-Over Date. The Trust shall make all determinations as to the
validity and form of any tender of Class A RP Units in accordance with the
provisions of this Agreement and upon rejection of a tender shall give the
tendering holder written notice of such rejection, which shall include the
reasons therefor.
(b) Unless otherwise determined by agreement of the Trust,
tenders of Class A RP Units pursuant to this Agreement shall be irrevocable and
shall not be subject to withdrawal or modification; provided that in the event
that the issuance of the full number of Requested Shares pursuant to any tender
of Class A RP Units would violate either the Ownership Limit or the REIT Rules
and either (i) the Trust elects pursuant to Section 3(e) below to deliver an
Exchange Promissory Note in substitution for any Excess Shares or (ii) the Trust
exercises the Registered Sale Option with respect to any such Excess Shares, the
holder of the Class A RP Units tendered will have the right to withdraw his or
her Letter of Transmittal as to the Excess Shares for which such Exchange
Promissory Note is proposed to be substituted or with respect to which such
Registered Sale Option is being exercised, which withdrawal must be made by
written notice to the Trust within ten (10) Business Days after receipt of the
applicable Election Notice.
(c) The rights to exchange Class A RP Units pursuant to this
Agreement constitute a continuous offer and may not be withdrawn, amended or
modified by the Trust without the prior written consent of each registered
holder of outstanding Class A RP Units adversely affected by such withdrawal,
amendment or modification; provided that any withdrawal, amendment or
modification that does not adversely affect any holder of outstanding Class A RP
Units may be effected without the consent of such holder.
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<PAGE> 8
SECTION 3. ACCEPTANCE OF TENDER; DELIVERY OF ELECTION NOTICE. (a)
Subject to paragraph (c) below, as promptly as practicable (and in any event
within ten (10) Business Days) after receipt of a Letter of Transmittal and all
related documents and certifications, the Trust shall elect, pursuant to an
election notice given to the registered holder who delivered such Letter of
Transmittal to the Trust (an "Election Notice"), to take one or more of the
following actions with respect to the Class A RP Units subject to such Letter of
Transmittal:
(i) with respect to any such Class A RP Units for which a
Paired Shares Request has been made, the Trust shall elect either (A)
to issue to the registered holder a number of Paired Shares equal to
the number of such Class A RP Units (including procuring the issuance
by the Corporation of the Corporation Shares component of such Paired
Shares) (the "Paired Shares Delivery Option"), (B) to pay to such
holder the Cash Equivalent of such Paired Shares determined as of the
date of such Election Notice (the "Paired Shares Cash Option"), (C) to
cause the Realty Partnership to redeem such Class A RP Units for a cash
redemption price equal to such Cash Equivalent of such Paired Shares
(the "Paired Shares Redemption Option") or (D) any combination of the
actions described in the foregoing clauses (A), (B) and (C); and
(ii) with respect to any Class A RP Units for which a valid
Class B EPS Request has been made, the Trust shall elect either (A) to
issue to the registered holder a number of shares of Class B EPS equal
to the number of such Class A RP Units multiplied by the Exchange Ratio
(as determined pursuant to paragraph (b) below) in effect as of the
date of such Election Notice (the "Class B EPS Delivery Option"), (B)
to pay to such registered holders an amount in cash equal to the Class
B Liquidation Preference of such shares of Class B EPS at such time
(the "Class B EPS Cash Option"), (C) to cause the Realty Partnership to
redeem such Class A RP Units for a cash redemption price equal to such
Class B Liquidation Preference of such shares of Class B EPS at such
time (the "Class B EPS Redemption Option") or (D) any combination of
the actions described in the foregoing clauses (A), (B) and (C).
(b) The "Exchange Ratio" of shares of Class B EPS for each
Class A RP Unit at any time shall be equal to one (1) divided by the number of
Class B Underlying Paired Shares (as defined in the Class B Articles
Supplementary) for which each share of Class B EPS is then indirectly
exchangeable as of such date (determined without taking into consideration any
Class A Dividend Replacement Shares or Class B Dividend Replacement Shares, as
defined in the Class A Articles Supplementary and Class B Articles
Supplementary, respectively).
-8-
<PAGE> 9
(c) (i) If, at any time after the Issue Date, the Trust or the
Corporation shall become a party to any transaction, including, without
limitation, a merger, consolidation, statutory share exchange, self tender offer
for all or substantially all outstanding Trust Shares and/or Corporation Shares,
sale of all or substantially all of the Trust's or the Corporation's assets or
recapitalization of the Trust Shares and/or the Corporation Shares (but
excluding any event constituting a Trust Common Adjustment Event or a
Corporation Common Adjustment Event) (each of the foregoing being referred to
herein as a "Paired Shares Transaction"), in each case as a result of which the
outstanding Trust Shares and/or Corporation Shares shall be converted into or
exchanged for the right to receive stock, securities or other property
(including cash or any combination thereof), effective as of the effective date
of such Paired Shares Transaction, each unit of Paired Shares issuable upon
tender of Class A RP Units hereunder shall thereafter be deemed to consist of
the kind and amount of shares of beneficial interest in the Trust, shares of
stock of the Corporation and other securities and property (including cash or
any combination thereof) that would have been held or receivable upon the
consummation of such Paired Shares Transaction by a holder of a number of Paired
Shares equal to the number of Class A RP Units so tendered assuming such holder
of Paired Shares (A) is not a Person with which the Trust or the Corporation
consolidated or into which the Trust or the Corporation was merged or which
merged into the Trust or the Corporation or to which such sale or transfer was
made, as the case may be (a "constituent person"), or an affiliate of a
Constituent Person and (B) failed to exercise his or her rights of election, if
any, as to the kind or amount of stock, securities and other property (including
cash) receivable upon such Paired Shares Transaction (provided that if the kind
or amount of stock, securities and other property (including cash) receivable
upon such Paired Shares Transaction is not the same for each unit of Paired
Shares held immediately prior to such Paired Shares Transaction by other than a
constituent person or an affiliate thereof and in respect of which such rights
of election shall not have been exercised ("Non-Electing Shares"), then for the
purposes of this subparagraph (ii) the kind and amount of stock, securities and
other property (including cash) receivable upon such Paired Shares Transaction
in respect of each Non-Electing Share shall be deemed to be the kind and amount
so receivable per share by a plurality of the Non-Electing Shares). The
provisions of this paragraph (i) shall similarly apply to successive Paired
Shares Transactions.
(ii) If, at any time after the Issue Date, the Trust shall become a
party to any transaction, including, without limitation, a merger,
consolidation, statutory share exchange, self tender offer for all or
substantially all outstanding Trust Shares, sale of all or substantially all of
the Trust's assets or
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<PAGE> 10
recapitalization of the Class B EPS (each of the foregoing being referred to
herein as a "Class B Transaction"), in each case as a result of which the
outstanding shares of Class B EPS shall be converted into or exchanged for the
right to receive stock, securities or other property (including cash or any
combination thereof), effective as of the effective date of such Class B
Transaction, each share of Class B EPS issuable upon tender of Class A RP Units
shall thereafter be deemed to consist of the kind and amount of shares of stock
and other securities and property (including cash or any combination thereof)
that would have been held or receivable upon the consummation of such Class B
Transaction by a holder of a number of shares of Class B EPS equal to the number
of Class A RP Units being tendered, assuming such holder of shares of Class B
EPS (A) is not a Person with which the Trust consolidated or into which the
Trust was merged or which merged into the Trust or to which such sale or
transfer was made, as the case may be, or an affiliate of such a constituent
person and (B) failed to exercise his or her rights of election, if any, as to
the kind or amount of stock, securities an other property (including cash)
receivable upon such Class B Transaction (provided that if the kind or amount of
stock, securities and other property (including cash) receivable upon such Class
B Transaction is not the same for each share of Class B EPS held immediately
prior to such Class B Transaction by other than a constituent person or an
affiliate thereof and in respect of which such rights of election shall not have
been exercised, then for the purposes of this subparagraph (ii) the kind and
amount of stock, securities and other property (including cash) receivable upon
such Class B Transaction by each Non-Electing Share shall be deemed to be the
kind and amount so receivable per share by a plurality of the Non-Electing
Shares). The provisions of this paragraph (ii) shall similarly apply to
successive Class B Transactions.
(d) Notwithstanding any other provision of this Agreement, no
Paired Shares or shares of Class B EPS shall be issued or paid in respect of any
tender of Class A RP Units prior to the expiration or termination of the waiting
period applicable to such issuance or payment, if any, under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as it may be amended from
time to time.
(e) If the delivery to a registered holder tendering Class A
RP Units of the full number(s) of Paired Shares and/or shares of Class B EPS
requested to be delivered pursuant to the Letter of Transmittal (the "Requested
Shares") would result in a violation of either the Ownership Limit or the REIT
Rules, the Trust may elect in the Election Notice, in lieu of the options
described in paragraph (a) above (i) to deliver to such holder the maximum
number(s) of Paired Shares and/or shares of Class B EPS, as applicable, (which
maximum numbers, in the case of a Letter of Transmittal containing both a Paired
Shares Request and
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<PAGE> 11
a Class B EPS Request, shall represent the same percentage of the numbers of
Paired Shares and shares of Class B EPS, respectively, comprising such Requested
Shares) that may be delivered without causing such a violation (the "Delivered
Shares", with the Requested Shares in excess of the Delivered Shares being
referred to herein as the "Excess Shares") and (ii) (A) in respect of any Paired
Shares included in such Excess Shares either (1) to pay such holder the Cash
Equivalent of such Paired Shares determined as of the date of such Election
Notice, (2) to deliver to such holder an Exchange Promissory Note in a principal
amount equal to such Cash Equivalent or (3) to cause the Realty Partnership to
redeem a corresponding number of Class A RP Units for a cash redemption price
equal to such Cash Equivalent and (B) in respect of any shares of Class B EPS
included in such Excess Shares, either (1) to make a cash payment to such holder
equal to the Class B Liquidation Preference of such shares as of such date, (2)
to deliver to such holder an Exchange Promissory Note in a principal amount
equal to such Class B Liquidation Preference or (3) to cause the Realty
Partnership to redeem a corresponding number of Class A RP Units for a cash
redemption price equal to such Class B Liquidation Preference. Notwithstanding
the foregoing, in the event that the delivery of the full number of Requested
Shares pursuant to a Letter of Transmittal would violate either the Ownership
Limit or the REIT Rules because the registered holder of Class A RP Units
tendering Class A RP Units, together with such holder's affiliates (but without
giving effect to any other applicable attribution rules under the Code),
beneficially owns, at the date of the Election Notice, Paired Shares and/or
shares of Class B EPS other than through the ownership of Westin Transaction
Securities, the Trust will have the option (the "Registered Sale Option"),
exercisable in the Election Notice, in lieu of delivering an Exchange Promissory
Note in a principal amount equal to the Cash Equivalent of the any Paired Shares
included in the Excess Shares or the Class B Liquidation Preference of any
shares of Class B EPS included in the Paired Shares, to procure the filing of a
registration statement under the Securities Act, and to publicly offer and sell
pursuant to such registration statement in such manner as the Trust in good
faith determines to be appropriate (x) a number of Paired Shares equal to the
number of Paired Shares included in such Excess Shares or (y) a number of Paired
Shares equal to the number of Class B Underlying Paired Shares (as defined in
the Class B Articles Supplementary) for which the shares of Class B EPS included
in such Excess Shares are then indirectly exchangeable as of such date
(determined without taking into consideration any Class A Dividend Replacement
Shares or Class B Dividend Replacement Shares, as defined in the Class A
Articles Supplementary and Class B Articles Supplementary, respectively) (in
either such case, the "Offered Shares"), the net proceeds of which sale (after
deducting any applicable underwriting discounts or commissions and the expenses
of such offering) shall be paid to such holder.
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<PAGE> 12
(f) If, as of the date of the Election Notice given by the
Trust with respect to any tender of Class A RP Units, there are any accrued but
unpaid RP Special Distributions (as defined in the Certificate of Admission),
then: (i) the number of shares of Class B EPS issuable in exchange for each
Class A RP Unit with respect to which a Class B EPS Request has been made shall
be increased by a number of shares equal to (A) the amount of such accrued but
unpaid RP Special Distributions divided by (B) the product of (1) the number of
Class B Underlying Paired Shares (as defined in the Class B Articles
Supplementary) for which each share of Class B EPS is then indirectly
exchangeable as of such date (determined without taking into consideration any
Class A Dividend Replacement Shares or Class B Dividend Replacement Shares, as
defined in the Class A Articles Supplementary and Class B Articles
Supplementary, respectively) multiplied by (2) the Cash Equivalent of each
Paired Share as of such date and (ii) the number of Paired Shares issuable in
exchange for each Class A RP Unit with respect to which a Paired Shares Request
has been made shall be increased by a number of shares equal to (A) the amount
of such accrued but unpaid RP Special Distributions divided by (B) the Cash
Equivalent of each Paired Share as of such date.
SECTION 4. DELIVERY OF SECURITIES AND/OR CASH TO HOLDER. (a)
If the Election Notice relating to any tender of Class A RP Units pursuant to
this Agreement does not give rise to a withdrawal right pursuant to Section 2(b)
above, such Election Notice shall be accompanied by the delivery of the Paired
Shares, shares of Class B EPS and/or cash required to be delivered pursuant to
such Election Notice. If the Election Notice does give rise to such a withdrawal
right, but such right is not exercised by the holder that delivered the related
Letter of Transmittal, the Trust shall deliver the Paired Shares, shares of
Class B EPS, Exchange Promissory Note(s) and/or cash required to be delivered
pursuant to such Election Notice within five (5) Business Days after the
expiration of such withdrawal right.
(b) If the Election Notice includes the exercise of the
Registered Sale Option, the proceeds from the sale of the Offered Shares shall
be paid over to the applicable registered holder promptly upon receipt. Any cash
payable to such registered holder hereunder shall be payable at the election of
the Trust by check or by wire transfer to an account designated in writing by
such holder, if one has been so designated.
(c) With respect to any Paired Shares to be issued pursuant to
an Election Notice, the Trust shall issue and deliver (and shall cause the
Corporation to issue and deliver) at the office of the Trust (or, at the option
of the Trust, at the office of the Transfer Agent) to the applicable registered
holder
-12-
<PAGE> 13
a certificate or certificates for the number of full Paired Shares deliverable
in accordance with the provisions of Section 3 above, and any fractional
interest in respect of a unit of Paired Shares otherwise deliverable pursuant to
such provisions shall be settled as provided in paragraph (d) below. With
respect to any shares of Class B EPS to be issued pursuant to an Election
Notice, the Trust shall issue and deliver at the office of the Trust (or, at the
option of the Trust, at the office of the Transfer Agent) to the applicable
registered holder a certificate or certificates for the number of full shares of
Class B EPS deliverable in accordance with the provisions of Section 3 above,
and any fractional interest in respect of a share of Class B EPS otherwise
deliverable pursuant to such provisions shall be settled as provided in
paragraph (d) below.
(d) No fractional units of Paired Shares or shares of Class B
EPS or scrip evidencing fractions of units of Paired Shares or shares of Class B
EPS shall be issued upon any tender of Class A RP Units pursuant to this
Agreement. Instead of any fractional interest in a unit of Paired Shares that
would otherwise be deliverable in connection with such tender, the Trust shall
pay to the registered holder an amount in cash equal to the corresponding
fraction of the Current Market Price of the Paired Shares on the Trading Day
immediately preceding the date of the applicable Election Notice, and instead of
any fractional interest in a share of Class B EPS that would otherwise be
deliverable in connection with such tender, the Trust shall pay to the
registered holder an amount in cash equal to the corresponding fraction of the
product of (x) the Current Market Price of the Paired Shares on the Trading Day
immediately preceding the date of the applicable Election Notice multiplied by
(y) the number of Class B Underlying Paired Shares (as defined in the Class B
Articles Supplementary) for which each share of Class B EPS is then indirectly
exchangeable as of such date (determined without taking into consideration any
Class A Dividend Replacement Shares or Class B Dividend Replacement Shares, as
defined in the Class A Articles Supplementary and Class B Articles
Supplementary, respectively). If more than one Letter of Transmittal shall be
delivered at one time by the same registered holder, the numbers of full Paired
Shares and full shares of Class B EPS which shall be issuable upon exchange of
the Class A RP Units tendered thereby shall be computed on the basis of the
aggregate number of Class A RP Units so tendered.
(e) The Trust covenants that any Paired Shares and shares of
Class B EPS issued pursuant to this Agreement will be validly issued, fully paid
and non-assessable. If a registered holder exchanges Class A RP Units pursuant
to this Agreement, the Trust shall pay any documentary, stamp or similar issue
or transfer tax due on any issuance of Paired Shares and/or shares of Class B
EPS upon such exchange. Such holder, however, shall (i) pay to the Trust the
amount of any additional documentary,
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<PAGE> 14
stamp or similar issue or transfer tax which is due (or shall establish to the
satisfaction of the Trust the payment thereof) as a result of Paired Shares or
shares of Class B EPS being issued in a name other than the name of such holder
and (ii) be responsible for all income or other taxes as a result of such
exchange.
(f) The Trust shall have the right to affix to any
certificates evidencing Paired Shares or shares of Class B EPS issued pursuant
to this Agreement: (i) any restrictive legend required in order for such
issuance to be in compliance with the Securities Act and any applicable state
securities laws, (ii) if applicable, a legend referring to the transfer
restrictions provided for in Section 6.16(f) of the Transaction Agreement and
(iii) any other legend required in order to comply with any applicable law.
SECTION 5. IMPLEMENTATION OF REDEMPTION OPTION. In the event
that the Trust exercises the Paired Shares Redemption Option or the Class B EPS
Redemption Option, the Trust shall cause the Realty Partnership to redeem the
corresponding Class A RP Units as soon as practicable after the date of the
Election Notice. The cash redemption price payable to the registered holder
pursuant to such Paired Shares Redemption Option or Class B EPS Redemption
Option shall be paid by the Realty Partnership at its election by check or by
wire transfer to an account designated in writing by such holder, if one has
been so designated.
SECTION 6. REPRESENTATIONS OF TENDERING HOLDER. Each tender of
Class A RP Units shall constitute a representation and warranty by the tendering
holder of each of the representations and warranties set forth in the form of
Letter of Transmittal. Without limiting the generality of the foregoing, unless,
at the time of a tender for exchange of Class A RP Units pursuant to this
Agreement, a registration statement relating to any Paired Shares and/or shares
of Class B EPS to be delivered upon such tender is effective under the
Securities Act, such tender shall constitute a representation and warranty by
the tendering holder to the Trust that such tendering holder (i) is an
"accredited investor" within the meaning of Rule 501 under the Securities Act,
(ii) has sufficient knowledge and experience in financial and business matters
and in investing in entities similar to the Realty Partnership, the Trust and
the Corporation so as to be able to evaluate the risks and merits of its
investment in the Trust and it is able financially to bear the risks thereof,
(iii) has had an opportunity to discuss the business, management and financial
affairs of the Realty Partnership, the Trust and the Corporation with the
management of the Realty Partnership, the Trust and the Corporation, and (iv)
understands the Paired Shares and shares of Class B EPS issuable pursuant to
this Agreement
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<PAGE> 15
have not and will not have been registered under the Securities Act by reason of
their issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated
under the Securities Act and such Paired Shares and shares of Class B EPS must
be held indefinitely unless a subsequent disposition thereof is registered under
the Securities Act and applicable state securities laws or is exempt from such
registration.
SECTION 7. STATUS OF TENDERING HOLDER. Until the holder of
Class A RP Units tendered pursuant to this Agreement becomes a holder of record
of the Paired Shares and/or shares of Class B EPS issued in exchange therefor
(in the case of an exercise of the Paired Shares Delivery Option and/or the
Class B EPS Delivery Option, as applicable) or until such holder has received
cash in exchange therefor (in the case of an exercise of the Paired Shares Cash
Option, the Paired Shares Redemption Option, the Class B EPS Cash Option and/or
the Class B EPS Redemption Option, as applicable) and until the holder has
received an Exchange Promissory Note in substitution for any Excess Shares or
until the holder has received the proceeds from the sale of the corresponding
Offered Shares (in the case of an exercise of the Registered Sale Option), such
holder shall continue to hold and own the corresponding Class A RP Units for all
purposes of the Realty Partnership Agreement. In the case of an exercise of the
Paired Shares Delivery Option or Class B EPS Delivery Option, no such holder
shall have any rights as a shareholder of the Trust or a stockholder of the
Corporation in respect of such Paired Shares, or as a shareholder of the Trust
in respect of such shares of Class B EPS, until such holder becomes a holder of
record of such Paired Shares or shares of Class B EPS.
SECTION 8. RESERVATION OF SHARES; CLOSING OF TRANSFER BOOKS.
(a) The Trust shall reserve and shall at all times have reserved out of its
authorized but unissued Trust Shares, solely for the purpose of effecting the
exchange pursuant to this Agreement, enough Trust Shares to permit the exchange
of the then outstanding Class A RP Units for Paired Shares pursuant to this
Agreement and shall use its best efforts to cause the Corporation to reserve and
shall at all times have, solely for the purpose of effecting such exchange,
enough Corporation Shares to permit such exchange. In addition, until the
Cross-Over Date, the Trust shall reserve and shall at all times have reserved
out of its authorized but unissued shares of Class B EPS, solely for the purpose
of effecting the exchange pursuant to this Agreement, enough shares of Class B
EPS to permit the exchange of the then outstanding Class A RP Units for shares
of Class B EPS pursuant to this Agreement.
(b) The Trust shall use its best efforts to cause the
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<PAGE> 16
Corporation not to close its transfer books so as to prevent the timely issuance
of Corporation Shares pursuant to this Agreement. The Trust shall not close its
transfer books so as to prevent the timely issuance of Trust Shares or shares of
Class B EPS pursuant to this Agreement.
SECTION 9. NOTICES. All notices, documents and other
communications under this Agreement shall be in writing and shall be deemed
given when delivered personally or by overnight mail or when sent by facsimile
transmission, or four days after being mailed (by registered mail, return
receipt requested) to a party at the following address (or to such other address
as such party may have specified by notice given to the other parties pursuant
to this provision):
(a) If to the Trust or the Realty Partnership, to:
Starwood Lodging Trust
2231 E. Camelback Road, Suite 410
Phoenix, AZ 85016
Attention: General Counsel
Telecopy No.: (602) 852-0686
Telephone No.: (602) 852-3900
with a copy to:
Sidley & Austin
555 West 5th Street
Los Angeles, California 90013
Attention: Sherwin L. Samuels
Telecopy No.: (213) 896-6600
Telephone No.: (213) 896-6000
(b) If to any Westin Limited Partner, to the address
specified on Schedule I hereto.
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Attention: Joseph C. Shenker
Telecopy No.: (212) 558-3588
Telephone No.: (212) 558-4000
SECTION 10. DETERMINATIONS AND INTERPRETATION. All agreements
between the Trust, the Realty Partnership and the Westin Limited Partners
provided for in (or required by or pursuant to) this Agreement shall be made on
behalf of the Trust and the Realty Partnership by their respective Disinterested
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<PAGE> 17
Members, including, without limitation, any agreement between the Trust, the
Realty Partnership and the Westin Limited Partners as to the election by the
Trust of the Paired Shares Delivery Option, the Paired Shares Cash Option, the
Paired Shares Redemption Option, the Class B EPS Delivery Option, the Class B
EPS Cash Option or the Class B EPS Redemption Option with respect to a tender of
Class A RP Units pursuant to Section 2(a), any agreement to permit the
revocation, withdrawal or modification of a tender of Class A RP Units pursuant
to Section 2(b). All interpretations of the terms of this Agreement shall be
resolved on behalf of the Trust by its Disinterested Members.
SECTION 11. PARTIAL INVALIDITY. In case any one or more of the
provisions contained herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein unless the deletion of
such provision or provisions would result in such a material change as to cause
completion of the transactions contemplated hereby to be unreasonable.
SECTION 12. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors or assigns. In addition, and whether or not any express
assignment shall have been made, the provisions of this Agreement which are for
the benefit of the parties hereto other than the Trust, the Realty Partnership
and the Westin Limited Partners, shall also be for the benefit of and
enforceable by any subsequent holder of any Class Units.
SECTION 13. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in one or more counterparts, each of which shall be considered an
original counterpart, and shall become a binding agreement when the Trust, the
Realty Partnership and the Westin Limited Partners shall have each executed a
counterpart of this Agreement.
SECTION 14. TITLES AND HEADINGS. Titles and headings to
Articles and Sections herein are inserted for convenience of reference only and
are not intended to be a part of or to affect the meaning or interpretation of
this Agreement.
SECTION 15. EXHIBITS. The Exhibits referred to in this
Agreement shall be construed with, and as an integral part of, this Agreement to
the same extent as if the same had been set forth verbatim herein.
-17-
<PAGE> 18
SECTION 16. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This
Agreement, including the Exhibits, contains the entire understanding of the
parties hereto with regard to the subject matter contained herein. In addition
to amendments and modifications permitted by Section 2(c), the parties hereto,
by mutual agreement in writing, may amend, modify and supplement this Agreement;
provided that any such amendment, modification or supplement shall be approved
by a majority of the Disinterested Members of the Trust. The failure of any
party hereto to enforce at any time any provision of this Agreement shall not be
construed to be a waiver of such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of such party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to constitute a waiver of any other or subsequent
breach.
SECTION 17. GOVERNING LAW. Except to the extent that Maryland
law is mandatorily applicable to the rights and obligations of the shareholders
of the Trust and the stockholders of the Corporation, this Agreement, and the
application or interpretation thereof, shall be governed exclusively by its
terms and by the internal laws of the State of New York, without regard to
principles of conflicts of laws as applied in the State of New York or any other
jurisdiction which, if applied, would result in the application of any laws
other than the internal laws of the State of New York.
SECTION 18. SUBMISSION TO JURISDICTION. Each of the parties
hereto irrevocably submits and consents to the jurisdiction of the United States
District Court for the Southern District of New York in connection with any
action or proceeding arising out of or relating to this Agreement, and
irrevocably waives any immunity from jurisdiction thereof and any claim of
improper venue, forum non conveniens or any similar basis to which it might
otherwise be entitled in any such action or proceeding.
SECTION 19. SPECIFIC PERFORMANCE. Each of the parties
acknowledges and agrees that in the event of any breach of this Agreement, the
non-breaching party or parties would be irreparably harmed and could not be made
whole by monetary damages. The parties hereby agree that in addition to any
other remedy to which they may be entitled at law or in equity, they shall be
entitled to compel specific performance of this Agreement in any action
instituted in any court of the United States or any state thereof having subject
matter jurisdiction for such action.
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<PAGE> 19
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the parties hereto or by their duly authorized officers, all as of
the date first above written.
STARWOOD LODGING TRUST,
a Maryland Trust
By:_________________________
Name:
Title:
SLT REALTY LIMITED PARTNERSHIP
By: STARWOOD LODGING TRUST,
general partner
By:_________________________
Name:
Title:
WHWE L.L.C.,
a Delaware limited liability
company
By: Whitehall Street Real Estate
Limited Partnership V,
Member and Manager
By: WH Advisors, L.P.V,
General Partner
By: WH Advisors, Inc. V,
General Partner
By:_________________________
Name:
Title:
WOODSTAR INVESTOR PARTNERSHIP,
a Delaware General Partnership
By: Marswood Investors, L.P.,
General Partner
By: Starwood Capital Group, L.P.,
<PAGE> 20
General Partner
By: BSS Capital Partners, L.P.,
General Partner
By: Sternlicht Holdings II, Inc.,
General Partner
By:_________________________
Name:
Title:
NOMURA ASSET CAPITAL CORPORATION,
a Delaware Corporation
By:_________________________
Name:
Title:
<PAGE> 21
SCHEDULE I TO
EXCHANGE RIGHTS AGREEMENT
NOTICE ADDRESS FOR HOLDERS
1) If to WHWE, L.L.C., to:
85 Broad Street
New York, New York 10004
Attention: Stuart Rothenberg
Telecopier: (212) 357-5505
2) If to Woodstar Investor Partnership, to:
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Attention: Barry S. Sternlicht
Telecopier: (203) 861-2101
3) If to Nomura Asset Capital Corporation, to:
Two World Financial Center, Building B
New York, New York 10281
Attention: Daniel S. Abrams
Telecopier: (212) 667-1666
<PAGE> 22
EXHIBIT A TO
EXCHANGE RIGHTS AGREEMENT
LETTER OF TRANSMITTAL
To Tender Units
of
Class A Realty Partnership Units
Pursuant to the Exchange Rights Agreement
Dated as of January 2, 1998
TO: Starwood Lodging Trust
2231 E. Camelback Road, Suite 410
Phoenix, AZ 85016
Attention: General Counsel
<TABLE>
<CAPTION>
DESCRIPTION OF UNITS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NAME(S) AND UNITS NUMBER OF NUMBER OF
ADDRESS(ES) OF TENDERED UNITS UNITS
REGISTERED OWNERS (ATTACH REQUESTED TO REQUESTED TO
ADDITIONAL BE EXCHANGED BE EXCHANGED
LIST IF FOR PAIRED FOR CLASS B
NECESSARY) SHARES EPS(1)
TOTAL
- --------
</TABLE>
(1) For a Class B EPS Request to be valid, this letter of Transmittal must be
delivered to the Trust on or prior to the Cross-over Date.
<PAGE> 23
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Starwood Lodging Trust (the
"Trust") the above-described Class A RP Units (as defined in the Exchange Rights
Agreement (Class A Realty Partnership Units) dated as of January 2, 1998 (the
"Exchange Rights Agreement")) in accordance with the terms and conditions of the
Exchange Rights Agreement and this Letter of Transmittal (which together
constitute the "Offer"), receipt of which is hereby acknowledged. All terms used
herein but not defined herein are used as defined in the Exchange Rights
Agreement.
Subject to, and effective upon the issuance of Paired Shares
and/or shares of Class B EPS and/or the delivery of cash or other specified
consideration, as the case may be, for the Class A RP Units tendered hereby, the
undersigned hereby assigns and transfers to the Trust all right, title and
interest in and to all the Class A RP Units that are being tendered hereby and
irrevocably constitutes and appoints the Trust (the "Class A Unit Agent"), with
full power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), to (a) transfer such Class A RP
Units on the books of the Realty Partnership and (b) receive all rights,
privileges and benefits, and any and all obligations and liabilities
appertaining thereto and otherwise exercise all rights of beneficial ownership
of such Class A RP Units, all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants to the Trust
that the undersigned has full power and authority to tender, sell, assign and
transfer the tendered Class A RP Units and that upon payment therefor, the Trust
will acquire unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and the same will not be subject to any
adverse claim. The undersigned will, upon request, execute any additional
documents deemed by the Trust to be reasonably necessary or desirable to
complete the sale, assignment and transfer of the tendered Class A RP Units.
Unless a registration statement relating to any Paired Shares
and/or Class B EPS to be delivered to the undersigned is effective under the
Securities Act of 1933, as amended (the "Securities Act"), the undersigned
hereby represents and warrants to the Trust that the undersigned (A) is an
"accredited investor" within the meaning of Rule 501 under the Securities Act,
or (B) has sufficient knowledge and experience in financial and business matters
and in investing in entities similar to the
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<PAGE> 24
Realty Partnership, the Corporation and the Trust so as to be able to evaluate
the risks and merits of its investment in the Realty Partnership, the
Corporation and the Trust and it is able financially to bear the risks thereof,
and in either case (i) has had an opportunity to discuss the business,
management and financial affairs of the Realty Partnership, the Corporation and
the Trust with the management of the Realty Partnership, the Corporation and the
Trust and (ii) understands that any such Paired Shares and/or Class B EPS have
not been registered under the Securities Act by reason of their issuance in a
transaction exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated under the
Securities Act and any such Paired Shares and/or Class B EPS must be held
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act and applicable state securities laws or is exempt from such
registration. If not sold pursuant to an effective registration statement, any
such Paired Shares and/or Class B EPS will bear an appropriate legend indicating
that such Paired Shares and/or Class B EPS have not been registered under the
Securities Act and resale of such Paired Shares and/or Class B EPS is restricted
under applicable securities laws.
All authority conferred or agreed to be conferred in this
Letter of Transmittal shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and any obligation of the undersigned hereunder
shall be binding upon the successors, assigns, heirs, executors, administrators
and legal representatives of the undersigned.
The undersigned understands that, except as provided in
Section 2(b) of the Exchange Rights Agreement, a tender of Class A RP Units
pursuant to the Exchange Rights Agreement is irrevocable and constitutes a
binding agreement between the undersigned and the Trust upon the terms and
subject to the conditions of the Exchange Rights Agreement.
Unless otherwise indicated under "Special Delivery
Instructions", please mail any Paired Shares and/or shares of Class B EPS
issuable upon exchange of the Class A RP Units tendered hereby and/or any cash
payment or Exchange Promissory Note(s) deliverable pursuant to the terms of the
Exchange Rights Agreement to the address(es) of the registered holder(s)
appearing under "Description of Units." In the event that the Special Delivery
Instructions are completed, please issue such Paired Shares and/or shares of
Class B EPS and any such Exchange Promissory Note(s) and make any such cash
payment in the name of the registered holder(s) and transmit the same to the
person or persons so indicated.
The Trust and the undersigned agree that they will cooperate
with each other and will make, execute, acknowledge,
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<PAGE> 25
deliver, record and file, or cause to be made, executed, acknowledged,
delivered, recorded and filed, at such times and places as the other may
reasonably deem necessary, all other and further documents and instruments, and
will take all other and further actions, as the other may reasonably request
from time to time in order to effectuate the purposes and provisions of the
tender made pursuant to this Letter of Transmittal.
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<PAGE> 26
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 5)
To be completed ONLY if Paired Shares and/or shares of Class B
EPS and/or cash or Exchange Promissory Note(s) deliverable pursuant to the
Exchange Rights Agreement are to be sent to someone other than the undersigned
or to the undersigned at an address other than that above.
Mail certificate(s) for Paired Shares and/or shares of Class B EPS and any
Exchange Promissory Note(s) and cash payments to:
Name_____________________________________________________________
(please print)
Address__________________________________________________________
_________________________________________________________________
(include Zip Code)
_________________________________________________________________
_________________________________________________________________
(Tax Identification or Social Security Number)
SIGN HERE
Complete Substitute Form W-9 included
_________________________________________________________________
_________________________________________________________________
(Signature(s) of holder of Units)
(Must be signed by registered holder(s) as name(s) appear(s) on books and
records of the Partnership. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of Trusts or others
acting in a fiduciary or representative capacity, please set forth full title
and see instruction 4.
Dated____________________________________________________________
Name(s)__________________________________________________________
(please print)
Capacity
(Full Title)_____________________________________________________
Address__________________________________________________________
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<PAGE> 27
(include Zip Code)
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<PAGE> 28
Area Code and Tel. No.___________________________________________
Tax Identification or
Social Security No.______________________________________________
(Complete Substitute Form W-9)
Guarantee of Signature(s)
(See Instruction 1)
Authorized
Signature________________________________________________________
Name of
Firm_____________________________________________________________
Dated____________________________________________________________
INSTRUCTIONS
Forming Part of the Terms and Conditions of the
Exchange Rights Agreement
1. GUARANTEE OF SIGNATURE. No signature guarantee on this
Letter of Transmittal is required unless the registered holder of the Class A RP
Units has completed the box entitled "Special Delivery Instructions". In such
case all signatures on this Letter of Transmittal must be guaranteed by a member
firm of any registered national securities exchange in the United States or of
the National Association of Securities Dealers, Inc. or by a commercial bank or
trust company (not a savings bank or a savings and loan association) having an
office, branch or agency in the United States.
2. DELIVERY OF LETTER OF TRANSMITTAL. This Letter of
Transmittal is to be completed by the holder of Class A RP Units. A properly
completed and duly executed Letter of Transmittal and any other documents
required by this Letter of Transmittal must be received by the Class A Unit
Agent.
No alternative, conditional or contingent tenders will be
accepted, except as permitted pursuant to the Exchange Rights Agreement.
3. INADEQUATE SPACE. If the space provided herein is
inadequate, the Units tendered and/or other information required should be
listed on a separate schedule attached hereto.
4. SIGNATURES ON LETTER OF TRANSMITTAL. The signature must
correspond with the name as shown on the books and
-28-
<PAGE> 29
records of the Realty Partnership without any change whatsoever.
If any of the Class A RP Units tendered hereby are owned of
record by two or more joint owners, all such owners must sign the Letter of
Transmittal.
If any tendered Class A RP Units are registered in different
names, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations.
If this Letter of Transmittal is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of Trusts or
others acting in a fiduciary or representative capacity, each person should so
indicate when signing, and proper evidence satisfactory to the Class A Unit
Agent of their authority so to act must be submitted.
5. SPECIAL DELIVERY INSTRUCTIONS. If a certificate for Paired
Shares and/or shares of Class B EPS and any Exchange Promissory Note(s) and cash
payment is to be sent to someone other than the signer of this Letter of
Transmittal or to an address other than that shown above, the appropriate boxes
on this Letter of Transmittal should be completed.
6. WAIVER OF CONDITIONS. The Trust reserves the right to waive
in its sole discretion any of the specified conditions of the Offer in the case
of the Class A RP Units tendered; provided that any such waiver shall not
adversely affect any holder of outstanding Class A RP Units without the consent
of such holder.
7. BACK-UP WITHHOLDING. Under the Federal income tax law, a
person surrendering Class A RP Units must provide the Class A Unit Agent with
his correct taxpayer identification number ("TIN") on Substitute Form W-9 below
unless an exemption applies. If the correct TIN is not provided, a $50 penalty
may be imposed by the Internal Revenue Service and payments made in exchange for
the surrendered Class A RP Units may be subject to back-up withholding of that
rate provided by the Federal income tax law (such rate being at the date of the
Exchange Rights Agreement, 31%).
The TIN that must be provided is that of the registered holder
of the Class A RP Units. The TIN for an individual is his social security
number.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance or additional copies of the Exchange Rights Agreement
and the Letter of Transmittal may be directed to the Class A Unit Agent at the
address set forth
-29-
<PAGE> 30
above.
IMPORTANT TAX INFORMATION
Under Federal income tax laws, a holder whose tendered Class A
RP Units are accepted for payment is required by law to provide the Class A Unit
Agent (as payer) with his correct taxpayer identification number on Substitute
Form W-9 below. If such holder is an individual, the taxpayer identification
number is his social security number. If the Class A Unit Agent is not provided
with the correct taxpayer identification number, the holder may be subject to a
$50 penalty imposed by the Internal Revenue Service. In addition, payments that
are made to such holder with respect to Class A RP Units purchased pursuant to
the Offer may be subject to back-up withholding.
If back-up withholding applies, the Class A Unit Agent is
required to withhold, at that rate provided by the Federal income tax law (such
rate being at the date of the Exchange Rights Agreement 31%), of any such
payments made to the holder of Class A RP Units. Paired Shares, shares of Class
B EPS and any Exchange Promissory Note(s) otherwise deliverable hereunder may,
at the expense (and with all risk of loss for the account) of the undersigned,
be sold to pay such amounts. Back-up withholding is not an additional tax.
Rather, the tax liability of persons subject to back-up withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent back-up withholding on payments that are made to a
holder of Class A RP Units purchased pursuant to the Offer, the holder is
required to notify the Class A Unit Agent of his correct taxpayer identification
number by completing the form below certifying that the taxpayer identification
number provided on Substitute Form W-9 is correct.
WHAT NUMBER TO GIVE THE AGENT
The holder is required to give the Class A Unit Agent the
social security number or employer identification number of the record owner of
the Class A RP Units.
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<PAGE> 31
PAYER'S NAME:
Starwood Lodging Trust
<TABLE>
<S> <C> <C>
Substitute Part 1 - Please provide your TIN in the box at Social Security
Form W-9 right and certify by signing and dating below Number/Employer
Identification
Number
Department of the Certification - Under the penalties of perjury,
Treasury/Internal (i) I certify that the information provided on this
Revenue Service form is true, correct and complete and (ii) I am
not subject to backup withholding because: (a) I
am exempt from backup Service withholding, or (b) I
have not been notified by the Internal Revenue
Service (IRS) that I am subject to backup
withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup
withholding.
Signature ________________________________________ Date ______________
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACK-UP
WITHHOLDING AT THAT RATE PROVIDED BY THE FEDERAL INCOME TAX
LAW (SUCH RATE BEING AT THE DATE OF THE EXCHANGE RIGHTS
AGREEMENT 31%) OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER.
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<PAGE> 1
Exhibit 10.51
EXCHANGE RIGHTS AGREEMENT
(CLASS B OPERATING PARTNERSHIP UNITS)
THIS EXCHANGE RIGHTS AGREEMENT (this "Agreement") is made as
of January 2, 1998 among STARWOOD LODGING CORPORATION, a Maryland Corporation
(the "Corporation"), SLC OPERATING LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Operating Partnership"), and certain limited partners of the
Operating Partnership listed on the signature pages hereto (the "OP Limited
Partners"). Unless otherwise indicated, capitalized terms used herein are used
herein as defined in Section 1.
WHEREAS, pursuant to a Transaction Agreement dated as of
September 8, 1997 (the "Transaction Agreement") among WHWE L.L.C., Woodstar
Investor Partnership, Nomura Asset Capital Corporation, Juergen Bartels, W&S
Hotel L.L.C., Westin Hotels & Resorts Worldwide, Inc., W&S Lauderdale Corp., W&S
Seattle Corp., Westin St. John Hotel Company, Inc., W&S Denver Corp., W&S
Atlanta Corp., the Trust, SLT Realty Limited Partnership, Starwood Lodging
Corporation and SLC Operating Limited Partnership, the OP Limited Partners are
making capital contributions to the Operating Partnership in return for the
issuance of Class B Operating Partnership Units ("Class B OP Units");
WHEREAS, pursuant to the Transaction Agreement the parties
hereto are entering into this Agreement to provide for: (a) certain rights of OP
Limited Partners to tender Class B OP Units to the Corporation on or prior to
the Cross-Over Date (as defined herein) in exchange for shares of Class B EPS
(as defined herein) and (b) certain rights of OP Limited Partners to tender
Class B OP Units to the Corporation at any time in exchange for Paired Shares
(as defined herein), subject in either such case to certain rights of the
Corporation to substitute cash or other forms of consideration for such shares
of Class B EPS or Paired Shares or to cause the Operating Partnership to redeem
the Class B OP Units being tendered for cash, all on the terms and conditions
set forth herein;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants set forth herein, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
"Board of Directors" shall mean the Board of Directors of the
Corporation or any committee authorized by the Board of Directors from
time to time to exercise any of its powers or perform any of its
responsibilities with respect to this Agreement.
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"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which state or federally chartered banking
institutions in New York, New York are not required to be open.
"Cash Equivalent" of Paired Shares as of any date shall mean
an amount of cash equal to (i) the average of the daily Current Market
Prices per unit of such Paired Shares during the five (5) consecutive
Trading Days immediately preceding such date or (ii) if the Paired
Shares are not publicly traded on such date, the fair market value of
such Paired Shares as of such date as determined by the Board of
Directors in good faith.
"Certificate of Admission" shall mean the Certificate of
Admission of SLC Operating Limited Partnership dated as of January 1,
1998 pursuant to which the Class B OP Units were authorized.
"Class A Articles Supplementary" shall mean Article 6.15 of
the Declaration pursuant to which the Trust has classified and
designated 30,000,000 shares of beneficial interest in the Trust as
"Class A Exchangeable Preferred Shares", as hereafter amended from time
to time.
"Class A EPS" means the Class A Exchangeable Preferred Shares,
par value $0.01 per share, created by the Class A Articles
Supplementary.
"Class B Articles Supplementary" shall mean Article 6.16 of
the Declaration pursuant to which the Trust has classified and
designated 15,000,000 shares of beneficial interest in the Trust as
"Class B Exchangeable Preferred Shares", as hereafter amended from time
to time.
"Class B EPS" shall mean the Class B Exchangeable Preferred
Shares, par value $0.01 per share, of the Trust created pursuant to the
Class B Articles Supplementary.
"Class B EPS Cash Option" shall have the meaning set forth in
paragraph (a)(ii) of Section 3 hereof.
"Class B EPS Delivery Option" shall have the meaning set forth
in paragraph (a)(ii) of Section 3 hereof.
"Class B EPS Redemption Option" shall have the meaning set
forth in paragraph (a)(ii) of Section 3 hereof.
"Class B EPS Request" shall have the meaning set forth in
paragraph (a) of Section 2 hereof.
"Class B Liquidation Preference" shall have the meaning
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set forth in paragraph (b) of Article 6.16.4 of the Declaration.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Corporation" shall mean Starwood Lodging Corporation,
a Maryland corporation, and any successor.
"Corporation Shares" shall mean the shares of common stock,
par value $.01 per share, of the Corporation or any stock of the
Corporation into which such common stock may hereafter be changed.
"Cross-Over Date" shall mean the fifth anniversary of the
Issue Date; provided that in the event that the CrossOver Date referred
to in the Declaration is extended pursuant to Article 6.16.9 thereof,
the Cross-Over Date for the purposes of this Agreement shall be
similarly extended.
"Current Market Price" of publicly traded Paired Shares or any
other shares of beneficial interest or other securities of the Trust or
any other issuer as of any Trading Day shall mean the last reported
sales price, regular way, on such day, or, if no sale takes place on
such day, the average of the reported closing bid and asked prices on
such day, regular way, in either case as reported on the NYSE or, if
such shares or other securities are not listed or admitted for trading
on the NYSE, on the principal national securities exchange on which
such shares or other securities are listed or admitted for trading or,
if not listed or admitted for trading on any national securities
exchange, on the NASDAQ National Market or, if such shares or other
securities are not quoted on such NASDAQ National Market, the average
of the closing bid and asked prices on such day in the over-the-counter
market as reported by NASDAQ or, if bid and asked prices for such
shares or other securities on such day shall not have been reported
through NASDAQ, the average of the bid and asked prices on such day as
furnished by any NYSE member firm regularly making a market in such
security selected for such purpose by the Chief Executive Officer or
Chief Financial Officer of the Trust or the Board of Directors.
"Declaration" shall mean the Amended and Restated Declaration
of Trust of the Trust, as amended from time to time.
"Delivered Shares" shall have the meaning set forth in
paragraph (e) of Section 3 hereof.
"Disinterested Members" when used with respect to the
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Trust has the meaning set forth in the Code of Regulations of the Trust
and, when used with respect to the Corporation, has the meaning set
forth in the By-Laws of the Corporation, in each case as amended from
time to time.
"Election Notice" shall have the meaning set forth in
paragraph (a) of Section 3 hereof.
"Excess Shares" shall have the meaning set forth in paragraph
(e) of Section 3 hereof.
"Exchange Promissory Note" shall mean an unsecured promissory
note of the Corporation in such form as the Corporation shall
reasonably prescribe with a maturity date ninety (90) days after the
date of issuance of such note. Such Exchange Promissory Note shall bear
interest in a amount equal to (i) in the case of the substitution of an
Exchange Promissory Note for Paired Shares constituting Excess Shares
pursuant to Section 3(e) hereof, the amount of any dividends paid
during the period that such note remains outstanding on a number of
Paired Shares equal to the number of Paired Shares for which such
Exchange Promissory Note is being substituted and (ii) in the case of
the substitution of an Exchange Promissory Note for any shares of Class
B EPS constituting Excess Shares pursuant to such Section, the amount
of any dividends accrued (whether or not paid) during the period that
such note remains outstanding on a number of shares of Class B EPS
equal to the number of shares of Class B EPS for which such Exchange
Promissory Note is being substituted, which interest shall be payable
on the dates of payment of the corresponding dividends.
"Exchange Ratio" shall have the meaning set forth in paragraph
(b) of Section 3 hereof.
"Issue Date" shall mean the first date on which shares of
Class A EPS and Class B EPS are issued by the Trust pursuant to the
Transaction Agreement.
"Letter of Transmittal" shall have the meaning set forth in
paragraph (a) of Section 2 hereof.
"NYSE" shall mean the New York Stock Exchange.
"Offered Shares" shall have the meaning set forth in paragraph
(e) of Section 3 hereof.
"OP Special Distribution" shall have the meaning set forth in
paragraph (f) of Section 3 hereof.
"Ownership Limit" shall have the meaning set forth in
Section 6.12 of the Declaration.
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<PAGE> 5
"Paired Shares" shall mean units consisting of one Trust Share
paired with one Corporation Share and represented by a single share
certificate, as provided in the Pairing Agreement dated as of June 25,
1980, between the Trust and the Corporation, as amended from time to
time, subject to any changes in the securities constituting a unit of
Paired Shares under such Pairing Agreement from time to time.
"Paired Shares Delivery Option" shall have the meaning set
forth in paragraph (a)(i) of Section 3 hereof.
"Paired Shares Cash Option" shall have the meaning set forth
in paragraph (a)(i) of Section 3 hereof.
"Paired Shares Redemption Option" shall have the meaning set
forth in paragraph (a)(i) of Section 3 hereof.
"Paired Shares Request" shall have the meaning set forth in
paragraph (a) of Section 2 hereof.
"Person" shall mean any individual, firm, partnership,
corporation, limited liability company or other entity, and shall
include any successor (by merger or otherwise) of such entity.
"Registered Sale Option" shall have the meaning set forth in
paragraph (e) of Section 3 hereof.
"REIT Rules" shall mean the requirements (i) for the Trust to
qualify as a real estate investment trust under the Code as set forth
in Sections 856(a)(5) and 856(a)(6) of the Code and (ii) for the
Corporation or any affiliate of the Corporation which is a tenant of
the Trust to not be treated as a related party pursuant to Section
856(d)(2)(B) of the Code.
"Requested Shares" shall have the meaning set forth in
paragraph (d) of Section 3 hereof.
"Securities Act" shall mean the Securities Act of 1933,
as amended.
"SLC Limited Partnership Agreement" shall mean the second
amended and restated limited partnership agreement of SLC operating
limited partnership entered into on November 14, 1997 by and among
Starwood Lodging Corporation, a Maryland corporation, as General
Partner and the persons whose names are set forth in exhibits A and A-1
thereof, as limited partners, pursuant to the provisions of the
Delaware Revised Uniform Limited Partnership Act.
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"Trading Day" with respect to publicly traded Paired Shares or
any other shares of beneficial interest or other securities of the
Trust or any other issuer shall mean any day on which the securities in
question are traded on the NYSE, or if such securities are not listed
or admitted for trading on the NYSE, on the principal national
securities exchange on which such securities are listed or admitted, or
if not listed or admitted for trading on any national securities
exchange, on the NASDAQ National Market, or if such securities are not
quoted on such NASDAQ National Market, in the applicable securities
market in which such securities are traded.
"Transaction Agreement" shall have the meaning set forth in
the Recitals.
"Transfer Agent" shall mean ChaseMellon Shareholder Services,
L.L.C. (or any successor thereof), or such other agent or agents of the
Trust as may be designated by the Board of Trustees of the Trust or
their designee as the transfer agent for the Class B EPS and/or the
Paired Shares.
"Trust" shall mean Starwood Lodging Trust, a Maryland real
estate investment trust, and any successor.
"Trust Shares" shall mean the common shares of beneficial
interest in the Trust, par value $.01 per share, or any shares of
beneficial interest in the Trust into which such common shares may be
changed.
"Westin Transaction Securities" shall mean, with respect to a
holder of Class B OP Units or an affiliate thereof, any shares of Class
A EPS, shares of Class B EPS, Class A RP Units and Starwood Operating
Partnership Units (as defined in the Transaction Agreement) received by
such holder or affiliate pursuant to the Transaction Agreement,
together with any shares of Class B EPS, Class A EPS or Paired Shares
(or other securities) issued upon exchange or conversion of any such
Westin Transaction Securities.
SECTION 2. RIGHT TO TENDER CLASS B OP UNITS. (a) Upon the
terms and subject to the conditions of this Agreement, each registered holder of
Class B OP Units will have the right to tender outstanding Class B OP Units to
the Corporation. In order for Class B OP Units to be validly tendered pursuant
to this Agreement, the registered holder thereof shall deliver to the
Corporation, at the address provided pursuant to Section 9 , (i) a completed and
duly executed Letter of Transmittal in the form attached hereto as Exhibit A
(the "Letter of Transmittal") and any other documents required by the Letter of
Transmittal and
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<PAGE> 7
(ii) a certificate (duly executed on behalf of such holder by an officer,
partner, manager or other duly authorized representative of such holder, if such
registered holder is not an individual) setting forth (A) the number of Trust
Shares and Corporation Shares held directly by such holder, and in the case of
WHWE L.L.C. ("WHWE"), held by Whitehall Real Estate Limited Partnership
("Whitehall"), GS Capital Partners, L.P. ("GSCP") or The Goldman Sachs Group,
L.P. (other than shares held in "street name" for third parties or shares held
in accounts for unaffiliated third parties) and (B) the number of partners in
Whitehall or GSCP with a 25% or greater interest in the profits or capital of
Whitehall or GSCP, respectively. In addition, in the event of a tender of Class
B OP Units by WHWE, the Corporation may deliver to WHWE a list of the
Corporation's ten largest stockholders, in which event, WHWE shall certify to
the Corporation the identity of any such stockholders that are directly partners
of Whitehall or GSCP in a partnership in which WHWE or GSCP and such stockholder
are both partners with a 25% or greater interest in the profits and capital of
such partnership. In such Letter of Transmittal, the holder of the Class B OP
Units being tendered shall specify which Class B OP Units such holder desires to
exchange for Paired Shares (a "Paired Shares Request") and which Class B OP
Units such holder desires to exchange for shares of Class B EPS (a "Class B EPS
Request"); provided that no Class B EPS Request may be made unless the Letter of
Transmittal is delivered to the Corporation on or prior to the Cross-Over Date.
The Corporation shall make all determinations as to the validity and form of any
tender of Class B OP Units in accordance with the provisions of this Agreement
and upon rejection of a tender shall give the tendering holder written notice of
such rejection, which shall include the reasons therefor.
(b) Unless otherwise determined by agreement of the
Corporation, tenders of Class B OP Units pursuant to this Agreement shall be
irrevocable and shall not be subject to withdrawal or modification; provided
that in the event that the issuance of the full number of Requested Shares
pursuant to any tender of Class B OP Units would violate either the Ownership
Limit or the REIT Rules and either (i) the Corporation elects pursuant to
Section 3(d) below to deliver an Exchange Promissory Note in substitution for
any Excess Shares or (ii) the Corporation exercises the Registered Sale Option
with respect to any such Excess Shares, the holder of the Class B OP Units
tendered will have the right to withdraw his or her Letter of Transmittal as to
the Excess Shares for which such Exchange Promissory Note is proposed to be
substituted or with respect to which such Registered Sale Option is being
exercised, which withdrawal must be made by written notice to the Corporation
within ten (10) Business Days after receipt of the applicable Election Notice.
(c) The rights to exchange Class B OP Units pursuant
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<PAGE> 8
to this Agreement constitute a continuous offer and may not be withdrawn,
amended or modified by the Corporation without the prior written consent of each
registered holder of outstanding Class B OP Units adversely affected by such
withdrawal, amendment or modification; provided that any withdrawal, amendment
or modification that does not adversely affect any holder of outstanding Class B
OP Units may be effected without the consent of such holder.
SECTION 3. ACCEPTANCE OF TENDER; DELIVERY OF ELECTION NOTICE.
(a) Subject to paragraph (c) below, as promptly as practicable (and in any event
within ten (10) Business Days) after receipt of a Letter of Transmittal and all
related documents and certifications, the Corporation shall elect, pursuant to
an election notice given to the registered holder who delivered such Letter of
Transmittal to the Corporation (an "Election Notice"), to take one or more of
the following actions with respect to the Class B OP Units subject to such
Letter of Transmittal:
(i) with respect to any such Class B OP Units for which a
Paired Shares Request has been made, the Corporation shall elect either
(A) to issue to the registered holder a number of Paired Shares equal
to the number of such Class B OP Units (including procuring the
issuance by the Trust of the Trust Shares component of such Paired
Shares) (the "Paired Shares Delivery Option"), (B) to pay to such
holder the Cash Equivalent of such Paired Shares determined as of the
date of such Election Notice (the "Paired Shares Cash Option"), (C) to
cause the Operating Partnership to redeem such Class B OP Units for a
cash redemption price equal to such Cash Equivalent of such Paired
Shares (the "Paired Shares Redemption Option") or (D) any combination
of the actions described in the foregoing clauses (A), (B) and (C); and
(ii) with respect to any Class B OP Units for which a Class B
EPS Request has been made, the Corporation shall elect either (A) to
procure the issuance by the Trust, to the registered holder a number of
shares of Class B EPS equal to the number of such Class B OP Units
multiplied by the Exchange Ratio (as determined pursuant to paragraph
(b) below) in effect as of the date of such Election Notice (the "Class
B EPS Delivery Option"), (B) to pay to such registered holders an
amount in cash equal to the Class B Liquidation Preference of such
shares of Class B EPS at such time (the "Class B EPS Cash Option"), (C)
to cause the Operating Partnership to redeem such Class B OP Units for
a cash redemption price equal to such Class B Liquidation Preference of
such shares of Class B EPS at such time (the "Class B EPS Redemption
Option") or (D) any combination of
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the actions described in the foregoing clauses (A), (B) and (C).
(b) The "Exchange Ratio" of shares of Class B EPS for each
Class B OP Unit at any time shall be equal to one (1) divided by the number of
Class B Underlying Paired Shares (as defined in the Class B Articles
Supplementary) for which each share of Class B EPS is then indirectly
exchangeable as of such date (determined without taking into consideration any
Class A Dividend Replacement Shares or Class B Dividend Replacement Shares, as
defined in the Class A Articles Supplementary and Class B Articles
Supplementary, respectively).
(c) (i) If, at any time after the Issue Date, the Trust or the
Corporation shall become a party to any transaction, including, without
limitation, a merger, consolidation, statutory share exchange, self
tender offer for all or substantially all outstanding Trust Shares
and/or Corporation Shares, sale of all or substantially all of the
Trust's or the Corporation's assets or recapitalization of the Trust
Shares and/or the Corporation Shares (but excluding any event
constituting a Trust Common Adjustment Event or a Corporation Common
Adjustment Event) (each of the foregoing being referred to herein as a
"Paired Shares Transaction"), in each case as a result of which the
outstanding Trust Shares and/or Corporation Shares shall be converted
into or exchanged for the right to receive stock, securities or other
property (including cash or any combination thereof), effective as of
the effective date of such Paired Shares Transaction, each unit of
Paired Shares issuable upon tender of Class B OP Units hereunder shall
thereafter be deemed to consist of the kind and amount of shares of
beneficial interest in the Trust, shares of stock of the Corporation
and other securities and property (including cash or any combination
thereof) that would have been held or receivable upon the consummation
of such Paired Shares Transaction by a holder of a number of Paired
Shares equal to the number of Class B OP Units so tendered assuming
such holder of Paired Shares (A) is not a Person with which the Trust
or the Corporation consolidated or into which the Trust or the
Corporation was merged or which merged into the Trust or the
Corporation or to which such sale or transfer was made, as the case may
be (a "constituent person"), or an affiliate of a Constituent Person
and (B) failed to exercise his or her rights of election, if any, as to
the kind or amount of stock, securities and other property (including
cash) receivable upon such Paired Shares Transaction (provided that if
the kind or amount of stock, securities and other property (including
cash) receivable upon such Paired Shares Transaction is not the same
for each unit of Paired Shares held immediately prior to such Paired
Shares Transaction by other than a constituent person or an
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affiliate thereof and in respect of which such rights of election shall
not have been exercised ("Non-Electing Shares"), then for the purposes
of this subparagraph (ii) the kind and amount of stock, securities and
other property (including cash) receivable upon such Paired Shares
Transaction in respect of each Non-Electing Share shall be deemed to be
the kind and amount so receivable per share by a plurality of the
Non-Electing Shares). The provisions of this paragraph (i) shall
similarly apply to successive Paired Shares Transactions.
(ii) If, at any time after the Issue Date, the Trust shall
become a party to any transaction, including, without limitation, a merger,
consolidation, statutory share exchange, self tender offer for all or
substantially all outstanding Trust Shares, sale of all or substantially all of
the Trust's assets or recapitalization of the Class B EPS (each of the foregoing
being referred to herein as a "Class B Transaction"), in each case as a result
of which the outstanding shares of Class B EPS shall be converted into or
exchanged for the right to receive stock, securities or other property
(including cash or any combination thereof), effective as of the effective date
of such Class B Transaction, each share of Class B EPS issuable upon tender of
Class B OP Units shall thereafter be deemed to consist of the kind and amount of
shares of stock and other securities and property (including cash or any
combination thereof) that would have been held or receivable upon the
consummation of such Class B Transaction by a holder of a number of shares of
Class B EPS equal to the number of Class B OP Units being tendered, assuming
such holder of shares of Class B EPS (A) is not a Person with which the Trust
consolidated or into which the Trust was merged or which merged into the Trust
or to which such sale or transfer was made, as the case may be, or an affiliate
of such a constituent person and (B) failed to exercise his or her rights of
election, if any, as to the kind or amount of stock, securities an other
property (including cash) receivable upon such Class B Transaction (provided
that if the kind or amount of stock, securities and other property (including
cash) receivable upon such Class B Transaction is not the same for each share of
Class B EPS held immediately prior to such Class B Transaction by other than a
constituent person or an affiliate thereof and in respect of which such rights
of election shall not have been exercised, then for the purposes of this
subparagraph (ii) the kind and amount of stock, securities and other property
(including cash) receivable upon such Class B Transaction by each Non-Electing
Share shall be deemed to be the kind and amount so receivable per share by a
plurality of the Non-Electing Shares). The provisions of this paragraph (ii)
shall similarly apply to successive Class B Transactions.
(d) Notwithstanding any other provision of this Agreement, no
Paired Shares or shares of Class B EPS shall be
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<PAGE> 11
issued or paid in respect of any tender of Class B OP Units (i) prior to the
expiration or termination of the waiting period applicable to such issuance or
payment, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as it may be amended from time to time, or (ii) prior to the receipt of all
governmental and regulatory approvals which are required to be obtained prior to
such issuance or payment, including, without limitation, any required approvals
of the gaming authorities of the State of Nevada and of Clark County, Nevada
(the "Gaming Approvals") subject to the limitations on transfer of any interest
in the Operating Partnership as provided in Section 9.6 of the SLC Limited
Partnership Agreement.
(e) If the delivery to a registered holder tendering Class B
OP Units of the full number(s) of Paired Shares and/or shares of Class B EPS
requested to be delivered pursuant to the Letter of Transmittal (the "Requested
Shares") would result in a violation of either the Ownership Limit or the REIT
Rules, the Corporation may elect in the Election Notice, in lieu of the options
described in paragraph (a) above (i) to deliver to such holder the maximum
number(s) of Paired Shares and/or shares of Class B EPS, as applicable, (which
maximum numbers, in the case of a Letter of Transmittal containing both a Paired
Shares Request and a Class B EPS Request, shall represent the same percentage of
the numbers of Paired Shares and shares of Class B EPS, respectively, comprising
such Requested Shares) that may be delivered without causing such a violation
(the "Delivered Shares", with the Requested Shares in excess of the Delivered
Shares being referred to herein as the "Excess Shares") and (ii) (A) in respect
of any Paired Shares included in such Excess Shares either (1) to pay such
holder the Cash Equivalent of such Paired Shares determined as of the date of
such Election Notice, (2) to deliver to such holder an Exchange Promissory Note
in a principal amount equal to such Cash Equivalent or (3) to cause the
Operating Partnership to redeem a corresponding number of Class B OP Units for a
cash redemption price equal to such Cash Equivalent and (B) in respect of any
shares of Class B EPS included in such Excess Shares, either (1) to make a cash
payment to such holder equal to the Class B Liquidation Preference of such
shares as of such date, (2) to deliver to such holder an Exchange Promissory
Note in a principal amount equal to such Class B Liquidation Preference or (3)
to cause the Operating Partnership to redeem a corresponding number of Class B
OP Units for a cash redemption price equal to such Class B Liquidation
Preference. Notwithstanding the foregoing, in the event that the delivery of the
full number of Requested Shares pursuant to a Letter of Transmittal would
violate either the Ownership Limit or the REIT Rules because the registered
holder of Class B OP Units tendering Class B OP Units, together with such
holder's affiliates (but without giving effect to any other applicable
attribution rules under the Code), beneficially owns, at the date of the
Election Notice, Paired Shares and/or shares of Class B
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<PAGE> 12
EPS other than through the ownership of Westin Transaction Securities, the
Corporation will have the option (the "Registered Sale Option"), exercisable in
the Election Notice, in lieu of delivering an Exchange Promissory Note in a
principal amount equal to the Cash Equivalent of the any Paired Shares included
in the Excess Shares or the Class B Liquidation Preference of any shares of
Class B EPS included in the Paired Shares, to procure the filing of a
registration statement under the Securities Act, and to publicly offer and sell
pursuant to such registration statement in such manner as the Corporation in
good faith determines to be appropriate (x) a number of Paired Shares equal to
the number of Paired Shares included in such Excess Shares or (y) a number of
Paired Shares equal to the number of Class B Underlying Paired Shares (as
defined in the Class B Articles Supplementary) for which the shares of Class B
EPS included in such Excess Shares are then indirectly exchangeable as of such
date (determined without taking into consideration any Class A Dividend
Replacement Shares or Class B Dividend Replacement Shares, as defined in the
Class A Articles Supplementary and Class B Articles Supplementary, respectively)
(in either such case, the "Offered Shares"), the net proceeds of which sale
(after deducting any applicable underwriting discounts or commissions and the
expenses of such offering) shall be paid to such holder.
(f) If, as of the date of the Election Notice given by the
Corporation with respect to any tender of Class B OP Units, there are any
accrued but unpaid OP Special Distributions (as defined in the Certificate of
Admission), then: (i) the number of shares of Class B EPS issuable in exchange
for each Class B OP Unit with respect to which a Class B EPS Request has been
made shall be increased by a number of shares equal to (A) the amount of such
accrued but unpaid OP Special Distributions divided by (B) the product of (1)
the number of Class B Underlying Paired Shares (as defined in the Class B
Articles Supplementary) for which each share of Class B EPS is then indirectly
exchangeable as of such date (determined without taking into consideration any
Class A Dividend Replacement Shares or Class B Dividend Replacement Shares, as
defined in the Class A Articles Supplementary and Class B Articles
Supplementary, respectively) multiplied by (2) the Cash Equivalent of each
Paired Share as of such date, and (ii) the number of Paired Shares issuable in
exchange for each Class B OP Unit with respect to which a Paired Shares Request
has been made shall be increased by a number of shares equal to (A) the amount
of such accrued but unpaid OP Special Distributions divided by (B) the Cash
Equivalent of each Paired Share as of such date.
SECTION 4. DELIVERY OF SECURITIES AND/OR CASH TO HOLDER. (a)
If the Election Notice relating to any tender of Class B OP Units pursuant to
this Agreement does not give rise to
-12-
<PAGE> 13
a withdrawal right pursuant to Section 2(b) above, such Election Notice shall be
accompanied by the delivery of the Paired Shares, shares of Class B EPS and/or
cash required to be delivered pursuant to such Election Notice. If the Election
Notice does give rise to such a withdrawal right, but such right is not
exercised by the holder that delivered the related Letter of Transmittal, the
Corporation shall deliver the Paired Shares, shares of Class B EPS, Exchange
Promissory Note(s) and/or cash required to be delivered pursuant to such
Election Notice within five (5) Business Days after the expiration of such
withdrawal right.
(b) If the Election Notice includes the exercise of the
Registered Sale Option, the proceeds from the sale of the Offered Shares shall
be paid over to the applicable registered holder promptly upon receipt. Any cash
payable to such registered holder hereunder shall be payable at the election of
the Corporation by check or by wire transfer to an account designated in writing
by such holder, if one has been so designated.
(c) With respect to any Paired Shares to be issued pursuant to
an Election Notice, the Corporation shall issue and deliver (and shall cause the
Trust to issue and deliver) at the office of the Corporation (or, at the option
of the Corporation, at the office of the Transfer Agent) to the applicable
registered holder a certificate or certificates for the number of full Paired
Shares deliverable in accordance with the provisions of Section 3 above, and any
fractional interest in respect of a unit of Paired Shares otherwise deliverable
pursuant to such provisions shall be settled as provided in paragraph (d) below.
With respect to any shares of Class B EPS to be issued pursuant to an Election
Notice, the Corporation shall procure from the Trust and deliver at the office
of the Corporation (or, at the option of the Corporation, at the office of the
Transfer Agent) to the applicable registered holder a certificate or
certificates for the number of full shares of Class B EPS deliverable in
accordance with the provisions of Section 3 above, and any fractional interest
in respect of a share of Class B EPS otherwise deliverable pursuant to such
provisions shall be settled as provided in paragraph (d) below.
(d) No fractional units of Paired Shares or shares of Class B
EPS or scrip evidencing fractions of units of Paired Shares or shares of Class B
EPS shall be issued upon any tender of Class B OP Units pursuant to this
Agreement. Instead of any fractional interest in a unit of Paired Shares that
would otherwise be deliverable in connection with such tender, the Corporation
shall pay to the registered holder an amount in cash equal to the corresponding
fraction of the Current Market Price of the Paired Shares on the Trading Day
immediately preceding the date of the applicable Election Notice, and instead of
any
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<PAGE> 14
fractional interest in a share of Class B EPS that would otherwise be
deliverable in connection with such tender, the Corporation shall pay to the
registered holder an amount in cash equal to the corresponding fraction of the
product of (x) the Current Market Price of the Paired Shares on the Trading Day
immediately preceding the date of the applicable Election Notice multiplied by
(y) the number of Class B Underlying Paired Shares (as defined in the Class B
Articles Supplementary) for which each share of Class B EPS is then indirectly
exchangeable as of such date (determined without taking into consideration any
Class A Dividend Replacement Shares or Class B Dividend Replacement Shares, as
defined in the Class A Articles Supplementary and Class B Articles
Supplementary, respectively). If more than one Letter of Transmittal shall be
delivered at one time by the same registered holder, the numbers of full Paired
Shares and full shares of Class B EPS which shall be issuable upon exchange of
the Class B OP Units tendered thereby shall be computed on the basis of the
aggregate number of Class B OP Units so tendered.
(e) The Corporation covenants that any Paired Shares and
shares of Class B EPS issued pursuant to this Agreement will be validly issued,
fully paid and non-assessable. If a registered holder exchanges Class B OP Units
pursuant to this Agreement, the Corporation shall pay any documentary, stamp or
similar issue or transfer tax due on any issuance of Paired Shares and/or shares
of Class B EPS upon such exchange. Such holder, however, shall (i) pay to the
Corporation the amount of any additional documentary, stamp or similar issue or
transfer tax which is due (or shall establish to the satisfaction of the
Corporation the payment thereof) as a result of Paired Shares or shares of Class
B EPS being issued in a name other than the name of such holder and (ii) be
responsible for all income or other taxes as a result of such exchange.
(f) The Corporation shall have the right to affix to any
certificates evidencing Paired Shares or shares of Class B EPS issued pursuant
to this Agreement: (i) any restrictive legend required in order for such
issuance to be in compliance with the Securities Act and any applicable state
securities laws, (ii) if applicable, a legend referring to the transfer
restrictions provided for in Section 6.16(f) of the Transaction Agreement and
(iii) any other legend required in order to comply with any applicable law.
SECTION 5. IMPLEMENTATION OF REDEMPTION OPTION. In the event
that the Corporation exercises the Paired Shares Redemption Option or the Class
B EPS Redemption Option, the Corporation shall cause the Operating Partnership
to redeem the corresponding Class B OP Units as soon as practicable after the
date of the Election Notice. The cash redemption price payable to the registered
holder pursuant to such Paired Shares
-14-
<PAGE> 15
Redemption Option or Class B EPS Redemption Option shall be paid by the
Operating Partnership at its election by check or by wire transfer to an account
designated in writing by such holder, if one has been so designated.
SECTION 6. REPRESENTATIONS OF TENDERING HOLDER. Each tender of
Class B OP Units shall constitute a representation and warranty by the tendering
holder of each of the representations and warranties set forth in the form of
Letter of Transmittal. Without limiting the generality of the foregoing, unless,
at the time of a tender for exchange of Class B OP Units pursuant to this
Agreement, a registration statement relating to any Paired Shares and/or shares
of Class B EPS to be delivered upon such tender is effective under the
Securities Act, such tender shall constitute a representation and warranty by
the tendering holder to the Corporation that such tendering holder (i) is an
"accredited investor" within the meaning of Rule 501 under the Securities Act,
(ii) has sufficient knowledge and experience in financial and business matters
and in investing in entities similar to the Operating Partnership, the
Corporation and the Trust so as to be able to evaluate the risks and merits of
its investment in the Operating Partnership and it is able financially to bear
the risks thereof, (iii) has had an opportunity to discuss the business,
management and financial affairs of the Operating Partnership, the Trust and the
Corporation with the management of the Operating Partnership, the Trust and the
Corporation, and (iv) understands the Paired Shares and shares of Class B EPS
issuable pursuant to this Agreement have not and will not have been registered
under the Securities Act by reason of their issuance in a transaction exempt
from the registration requirements of the Securities Act pursuant to Section
4(2) thereof or Rule 505 or 506 promulgated under the Securities Act and such
Paired Shares and shares of Class B EPS must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act and
applicable state securities laws or is exempt from such registration.
SECTION 7. STATUS OF TENDERING HOLDER. Until the holder of
Class B OP Units tendered pursuant to this Agreement becomes a holder of record
of the Paired Shares and/or shares of Class B EPS issued in exchange therefor
(in the case of an exercise of the Paired Shares Delivery Option and/or the
Class B EPS Delivery Option, as applicable) or until such holder has received
cash in exchange therefor (in the case of an exercise of the Paired Shares Cash
Option, the Paired Shares Redemption Option, the Class B EPS Cash Option and/or
the Class B EPS Redemption Option, as applicable) and until the holder has
received an Exchange Promissory Note in substitution for any Excess Shares or
until the holder has received the proceeds from the sale of the corresponding
Offered Shares (in the case of an exercise of the Registered Sale Option), such
holder shall
-15-
<PAGE> 16
continue to hold and own the corresponding Class B OP Units for all purposes of
the Realty Partnership Agreement. In the case of an exercise of the Paired
Shares Delivery Option or Class B EPS Delivery Option, no such holder shall have
any rights as a shareholder of the Trust or a stockholder of the Corporation in
respect of such Paired Shares, or as a shareholder of the Trust in respect of
such shares of Class B EPS, until such holder becomes a holder of record of such
Paired Shares or shares of Class B EPS.
SECTION 8. RESERVATION OF SHARES; CLOSING OF TRANSFER BOOKS.
(a) The Corporation shall reserve and shall at all times have reserved out of
its authorized but unissued Corporation Shares, solely for the purpose of
effecting the exchange pursuant to this Agreement, enough Corporation Shares to
permit the exchange of the then outstanding Class B OP Units for Paired Shares
pursuant to this Agreement and shall use its best efforts to cause the Trust to
reserve and shall at all times have, solely for the purpose of effecting such
exchange, enough Trust Shares to permit such exchange. In addition, until the
Cross-Over Date, the Corporation shall use its best efforts to cause the Trust
to reserve and at all times have reserved out of its authorized but unissued
shares of Class B EPS, solely for the purpose of effecting the exchange pursuant
to this Agreement, enough shares of Class B EPS to permit the exchange of the
then outstanding Class B OP Units for shares of Class B EPS pursuant to this
Agreement.
(b) The Corporation shall not close its transfer books so as
to prevent the timely issuance of Corporation Shares pursuant to this Agreement.
The Corporation shall use its best efforts to cause the Trust not to close its
transfer books so as to prevent the timely issuance of Trust Shares or shares of
Class B EPS pursuant to this Agreement.
SECTION 9. NOTICES. All notices, documents and other
communications under this Agreement shall be in writing and shall be deemed
given when delivered personally or by overnight mail or when sent by facsimile
transmission, or four days after being mailed (by registered mail, return
receipt requested) to a party at the following address (or to such other address
as such party may have specified by notice given to the other parties pursuant
to this provision):
(a) If to the Corporation or the Operating Partnership, to:
Starwood Lodging Corporation
2231 E. Camelback Road, Suite 410
Phoenix, AZ 85016
Attention: General Counsel
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<PAGE> 17
Telecopy No.: (602) 852-0686
Telephone No.: (602) 852-3900
with a copy to:
Sidley & Austin
555 West 5th Street
Los Angeles, California 90013
Attention: Sherwin L. Samuels
Telecopy No.: (213) 896-6600
Telephone No.: (213) 896-6000
(b) If to any OP Limited Partner, to the address
specified on Schedule I hereto.
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Attention: Joseph C. Shenker
Telecopy No.: (212) 558-3588
Telephone No.: (212) 558-4000
SECTION 10. DETERMINATIONS AND INTERPRETATION. All agreements
between the Corporation, the Operating Partnership and the OP Limited Partners
provided for in (or required by or pursuant to) this Agreement shall be made on
behalf of the Corporation and the Operating Partnership by their respective
Disinterested Members, including, without limitation, any agreement between the
Corporation, the Operating Partnership and the OP Limited Partners as to the
election by the Corporation of the Paired Shares Delivery Option, the Paired
Shares Cash Option, the Paired Shares Redemption Option, the Class B EPS
Delivery Option, the Class B EPS Cash Option or the Class B EPS Redemption
Option with respect to a tender of Class B OP Units pursuant to Section 2(a),
any agreement to permit the revocation, withdrawal or modification of a tender
of Class B OP Units pursuant to Section 2(b). All interpretations of the terms
of this Agreement shall be resolved on behalf of the Corporation by its
Disinterested Members.
SECTION 11. PARTIAL INVALIDITY. In case any one or more of the
provisions contained herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein unless the deletion of
such provision or provisions would result in such a material change as to cause
completion of the transactions contemplated
-17-
<PAGE> 18
hereby to be unreasonable.
SECTION 12. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors or assigns. In addition, and whether or not any express
assignment shall have been made, the provisions of this Agreement which are for
the benefit of the parties hereto other than the Corporation, the Operating
Partnership and the OP Limited Partners, shall also be for the benefit of and
enforceable by any subsequent holder of any Class Units.
SECTION 13. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in one or more counterparts, each of which shall be considered an
original counterpart, and shall become a binding agreement when the Corporation,
the Operating Partnership and the OP Limited Partners shall have each executed a
counterpart of this Agreement.
SECTION 14. TITLES AND HEADINGS. Titles and headings to
Articles and Sections herein are inserted for convenience of reference only and
are not intended to be a part of or to affect the meaning or interpretation of
this Agreement.
SECTION 15. EXHIBITS. The Exhibits referred to in this
Agreement shall be construed with, and as an integral part of, this Agreement to
the same extent as if the same had been set forth verbatim herein.
SECTION 16. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This
Agreement, including the Exhibits, contains the entire understanding of the
parties hereto with regard to the subject matter contained herein. In addition
to amendments and modifications permitted by Section 2(c), the parties hereto,
by mutual agreement in writing, may amend, modify and supplement this Agreement;
provided that any such amendment, modification or supplement shall be approved
by a majority of the Disinterested Members of the Corporation. The failure of
any party hereto to enforce at any time any provision of this Agreement shall
not be construed to be a waiver of such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of such party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to constitute a waiver of any other or subsequent
breach.
SECTION 17. GOVERNING LAW. Except to the extent that Maryland
law is mandatorily applicable to the rights and obligations of the shareholders
of the Trust and the stockholders of the Corporation, this Agreement, and the
application or interpretation thereof, shall be governed exclusively by its
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<PAGE> 19
terms and by the internal laws of the State of New York, without regard to
principles of conflicts of laws as applied in the State of New York or any other
jurisdiction which, if applied, would result in the application of any laws
other than the internal laws of the State of New York.
SECTION 18. SUBMISSION TO JURISDICTION. Each of the parties
hereto irrevocably submits and consents to the jurisdiction of the United States
District Court for the Southern District of New York in connection with any
action or proceeding arising out of or relating to this Agreement, and
irrevocably waives any immunity from jurisdiction thereof and any claim of
improper venue, forum non conveniens or any similar basis to which it might
otherwise be entitled in any such action or proceeding.
SECTION 19. SPECIFIC PERFORMANCE. Each of the parties
acknowledges and agrees that in the event of any breach of this Agreement, the
non-breaching party or parties would be irreparably harmed and could not be made
whole by monetary damages. The parties hereby agree that in addition to any
other remedy to which they may be entitled at law or in equity, they shall be
entitled to compel specific performance of this Agreement in any action
instituted in any court of the United States or any state thereof having subject
matter jurisdiction for such action.
-19-
<PAGE> 20
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the parties hereto or by their duly authorized officers, all as of
the date first above written.
STARWOOD LODGING CORPORATION,
a Maryland Corporation
By:_________________________
Name:
Title:
SLC OPERATING LIMITED PARTNERSHIP
By: STARWOOD LODGING CORPORATION,
general partner
By:_________________________
Name:
Title:
WHWE L.L.C.,
a Delaware limited liability
company
By: Whitehall Street Real Estate
Limited Partnership V,
Member and Manager
By: WH Advisors, L.P.V,
General Partner
By: WH Advisors, Inc. V,
General Partner
By:_________________________
Name:
Title:
WOODSTAR INVESTOR PARTNERSHIP,
a Delaware General Partnership
By: Marswood Investors, L.P.,
General Partner
By: Starwood Capital Group, L.P.,
<PAGE> 21
General Partner
By: BSS Capital Partners, L.P.,
General Partner
By: Sternlicht Holdings II, Inc.,
General Partner
By:_________________________
Name:
Title:
NOMURA ASSET CAPITAL CORPORATION,
a Delaware Corporation
By:_________________________
Name:
Title:
<PAGE> 22
SCHEDULE I TO
EXCHANGE RIGHTS AGREEMENT
NOTICE ADDRESS FOR HOLDERS
1) If to WHWE, L.L.C., to:
85 Broad Street
New York, New York 10004
Attention: Stuart Rothenberg
Telecopier: (212) 357-5505
2) If to Woodstar Investor Partnership, to:
Three Pickwick Plaza, Suite 250
Greenwich, CT 06830
Attention: Barry S. Sternlicht
Telecopier: (203) 861-2101
3) If to Nomura Asset Capital Corporation, to:
Two World Financial Center, Building B
New York, New York 10281
Attention: Daniel S. Abrams
Telecopier: (212) 667-1666
<PAGE> 23
EXHIBIT A TO
EXCHANGE RIGHTS AGREEMENT
LETTER OF TRANSMITTAL
To Tender Units
of
Class B Operating Partnership Units
Pursuant to the Exchange Rights Agreement
Dated as of January 2, 1998
TO: Starwood Lodging Corporation
2231 E. Camelback Road, Suite 410
Phoenix, AZ 85016
Attention: General Counsel
<TABLE>
<CAPTION>
DESCRIPTION OF UNITS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NAME(S) AND UNITS NUMBER OF NUMBER OF
ADDRESS(ES) OF TENDERED UNITS UNITS
REGISTERED OWNERS (ATTACH REQUESTED TO REQUESTED
ADDITIONAL BE EXCHANGED TO BE
LIST IF FOR PAIRED EXCHANGED
NECESSARY) SHARES FOR CLASS
B EPS(1)
TOTAL
</TABLE>
- --------
(1) For a Class B EPS Request to be valid, this letter of Transmittal must be
delivered to the Corporation on or prior to the Cross-over Date.
<PAGE> 24
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Starwood Lodging Corporation
(the "Corporation") the above-described Class B OP Units (as defined in the
Exchange Rights Agreement (Class B Operating Partnership Units) dated as of
January 2, 1998 (the "Exchange Rights Agreement")) in accordance with the terms
and conditions of the Exchange Rights Agreement and this Letter of Transmittal
(which together constitute the "Offer"), receipt of which is hereby
acknowledged. All terms used herein but not defined herein are used as defined
in the Exchange Rights Agreement.
Subject to, and effective upon the issuance of Paired Shares
and/or shares of Class B EPS and/or the delivery of cash or other specified
consideration, as the case may be, for the Class B OP Units tendered hereby, the
undersigned hereby assigns and transfers to the Corporation all right, title and
interest in and to all the Class B OP Units that are being tendered hereby and
irrevocably constitutes and appoints the Corporation (the "Class B Unit Agent"),
with full power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), to (a) transfer such Class B OP
Units on the books of the Operating Partnership and (b) receive all rights,
privileges and benefits, and any and all obligations and liabilities
appertaining thereto and otherwise exercise all rights of beneficial ownership
of such Class B OP Units, all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants to the
Corporation that the undersigned has full power and authority to tender, sell,
assign and transfer the tendered Class B OP Units and that upon payment
therefor, the Corporation will acquire unencumbered title thereto, free and
clear of all liens, restrictions, charges and encumbrances and the same will not
be subject to any adverse claim. The undersigned will, upon request, execute any
additional documents deemed by the Corporation to be reasonably necessary or
desirable to complete the sale, assignment and transfer of the tendered Class B
OP Units.
Unless a registration statement relating to any Paired Shares
and/or Class B EPS to be delivered to the undersigned is effective under the
Securities Act of 1933, as amended (the "Securities Act"), the undersigned
hereby represents and warrants to the Corporation that the undersigned (A) is an
"accredited investor" within the meaning of Rule 501 under the Securities
-24-
<PAGE> 25
Act, or (B) has sufficient knowledge and experience in financial and business
matters and in investing in entities similar to the Operating Partnership, the
Corporation and the Trust so as to be able to evaluate the risks and merits of
its investment in the Operating Partnership, the Corporation and the Trust and
it is able financially to bear the risks thereof, and in either case (i) has had
an opportunity to discuss the business, management and financial affairs of the
Operating Partnership, the Corporation and the Trust with the management of the
Operating Partnership, the Corporation and the Trust and (ii) understands that
any such Paired Shares and/or Class B EPS have not been registered under the
Securities Act by reason of their issuance in a transaction exempt from the
registration requirements of the Securities Act pursuant to Section 4(2) thereof
or Rule 505 or 506 promulgated under the Securities Act and any such Paired
Shares and/or Class B EPS must be held indefinitely unless a subsequent
disposition thereof is registered under the Securities Act and applicable state
securities laws or is exempt from such registration. If not sold pursuant to an
effective registration statement, any such Paired Shares and/or Class B EPS will
bear an appropriate legend indicating that such Paired Shares and/or Class B EPS
have not been registered under the Securities Act and resale of such Paired
Shares and/or Class B EPS is restricted under applicable securities laws.
All authority conferred or agreed to be conferred in this
Letter of Transmittal shall not be affected by, and shall survive, the death or
incapacity of the undersigned, and any obligation of the undersigned hereunder
shall be binding upon the successors, assigns, heirs, executors, administrators
and legal representatives of the undersigned.
The undersigned understands that, except as provided in
Section 2(b) of the Exchange Rights Agreement, a tender of Class B OP Units
pursuant to the Exchange Rights Agreement is irrevocable and constitutes a
binding agreement between the undersigned and the Corporation upon the terms and
subject to the conditions of the Exchange Rights Agreement.
Unless otherwise indicated under "Special Delivery
Instructions", please mail any Paired Shares and/or shares of Class B EPS
issuable upon exchange of the Class B OP Units tendered hereby and/or any cash
payment or Exchange Promissory Note(s) deliverable pursuant to the terms of the
Exchange Rights Agreement to the address(es) of the registered holder(s)
appearing under "Description of Units." In the event that the Special Delivery
Instructions are completed, please issue such Paired Shares and/or shares of
Class B EPS and any such Exchange Promissory Note(s) and make any such cash
payment in the name of the registered holder(s) and transmit the same to the
person or persons so indicated.
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<PAGE> 26
The Corporation and the undersigned agree that they will
cooperate with each other and will make, execute, acknowledge, deliver, record
and file, or cause to be made, executed, acknowledged, delivered, recorded and
filed, at such times and places as the other may reasonably deem necessary, all
other and further documents and instruments, and will take all other and further
actions, as the other may reasonably request from time to time in order to
effectuate the purposes and provisions of the tender made pursuant to this
Letter of Transmittal.
-26-
<PAGE> 27
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4 AND 5)
To be completed ONLY if Paired Shares and/or shares of Class B
EPS and/or cash or Exchange Promissory Note(s) deliverable pursuant to the
Exchange Rights Agreement are to be sent to someone other than the undersigned
or to the undersigned at an address other than that above.
Mail certificate(s) for Paired Shares and/or shares of Class B EPS and any
Exchange Promissory Note(s) and cash payments to:
Name_____________________________________________________________
(please print)
Address__________________________________________________________
_________________________________________________________________
(include Zip Code)
_________________________________________________________________
_________________________________________________________________
(Tax Identification or Social Security Number)
SIGN HERE
Complete Substitute Form W-9 included
_________________________________________________________________
_________________________________________________________________
(Signature(s) of holder of Units)
(Must be signed by registered holder(s) as name(s) appear(s) on books and
records of the Partnership. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of Trusts or others
acting in a fiduciary or representative capacity, please set forth full title
and see instruction 4.
Dated____________________________________________________________
Name(s)__________________________________________________________
(please print)
Capacity
(Full Title)_____________________________________________________
Address__________________________________________________________
_27_
<PAGE> 28
(include Zip Code)
-28-
<PAGE> 29
Area Code and Tel. No.___________________________________________
Tax Identification or
Social Security No.______________________________________________
(Complete Substitute Form W-9)
Guarantee of Signature(s)
(See Instruction 1)
Authorized
Signature________________________________________________________
Name of
Firm_____________________________________________________________
Dated____________________________________________________________
INSTRUCTIONS
Forming Part of the Terms and Conditions of the
Exchange Rights Agreement
1. GUARANTEE OF SIGNATURE. No signature guarantee on this
Letter of Transmittal is required unless the registered holder of the Class B OP
Units has completed the box entitled "Special Delivery Instructions". In such
case all signatures on this Letter of Transmittal must be guaranteed by a member
firm of any registered national securities exchange in the United States or of
the National Association of Securities Dealers, Inc. or by a commercial bank or
trust company (not a savings bank or a savings and loan association) having an
office, branch or agency in the United States.
2. DELIVERY OF LETTER OF TRANSMITTAL. This Letter of
Transmittal is to be completed by the holder of Class B OP Units. A properly
completed and duly executed Letter of Transmittal and any other documents
required by this Letter of Transmittal must be received by the Class B Unit
Agent.
No alternative, conditional or contingent tenders will be
accepted, except as permitted pursuant to the Exchange Rights Agreement.
3. INADEQUATE SPACE. If the space provided herein is
inadequate, the Units tendered and/or other information required should be
listed on a separate schedule attached hereto.
4. SIGNATURES ON LETTER OF TRANSMITTAL. The signature must
correspond with the name as shown on the books and
-29-
<PAGE> 30
records of the Operating Partnership without any change whatsoever.
If any of the Class B OP Units tendered hereby are owned of
record by two or more joint owners, all such owners must sign the Letter of
Transmittal.
If any tendered Class B OP Units are registered in different
names, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations.
If this Letter of Transmittal is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of Trusts or
others acting in a fiduciary or representative capacity, each person should so
indicate when signing, and proper evidence satisfactory to the Class B Unit
Agent of their authority so to act must be submitted.
5. SPECIAL DELIVERY INSTRUCTIONS. If a certificate for Paired
Shares and/or shares of Class B EPS and any Exchange Promissory Note(s) and cash
payment is to be sent to someone other than the signer of this Letter of
Transmittal or to an address other than that shown above, the appropriate boxes
on this Letter of Transmittal should be completed.
6. WAIVER OF CONDITIONS. The Corporation reserves the right to
waive in its sole discretion any of the specified conditions of the Offer in the
case of the Class B OP Units tendered; provided that any such waiver shall not
adversely affect any holder of outstanding Class B OP Units without the consent
of such holder.
7. BACK-UP WITHHOLDING. Under the Federal income tax law, a
person surrendering Class B OP Units must provide the Class B Unit Agent with
his correct taxpayer identification number ("TIN") on Substitute Form W-9 below
unless an exemption applies. If the correct TIN is not provided, a $50 penalty
may be imposed by the Internal Revenue Service and payments made in exchange for
the surrendered Class B OP Units may be subject to back-up withholding of that
rate provided by the Federal income tax law (such rate being at the date of the
Exchange Rights Agreement, 31%).
The TIN that must be provided is that of the registered holder
of the Class B OP Units. The TIN for an individual is his social security
number.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance or additional copies of the Exchange Rights Agreement
and the Letter of Transmittal may be directed to the Class B Unit Agent at the
address set forth
-30-
<PAGE> 31
above.
IMPORTANT TAX INFORMATION
Under Federal income tax laws, a holder whose tendered Class B
OP Units are accepted for payment is required by law to provide the Class B Unit
Agent (as payer) with his correct taxpayer identification number on Substitute
Form W-9 below. If such holder is an individual, the taxpayer identification
number is his social security number. If the Class B Unit Agent is not provided
with the correct taxpayer identification number, the holder may be subject to a
$50 penalty imposed by the Internal Revenue Service. In addition, payments that
are made to such holder with respect to Class B OP Units purchased pursuant to
the Offer may be subject to back-up withholding.
If back-up withholding applies, the Class B Unit Agent is
required to withhold, at that rate provided by the Federal income tax law (such
rate being at the date of the Exchange Rights Agreement 31%), of any such
payments made to the holder of Class B OP Units. Paired Shares, shares of Class
B EPS and any Exchange Promissory Note(s) otherwise deliverable hereunder may,
at the expense (and with all risk of loss for the account) of the undersigned,
be sold to pay such amounts. Back-up withholding is not an additional tax.
Rather, the tax liability of persons subject to back-up withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent back-up withholding on payments that are made to a
holder of Class B OP Units purchased pursuant to the Offer, the holder is
required to notify the Class B Unit Agent of his correct taxpayer identification
number by completing the form below certifying that the taxpayer identification
number provided on Substitute Form W-9 is correct.
WHAT NUMBER TO GIVE THE AGENT
The holder is required to give the Class B Unit Agent the
social security number or employer identification number of the record owner of
the Class B OP Units.
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<PAGE> 32
PAYER'S NAME:
Starwood Lodging Corporation
<TABLE>
<S> <C> <C>
Substitute Part 1 - Please provide your TIN in the box at Social Security
Form W-9 right and certify by signing and dating below Number/Employer
Identification
Number
Department of the Certification - Under the penalties of perjury,
Treasury/Internal (i) I certify that the information provided on this
Revenue Service form is true, correct and complete and (ii) I am
not subject to backup withholding because: (a) I
am exempt from backup Service withholding, or (b) I
have not been notified by the Internal Revenue
Service (IRS) that I am subject to backup
withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup
withholding.
Signature ________________________________________ Date ______________
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACK-UP
WITHHOLDING AT THAT RATE PROVIDED BY THE FEDERAL INCOME TAX
LAW (SUCH RATE BEING AT THE DATE OF THE EXCHANGE RIGHTS
AGREEMENT 31%) OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER.
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<PAGE> 1
Exhibit 10.52
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
as of January 2, 1998 among Starwood Lodging Trust, a real estate investment
trust organized under the laws of the State of Maryland (the "Trust"), Starwood
Lodging Corporation, a Maryland corporation (the "Corporation"), and the persons
and entities whose names appear under the heading "Holders" on the signature
pages hereto (together with their permitted assigns, the "Holders"). Unless
otherwise indicated, capitalized terms used herein are used herein as defined in
Section 1.1.
RECITALS
WHEREAS, pursuant to a Transaction Agreement dated as of
September 8, 1997 (the "Transaction Agreement") among the Trust, SLT Realty
Limited Partnership, a Delaware limited partnership (the "Realty Partnership"),
the Corporation, SLC Operating Limited Partnership, a Delaware limited
partnership (the "Operating Partnership"), certain of the Holders and certain
other parties, (i) shares of common stock of Westin Hotels & Resorts Worldwide,
Inc., a Delaware corporation ("Worldwide"), are being converted into, among
other things, shares of Class A Exchangeable Preferred Stock, par value $.01 per
share, of the Trust and shares of Class B Exchangeable Preferred Stock, par
value $.01 per share, of the Trust pursuant to the merger of Worldwide with and
into the Trust provided for in the Transaction Agreement (such shares of Class A
Preferred Stock and Class B Preferred Stock issued pursuant to such merger being
hereinafter called the "Class A Preferred Stock" and "Class B Preferred Stock",
respectively), (ii) on the date hereof certain of the Holders are making capital
contributions to the Realty Partnership in return for the issuance by the Realty
Partnership to such Holders of Class A Units (as defined in the Limited
Partnership Agreement of the Realty Partnership) of the Realty Partnership (such
Class A Units issued by the Realty Partnership to the Holders on the date hereof
being hereinafter called the "Realty Units") and (iii) on the date hereof
certain of the Holders are making capital contributions to the Operating
Partnership in return for the issuance by the Operating Partnership to such
Holders of Class A Units (as defined in the Limited Partnership Agreement of the
Operating Partnership) of the Operating Partnership (such Class A Units issued
by the Operating Partnership to the Holders on the date hereof being hereinafter
called the "Operating Units");
WHEREAS, pursuant to the Transaction Agreement, the parties
hereto desire to set forth the rights of the Holders and the obligations of the
Trust and the Corporation to cause the registration of the Registrable
Securities (as defined in Section 1.1) pursuant to the Securities Act;
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS AND USAGE.
1.1. DEFINITIONS. As used in this Agreement:
Beneficially Owning. "Beneficially Owning" means owning Trust
Shares directly, indirectly or constructively by a Person through the
application of Section 318(a) of the Code, as modified by Section 856(d)(5) of
the Code, or Section 544 of the Code, as modified by Section 856(h) of the Code.
Business Day. "Business Day" means any day other than
Saturday, Sunday and any day on which commercial banks are not open to do
business in New York, New York.
Class A Preferred Stock. "Class A Preferred Stock" shall have
the meaning set forth in the recitals.
Class B Preferred Stock. "Class B Preferred Stock" shall have
the meaning set forth in the recitals.
Code. "Code" shall mean the Internal Revenue Code of 1986, and
the rules and regulations promulgated thereunder, as amended from time to time.
Commission. "Commission" shall mean the Securities and
Exchange Commission or any other federal agency at the time administering the
Securities Act.
Continuously Effective. "Continuously Effective", with respect
to a specified registration statement, shall mean that such registration
statement shall not cease to be effective and available for Transfers of
Registrable Securities thereunder for longer than either (i) any ten (10)
consecutive Business Days, or (ii) an aggregate of fifteen (15) Business Days
during the period specified in the relevant provision of this Agreement.
Corporation Shares. "Corporation Shares" shall mean the shares
of common stock, par value $.01 per share, of the Corporation.
Effectiveness Period. "Effectiveness Period" shall have the
meaning set forth in Section 2.2.
Effective Time. "Effective Time" shall mean the date on which
the Commission declares the Shelf Registration Statement effective or on which
the Shelf Registration Statement otherwise
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<PAGE> 3
becomes effective.
Electing Holder. "Electing Holder" shall mean a Holder that
elects to require the Trust and the Corporation to file a Shelf Registration
Statement pursuant to Section 2 or to participate in a Piggyback Registration
pursuant to Section 3.
Exchange Act. "Exchange Act" shall mean the Securities
Exchange Act of 1934 and the rules and regulations of the Commission thereunder,
all as the same shall be in effect at the time.
Holders. "Holders" shall have the meaning set forth in the
recitals.
Operating Partnership. "Operating Partnership" shall have the
meaning set forth in the recitals.
Operating Units. "Operating Units" shall have the meaning set
forth in the recitals.
Original Securities "Original Securities" shall have the
meaning set forth in the definition of "Registrable Securities".
Ownership Limit. "Ownership Limit" when used with respect to
Trust Shares, has the meaning set forth in the Declaration of Trust of the Trust
and, when used with respect to the Corporation Shares, has the meaning set forth
in the Restated Articles of Incorporation of the Corporation, in each case as
amended from time to time.
Paired Shares. "Paired Shares" shall mean the Trust Shares and
the Corporation Shares which are "paired" pursuant to the Pairing Agreement
dated June 25, 1980 between the Trust and the Corporation, as it may be amended
from time to time.
Person. "Person" shall mean any individual, corporation,
partnership, joint venture, association, joint-stock company, limited liability
company, trust, unincorporated organization or government or other agency or
political subdivision thereof.
Prospectus. "Prospectus" shall mean the prospectus (including,
without limitation, any preliminary prospectus, any final prospectus and any
prospectus that discloses information previously omitted from a prospectus filed
as part of an effective registration statement in reliance upon Rule 430A under
the Securities Act) included in the Shelf Registration Statement, as amended or
supplemented by any prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Securities covered by the Shelf
Registration
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<PAGE> 4
Statement and by all other amendments and supplements to such prospectus,
including all material incorporated by reference in such prospectus and all
documents filed after the date of such prospectus by the Trust and the
Corporation under the Exchange Act and incorporated by reference therein.
Piggyback Registration. "Piggyback Registration" shall have
the meaning set forth in Section 3.
Realty Partnership. "Realty Partnership" shall have the
meaning set forth in the recitals.
Realty Units. "Realty Units" shall have the meaning set forth
in the recitals.
Register, Registered and Registration. "Register",
"registered", and "registration" shall refer to a registration effected by
preparing and filing a registration statement or similar document in compliance
with the Securities Act, and the declaration or ordering by the Commission of
effectiveness of such registration statement or document.
Registrable Securities. "Registrable Securities" shall mean:
(i) the Paired Shares issued or issuable upon exchange or conversion of any of
the Class A Preferred Stock, Class B Preferred Stock, Realty Units or Operating
Units issued in connection with the Transaction Agreement (the "Original
Securities"), (ii) any Paired Shares or other securities issued as (or issuable
upon the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange by
the Trust and the Corporation generally for, or in replacement by the Trust and
the Corporation generally of, such Paired Shares (or Original Securities that
are convertible or exchangeable for Paired Shares); (iii) any securities issued
in exchange for Paired Shares (or Original Securities that are convertible or
exchangeable for Paired Shares) in any merger or reorganization of the Trust and
the Corporation; provided, however, that Registrable Securities shall not
include any securities which have theretofore been registered and sold pursuant
to the Securities Act or which have been publicly sold pursuant to Rule 144
under the Securities Act or any similar rule promulgated by the Commission
pursuant to the Securities Act and (iv) during the continuance of any default by
Starwood Trust of its obligations under the terms of the Class B EPS, the shares
of Class B EPS received in the transactions contemplated by the Transaction
Agreement; provided further, that the Trust and the Corporation shall have no
obligation under Sections 2 and 3 to register any Registrable Securities if
nationally recognized counsel for the Trust and the Corporation, experienced in
such matters and reasonably satisfactory to such Holders, delivers (after
consultation with counsel for such Holders) to the Holders of
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<PAGE> 5
such Registrable Securities an opinion of counsel to the effect that the
proposed sale or disposition of all the Registrable Securities for which
registration was requested does not require registration under the Securities
Act for a sale or disposition in a single public sale, and the Trust and the
Corporation offer to remove any and all legends restricting transfer from the
certificates evidencing such Registrable Securities. Notwithstanding anything to
the contrary set forth herein, Registrable Securities shall not include (x) any
Realty Units, Operating Units, Class A EPS or, except as provided above, Class B
EPS or (y) securities convertible or exchangeable for Paired Shares which are
not being issued in connection with the Transaction Agreement or Paired Shares
which are acquired other than in connection with the Transaction Agreement
(which shall not be deemed to include Paired Shares which are acquired pursuant
to the conversion or exchange of securities acquired pursuant to the Transaction
Agreement).
Registrable Securities then outstanding. "Registrable
Securities then outstanding" shall mean, with respect to a specified
determination date, the Registrable Securities owned by all Holders on such date
and the Registrable Securities which are issuable upon conversion or exchange of
Class A Preferred Stock, Class B Preferred Stock, Realty Units and Operating
Units owned by all Holders on such date.
Registration Expenses. "Registration Expenses" shall have the
meaning set forth in Section 6.1.
REIT Rules. "REIT Rules" shall mean the rules under the Code,
governing ownership limits and rules under the Code applicable to related party
rents.
Required Holder or Required Holders. "Required Holder" shall
have the meaning set forth in Section 2.1.
Securities Act. "Securities Act" shall mean the Securities Act
of 1933 and the rules and regulations of the Commission thereunder, all as the
same may be in effect at the time.
Selling Holder. "Selling Holder" shall mean, with respect to a
specified offering pursuant to this Agreement, a Holder whose Registrable
Securities are included in such registration.
Shelf Registration Statement. "Shelf Registration Statement"
shall mean a "shelf" registration statement filed under the Securities Act
providing for the registration of, and the sale on a continuous or delayed basis
by the Holders of, all or a portion of the Registrable Securities pursuant to
Rule 415 under the Securities Act and/or any similar rule that may be
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<PAGE> 6
adopted by the Commission, filed by the Trust and the Corporation pursuant to
the provisions of Section 2 of this Agreement, including the Prospectus
contained therein, any amendments and supplements to such registration
statement, including post-effective amendments, and all exhibits and all
material incorporated by reference in such registration statement.
Transaction Agreement. "Transaction Agreement" shall have the
meaning set forth in the recitals.
Transfer. "Transfer" shall mean and include the act of
selling, giving, transferring, creating a trust (voting or otherwise), assigning
or otherwise disposing of (other than pledging, hypothecating or otherwise
transferring as security) (and correlative words shall have correlative
meanings); provided however, that any transfer or other disposition upon
foreclosure or other exercise of remedies of a secured creditor after an event
of default under or with respect to a pledge, hypothecation or other transfer as
security shall constitute a "Transfer".
Trust Shares. "Trust Shares" shall mean the shares of
beneficial interest, $.01 par value, of the Trust.
Underwriters' Representative. "Underwriters' Representative"
shall mean the managing underwriter, or, in the case of a co-managed
underwriting, the managing underwriter designated as the Underwriters'
Representative by the co-managers.
Units. "Units" shall mean Realty Units and Operating Units.
Violation. "Violation" shall have the meaning set forth in
Section 7.1.
1.2. USAGE.
(i) References to a Person are also references to its assigns
and successors in interest (by means of merger, consolidation or sale of all or
substantially all the assets of such Person or otherwise, as the case may be).
(ii) References to Registrable Securities "owned" by a Holder
shall include Registrable Securities beneficially owned by such Person but which
are held of record in the name of a nominee, trustee, custodian, or other agent,
but shall exclude Paired Shares held by a Holder in a fiduciary capacity for
customers of such Person.
(iii) References to a document are to it as amended, waived
and otherwise modified from time to time and references to a statute or other
governmental rule are to it as amended and otherwise modified from time to time
(and references to any
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<PAGE> 7
provision thereof shall include references to any successor provision).
(iv) References to Sections or to Schedules or Exhibits are to
sections hereof or schedules or exhibits hereto, unless the context otherwise
requires.
(v) The definitions set forth herein are equally applicable
both to the singular and plural forms and the feminine, masculine and neuter
forms of the terms defined.
(vi) The term "including" and correlative terms shall be
deemed to be followed by "without limitation" whether or not followed by such
words or words of like import.
(vii) The term "hereof" and similar terms refer to this
Agreement as a whole.
(viii) The "date of" any notice or request given pursuant to
this Agreement shall be determined in accordance with Section 11.
SECTION 2. SHELF REGISTRATIONS.
2.1. Subject to Section 2.3 and 2.4, if one or more Holders
(each, a "Required Holder") of at least 1,257,156 shares or Units (or any
combination thereof) of Registrable Securities (subject to adjustment in the
event the exchange ratios of the Original Securities are adjusted pursuant to
their terms) shall make a written request to the Trust and the Corporation to
file with the Commission a Shelf Registration Statement relating to the offer
and sale of the Registrable Securities held by the Required Holder or Required
Holders, the Trust and the Corporation shall, within 60 calendar days following
the date on which such request is received, so file such Shelf Registration
Statement and, thereafter, shall use all reasonable efforts to cause such Shelf
Registration Statement to be declared effective under the Securities Act within
60 calendar days after the date of filing of such Shelf Registration Statement.
Within seven calendar days after receiving the request from such Required Holder
or Required Holders, the Trust and the Corporation will send written notice to
the other Holders of such request. Such request shall specify the number of
Registrable Securities to which it relates and the possible intended methods of
disposition thereof and shall state that the Required Holder or Required Holders
intends to distribute publicly all such Registrable Securities within two years
after the filing of such Shelf Registration Statement. The Trust and the
Corporation shall include in such Shelf Registration Statement all or any
portion of the Registrable Securities requested by the Required Holders together
with all or such portion of the Registrable Securities
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<PAGE> 8
of any Holder or Holders joining in such request as are specified in a written
request received by the Trust and the Corporation within ten Business Days after
written notice from the Trust and the Corporation is given above. Prior to
filing the Shelf Registration Statement, the Trust and the Corporation will
furnish a draft thereof to the Holders and shall not file the Shelf Registration
Statement (other than reports, proxy statement and other documents filed under
the Exchange Act) with the Commission without the prior consent of the Holders,
which consent shall not be unreasonably withheld or delayed. Notwithstanding
anything to the contrary in this Agreement, the Trust and the Corporation shall
have no obligation under this Section 2 or under Section 3 to any Holder of
Registrable Securities to the extent such Holder is restricted under the
Transaction Agreement or the Other Agreement (as defined in the Transaction
Agreement) from selling or otherwise transferring such Registrable Securities;
provided, however, that in the event of any transaction constituting a Change of
Control (as defined in the Other Agreement) specified in clause (3) of such
definition in which the Holders of Registrable Securities receive securities in
exchange for the Registrable Securities, the Trust and, the Corporation agree
that such transaction will be registered under the Securities Act; provided
further that in the event of any Change of Control specified in clause (2) of
the definition thereof (or any announced proxy solicitation intended to effect
such a Change of Control) this sentence shall be deemed to be of no further
force and effect.
2.2. The Trust and the Corporation shall use all reasonable
efforts to keep the Shelf Registration Statement Continuously Effective in order
to permit the Prospectus forming a part thereof to be usable by Holders for
resales of Registrable Securities until the Registrable Securities registered
thereunder have been distributed as contemplated thereby, but not later than the
second anniversary of the Effective Date; provided that such two-year period
will be extended for so long as such Holders reasonably request (based on advice
of counsel that the proposed sale or disposition of all such Registrable
Securities requires registration under the Securities Act) (such period being
referred to herein as the "Effectiveness Period").
2.3. The Trust and the Corporation shall be entitled to
postpone for up to 90 calendar days (provided that if such a 90-day postponement
has occurred previously in the prior 365 days up to 45 days but no more) the
filing, effectiveness, supplementing or amending of the Shelf Registration
Statement or any supplement to the Prospectus thereto otherwise required to be
prepared and filed pursuant to this Section 2 and may suspend any sales pursuant
to the Shelf Registration Statement, the Prospectus and any supplements to the
Prospectus (each, a "Blackout Period"), if the Board of Trustees of the Trust
and the
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<PAGE> 9
Board of Directors of the Corporation determine in good faith and on the advice
of counsel that the disclosure required in such registration and the Transfer of
Registrable Securities contemplated thereby would materially adversely affect
any material financing, acquisition, disposition, reorganization or other
material transaction involving the Realty Partnership, the Operating
Partnership, the Trust or the Corporation or any of their respective
subsidiaries and the Trust or the Corporation, as the case may be, promptly
gives the Required Holder or Required Holders notice of such determination. Each
Blackout Period shall terminate upon the earlier to occur of (x) the completion
or abandonment of the financing, acquisition, disposition, reorganization, or
other transaction and (y) the public disclosure by either the Trust or the
Corporation or public admission by either the Trust or the Corporation of such
information.
2.4. Notwithstanding anything in this Agreement to the
contrary, (a) in no event will the Trust or the Corporation be obligated to
effect more than one Shelf Registration Statement upon the request, as a
Required Holder, of each of WHWE, Marswood or Nomura (each as defined in the
Transaction Agreement), it being understood and agreed that any Shelf
Registration Statement withdrawn prior to effectiveness shall not count as
WHWE's, Marswood's or Nomura's one Shelf Registration Statement, and (b) no
registration shall be effected under this Agreement and no Transfer of
Registrable Securities may be effected if as a result thereof the Trust would
violate the REIT Rules in any respect or if such registration or Transfer would
result in any Person Beneficially Owning Paired Shares in excess of the
Ownership Limit.
2.5. The Shelf Registration Statement shall be on such
appropriate registration form of the Commission as shall be selected by the
Trust and the Corporation and shall permit the disposition of the Registrable
Securities in accordance with the intended method or methods of disposition
specified in the request pursuant to Section 2.1.
2.6. If any sale under the Shelf Registration Statement
involves an underwritten offering (whether on a "firm commitment", "best
efforts" or "all reasonable efforts" basis or otherwise), the Required Holder or
Required Holders shall select the underwriter or underwriters and manager or
managers to administer such underwritten offering. If WHWE and its Affiliates
collectively hold (i) more than 50%, or (ii) more than 30% but not more than
50%, of the Registrable Securities to be offered in such underwritten offering,
then Goldman, Sachs & Co. or an affiliate thereof ("Goldman Sachs") shall be (i)
the underwriter or (ii) a co-manager, respectively; provided, however, that if
any Holder or Holders in addition to WHWE is a
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<PAGE> 10
Required Holder then such additional Holder or Holders may select a co-manager,
in addition to Goldman Sachs. Each Person so selected shall be acceptable to the
Trust and the Corporation; provided, however, that Goldman Sachs shall be deemed
to be acceptable to the Trust and the Corporation.
2.7. In connection with an underwritten offering by one or
more Selling Holders of Registrable Securities if the Underwriters'
Representative advises the Selling Holders that, in its opinion, the amount of
securities requested to be included in such offering exceeds the amount which
can be sold in such offering within a price range acceptable to the Selling
Holder or Holders, securities shall be included in such offering, to the extent
of the amount which can be sold within such price range, pro-rata based on the
estimated gross proceeds from the sale thereof.
SECTION 3. PIGGYBACK REGISTRATION.
3.1. If, at any time, the Trust and the Corporation propose to
register securities under the Securities Act in connection with a public
offering (other than a registration statement on Form S-4 or S-8 (or any
replacement or successor forms)), the Trust and the Corporation shall promptly
give the Holders written notice of such registration. Upon the written request
of each Holder given as promptly as practicable but in any event within twenty
(20) days following the date of such notice, the Trust and the Corporation shall
cause to be included in such registration statement and use their respective
reasonable efforts to be registered under the Securities Act all the Registrable
Securities that each such Holder shall have requested to be registered;
provided, however, that such right of inclusion shall not apply to any
registration statement covering an offering of debt securities or convertible
debt securities that does not include an offering of equity securities (other
than those underlying such convertible debt securities) (any such registration
in which Holders participate pursuant to this Section 3.1 being referred to as a
"Piggyback Registration"). The Trust and the Corporation shall have the absolute
right to delay, withdraw or cease to prepare or file any registration statement
for any offering referred to in this Section 3 without any obligation or
liability to any Holder, it being understood that any Registrable Securities
previously included in any such withdrawn Registration Statement shall not cease
to be Registrable Securities by reason of such inclusion or withdrawal.
3.2. If the Underwriters' Representative shall advise the
Trust and the Corporation that, in its opinion, the amount of Registrable
Securities requested to be included in a Piggyback Registration would adversely
affect such offering, or the timing
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<PAGE> 11
thereof, then the Trust and the Corporation will include in such registration,
to the extent of the amount and class which the Trust and the Corporation are so
advised can be sold without such adverse effect in such offering: first, all
securities proposed to be sold by the Trust and the Corporation for their own
accounts; second, all securities, if any, requested to be included in a
registration statement pursuant to the exercise of demand registration rights
granted by the Trust and the Corporation; and third, the Registrable Securities
requested to be included in such registration by Holders pursuant to this
Section 3 and all other securities requested to be included in such registration
pursuant to the exercise of piggyback rights granted to other entities, pro rata
based on the estimated gross proceeds from the sale thereof.
SECTION 4. REGISTRATION PROCEDURES. In connection with the
Shelf Registration Statement the Trust and the Corporation shall, as soon as
reasonably practicable (and, in any event, subject to the terms of this
Agreement, at or before the time required by applicable laws and regulations),
but only during the Effectiveness Period:
4.1. Promptly prepare and file with the Commission such
amendments and supplements to the Shelf Registration Statement and the
Prospectus as may be necessary to comply with the provisions of the Securities
Act and rules thereunder with respect to the disposition of all securities
covered by the Shelf Registration Statement; provided, however, no such
amendment or supplement (other than reports, proxy statements and other
documents filed under the Exchange Act) shall be filed until the Holders have
had a reasonable opportunity to comment thereon and have provided their consent
to such filing. If the offering is an underwritten offering, the Trust and the
Corporation shall amend the Shelf Registration Statement or supplement the
Prospectus whenever required by the terms of the underwriting agreement entered
into pursuant to Section 4.4. The Trust and the Corporation shall amend the
Shelf Registration Statement or supplement the Prospectus so that it will remain
current and in compliance with the requirements of the Securities Act during the
Effectiveness Period and if during such period any event or development occurs
as a result of which the Shelf Registration Statement or Prospectus contains a
misstatement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the Trust or the
Corporation shall as promptly as practicable notify each Holder, amend the Shelf
Registration Statement and supplement the Prospectus so that each will
thereafter comply with the Securities Act and furnish to each Holder,
underwriter and manager such amended or supplemented Prospectus, which each such
Holder shall thereafter use and shall use all reasonable
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<PAGE> 12
efforts to cause any manager or underwriter to use in the Transfer of
Registrable Securities covered by the Shelf Registration Statement. Upon receipt
of notice pursuant to this Section 4.1, each such Holder shall cease making
offers or Transfers of Registrable Shares pursuant to the prior Prospectus. In
the event that any Registrable Securities included in a registration statement
subject to, or required by, this Agreement remain unsold at the end of the
period during which the Trust and Corporation are obligated to use their
respective reasonable efforts to maintain the effectiveness of such registration
statement, the Trust and the Corporation may file a post-effective amendment to
the registration statement for the purpose of removing such Registrable
Securities from registered status.
4.2. Furnish to each Holder of Registrable Securities, without
charge, such numbers of copies of the Shelf Registration Statement, any
pre-effective or post-effective amendment thereto, the Prospectus, including
each preliminary prospectus and any amendments or supplements thereto, in each
case in conformity with the requirements of the Securities Act and the rules
thereunder, documents incorporated by reference in the Shelf Registration
Statement and such other related documents as any such Holder may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by such Holder.
4.3. Use their respective reasonable best efforts (i) to
register and qualify the securities covered by such registration statement under
such other securities or "blue sky" laws of such states where an exemption from
registration is not available and as shall be reasonably requested by the
Underwriters' Representative or any Holder and (ii) to obtain the withdrawal of
any order suspending the effectiveness of the Shelf Registration Statement, or
the lifting of any suspension of the qualification (or exemption from
qualification) of the offer and transfer of any of the Registrable Securities in
any state, at the earliest possible moment; provided, however, that neither the
Trust nor the Corporation shall be required in connection therewith to (A)
qualify as a foreign corporation or other foreign entity or as a dealer in
securities in any jurisdiction where it would not otherwise be required to
qualify but for the requirements of this Section 4.3 or (B) consent to general
service of process in any such jurisdiction, provided that the Trust and the
Corporation shall execute consents to service of process in the forms
customarily requested in connection with the Shelf Registration Statement or
qualification of securities under any applicable state or securities or blue sky
laws.
4.4. In the event of any underwritten offering, use their
respective reasonable efforts to enter into and perform their respective
obligations under an underwriting agreement (including indemnification and
contribution obligations of
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<PAGE> 13
underwriters), in usual and customary form, with the managing underwriter or
underwriters of such offering and take such other actions as are reasonably
necessary in connection therewith in order to expedite or facilitate the
disposition of Registered Securities; and (A) make such representations and
warranties with respect to the Shelf Registration Statement or any
post-effective amendment or supplement thereto, Prospectus or any amendment or
supplement thereto, and documents incorporated by reference, if any, to the
Holders and the managers or underwriters of the Registered Securities in form,
substance and scope as are customary in connection with transactions of such
kind; (B) if requested by the managing underwriters or lead placement agent of
the Registered Securities, obtain an opinion of outside counsel to the
Corporation and the Trust in customary form and covering matters of the type
customarily covered by such an opinion, addressed to such placement agent or
underwriters named in the underwriting agreement and dated the date of the
closing of the sale of the Registrable Securities relating thereto; (C) if
requested by the managing underwriters or lead placement agent of the
Registrable Securities, (I) obtain "comfort" letters (or, if a "comfort" letter
or "comfort" letters may not be delivered under applicable accounting
pronouncements or standards, a "procedures" letter) and an update thereof from
each of the independent certified public accountants who have certified the most
recent audited financial statements that are incorporated by reference in the
Shelf Registration Statement, which letters shall be addressed to the sales or
placement agent or any underwriter of the Registrable Securities and shall be
dated the date of the Prospectus used in connection with an offering of
Registrable Securities and/or the date of the closing of the sale of Registrable
Securities, such letter or letters to be in customary form and covering such
matters of the type customarily covered by "comfort" letters of such type, and
(II) use their respective reasonable best efforts to have such letter addressed
to the Selling Holders of Registrable Securities (provided, however, that such
letters need not be addressed to any Holder to whom, in the reasonable opinion
of the Issuers' independent certified public accountants, addressing such letter
is not permissible under applicable accounting standards); and (D) deliver such
documents and certificates as may be reasonably requested by the Selling Holder
and the sales or placement agent or any underwriter of Securities to evidence
compliance with any conditions contained in the underwriting agreement or other
agreement entered into by the Trust and the Corporation. The Trust and the
Corporation shall also cooperate with the Selling Holders, and the Underwriters'
Representative for such offering in the marketing of the Registrable Securities,
including making available the officers, making the officers available to
participate in such "road show" presentations and conference calls as the
Selling Holders may reasonably request, accountants, counsel, premises, books
and records of the Trust and the Corporation for such purpose.
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<PAGE> 14
4.5. Promptly notify each Selling Holder and the Underwriter's
Representative of any stop order issued or threatened to be issued by the
Commission in connection therewith and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered.
4.6. Make available for inspection by any Selling Holder, any
underwriter participating in such offering and the representatives of such
Selling Holder and Underwriter (but not more than one firm of counsel to such
Selling Holders), all financial and other information as shall be reasonably
requested by them, and provide any Selling Holder, any underwriter participating
in such offering and the representatives of such Selling Holder and Underwriter
the reasonable opportunity to discuss the business affairs of the Trust and the
Corporation with their officers and independent public accountants who have
certified the audited financial statements included in such registration
statement, in each case all as necessary to enable them to exercise their due
diligence responsibility under the Securities Act; provided, however, that
information that the Trust or the Corporation determine to be confidential and
which the Trust or the Corporation advise such Person in writing, is
confidential shall not be disclosed unless such Person signs a confidentiality
agreement reasonably satisfactory to the Trust and the Corporation or the
related Selling Holder of Registrable Securities agrees to be responsible for
such Person's breach of confidentiality on terms reasonably satisfactory to the
Trust and the Corporation.
4.7. Promptly notify each Holder, each sales or placement
agent and each underwriter (A) when the Shelf Registration Statement or any
related Prospectus or any amendment or supplement has been filed, and, with
respect to the Shelf Registration Statement or any amendment thereto, when the
same has become effective or (B) of any request by the Commission for amendments
or supplements to the Shelf Registration Statement or the related Prospectus or
for additional information.
4.8. Cooperate with each Holder and any sales or placement
agent or underwriter of Registrable Securities to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold pursuant to the Shelf Registration Statement, which certificates shall
not bear any restrictive legends except as required by law or as customarily
borne by securities held by DTC or any similar depository; and, in the case of
an underwritten offering, enable such Registrable Securities to be in such
denominations and registered in such names as the managing underwriter or
underwriters thereof may request in writing at least two business days prior to
any sale of the Registrable Securities.
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<PAGE> 15
4.9. Make available to their respective security Holders
separate and combined earnings statements, as soon as reasonably practicable but
in no event later than 45 days after the end of the period of twelve months
commencing on the first day of any fiscal quarter next succeeding each sale by
any Selling Holder, which earnings statements shall cover such twelve month
period and shall satisfy the provisions of Section 11(a) of the Securities Act
and may be prepared in accordance with Rule 158 under the Securities Act;
provided, however, that the Trust's and the Corporation's obligations under this
Section 4.9 may be satisfied by the timely filing of quarterly or annual reports
under the Exchange Act containing the information specified by Rule 158.
4.10. In the event that any broker-dealer registered under the
Exchange Act shall be an "affiliate" (as defined in Rule 2720(b)(1) of the NASD
Rules (or any successor provision thereto)) of the Trust or the Corporation or
has a "conflict of interest" (as defined in Rule 2720(b)(7) of the NASD Rules
(or any successor provision thereto)) and such broker-dealer shall underwrite,
participate as a member of an underwriting syndicate or selling group or assist
in the distribution of any Registrable Securities covered by the Shelf
Registration Statement, whether as a holder of such Registrable Securities or as
an underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Trust and the Corporation shall assist such
broker-dealer in complying with the requirements of the NASD Rules, including,
without limitation, by (A) engaging a "qualified independent underwriter" (as
defined in Rule 2720(b)(15) of the NASD Rules (or any successor provision
thereto)) to participate in the preparation of the registration statement
relating to such Registrable Securities, to exercise usual standards of due
diligence in respect thereto and to recommend the public offering price of such
Registrable Securities, (B) indemnifying such qualified independent underwriter
to the extent of the indemnification of underwriters provided in Section 7
hereof, and (C) providing such information, known to the Trust or the
Corporation to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the NASD Rules.
4.11. Use their respective reasonable efforts to cause the
Registrable Securities covered by the Shelf Registration Statement (i) if the
Paired Shares are then listed on a securities exchange or included for quotation
in a recognized trading market, to continue to be so listed or included for a
reasonable period of time after the offering, and (ii) to be registered with or
approved by such other United States or state governmental agencies or
authorities as may be necessary by virtue of the business and operations of the
Trust and the
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<PAGE> 16
Corporation to enable the Selling Holders of Registrable Securities to
consummate the disposition of such Registrable Securities.
4.12. Take such other actions as are reasonably required in
order to expedite or facilitate the disposition of Registrable Securities
included in each such offering.
SECTION 5. HOLDERS' OBLIGATIONS. It shall be a condition
precedent to the obligations of the Trust and the Corporation to take any action
pursuant to this Agreement with respect to the Registrable Securities of any
Selling Holder of Registrable Securities that such Selling Holder shall:
5.1. Furnish to the Trust and the Corporation such information
regarding such Selling Holder, the number of the Registrable Securities owned by
it, and the intended method of disposition of such securities as shall be
required to effect the offering of such Selling Holder's Registrable Securities,
and to reasonably cooperate with the Trust and the Corporation in preparing the
Shelf Registration Statement and the Prospectus (together with any amendments or
supplements thereto).
5.2. Agree to sell their Registrable Securities to the
underwriters at the same price and on substantially the same terms and
conditions as the Trust and the Corporation or the other Persons on whose behalf
the Piggyback Registration statement or supplement to the Prospectus was being
filed have agreed to sell their securities, and, in the case of a registration
under Section 3, to execute the underwriting agreement agreed to by the Trust
and the Corporation and the Selling Holders.
SECTION 6. EXPENSES OF REGISTRATION. Expenses in connection
with registrations pursuant to this Agreement shall be allocated and paid as
follows:
6.1. With respect to the Shelf Registration Statement and each
offering pursuant thereto and pursuant to the Prospectus, each of the Trust and
the Corporation shall bear and pay all expenses incurred in connection with any
registration, filing, or qualification of Registrable Securities with respect to
such Registration for each Selling Holder, including all registration, filing
and National Association of Securities Dealers, Inc. fees, all fees and expenses
of complying with securities or blue sky laws, all printing expenses, messenger
and delivery expenses, the reasonable fees and disbursements of counsel for the
Trust and the Corporation, and of the independent public accountants for the
Trust and the Corporation, including the expenses of "cold comfort" letters
required by or incident to such performance and compliance (the "Registration
Expenses"), but excluding underwriting discounts and commissions relating to
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<PAGE> 17
Registrable Securities (which shall be paid on a pro rata basis by the Selling
Holders) and all fees and expenses of counsel for the Selling Holders; provided,
however, that the Trust and the Corporation shall not be required to pay for any
expenses of any registration proceeding begun pursuant to Section 2 if the
registration is subsequently withdrawn by the Required Holder (in which case the
Selling Holders shall bear such expenses), unless, in the case of a Shelf
Registration, the Required Holder agrees that such withdrawn registration shall
have constituted the Shelf Registration available to it under Section 2 hereof.
The Trust and the Corporation each agree between themselves that they shall bear
and pay Registration Expenses in an amount equal to their respective Issuance
Percentage of such Registration Expenses and that they shall reimburse each
other to the extent necessary to cause each of them to so bear and pay such
respective amounts.
6.2. The Trust and the Corporation shall bear and pay all
Registration Expenses incurred in connection with any Piggyback Registrations
pursuant to Section 3, but excluding underwriting discounts and commissions
relating to Registrable Securities (which shall be paid on a pro rata basis by
the Selling Holders) and all fees and expenses of counsel for the Selling
Holders.
SECTION 7. INDEMNIFICATION; CONTRIBUTION. If any Registrable
Securities are included in a registration statement under this Agreement:
7.1. To the extent permitted by applicable law, each of the
Trust and the Corporation, severally and not jointly, shall indemnify and hold
harmless each Selling Holder, each Person, if any, who controls such Selling
Holder within the meaning of the Securities Act, each Person who participates as
a sales or placement agent or underwriter in any offering of the Registered
Securities and each officer, director, partner and employee of such Selling
Holder and such controlling Person, against any and all losses, claims, damages,
liabilities and expenses (joint or several), including reasonable attorneys'
fees and disbursements and reasonable expenses of investigation, incurred by
such party or to which such party may become subject pursuant to any actual or
threatened action, suit, proceeding or investigation, or to which any of the
foregoing Persons may otherwise become subject under the Securities Act, the
Exchange Act or other federal or state laws, insofar as such losses, claims,
damages, liabilities and expenses arise out of or are based upon any of the
following statements, omissions or violations (collectively a "Violation"):
(i) Any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including any
preliminary Prospectus or final Prospectus
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contained therein, or any amendments or supplements thereto; or
(ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading;
provided, however, that the indemnification required by this Section 7.1 shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or expense if such settlement is effected by the indemnified person
without the consent of the Trust or the Corporation (which consent shall not be
unreasonably withheld), nor shall the Trust or the Corporation be liable in any
such case for any such loss, claim, damage, liability or expense to the extent
that it arises out of or is based upon a Violation which occurs in reliance upon
and in conformity with information furnished to the Trust or the Corporation by
the indemnified party expressly for use in connection with such registration;
and provided further that the indemnity agreement contained in this Section 7
shall not apply to the extent that any such loss is based on or arises out of an
untrue statement or alleged untrue statement of a material fact, contained in or
omitted from any preliminary Prospectus if the final Prospectus shall correct
such untrue statement or alleged untrue statement, or such omission or alleged
omission, and a copy of the final Prospectus has not been sent or given to such
person at or prior to the confirmation of sale to such person if an underwriter,
placement agent or Selling Holder was under an obligation to deliver such final
Prospectus and failed to do so.
7.2. To the extent permitted by applicable law, each Selling
Holder shall indemnify and hold harmless the Trust, the Corporation, each of the
Trustees of the Trust, each of the directors of the Corporation, each of the
officers of the Trust or the Corporation who shall have signed the registration
statement, each Person, if any, who controls the Trust or the Corporation within
the meaning of the Securities Act, any other Selling Holder, any controlling
Person of any such other Selling Holder and each officer, director, partner, and
employee of such other Selling Holder and such controlling Person, against any
and all losses, claims, damages, liabilities and expenses (joint and several),
including reasonable attorneys' fees and disbursements and reasonable expenses
of investigation, incurred by such party pursuant to any actual or threatened
action, suit, proceeding or investigation, or to which any of the foregoing
Persons may otherwise become subject under the Securities Act, the Exchange Act
or other federal or state laws, but only insofar as such losses, claims,
damages, liabilities and expenses arise out of or are based upon any Violation,
in each case to the extent that, but only to the extent that, such Violation
arises out of or is based upon and was made in reliance upon information
furnished by such Selling Holder expressly for use in connection with such
registration; provided, however, that (x) the indemnification
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required by this Section 7.2 shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or expense if such settlement (A) is
effected without the consent of the relevant Selling Holder (which consent shall
not be unreasonably withheld), (B) does not include an unconditional release of
the indemnified party from all liability arising out of such action or claim or
(C) includes a statement as to, or an admission of, fault, culpability or a
failure to act, by or on behalf of any indemnified party and (y) in no event
shall the amount of any indemnity under this Section 7.2 exceed the net proceeds
from the applicable offering received by such Selling Holder.
7.3. Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, suit, proceeding,
investigation or threat thereof made in writing for which such indemnified party
may make a claim under this Section 7, such indemnified party shall deliver to
the indemnifying party a written notice thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with nationally recognized counsel experienced in such
matters reasonably satisfactory to the indemnified party; provided, however,
that an indemnified party shall have the right to retain its own counsel and to
not have the indemnifying party assume its defense, with the fees, disbursements
and expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time following the commencement of any such action, if
materially prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
7 to the extent of such prejudice but shall not relieve the indemnifying party
of any liability that it may have to any indemnified party otherwise than
pursuant to this Section 7. Any fees and expenses incurred by the indemnified
party (including any fees and expenses incurred in connection with investigating
or preparing to defend such action or proceeding) shall be paid to the
indemnified party, as incurred, within thirty (30) days of written notice
thereof to the indemnifying party (regardless of whether it is ultimately
determined that an indemnified party is not entitled to indemnification
hereunder). Any such indemnified party shall have the right to employ separate
counsel in any such action, claim or proceeding and to participate in the
defense thereof, but the fees and expenses of such counsel shall be the expenses
of such indemnified party unless (i) the indemnifying party has agreed to pay
such fees and expenses or (ii) the indemnifying
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<PAGE> 20
party shall have failed to promptly assume the defense of such action, claim or
proceeding or (iii) the named parties to any such action (including any
impleaded parties) include both such indemnified party and the indemnifying
party, and such indemnified party shall have been advised by counsel that there
may be one or more legal defenses available to it which are different from or in
addition to those available to the indemnifying party and that the assertion of
such defenses would create a conflict of interest such that counsel employed by
the indemnifying party could not faithfully represent the indemnified party (in
which case, if such indemnified party notifies the indemnifying party in writing
that it elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the defense of
such action, claim or proceeding on behalf of such indemnified party, it being
understood, however, that the indemnifying party shall not, in connection with
any one such action, claim or proceeding or separate but substantially similar
or related actions, claims or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all such indemnified parties, unless
in the reasonable judgment of such indemnified party a conflict of interest may
exist between such indemnified party and any other of such indemnified parties
with respect to such action, claim or proceeding, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels).
7.4. If the indemnification required by this Section 7 from
the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to in
this Section 7:
(i) The indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference to,
among other things, whether any Violation has been committed by, or relates to
information supplied by, such indemnifying party or indemnified parties, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such Violation. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
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Section 7.1 and Section 7.2, any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
(ii) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7.4 were determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in Section 7.4(i). No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
7.5. If indemnification is available under this Section 7, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in this Section 7 without regard to the relative fault of such
indemnifying party or indemnified party or any other equitable consideration
referred to in Section 7.4 except that no Selling Holder shall be liable for any
amount in excess of the net proceeds it receives in the offering which is the
subject of the indemnification proceeding.
7.6. The obligations of the Trust and the Corporation under
this Section 7 shall be in addition to any liability which the Trust and the
Corporation may otherwise have to the persons specified in Section 7.1 and the
obligations of the Selling Holders under this Section 7 shall be in addition to
any liability which such Persons may otherwise have to the Trust and the
Corporation. The remedies provided in this Section 7 are not exclusive and shall
not limit any rights or remedies which may otherwise be available to an
indemnified party at law or in equity.
7.7. The obligations of the Trust, the Corporation and the
Selling Holders of Registrable Securities under this Section 7 shall survive the
completion of any offering of Registrable Securities pursuant to a registration
statement under this Agreement, and otherwise.
SECTION 8. HOLDBACK. (a) Each Holder, if so requested by the
Underwriters' Representative in connection with an offering of any securities
covered by a registration statement filed by Trust and the Corporation, whether
or not such Holder's securities are included therein, shall not effect any
public sale or distribution of Paired Shares or any securities convertible into
or exchangeable or exercisable for Paired Shares, including a sale pursuant to
Rule 144 under the Securities act (except as part of such underwritten
registration), during the 90-day period (provided that if such a 90-day period
has previously occurred
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under this Section 8 (a) in the prior 365 days, the 45-day period) beginning on
the date such registration statement is declared effective under the Securities
Act by the Commission. Notwithstanding the immediately preceding sentence or
Section 2.3, the 90-day and 45-day periods referred to therein and herein shall
not extend to more than 180 days in any consecutive 365 day period. In order to
enforce the foregoing covenant, the Trust and the Corporation shall be entitled
to impose stop-transfer instructions with respect to the Registrable Securities
of each Holder until the end of such period. Holders of Registrable Securities
shall have the right to participate in any such registration on the terms
provided in Section 3 hereof.
(b) Each of the Trust and the Corporation agrees not to effect any public sale
or distribution of its equity securities, or any securities convertible into or
exchangeable to or exercisable for such securities, during the 90-day (or
45-day) period beginning on the effective date of any underwritten demand
registration (except pursuant to (i) registrations on Form S-4 or any successor
form and (ii) registrations of securities in connection with a dividend
reinvestment plan on form(s) applicable to such securities) unless the
underwriters managing the registered public offering otherwise agree.
SECTION 9. AMENDMENT, MODIFICATION AND WAIVERS; FURTHER ASSURANCES.
(i) This Agreement may be amended with the consent of the
Trust and the Corporation and the Holders and the Trust and the Corporation may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, only if the Trust and the Corporation shall have obtained
the written consent of the Holders to such amendment, action or omission to act.
(ii) No waiver of any terms or conditions of this Agreement
shall operate as a waiver of any other breach of such terms and conditions or
any other term or condition, nor shall any failure to enforce any provision
hereof operate as a waiver of such provision or of any other provision hereof.
No written waiver hereunder, unless it by its own terms explicitly provides to
the contrary, shall be construed to effect a continuing waiver of the provisions
being waived and no such waiver in any instance shall constitute a waiver in any
other instance or for any other purpose or impair the right of the party against
whom such waiver is claimed in all other instances or for all other purposes to
require full compliance with such provision.
(iii) Each of the parties hereto shall execute all such
further instruments and documents and take all such further action as any other
party hereto may reasonably require in order
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to effectuate the terms and purposes of this Agreement.
SECTION 10. ASSIGNMENT; BENEFIT. This Agreement and all of the
provisions hereof shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, assigns, executors, administrators or
successors; provided, however that neither this Agreement nor any of the rights,
interests or obligations hereunder shall be directly or indirectly assigned
(including the substitution of an issuer or issuers other than the Trust and the
Corporation) or delegated by a Holder other than to a permitted transferee of
the Registrable Securities that agrees to be bound hereby.
SECTION 11. MISCELLANEOUS.
11.1. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING
REGARD TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.
11.2. NOTICES. All notices and requests given pursuant to this
Agreement shall be in writing and shall be made by hand-delivery, first-class
mail (registered or certified, return receipt requested), confirmed facsimile or
overnight air courier guaranteeing next Business Day delivery to the relevant
address specified on Annex A hereto. Except as otherwise provided in this
Agreement, the date of each such notice and request shall be deemed to be, and
the date on which each such notice and request shall be deemed given shall be:
at the time delivered, if personally delivered or mailed; when receipt is
acknowledged, if sent by facsimile; and the next Business Day after timely
delivery to the courier, if sent by overnight air courier guaranteeing next
Business Day delivery.
11.3. ENTIRE AGREEMENT; INTEGRATION. Except as expressly
agreed in a separate writing signed by the parties hereto on or after the date
of this Agreement, this Agreement, the Transaction Agreement, the Westin
Disclosure Letter (as defined in the Transaction Agreement), the Starwood
Disclosure Letter (as defined in the Transaction Agreement), the Confidentiality
Agreement (as defined in the Transaction Agreement) and the Other Agreement (as
defined in the Transaction Agreement) constitute the entire agreement, and
supersede all other prior agreements, understandings, representations and
warranties both written and oral, among the parties, with respect to the subject
matter hereof.
11.4. SECTION HEADINGS. Section headings are for convenience
of reference only and shall not affect the meaning of any provision of this
Agreement.
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<PAGE> 24
11.5. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original, and all of which
shall together constitute one and the same instrument. All signatures need not
be on the same counterpart.
11.6. SEVERABILITY. If any provision of this Agreement shall
be invalid or unenforceable, such invalidity or unenforceability shall not
affect the validity and enforceability of the remaining provisions of this
Agreement, unless the result thereof would be unreasonable, in which case the
parties hereto shall negotiate in good faith as to appropriate amendments
hereto.
11.7. TERMINATION. This Agreement may be terminated at any
time by a written instrument signed by the Trust, the Corporation and all of the
Holders. Unless sooner terminated in accordance with the preceding sentence,
this Agreement (other than Section 7 hereof) shall terminate in its entirety on
such date as there shall be (a) no Registrable Securities outstanding, and (b)
no securities outstanding which are convertible or exchangeable into Registrable
Securities; provided that any Paired Shares previously subject to this Agreement
shall not be Registrable Securities following the sale of any such shares in an
offering registered pursuant to this Agreement and provided that the rights and
obligations pursuant to Section 7 shall survive termination of this Agreement.
11.8. STARWOOD TRUST. The parties hereto understand and agree
that the name "Starwood Lodging Trust" is a designation of the Trust and its
Trustees (as Trustees but not personally) under the Declaration of Trust, and
all persons dealing with the Trust shall look solely to the Trust's assets for
the enforcement of any claims against the Trust, and that the Trustees,
officers, agents and security holders of the Trust assume no personal liability
for obligations entered into on behalf of the Trust, and their respective
individual assets shall not be subject to the claims of any person relating to
such obligations.
11.9. SUBMISSION TO JURISDICTION. Each of the parties hereto
and each of the Holders irrevocably submits and consents to the jurisdiction of
the United States District Court for the Southern District of New York in
connection with any action or proceeding arising out of or relating to this
Agreement, and irrevocably waives any immunity from jurisdiction thereof and any
claim of improper venue, forum non conveniens or any similar basis to which it
might otherwise be entitled in any such action or proceeding.
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<PAGE> 25
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of the date first written above.
STARWOOD LODGING TRUST,
a Maryland real estate investment
trust
By: ________________________________
Name:
Title:
STARWOOD LODGING CORPORATION,
a Maryland corporation
By: ________________________________
Name:
Title:
HOLDERS:
W&S Hotel L.L.C.
By: ________________________________
Name:
Title:
WHWE L.L.C.
By: Whitehall Street Real Estate
Limited Partnership V,
Member and Manager
By: ________________________________
Name:
Title:
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Woodstar Investor Partnership
By: Marswood Investors, L.P.
General Partner
By: Starwood Capital Group, L.P.
General Partner
By: BSS Capital Partners, L.P.
General Partner
By: Sternlicht Holdings II, Inc.
General Partner
By: ________________________________
Name:
Title:
Juergen Bartels
____________________________________
Nomura Asset Capital Corporation
By: ________________________________
Name:
Title:
GS CAPITAL PARTNERS, L.P.
By: GS Advisors, L.P.,
General Partner
By: GS Advisors, Inc.,
General Partner
By: ________________________________
Name:
Title:
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<PAGE> 27
STONE STREET FUND 1994, L.P.
By: Stone Street Funding Corp.,
General Partner
By: ________________________________
Name:
Title:
STONE STREET WESTIN HOLDING, INC.
By: ________________________________
Name:
Title:
STONE STREET FUND 1995, L.P.
By: Stone Street Value Corp.,
General Partner
By: ________________________________
Name:
Title:
STONE STREET 1995 WESTIN HOLDING INC.
By: ________________________________
Name:
Title:
BRIDGE STREET FUND 1994, L.P.
By: Stone Street Funding Corp.,
General Partner
By: ________________________________
Name:
Title:
-27-
<PAGE> 28
BRIDGE STREET FUND 1995, L.P.
By: Stone Street Value Corp.,
General Partner
By: ________________________________
Name:
Title:
GS CAPITAL PARTNERS WESTIN HOLDING,
L.P.
By: GS Capital Partners, L.P.
General Partner
By: GS Advisors, L.P.
General Partner
By: GS Advisors, Inc.,
General Partner
By: ________________________________
Name:
Title:
Richard L. Mahoney
____________________________________
Frederick J. Kleisner
____________________________________
John van Hartesvelt
____________________________________
-28-
<PAGE> 1
Exhibit 10.53
HOUSTON EXECUTION
PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
By
And Between
NEW REMINGTON PARTNERS,
a Texas General Partnership,
As Seller
And
STARWOOD LODGING TRUST,
a Maryland Real Estate Investment Trust
And
STARWOOD LODGING CORPORATION,
a Maryland Corporation,
As Buyer.
Dated As Of: December 30, 1997
Relating to the Houston Luxury Collection Hotel,
Houston, Texas
<PAGE> 2
PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
THIS PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (this
"Agreement") is entered into as of the 30th day of December, 1997, by and
between NEW REMINGTON PARTNERS, a Texas general partnership ("Seller"), and
STARWOOD LODGING TRUST, a Maryland Real Estate Investment Trust (the "Trust"),
and STARWOOD LODGING CORPORATION, a Maryland corporation (the "Corporation"; the
Trust and the Corporation being referred to herein collectively as, "Buyer").
A. Seller owns that certain parcel of land described in EXHIBIT A attached
hereto and made a part hereof, which is improved with a hotel building and
certain related improvements, all as more particularly set forth in this
Agreement.
B. Seller desires to sell, and Buyer desires to purchase, the above described
land and hotel together with the related improvements upon the terms and subject
to the conditions set forth in this Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and the mutual promises and
agreements contained in this Agreement and for other good and valuable
consideration, the receipt and adequacy of which are hereby mutually
acknowledged, Buyer and Seller agree as follows:
SECTION 1
DEFINITIONS
1.1 Defined Terms
"Accounts Receivable" shall mean, collectively, all Cash Equivalent Receivables,
all Invoiced Receivables and all Other Accounts Receivable.
"Affiliate" shall have the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Exchange Act.
"Approved Service Contracts" shall mean the Service Contracts identified on
SCHEDULE 1.1.1 annexed hereto and made a part hereof and any other Service
Contracts cancelable upon thirty (30) or fewer days notice without penalty,
which Service Contracts Buyer shall assume as of the Closing pursuant to the
General Assignment and Assumption Agreement.
"Assignment and Assumption of Management Agreement" shall have the meaning set
forth in SECTION 4.2.1.4.
"Assignment and Assumption of Tenant Leases" shall have the meaning set forth in
SECTION 4.2.1.2.
"Assignment and Assumption of Liquor-Related Agreements" shall have the meaning
set forth in SECTION 4.2.1.7.
"Bill of Sale" shall have the meaning set forth in SECTION 4.2.1.5.
"Business Day" shall mean any day other than Saturday or Sunday on which the New
York Stock Exchange is open for business.
"Booking" shall mean a contract or reservation for the use of guest rooms,
banquet facilities, meeting rooms, and/or conference facilities at the Hotel.
"Buyer's Counsel" shall mean the law firm of Greenberg Traurig Hoffman Lipoff
Rosen & Quentel acting through Andrew E. Zobler, Esq.
"Buyer Default" shall have the meaning set forth in SECTION 3.5.1.
<PAGE> 3
"Cash Equivalent Receivables" shall mean all Guest Ledger Receivables which are
in the form of drafts or checks written on any bank or other financial
institution, certified checks, money orders, amounts owed to Seller from credit
card, debit card, travel and entertainment card or traveler's check companies,
and are in such other forms which are considered to be cash equivalents under
generally acceptable accounting principles, whether or not such Guest Ledger
Receivables have been presented or billed to any such bank, financial
institution or other company as of the Closing Date.
"Cash Purchase Price" shall mean (a) Twenty-One Million Dollars ($21,000,000.00)
plus (b) the Overage Cash Payment, if any, as adjusted pursuant to SECTION
3.2.2.
"Closing" or "Close of Escrow" shall have the meaning set forth in SECTION
4.7.2.
"Closing Agent" shall have the meaning set forth in SECTION 4.8.10.
"Closing Date" shall mean the day on which the Closing occurs hereunder.
"Closing Payment" shall have the meaning set forth in SECTION 3.2.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
"Collective Bargaining Agreements" shall have the meaning set forth in SECTION
14.2.
"Conveyance Documents" shall mean the Deed, the Assignment and Assumption of
Management Agreement, the Assignment and Assumption of Tenant Leases, the Bill
of Sale, the General Assignment and Assumption Agreement and the Assignment and
Assumption of Liquor-Related Agreements.
"Deed" shall have the meaning set forth in SECTION 4.2.1.1.
"Deposit" shall mean an amount equal to $2,857,143.00, held in accordance with
the provisions of SECTION 3 hereof together with all interest accrued thereon.
"Employer Corporation" shall mean Luxury Holdings, Inc. (formerly known as TQM
Inc.).
"Employment Agreements" shall mean the Collective Bargaining Agreements and
Employee Benefit Plans (as defined in Section 3(3) of ERISA), affecting Hotel
Employees, including pension, profit sharing, employee benefit and similar
plans, if any, and agreements with regard to any Hotel Employee each of which
are identified on or expressly described in the materials identified on SCHEDULE
1.1.2 annexed hereto and made a part hereof.
"Environmental Condition" shall mean any condition with respect to soil, surface
waters, groundwater, land, stream sediments, surface or subsurface strata,
ambient air and any environmental medium comprising or surrounding the Real
Property, which results in any damage, loss, cost, expense, claim, demand, order
or liability to or against Seller or Buyer by any third party (including,
without limitation, any government entity) as a result of a violation of any
applicable Environmental Laws.
"Environmental Laws" shall mean all presently applicable statutes, regulations,
rules, ordinances, codes, licenses, permits and orders of any and all
governmental agencies, departments, commissions, boards, bureaus or
instrumentalities of the United States, states and political subdivisions
thereof, and all applicable judicial and administrative and regulatory decrees,
judgments and orders relating to the protection of the environment, including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. 9061 et seq.; the Hazardous
Materials Transportation Act, as amended, 49 U.S.C. 1801, et seq.; the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. 6901, et seq.; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. 1251, et seq.; and analogous
state laws and regulations.
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<PAGE> 4
"Equipment Leases" shall mean all leases of equipment, vehicles, furniture or
other personal property leased by, or on behalf of, Seller and located at, or
used in the operation of the Real Property, together with any and all amendments
thereto, which are identified on SCHEDULE 1.1.3 annexed hereto.
"Equity Purchase Price" shall mean the number of Paired Shares with a value as
determined pursuant to the Stock Agreement equal to $26,665,500.00 to be
delivered in accordance with the applicable provisions of the Stock Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated thereunder.
"Escrow" shall mean an escrow opened with the Escrow Holder for the purchase and
sale of the Property in accordance with the provisions of this Agreement.
"Escrow Holder" shall mean the Title Company unless otherwise agreed in writing
by Buyer and Seller.
"Escrow Instructions" shall have the meaning set forth in SECTION 4.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Excluded Property" shall mean all Seller's right, title and interest in and to:
(a) those claims of Seller attributable to the period prior to the Closing Date
and described on SCHEDULE 1.1.4 annexed hereto and made a part hereof, or which
Seller is entitled to assert under the express provisions of SECTION 5; (b) all
insurance proceeds under Seller's Insurance and workers' compensation policies,
including return premiums and dividends thereon and all claims thereunder in
each case to the extent attributable to acts or occurrences prior to the Closing
Date; (c) all accounts owned or maintained by Seller, or Manager on Seller's
behalf, in connection with the Hotel, including all operating and reserve
accounts; and (d) any books, records, files or papers specifically described in
SECTION 6.3.2 as excluded from the Property Information.
"Excluded Parties" shall have the meaning set forth in SECTION 17.18
"Execution Date" shall mean the date hereof.
"General Assignment and Assumption Agreement" shall have the meaning set forth
in SECTION 4.2.1.3.
"Guest Ledger Receivables" shall mean amounts, including, without limitation,
room charges, accrued to the accounts of guests occupying rooms at the Hotel or
group, conference or banquet customers of Seller at the Hotel.
"Hart-Scott-Rodino Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 and the rules and regulations promulgated thereunder, as the same
has been amended from time to time.
"Hotel" shall mean the hotel located on the Land and commonly known as Houston
Luxury Collection Hotel.
"Hotel Employees" shall mean all full-time, part-time or temporary employees of
Seller and/or the Employer Corporation (but not employees of Manager or any of
its affiliates) who are employed by Seller and/or the Employer Corporation
exclusively at or in connection with the Hotel as of the Closing Date and who
are listed on SCHEDULE 1.1.6 annexed hereto and made a part hereof.
"Houston Adjacent Assets" shall have the meaning set forth in SECTION 4.2.1.11.
"Houston Right of First Offer Agreement" shall have the meaning set forth in
SECTION 4.2.1.12.
"Improvements" shall mean Seller's right, title and interest in and to the hotel
building and other
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<PAGE> 5
improvements now or hereafter located on the Land.
"Insured Casualty Notice" shall have the meaning set forth in SECTION 12.1.1.
"Intangible Property" shall mean all of Seller's right, title and interest in
and to the following, in each case excluding any Excluded Property: (i) Licenses
and Permits; (ii) trademark rights, and other intangible property, rights,
titles, interests, privileges and appurtenances related to or used in connection
with the Hotel or its operations; (iii) warranties and guaranties of architects,
engineers, contractors, subcontractors, suppliers or materialmen involved in the
repair, construction, maintenance, design, reconstruction or operation of the
Hotel, or any equipment or systems constituting a part of the Hotel; (iv)
Approved Service Contracts; (v) Equipment Leases; (vi) Bookings; and (vii)
computer programs, software and documentation thereof (subject to the
limitations of any applicable license agreements pertaining thereto), and
including all electronic data processing systems, program specifications, source
codes, logs, input data and report layouts and forms, record file layouts,
diagrams, functional specifications and variable descriptions, flow charts and
other related materials used in connection therewith; and (viii) any goodwill
associated with the operation of the Hotel.
"Interim Management Agreement" shall have the meaning set forth in SECTION 17.20
hereto.
"Invoiced Receivables" shall mean all Guest Ledger Receivables other than Cash
Equivalent Receivables whether or not such Guest Ledger Receivables have been
invoiced by Seller as of the Closing Date.
"Land" shall mean Seller's right, title and interest in and to the land
described on EXHIBIT A annexed hereto and made a part hereof.
"LIBOR rate" shall mean the average of interbank offered rates for three-month
dollar deposits in the London market based on quotations at five (5) major
banks, as published from time to time in The Wall Street Journal. If The Wall
Street Journal ceases to be published, then Buyer shall propose a substitute
method of determining the interest rate generally known as the three-month LIBOR
rate, which method, absent manifest error, shall be binding on Buyer and Seller.
"Licenses and Permits" shall mean all licenses, permits, registrations,
certificates, authorizations and governmental approvals other than the Liquor
License obtained in connection with the design, construction, rehabilitation,
use and/or operation of the Hotel.
"Liquor Agreements" shall have the meaning set forth in SECTION 6.3.14.
"Liquor Lease" shall have the meaning set forth in SECTION 6.3.17.
"Liquor License" shall mean all licenses, permits, registrations, certificates,
authorizations and governmental approvals with respect to service of alcoholic
beverages at the Hotel.
"Lock Price" shall have the meaning set forth in the Stock Agreement.
"Losses" shall mean any and all losses, liabilities, obligations, damages, claim
or expense, including without limitation, reasonable attorneys' and accountants'
fees and disbursements related thereto.
"Manager" means Sheraton Operating Corporation, a wholly-owned subsidiary of ITT
Sheraton Corporation.
"Management Agreement" shall mean that certain Management Agreement entered into
as of August 13, 1997 between Seller and Manager.
"Market Price" shall have the meaning set forth in the Stock Agreement.
"Master Lease" shall have the meaning set forth in SECTION 4.2.1.11.
"Material" shall mean $5,000 for any single occurrence and $15,000 in the
aggregate for any
5
<PAGE> 6
group of occurrences whether or not related.
"Material Casualty" shall mean a casualty or casualties that, in the aggregate:
(i) causes in excess of $10,000,000.00 worth of damage to the Hotel; or (ii)
will take twelve (12) months or longer from the date of the casualty to fully
remediate.
"Material Taking" shall mean an exercise by an applicable governmental authority
of the power of condemnation or eminent domain that results in: (a) the taking
of more than twenty percent (20%) of the Real Property; (b) a material reduction
or restriction in access to the Property; or (c) the inability to operate the
Hotel in substantially the same manner (without material additional expense) as
it was operated prior to such taking.
"Memorandum of Contract" shall mean a memorandum of this Agreement in the form
attached as EXHIBIT B hereto.
"Monetary Lien" shall mean any monetary lien affecting the Real Property of an
ascertainable amount, other than any lien for taxes or assessments which are not
yet due and payable.
"Non-Foreign Person Certificate" shall have the meaning set forth in SECTION
4.2.1.13.
"Other Accounts Receivable" shall mean any and all rents, additional rent,
deposits, and other sums and charges owing to Seller that are in any way
attributable to the operation of the business at the Hotel, including, without
limitation, all rents and/or license fees due from Tenants under Tenant Leases,
and including any such amounts which are past due, but excluding Guest Ledger
Receivables.
"Overage Cash Payment" shall mean the portion of the Equity Purchase Price which
is payable in cash at Closing as provided in SECTION 3.2.2.1, if any.
"Ownership Limitation" shall mean the limitations contained in the declaration
of trust for the Trust and the Corporation's articles of incorporation
prohibiting actual or constructive ownership by any one person or group of
related persons of more than 8% of the issued and outstanding Paired Shares
taking into account the attribution rules of Section 544(a) of the Code as
modified by Section 856(h) of the Code or Section 318(a) of the Code as modified
by Section 856(d)(5) of the Code.
"Paired Shares" shall mean one share of beneficial interest, par value $.01 per
share of the Trust, and one share of common stock, par value $.01 per share, of
the Corporation that are subject to the Pairing Agreement, which shares shall be
transferable as provided in the Stock Agreement and the Pairing Agreement.
"Pairing Agreement" shall mean the Pairing Agreement dated as of June 25, 1980,
as amended, between the Trust and the Corporation providing, in relevant part,
for the pairing of all outstanding beneficial interests of the Trust and shares
of the Corporation.
"Permitted Encumbrances" shall have the meaning set forth in SECTION 7.3.
"Person" shall mean any natural person, partnership, corporation, association,
limited liability company, trust or any other legal entity.
"Personal Property" shall mean collectively the Tangible Personal Property and
the Intangible Property.
"Preliminary Title Report" shall have the meaning set forth in SECTION 7.1.
"Property" shall mean collectively the Real Property, the Personal Property, the
Tenant Leases, and the Accounts Receivable, but shall exclude the Excluded
Property.
"Property Information" shall have the meaning set forth in SECTION 6.4.2.
"Proration Time" shall mean 12:01 a.m. Mountain Time on the Closing Date.
"Purchase Price" shall mean the sum of the Cash Purchase Price and the Equity
Purchase Price.
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<PAGE> 7
"Real Property" shall mean the Land and the Improvements, together with Seller's
right, title and interest in and to all rights of way, easements, water or
littoral rights, rights to any minerals, oil, gas and other hydrocarbon
substances, or any portion thereof, relating to the Land, and Seller's right,
title and interest in and to all streets, alleys, strips and gores abutting the
Land, if any.
"Records and Plans" shall mean, all financial records showing the income and
expenses of the Hotel for the prior three (3) calendar years and for the current
year to date, certificates of occupancy, records of the Hotel's operations
(including utility bills), building plans, specifications and drawings, lists of
Personal Property, surveys, tax bills for the Real Property for the last three
(3) years and for the current year to date, copies of the Service Contracts,
Licenses and Permits and other documents related to the use, maintenance,
repair, management, construction and/or operation of the Hotel, in each case, to
the extent located on-site at the Hotel, or to Seller's Knowledge, otherwise
under the control of Seller.
"Related Agreement" shall have the meaning set forth in SECTION 9.1.3.
"Schedule of Advance Bookings" means the Schedule of Advance Bookings delivered
pursuant to SECTION 4.2.1.19.
"Schedule of Tenant Leases" means the Schedule of Tenant Leases set forth in
SCHEDULE 1.1.7 annexed hereto and made a part hereof.
"Scheduled Closing Date" shall mean January 15, 1998, as such date may be
extended in accordance with the provisions of SECTION 7.1 time being of the
essence.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC Documents" shall have the meaning set forth in SECTION 6.1.4.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller Default" shall have the meaning set forth in SECTION 11.1.
"Seller's Closing Certificate" shall have the meaning set forth in SECTION
4.2.1.18.
"Seller's Counsel" shall mean Morrison & Foerster LLP acting through Thomas R.
Fileti, Esq.
"Seller's Due Diligence" shall mean the information gathering and review process
described on SCHEDULE 1.1.8.
"Seller's Insurance" shall have the meaning set forth in SECTION 6.3.12.
"Seller's Knowledge" shall mean with respect to any representation or warranty
so qualified, the knowledge of the person(s) identified on SCHEDULE 1.1.8
annexed hereto and made a part hereof, on the date on or as of which such
representation or warranty is made, following the completion by such person(s)
of Seller's Due Diligence, but without any other duty to investigate or inquire
and without attribution to any such identified person(s) of facts and matters
otherwise within the personal knowledge of any other officers, employees, or
agents of Seller or any third parties (including, but not limited to, the
Manager or any previous manager of the Hotel), but not within the actual current
knowledge of such named person(s). It is understood that none of the individuals
identified on SCHEDULE 1.1.8 shall have any personal liability for any of
Seller's representations, warranties and other obligations under this Agreement.
"Service Contracts" shall mean any and all service contracts, landscaping
contracts, maintenance agreements, open purchase orders and other contracts for
the provision of services, materials or supplies to or for the benefit of the
Property, except for the Management Agreement, together with any and all
amendments thereto.
"Specific Disclosure Matters" shall mean certain disclosures and information
provided or disclosed by Seller to Buyer described on SCHEDULE 1.1.9 annexed
hereto and made a part
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<PAGE> 8
hereof.
"Starwood Disclosure" shall mean collectively, the Form S-3 filed by the
Corporation and the Trust with the SEC on November 12, 1997, and the Form S-4
filed by the Corporation and the Trust with the SEC on November 20, 1997, as the
same may be amended by any filing with the SEC made by the Trust or the
Corporation, as amended to date and from time to time thereafter.
"Starwood Operating Partnership" shall mean SLC Operating Limited Partnership, a
Delaware limited partnership.
"Starwood Realty Partnership" shall mean SLT Realty Limited Partnership, a
Delaware limited partnership.
"State" shall mean the state in which the Hotel is located.
"Stock Agreement" shall have the meaning set forth in SECTION 4.2.1.6.
"Survey" shall mean an as-built ALTA survey of the Real Property certified to
the Title Company meeting all State land survey requirements.
"Tangible Personal Property" shall mean, in each case to the extent owned by
Seller and excluding any and all of the Excluded Property: (i) all Records and
Plans; (ii) all "Inventories", as such term is defined in the Uniform System of
Accounts; (iii) all depreciable personal property; and (iv) all other tools,
vehicles, supplies, artwork, furniture, furnishings, machinery, equipment,
licensed software and personal computer based security systems, if any,
specialized hotel equipment and other tangible personal property, used in
connection with the ownership, operation or maintenance of the Property,
including, without limitation, all china, glassware, silverware, linens, towels,
curtains, uniforms, engineering, maintenance, and housekeeping supplies,
draperies, materials and carpeting, used or intended for use, but not for sale,
in connection with the operation of the Hotel, all equipment used in the
operation of the kitchen, dining rooms, lounges, bars, laundry, dry cleaners,
lobby, reservation desk and all merchandise, food and beverages held for sale in
connection with the operation of the Hotel, which are on hand on the Closing
Date; provided, however, that to the extent that any applicable law prohibits
the transfer of alcoholic beverages from Seller to Buyer, such beverages shall
not be considered a part of the Tangible Personal Property.
"Tenant" shall mean a tenant, licensee or concessionaire occupying space at any
portion of the Property pursuant to a Tenant Lease.
"Tenant Lease" shall mean a lease, concession agreement or license agreement
entered into by or on behalf of Seller with a third party for the use of any
part of the Real Property, including those leases, concession agreements and
license agreements shown on the Schedule of Tenant Leases, together with any
amendments thereto but excluding Bookings.
"Tenant Security Deposits" shall mean all security deposits or other security of
Tenants under the Tenant Leases, plus accrued interest, if any, payable thereon.
"Termination Charges" shall have the meaning set forth in SECTION 14.1.
"Termination Notice" shall have the meaning set forth in SECTION 3.5.1.
"Threshold Amount" shall mean One Million Dollars ($1,000,000).
"Title Company" shall mean Chicago Title Insurance Company.
"Title Policy" shall have the meaning set forth in SECTION 7.2.
"Transfer Restriction Period" shall have the meaning set forth in SECTION 17.18.
"Uninsured Casualty Notice" shall have the meaning set forth in SECTION 12.2.1.
"Uninsured Estimate to Repair" shall have the meaning set forth in SECTION
12.2.1.
"Uniform System of Accounts" shall mean the Uniform System of Accounts for
Hotels,
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prepared by The Hotel Association of New York City, Inc., in effect as of the
date hereof.
"Utility Deposits" shall mean Seller's right, title and interest in and to all
deposits delivered by Seller to utilities, governmental agencies, suppliers or
others pursuant to an Approved Service Contract or otherwise in connection with
the Real Property.
"Value Letter" shall have the meaning set forth in SECTION 4.3.1.4.
"WARN Act" shall mean the Workers Adjustment and Retraining Notification Act and
the Regulations promulgated thereunder, as the same has been amended.
1.2 Other Definitional Provisions. The terms "hereof," "hereto," "hereunder" and
similar terms when used in this Agreement shall refer to this Agreement
generally, rather than to the section in which such term is used, unless
otherwise specifically provided. Unless the context otherwise requires, any
defined term used in the plural shall refer to all members of the relevant
class, and any defined term used in the singular shall refer to any one or more
of the members of the relevant class.
SECTION 2
PURCHASE AND SALE OF PROPERTY
On the terms and subject to the conditions of this Agreement, Seller agrees to
sell the Property to Buyer, and Buyer agrees to purchase the Property from
Seller all as hereinafter provided. Notwithstanding any other provision of this
Agreement, there shall be excluded from the Property being conveyed hereunder
the Excluded Property.
SECTION 3
PURCHASE PRICE; PAYMENT;
BUYER'S DEFAULT; LIQUIDATED DAMAGES
3.1 Purchase Price. The purchase price for the Property shall be the Purchase
Price.
3.2 Payment. The Purchase Price shall be paid as follows:
3.2.1 Upon the execution hereof, Buyer shall deliver to Escrow Holder, in cash
or other immediately available funds, the Deposit, to be held by Escrow Holder
strictly in accordance with the provisions of this Agreement. If the Close of
Escrow shall occur, Seller shall be entitled to receive the Deposit as a credit
against the Purchase Price.
3.2.2 At least one (1) day prior to the Scheduled Closing Date (unless extended
pursuant to SECTION 7.1), Buyer shall deliver to Escrow Holder an amount (the
"Closing Payment") payable in the form specified in SECTIONS 3.2.2.1 and 3.2.2.2
below, equal to the Purchase Price less the amount of the Deposit. The Closing
Payment shall be paid as follows:
3.2.2.1 The Equity Purchase Price shall be delivered in Paired Shares without
adjustment for the pro-rations hereunder, which shares shall be delivered in
accordance with and subject to and transferable in accordance with the
provisions of the Stock Agreement and the Pairing Agreement. If any portion of
the Equity Purchase Price cannot be paid in Paired Shares on account of the
Ownership Limitation, a cash payment in an amount equal to the product of (a)
the number of Paired Shares which are not delivered hereunder or under the Stock
Agreement because of the Ownership Limitation and (b) the Lock Price (the
"Overage Cash Payment") shall be paid in cash or other immediately available
funds.
3.2.2.2 The balance of the Closing Payment shall be paid in cash or other
immediately available funds adjusted for the pro-rations provided for expressly
in this Agreement.
3.3 Investment of Escrowed Funds. Escrow Holder shall invest and reinvest any
funds deposited by Buyer in the Escrow only in bonds, notes, Treasury bills or
other securities having maturities of thirty (30) days or less and constituting
direct obligations of, or fully guaranteed
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by, the United States of America (and provided, further, that such direct
obligations or guarantees, as the case may be, are entitled to the full faith
and credit of the United States of America) or such other investments as Buyer
may direct and Seller may approve, until Escrow Holder is required to deliver or
use such funds or any interest earned thereon in accordance with the provisions
of this Agreement. All interest accruing on the Deposit shall be paid to the
party ultimately entitled to the Deposit. All risk of loss on funds held in
Escrow shall be borne by Buyer or Escrow Holder.
3.4 Allocation of Purchase Price. The Purchase Price shall be allocated among
the assets and property that comprise the Property as proposed by Seller prior
to Closing subject to the reasonable approval of Buyer, and such allocation
shall be used by Seller and Buyer in connection with the preparation of their
respective income tax, sales tax, transfer tax, and any other applicable tax
returns. Seller and Buyer shall not, nor shall they permit their respective
Affiliates to, take a federal or state income tax position with any taxing or
other public authorities in any jurisdiction which is materially inconsistent
with the allocation so agreed upon by the parties.
3.5 Default by Buyer Prior to Closing; Liquidated Damages.
3.5.1 EXCEPT AS PROVIDED TO THE CONTRARY IN SECTION 7.1.1., IF BUYER BREACHES
ITS OBLIGATION TO PURCHASE THE PROPERTY UNDER THIS AGREEMENT AND FAILS TO CURE
SUCH BREACH ON OR BEFORE THE SCHEDULED CLOSING DATE (A "BUYER DEFAULT"), THEN
UPON WRITTEN NOTICE OF TERMINATION (A "TERMINATION NOTICE") FROM SELLER TO BUYER
AND ESCROW HOLDER, THE ESCROW AND THIS AGREEMENT SHALL TERMINATE AND ESCROW
HOLDER SHALL DISBURSE FROM THE ESCROW THE DEPOSIT TO SELLER AS LIQUIDATED
DAMAGES, WHICH SHALL BE SELLER'S SOLE REMEDY AT LAW OR IN EQUITY FOR THE BUYER
DEFAULT, AND THEREAFTER NEITHER PURCHASER NOR SELLER SHALL HAVE ANY FURTHER
LIABILITY HEREUNDER, EXCEPT THAT BUYER SHALL REMAIN OBLIGATED FOR PERFORMANCE OF
ITS OBLIGATIONS UNDER SECTIONS 8, 10, 17.14, 17.19 AND ANY OTHER PROVISION
HEREOF WHICH BY ITS EXPRESS TERMS SURVIVES THE TERMINATION OF THIS AGREEMENT.
NOTHING CONTAINED HEREIN SHALL LIMIT SELLER'S RIGHT TO OBTAIN SPECIFIC
PERFORMANCE OF BUYER'S OBLIGATION TO CLOSE PURSUANT TO SECTION 7.1.1.
3.5.2 THE PARTIES ACKNOWLEDGE AND AGREE BY INITIALING THIS SECTION 3.5.2 THAT IF
A BUYER DEFAULT OCCURS ON OR PRIOR TO THE SCHEDULED CLOSING DATE AND IF, AS A
RESULT OF SUCH BUYER DEFAULT, CLOSE OF ESCROW FAILS TO OCCUR, SELLER WILL INCUR
CERTAIN COSTS AND OTHER DAMAGES IN AN AMOUNT THAT WOULD BE EXTREMELY DIFFICULT
OR IMPRACTICAL TO ASCERTAIN; AND THE DEPOSIT BEARS A REASONABLE RELATIONSHIP TO
THE DAMAGES WHICH THE PARTIES ESTIMATE MAY BE SUFFERED BY SELLER BY REASON OF
SUCH FAILURE OF THE CLOSE OF ESCROW TO OCCUR AND THAT SELLER'S RETENTION OF THE
DEPOSIT IS FAIR AND REASONABLE COMPENSATION TO SELLER BY REASON OF SUCH FAILURE
OF THE CLOSE OF ESCROW TO OCCUR.
INITIALS: /s/ MD /s/ MCM /s/ SRG
__________________________ _________________________
Seller Buyer
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SECTION 4
ESCROW; CLOSING; COSTS
4.1 Escrow. The purchase and sale of the Property shall be consummated through
the Escrow. Immediately upon the execution of this Agreement, the parties shall
deposit a copy of this Agreement with Escrow Holder. This Agreement, together
with any general provisions agreed to in writing by Buyer and Seller for the
benefit of Escrow Holder, shall constitute the escrow instructions for the
transfer of the Property (the "Escrow Instructions"). In the event of any
conflict between this Agreement and such general provisions, this Agreement
shall control unless otherwise expressly agreed in writing by Buyer, Seller and
Escrow Holder. If any requirements relating to the duties or obligations of
Escrow Holder are not acceptable to Escrow Holder, or if Escrow Holder requires
additional instructions, the parties shall make such deletions, substitutions
and additions to the Escrow Instructions as Buyer's Counsel and Seller's Counsel
shall mutually approve and which do not substantially alter this Agreement or
its intent. Written instructions from Seller's Counsel, in the case of Seller,
or from Buyer's Counsel, in the case of Buyer, shall be accepted by Escrow
Holder and shall be binding upon the party whose counsel gave such instructions
to Escrow Holder.
4.2 Seller's Deliveries to Escrow Holder.
4.2.1 Prior to the Scheduled Closing Date (subject to extension pursuant to
SECTION 7.1), Seller shall deliver to Escrow Holder the following documents duly
executed and, where applicable, acknowledged by Seller, each of which shall be
undated and the delivery of each of which shall be a condition precedent to the
obligation of Buyer to close hereunder.
4.2.1.1 Deed. A deed with respect to the Real Property in the form of EXHIBIT
4.2.1.1 annexed hereto and made a part hereof, sufficient to transfer all of
Seller's right, title and interest in and to the Real Property, subject only to
matters of record as of the Closing Date, from Seller to Buyer (the "Deed");
4.2.1.2 Assignment and Assumption of Tenant Leases. An Assignment and Assumption
of Tenant Leases in the form of EXHIBIT 4.2.1.2 annexed hereto and made a part
hereof pursuant to which Seller shall assign the Tenant Leases to Buyer and
Buyer shall assume all of Seller's obligations thereunder (the "Assignment and
Assumption of Tenant Leases");
4.2.1.3 General Assignment. A General Assignment and Assumption Agreement in the
form of EXHIBIT 4.2.1.3 annexed hereto and made a part thereof pursuant to which
Seller shall assign to Buyer all of Seller's right, title and interest in and to
all of the Intangible Property and Buyer shall assume all obligations thereunder
(the "General Assignment and Assumption Agreement");
4.2.1.4 Assignment and Assumption of Management Agreement. An Assignment and
Assumption of Management Agreement in the form of EXHIBIT 4.2.1.4 annexed hereto
and made a part hereof pursuant to which Seller shall assign to Buyer the
Management Agreement and Buyer shall assume the obligations of Seller
thereunder, provided, however, the obligation to deliver the Assignment and
Assumption of Management Agreement shall be irrevocably waived, if prior to the
Close of Escrow, the Management Agreement shall have been terminated and the
Interim Management Agreement shall have become effective in accordance with
SECTION 17.20.
4.2.1.5 Bill of Sale. One or more Bills of Sale in the form of EXHIBIT 4.2.1.5A
AND 4.2.1.5B annexed hereto and made a part hereof conveying to Buyer or
designees of Buyer all of Seller's right, title and interest in and to the
Tangible Personal Property (the "Bill of Sale");
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4.2.1.6 Stock Agreement. The Stock Agreement in the form of EXHIBIT 4.2.1.6
annexed hereto and made a part hereof (the "Stock Agreement");
4.2.1.7 Assignment and Assumption of Liquor-Related Agreements. The Assignment
and Assumption of Liquor-Related Agreements in the form of EXHIBIT 4.2.1.7
annexed hereto and made a part hereof (the "Assignment and Assumption of
Liquor-Related Agreements");
4.2.1.8 [Intentionally Omitted]
4.2.1.9 [Intentionally Omitted]
4.2.1.10 [Intentionally Omitted]
4.2.1.11 Houston Master Lease. The Master Lease in the form of EXHIBIT 4.2.1.11
annexed hereto and made a part hereof pursuant to which Seller shall lease to
Buyer on a triple net basis the land (the "Houston Adjacent Assets") more
particularly described on SCHEDULE 4.2.1.11 (the "Master Lease");
4.2.1.12 Houston Right of First Offer Agreement. A Right of First Offer
Agreement in the form of EXHIBIT 4.2.1.12 annexed hereto pursuant to which
Seller shall grant Buyer a right of first offer with respect to the Houston
Adjacent Assets (the "Houston Right of First Offer Agreement");
4.2.1.13 Non-Foreign Person Certificate. A Non-Foreign Person Certificate in the
form of EXHIBIT 4.2.1.13 annexed hereto and made a part hereof (the "Non-Foreign
Person Certificate");
4.2.1.14 Transfer Tax Forms. Any statements, such as a transfer or conveyance
tax forms or returns required by applicable state or local law to be executed by
Seller in order to effect the Closing;
4.2.1.15 Certified Rent Roll. A copy of the rent roll for the Property dated as
of the Closing Date and certified by Seller to be (a) a true, correct and
complete copy of the rent roll for the Property provided to Seller by the
Manager; and (b) to Seller's Knowledge, to be true, correct and complete;
4.2.1.16 Certified Operating Statement. An operating statement for the Property
dated as of a date no more than thirty (30) days prior to the Closing Date and
certified by Seller to be (a) a true, correct and complete copy of the operating
statement for the Property provided to Seller by Manager for the period of
Manager's employment at the Property; and (b) to Seller's Knowledge, to be,
true, correct and complete;
4.2.1.17 Guest Ledger. A copy of the guest ledger dated as of the Proration Time
showing all Guest Ledger Receivables and certified by Seller (a) to be a true,
correct and complete copy of the guest ledger provided to Seller by Manager; and
(b) to Seller's Knowledge, to be true, correct and complete;
4.2.1.18 Closing Certificate. A certification by Seller to Seller's Knowledge
that the representations and warranties set forth in SECTION 6.3 are true,
correct and complete as of the Closing Date, except to the extent that any such
representation or warranty is expressly made only as of the Execution Date
subject to Seller's right to make revisions pursuant to SECTION 6.7 to such
representations and warranties ("Seller's Closing Certificate");
4.2.1.19 Schedule of Bookings. A schedule of all Bookings relating to periods
after the Proration Time, certified by Seller (a) to be a true, correct and
complete copy of the schedule of Bookings provided to Seller by Manager; and (b)
to Seller's Knowledge, to be true, correct and complete;
4.2.1.20 Title Requirements. Any and all certificates, affidavits and other
instruments and
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documents which the Title Company shall reasonably require to permit it to issue
the Title Policy in the condition required herein; provided, however, that, (a)
Seller is given written notice by Title Company of the requirement of any such
certificates, affidavits or other instruments and documents within a reasonably
sufficient time in advance of the Scheduled Closing Date and (b) such incidental
documents do not create any liability to Seller that is inconsistent with the
liability retained by Seller under the terms of this Agreement;
4.2.1.21 Payoff Letters. A pay-off letter from the holder of any mortgage or
deed of trust presently encumbering the Real Property indicating all sums
required to satisfy the debt secured by and permit the discharge of record the
lien of such mortgage or deed of trust;
4.2.1.22 Notices to Tenants. Notices to Tenants of the assignment to Buyer of
the Tenant Leases in form and substance satisfactory to Seller and Buyer;
4.2.1.23 Opinion of Seller's Counsel. An opinion of Seller's Counsel in a form
to be agreed upon by the parties; and
4.2.1.24 Other. Any other incidental documents, not otherwise expressly provided
for herein, reasonably required by Escrow Holder to consummate the purchase and
sale of the Property; provided, however, that (a) Seller is given written notice
by Escrow Holder of the requirement of any such incidental documents within a
reasonably sufficient time in advance of the Scheduled Closing Date (subject to
extension in accordance with the provisions of SECTION 7.1); and (b) such
incidental documents do not create any liability to Seller that is inconsistent
with the liability retained by Seller under the terms of the this Agreement.
4.3 Buyer's Deliveries to Escrow Holder.
4.3.1 Prior to the Scheduled Closing Date (subject to extension in accordance
with the provisions of SECTION 7.1), and subject further to the provisions of
SECTION 4.3.1.4 in the case of the Value Letter, Buyer shall deliver to Escrow
Holder the following items and documents, which documents shall be duly executed
and, where applicable, acknowledged by Buyer or its designee, as applicable, and
undated, and the delivery of each of which shall be a condition precedent to the
obligation of Seller to close hereunder:
4.3.1.1 The Cash Purchase Price. The Cash Purchase Price;
4.3.1.2 Stock Certificates. Paired Shares in the amount required to be delivered
at the Closing in accordance with the provisions of this Agreement and in
accordance with and subject to the provisions of the Stock Agreement;
4.3.1.3 Assignment and Assumption of Management Agreement. A counterpart of the
Assignment and Assumption of Management Agreement, provided, however, the
obligation to deliver the Assignment and Assumption of Management Agreement
shall be irrevocably waived, if prior to the Close of Escrow, the Management
Agreement shall have been terminated and the Interim Management Agreement shall
have become effective in accordance with SECTION 17.20.;
4.3.1.4 Value Letter. A letter (the "Value Letter") to be obtained by Buyer at
Buyer's expense with respect to the reasonableness of the allocation of the
purchase price among the transactions being entered into as of the date hereof
between Buyer and Seller and/or Seller's Affiliates issued by Bear Stearns;
4.3.1.5 Opinion of Buyer's Counsel. An opinion of Buyer's counsel in a form to
be agreed upon by the parties;
4.3.1.6 Stock Agreement. A counterpart of the Stock Agreement;
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4.3.1.7 [Intentionally Omitted]
4.3.1.8 Assignment and Assumption of Liquor-Related Agreements. A counterpart of
the Assignment and Assumption of Liquor-Related Agreements;
4.3.1.9 [Intentionally Omitted]
4.3.1.10 Houston Master Lease. A counterpart of the Master Lease;
4.3.1.11 Houston Right of First Offer. A counterpart of the Houston Right of
First Offer Agreement;
4.3.1.12 Closing Certificate. A certification by Buyer that the representations
and warranties set forth in SECTION 6.1 and SECTION 6.2 are true, correct and
complete as of the Closing Date;
4.3.1.13 The Assignment and Assumption of Tenant Leases. A counterpart of the
Assignment and Assumption of Tenant Leases;
4.3.1.14 The General Assignment and Assumption Agreement. A counterpart of the
General Assignment and Assumption Agreement;
4.3.1.15 Transfer Tax Forms. Any statements, such as a transfer or conveyance
tax forms or returns required by applicable state or local law to be executed by
Buyer in order to effect the closing; and
4.3.1.16 Other. Any other incidental documents, not otherwise expressly provided
for herein, required by Escrow Holder to consummate the purchase and sale of the
Property; provided, however, that (a) Buyer is given written notice by Escrow
Holder of the requirement of such incidental documents within a reasonably
sufficient time in advance of the Scheduled Closing Date; and (b) Buyer shall
not be required to incur any liability, in connection with the delivery of such
incidental documents inconsistent with the provisions of this Agreement.
4.4 Seller's Deliveries to Buyer. At or prior to the Close of Escrow, Seller
shall deliver to Buyer or cause to be available to Buyer on-site at the Hotel,
the following documents, to the extent the same have not already been delivered
and to the extent in the possession or control of Seller:
4.4.1 Tenant Leases/Tenant Deposits. The original Tenant Leases (or if not
available, the best available copies), and the originals of Tenant Security
Deposits which are evidenced by letters of credit or escrow agreements, if any,
and if necessary to enable Buyer to realize or draw upon same, consents of the
applicable Tenants and/or financial institutions or replacement letters of
credit or escrow agreements in favor of Buyer;
4.4.2 Service Contracts. The originals, or, if not available, the best available
copies, of the Approved Service Contracts;
4.4.3 Licenses and Permits. The originals, or, if not available, the best
available copies of the Licenses and Permits; and
4.4.4 Records and Plans. The originals, or, if not available, the best available
copies of the Records and Plans.
4.5 Possession. Seller shall deliver the keys and possession of the Property to
Buyer at the Close of Escrow free and clear of all leases, tenancies and
occupancies, except for the Management Agreement, the Bookings, the rights of
guests in guest rooms, banquet facilities, conference rooms and meeting rooms,
the rights of Tenants under the Tenant Leases (including their assignees,
subtenants or licensees), and the other Permitted Encumbrances.
4.6 Evidence of Authorization. At the Close of Escrow, each party shall deliver
to the other party evidence in form and content reasonably satisfactory to the
other party and the Title
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Company that (a) the party is duly organized and validly existing under the laws
of the state of its organization and has the power and authority to enter into
this Agreement, (b) this Agreement and all documents delivered pursuant hereto
have been duly executed and delivered by the party, and (c) the performance by
the party of its obligations under this Agreement have been duly authorized by
all necessary corporate, partnership or other action.
4.7 Close of Escrow.
4.7.1 The Escrow shall close on or before the Scheduled Closing Date.
4.7.2 Provided that Escrow Holder has not received from either party written
notice of the failure of any condition precedent specified in SECTION 9 to the
obligations of such party (or any previous such notice has been withdrawn), then
when the parties have each deposited into the Escrow the documents and funds
required by this Agreement and the Title Company is unconditionally prepared to
issue the Title Policy at the Close of Escrow, Escrow Holder shall perform the
following actions (collectively, "Close of Escrow" or "Closing"):
4.7.2.1 Prepare a closing statement for the transaction for approval by Seller
and Buyer prior to the Close of Escrow;
4.7.2.2 Insert the Closing Date as the date of any undated document to be
delivered through Escrow;
4.7.2.3 Cause the Deed to be recorded in the land records of the state and
county where the Real Property is located;
4.7.2.4 Deliver to Buyer the documents deposited into the Escrow for delivery to
Buyer at the Close of Escrow;
4.7.2.5 Deliver to Seller (a) all funds and Paired Shares to be received by
Seller from Buyer through the Escrow at the Close of Escrow less (i) all amounts
to be paid by Seller for Escrow Holder's fees and expenses and (ii) all amounts
paid by Escrow Holder in satisfaction of liens and encumbrances on the Real
Property or other matters pursuant to the written instruction of Seller, and (b)
the documents deposited into the Escrow for delivery to Seller at the Close of
Escrow; and
4.7.2.6 Cause the Title Policy to be issued by the Title Company and delivered
to Buyer.
4.8 Costs of Escrow. Costs of the Escrow shall be allocated as follows:
4.8.1 Buyer and Seller shall each pay one-half (1/2) of the fees of Escrow
Holder;
4.8.2 Buyer and Seller shall each pay one-half (1/2) of the cost of providing
the Survey required to be delivered in accordance with the provisions of SECTION
7.1; provided, however, Buyer shall be responsible for the full cost of the
Survey in the event the Closing does not occur hereunder other than on account
of default of Seller;
4.8.3 Buyer and Seller shall each pay one-half (1/2) of all transfer taxes and
recording fees payable in connection with the conveyance of each portion of the
Real Property and/or the recording of the Deed and any other documents or
instruments recorded pursuant to this Agreement;
4.8.4 Buyer and Seller shall each pay one-half (1/2) of all sales or other
personal property taxes, levies, fees and charges payable as a result of the
transfer of the Personal Property to Buyer and the consummation of the
transactions contemplated hereby. Buyer shall be the reporting person for such
purposes and shall prepare the necessary sales tax reports based upon the
allocations set forth in SECTION 3.4. The parties acknowledge that additional
sales tax may be assessed as a result of the transfer of the Personal Property
to Buyer and the consummation of the transactions contemplated hereby after the
Closing and that Buyer and Seller shall
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continue to each be responsible for one-half of any such additional taxes. The
provisions of Section 4.8.3 and Section 4.8.4 shall survive the Closing;
4.8.5 Buyer and Seller shall each pay one-half (1/2) of the cost of obtaining
the coverage under the Title Policy, except that the cost of any special
endorsements shall be paid exclusively by Buyer;
4.8.6 At Closing or thereafter Buyer shall pay for the cost of the Value Letter;
4.8.7 [Intentionally Omitted]
4.8.8 If the Close of Escrow fails to occur other than as a result of a default
hereunder by either party, including, without limitation, as a result of a
failure of a condition precedent set forth in SECTION 9, the fees of the Escrow
Holder and Title Company (including, without limitation, cancellation fees)
shall be borne equally between Buyer and Seller;
4.8.9 If the Close of Escrow fails to occur as a result of a default hereunder
by either party, the fees of the Escrow Holder and Title Company (including,
without limitation, cancellation fees) shall be borne by the defaulting party;
and
4.8.10 Pursuant to Section 6045 of the Internal Revenue and Taxation Code, the
Title Company shall be designated the "Closing Agent" hereunder and shall be
solely responsible for complying with the Tax Reform Act of 1986 with regard to
the reporting of all settlement information to the Internal Revenue Service.
4.9 Other Costs. Except as set forth in SECTION 4.8.6, SECTION 11.1 and SECTION
15.1.6, each party shall pay all of its own legal, accounting and consulting
fees and other costs and expenses incurred in connection with this Agreement.
4.10 Maintenance of Confidentiality by Escrow Holder. Escrow Holder shall
maintain in strict confidence and not disclose to anyone the existence of the
Escrow, the identity of the parties thereto, the amount of the Purchase Price,
the existence or provisions of this Agreement or any other information
concerning the Escrow or the transactions contemplated hereby, without the prior
written consent of Buyer and Seller.
SECTION 5
PRORATIONS AND ASSUMPTION OF OBLIGATIONS
5.1 General. All income, receivables, expenses (whether payable or prepaid) and
payables of the Property shall be apportioned equitably between the parties as
of the Proration Time in accordance with the provisions of this SECTION 5 (all
prorations are to be based upon the number of days in a 365 day year). The
obligation to make apportionments under SECTIONS 5.1 AND 5.2 shall, unless
otherwise expressly provided in this SECTION 5, survive the Close of Escrow for
a period of sixty (60) days at which time such apportionment shall be final
unless disputed during such period.
5.2 General and Specific Prorations. Without limitation, the following items
shall be apportioned:
5.2.1 At the Closing, Buyer shall assume all of the accounts payable relating to
goods and services ordered or obtained in the ordinary course of operation of
the business of the Hotel (including without limitation, payments under the
Service Contracts and Equipment Leases) prior to the Proration Time. Seller
shall be obligated to credit Buyer at the Close of Escrow with an amount
mutually agreed upon by Buyer and Seller at the Closing, reflecting the parties'
good faith estimate of such accounts payable as of the Proration Time (which
estimate shall deduct any discounts then available in the ordinary course of
business for the prompt payment of such accounts payable), plus a further credit
for any late fees then payable with respect to any
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identified accounts payable. Buyer shall be responsible for paying when due all
accounts payable arising from the operation of the Property on or after the
Proration Time, and Seller shall have no further liability for such payables or
charges. As of the date which is sixty (60) days following the Closing Date,
Buyer and Seller shall calculate the amount of all accounts payable relating to
goods and services ordered or obtained in the ordinary course of operation of
the business of the Hotel (including without limitation, payments under the
Service Contracts and Equipment Leases) prior to the Proration Time. Seller
shall reimburse Buyer for any payments made on account of any such accounts
payable which were not reflected in the Parties' estimate of such amount
credited to Buyer at Closing and which have been paid by Buyer or for which
Buyer is obligated to pay in accordance with the provisions hereof, and if the
amount of such credit exceeds the amounts so paid or for which Buyer is so
obligated, Buyer shall pay such excess amount to Seller.
5.2.2 At the Closing, Seller shall assign to Buyer all of the Accounts
Receivable, for which Seller shall receive a credit at the Close of Escrow in an
amount equal to (a) the full, aggregate outstanding balance of the Cash
Equivalent Receivables (without discount except for service charges due to
charge card companies) plus (b) the full aggregate outstanding balance of the
Invoiced Receivables and Other Accounts Receivable as of the Proration Time,
provided, Buyer shall at its option accept or reject any Invoiced Receivables
and Other Accounts Receivable over ninety (90) days and Seller shall not receive
a credit for any Invoiced Receivables and Other Accounts Receivable over ninety
(90) days rejected by Buyer; provided, that Buyer shall at its own expense use
reasonable efforts to collect any such rejected Invoiced Receivables and Other
Accounts Receivable on behalf of Seller for a period of sixty (60) days after
the Closing Date and thereafter Seller shall have the right to collect same for
its own account; provided, further, as of the date which is sixty (60) days
following the Closing Date, Buyer and Seller shall make any adjustments required
to reflect the collectibility of any Invoiced Receivables and Other Accounts
Receivable (it being agreed that (a) any accounts receivable not listed on the
schedule of accounts receivable of the Property as of the date which is sixty
(60) days following the Closing Date shall be deemed paid as of such date and
(b) except as provided in (a), any accounts receivable which are more than
ninety (90) days past due as of the date which is sixty (60) days following the
Closing Date shall be deemed uncollectable as of such date) and Seller and Buyer
shall make a corresponding payment to the other as required to accurately
reflect the collectibility of such Invoiced Receivables and Other Accounts
Receivable and any accounts receivable deemed uncollectable as of such date in
accordance with the terms hereof shall be the property of Seller and Seller
shall be permitted (at its expense and for its own account) to collect the same;
5.2.3 In prorating the Accounts Receivable, Buyer and Seller shall each receive
credit for one-half (1/2) of all Guest Ledger Receivables attributable to the
room night during which the Proration Time occurs. Seller shall receive the
income from all restaurant and bar facilities located at the Property through
the Proration Time and Buyer shall receive such income thereafter;
5.2.4 [Intentionally Omitted]
5.2.5 All sales, use and occupancy taxes arising from the operation of the
Property shall be prorated as of the Proration Time;
5.2.6 Fees for transferable annual permits, licenses, and/or inspection fees, if
any, for periods during which the Proration Time occurs shall be prorated as of
the Proration Time;
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5.2.7 Utility charges with respect to the Property levied against Seller or the
Property and the value of fuel stored on the Property shall be prorated at
Seller's cost therefor as of the Proration Time. Seller shall notify all
utilities, governmental agencies, suppliers and others providing services to the
Property of the prospective change in ownership and operation of the Property,
and Seller shall use its reasonable efforts to cause all utilities furnished to
the Property, including, but not limited to, electricity, gas, water and sewer,
along with any fuel storage tanks to be read the day prior to the Proration
Time;
5.2.8 Permitted administrative charges, if any, on Tenant Security Deposits
shall be prorated;
5.2.9 Buyer shall receive a credit for advance payments and/or deposits, if any,
under Bookings to the extent the Bookings relate to a period after the Proration
Time;
5.2.10 Vending machine monies will be removed by Seller as of the Proration Time
for the benefit of Seller;
5.2.11 Buyer shall purchase and Seller shall sell to Buyer (or Seller shall
receive a credit therefore) all petty cash funds and cash in the Property's
house banks at 100% of face value at the Proration Time;
5.2.12 Wages, salaries and payroll taxes and other payroll deductions for all
Hotel Employees shall be apportioned as of the Proration Time (i.e., the night
shift shall be prorated 50/50 for the night preceding the Closing Date). Buyer
shall assume all accrued vacation benefits and sick leave benefits due to such
Hotel Employees which relate to any period prior to the Proration Time and shall
receive a credit for the full amount of all such accrued benefits reasonably
expected to be paid after the Closing Date; provided, that as of the date which
is sixty (60) days following the Closing, Buyer and Seller shall adjust the
amount of the credit if required to take into account the benefits actually
required to be paid by Buyer or then reasonably expected to be paid following
the Closing Date by Buyer. Buyer shall also assume all obligations of Seller and
the Employer Corporation, under the Employment Agreements and/or the Management
Agreement to pay all such wages, salaries, and compensation set forth above
accruing subsequent to Proration Time; provided, however, that other than as set
forth in SECTION 14.1 hereof, no provision contained in this Agreement shall be
construed to prevent the Buyer from terminating or amending in any manner such
Employment Agreements and Management Agreements subsequent to the Proration
Time. The obligation to pay bonuses, if any, following the Closing shall be
allocated as of the Proration Time and adjusted between Buyer and Seller.
5.2.13 Real and personal property taxes, assessments and special district levies
shall be prorated for the tax fiscal year in which the Closing Date occurs on
the basis of the then most current available tax bills, Seller being charged
through the day prior to the Closing Date and Buyer with the Closing Date and
thereafter;
5.3 Deposits. All rights to utility, assessment, and other cash deposits
(including, without limitation, any Utility Deposits) held by others for
Seller's account, and all certificates of deposit or other forms of cash
collateral held by or otherwise pledged to others for Seller's account to secure
obligations of Seller under Service Contracts, Equipment Leases or other
obligations assumed by Buyer, shall be assigned or transferred to Buyer at the
Close of Escrow; provided, that if any of such deposits are not transferable,
Seller shall retain all rights with respect thereto and there shall be no debit
made to Buyer on account thereof.
5.4 Tenant Leases. At the Close of Escrow, pursuant to the Assignment and
Assumption of Tenant Leases, Buyer shall assume all of the obligations of Seller
under the Tenant Leases as of the Proration Time, including, without limitation,
tenant improvement obligations of landlord
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thereunder and obligations with respect to Tenant Security Deposits (to the
extent received by Buyer or credited to Buyer hereunder).
5.5 Service Contracts and Other Intangible Property. At the Close of Escrow,
Seller shall assign to Buyer pursuant to the terms of the General Assignment and
Assumption Agreement, all right, title and interest of Seller in and to the
Approved Service Contracts and other Intangible Property, and Buyer shall assume
all of the obligations of Seller under the Approved Service Contracts arising
from and after the Close of Escrow. Buyer shall protect, hold harmless,
indemnify and defend Seller and its directors, officers, agents, affiliates,
principals, partners, shareholders, representatives and controlling persons from
any Losses attributable to the period beginning on and after the Closing Date
with respect to the Approved Service Contracts. Seller shall be responsible for
all obligations thereunder attributable to the period prior to the Closing Date
with respect to Approved Service Contracts (except to the extent that Buyer
shall have received a credit hereunder with respect to any such obligations).
The provisions of this SECTION 5.5 shall survive the Close of Escrow.
5.6 Tax Refunds and Proceedings. Buyer shall have the exclusive right to
commence or continue any proceeding to determine the assessed value of the
Property, the real or personal property taxes payable with respect to the
Property or any action to contest water charges, sewer charges, sales tax or use
tax for the relevant taxable period during which the Proration Time occurs and
to settle or compromise any claim thereof, and any refunds or proceeds resulting
from such proceedings along with the costs (including reasonable legal and
accounting fees) incurred by Buyer in obtaining the same, shall be prorated as
of the Proration Time. In prosecuting any such action, Buyer shall utilize the
services of Marvin Poer & Co. and Gilbert Bernal. Seller shall retain the right
to continue, commence, prosecute, settle or compromise any proceedings relating
exclusively to any relevant taxable period or periods prior to the period during
which the Proration Time shall occur. Buyer and Seller agree to cooperate with
each other and to execute any and all documents reasonably requested in
furtherance of the foregoing. The provisions of SECTION 5.6 shall survive the
Closing.
5.7 Guest Baggage. As of the Close of Escrow, Buyer shall indemnify and hold
harmless Seller against all Losses with respect to all baggage of departed
guests or guests who are still registered at the Hotel on the Closing Date which
has been checked with the Hotel. As of the Close of Escrow, Seller shall assign
to Buyer all claims and causes of action against the Manager with respect to any
Losses with respect to such baggage. Seller agrees to submit to Seller's
Insurance any claims for Losses with respect to such baggage which arose from
acts or omissions prior to the Closing Date to the extent coverage is available
under said insurance and provide Buyer with the proceeds therefrom provided
Buyer is not in default under this SECTION 5.7. The provisions of this SECTION
5.7 shall survive the Closing.
5.8 Safe Deposit Boxes. As of the Close of Escrow, Buyer shall indemnify and
hold harmless Seller against all Losses with respect to the contents of any
safety deposit boxes in use at the Hotel. As of the Close of Escrow, Seller
shall assign to Buyer all claims and causes of action against the Manager with
respect to any Losses relating to said safety deposit boxes. Seller agrees to
submit to Seller's insurance any claims for Losses which arose from acts or
omissions prior to the Closing Date to the extent coverage is available under
said insurance and provide Buyer with the proceeds therefrom provided Buyer is
not in default under this SECTION 5.8. The provisions of this SECTION 5.8 shall
survive the Closing.
5.9 Advance Bookings. Buyer shall assume and honor for its account all Bookings
relating
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to dates after the Proration Time set forth on the Schedule of Advance Bookings
delivered by Seller to Buyer at the Close of Escrow pursuant to SECTION 4.2.1.9.
5.10 Special Purchase Price Adjustment. In the event that the Closing Date is
extended beyond January 30, 1998 for any reason other than on account of a
default by Buyer hereunder, Buyer shall receive a credit at Closing against the
Cash Purchase Price in an amount equal to interest on the Purchase Price
calculated at the LIBOR Rate plus 2% per annum for the period from January 30,
1998 through the earlier of (a) the Closing Date and (b) sixty (60) days after
January 30, 1998. Nothing in this SECTION 5.10 shall create a waiver of any
other remedy of Buyer for a Seller default permitted under the provisions of
this Agreement.
SECTION 6
REPRESENTATIONS AND WARRANTIES;
CONDITION OF PROPERTY
6.1 Of the Trust. As an inducement to Seller to enter into this Agreement, the
Trust hereby represents, warrants and covenants to Seller as follows:
6.1.1 Power and Authority. The Trust is a real estate investment trust duly
organized and validly existing under the laws of the State of Maryland. The
Trust has the power and authority to carry on its present business, to enter
into this Agreement and to consummate the transactions herein contemplated;
neither the execution and delivery of this Agreement by the Trust, nor the
performance by the Trust of the Trust's obligations hereunder will violate or
constitute an event of default under any material terms or material provisions
of any agreement, document, instrument, judgment, order or decree to which the
Trust is a party or by which the Trust is bound and/or violate any applicable
law, rule or regulation the violation of which would have a Material effect upon
the principal benefits intended to be provided by this Agreement.
6.1.2 Authorization; Valid Obligation. All proceedings required to be taken by
or on behalf of the Trust to authorize the Trust to make, deliver and carry out
the terms of this Agreement will be duly taken prior to the Closing Date. No
consent to the execution, delivery and performance of this Agreement will be
required from any partner, board of directors, shareholder, creditor, investor,
judicial or administrative body, governmental authority or other person, other
than any such consent which already has been (or prior to the Closing will have
been unconditionally given. The individuals executing this Agreement and the
documents referenced herein on behalf of the Trust have the legal power, right
and actual authority to bind the Trust to the terms and conditions hereof. This
Agreement is a valid and binding obligation of Trust, enforceable in accordance
with its terms, except as the same may be affected by bankruptcy, insolvency,
moratorium or similar laws, or by legal or equitable principles relating to or
limiting the rights of contracting parties generally.
6.1.3 Capital Structure. The authorized and outstanding capital stock and units
of the Trust and its operating partnership are as set forth in the Starwood
Disclosure. All Paired Shares to be issued as the Equity Purchase Price at the
Closing in accordance with this Agreement will, when so issued, be duly
authorized, validly issued, fully paid and nonassessable and free of preemptive
rights and will be paired with each other in the same ratio as all other shares
are paired with each other pursuant to the Pairing Agreement.
6.1.4 SEC Documents and Other Reports. The Trust has filed all required
documents with the SEC since January 1, 1996 (such documents together with the
Starwood Disclosure being referred to herein as the "SEC Documents"). As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of applicable law, and, at the respective times they were
filed, none of the SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The consolidated financial statements
(including, in each case, any notes
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thereto) of the Trust included in the SEC Documents complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto as of their respective
dates of filing, were prepared in accordance with generally accepted accounting
principles (except, in the case of the unaudited statements, as permitted by
Regulation S-X of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated therein or in the notes thereto) and fairly
presented the consolidated financial position of the Trust and its consolidated
subsidiaries as of the respective dates thereof and the consolidated results of
their operations and their consolidated cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein). Except as disclosed
in the SEC Documents or as required by generally accepted accounting principles,
the Trust has not, since December 31, 1996, made any change in the accounting
practices or policies applied in the preparation of their financial statements.
Prior to the Closing Date, the Trust will file all required documents with the
SEC, which documents will comply in all material respects with the requirements
of the applicable law, and will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
6.1.5 Absence of Certain Changes or Events. Except as disclosed in the SEC
Documents filed prior to the date of this Agreement, since December 31, 1996,
(a) 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 change in or effect on the financial condition, properties,
business, results of operations or prospects of the Trust and its subsidiaries
taken as a whole, or (b) there has not been any split, combination or
reclassification of any of the capital stock or units of the Trust or its
operating partnership or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of, or in substitution for shares of
such capital stock.
6.1.6 Actions and Proceedings. Except as set forth in the 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 Trust or any of its subsidiaries, or against or involving any of the
directors, officers or employees of the Trust 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 change in or effect on the financial condition, properties,
business, results of operations or prospects of the Trust and its subsidiaries
taken as a whole. Except as set forth in the SEC Documents, there are no
actions, suits or claims or legal, administrative or arbitrative proceedings or
investigations pending or, to the knowledge of the Trust, threatened against or
involving the Trust 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 change in or effect on the financial
condition, properties, business, results of operations or prospects of the Trust
and its subsidiaries taken as a whole. 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
Trust, threatened against or affecting the Trust or any of their 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.
6.1.7 REIT Status. The Trust is currently a "real estate investment trust"
("REIT") for federal income tax purposes and, to its knowledge, the Trust is and
at all times during the testing period described in Code Section 897(h)(4)(D)
has been a "domestically controlled REIT" (as defined in Section 897(h)(4)(D) of
the Code). From and after January 1, 1995, neither the
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Internal Revenue Service nor any other taxing entity or authority has made any
assertion that the Trust does not qualify as a REIT for income tax purposes, nor
has there been any challenge to the REIT status of the Trust. From time to time
upon request by the Seller or its assigns after the Closing Date, the Trust
agrees to inform Seller or such assigns whether to its knowledge it complies
with the representation and warranties set forth in this Section 6.1.7.
6.1.8 Partnership Status. Starwood Realty Partnership is classified and taxable
as a partnership for U.S. federal income tax purposes.
6.1.9 Hart-Scott-Rodino Act. The provisions of the Hart-Scott-Rodino Act are not
applicable to the transactions contemplated hereby and neither the Trust nor
Seller is required to make any filings or submissions or obtain any approvals
thereunder in connection herewith.
6.2 Of the Corporation. As an inducement to Seller to enter into this Agreement,
the Corporation hereby represents, warrants and covenants to Seller as follows:
6.2.1 Power and Authority. The Corporation is a corporation duly organized and
validly existing under the laws of the State of Maryland. The Corporation has
the power and authority to carry on its present business, to enter into this
Agreement and to consummate the transactions herein contemplated; neither the
execution and delivery of this Agreement by the Corporation nor the performance
by the Corporation of the Corporation's obligations hereunder will violate or
constitute an event of default under any material terms or material provisions
of any agreement, document, instrument, judgment, order or decree to which the
Corporation is a party or by which the Corporation is bound and/or violate any
applicable law, rule or regulation the violation of which would have a Material
effect upon the principal benefits intended to be provided by this Agreement.
6.2.2 Authorization; Valid Obligation. All proceedings required to be taken by,
or on behalf of the Corporation, to authorize the Corporation to make, deliver
and carry out the terms of this Agreement will be duly taken prior to the
Closing Date. No consent to the execution, delivery and performance of this
Agreement will be required from any partner, board of directors, shareholder,
creditor, investor, judicial or administrative body, governmental authority or
other person, other than any such consent which already has been (or prior to
the Closing will have been) unconditionally given. The individuals executing
this Agreement and the documents referenced herein on behalf of the Corporation
have the legal power, right and actual authority to bind the Corporation to the
terms and conditions hereof. This Agreement is a valid and binding obligation of
Corporation, enforceable in accordance with its terms, except as the same may be
affected by bankruptcy, insolvency, moratorium or similar laws, or by legal or
equitable principles relating to or limiting the rights of contracting parties
generally.
6.2.3 Capital Structure. The authorized and outstanding capital stock and units
of the Corporation and its operating partnership are as set forth in the
Starwood Disclosure. All Paired Shares to be issued as the Equity Purchase Price
at the Closing in accordance with this Agreement will, when so issued, be duly
authorized, validly issued, fully paid and nonassessable and free of preemptive
rights and will be paired with each other in the same ratio as all other shares
are paired with each other pursuant to the Pairing Agreement.
6.2.4 SEC Documents and Other Reports. The Corporation has filed all required
SEC Documents since January 1, 1996. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
applicable law, and, at the respective times they were filed, none of the SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements (including, in each case,
any notes thereto) of the Corporation included in the SEC Documents complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect
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thereto as of their respective dates of filing, were prepared in accordance with
generally accepted accounting principles (except, in the case of the unaudited
statements, as permitted by Regulation S-X of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated therein or in the
notes thereto) and fairly presented the consolidated financial position of the
Corporation and its consolidated subsidiaries as of the respective dates thereof
and the consolidated results of their operations and their consolidated cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments and to any other adjustments described
therein). Except as disclosed in the SEC Documents or as required by generally
accepted accounting principles, the Corporation has not, since December 31,
1996, made any change in the accounting practices or policies applied in the
preparation of their financial statements. Prior to the Closing Date, the
Corporation will file all required documents with the SEC, which documents will
comply in all material respects with the requirements of the applicable law, and
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
6.2.5 Absence of Certain Changes or Events. Except as disclosed in the SEC
Documents filed prior to the date of this Agreement, since December 31, 1996,
(a) 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 change in or effect on the financial condition, properties,
business, results of operations or prospects of the Corporation and its
subsidiaries taken as a whole, or (b) there has not been any split, combination
or reclassification of any of the capital stock or units of the Corporation or
its respective operating partnerships or any issuance or the authorization of
any issuance of any other securities in respect of, in lieu of or in
substitution for shares of such capital stock.
6.2.6 Actions and Proceedings. Except as set forth in the 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 Corporation or any of its subsidiaries, or against or involving any of the
directors, officers or employees of the Corporation 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 change in or effect on the financial condition,
properties, business, results of operations or prospects of the Corporation and
its subsidiaries taken as a whole. Except as set forth in the SEC Documents,
there are no actions, suits or claims or legal, administrative or arbitrative
proceedings or investigations pending or, to the knowledge of the Corporation,
threatened against or involving the Corporation 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 change in or effect
on the financial condition, properties, business, results of operations or
prospects of the Corporation and its subsidiaries taken as a whole. 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 Corporation, threatened against or affecting the
Corporation or any of their 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.
6.2.7 Starwood Operating Partnership is classified and taxable as a partnership
for U.S. Federal Income Tax purposes.
6.2.8 Hart-Scott-Rodino. The provisions of the Hart-Scott-Rodino Act are not
applicable to the transactions contemplated hereby and neither the Corporation
nor Seller is required to make any filings or submissions to obtain any
approvals thereunder in connection herewith.
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6.3 Of Seller. As an inducement to Buyer to enter into this Agreement, Seller,
represents, warrants and covenants to Buyer as follows:
6.3.1 Regarding Seller's Authority.
6.3.1.1 Seller is a general partnership in dissolution under the laws of the
State of Texas. Seller has the power and authority to enter into this Agreement
and the Conveyance Documents and, to sell the Property on the terms set forth in
this Agreement. The execution and delivery hereof and the performance by Seller
of its obligations hereunder, will not violate or constitute an event of default
under any material terms or material provisions of any agreement, document,
instrument, judgment, order or decree to which Seller is a party or by which
Seller is bound and/or violate any applicable law, rule or regulation the
violation of which would have a Material effect upon the principal benefits
intended to be provided by this Agreement.
6.3.1.2 The individuals executing this Agreement and the documents referenced
herein on behalf of Seller have the legal power, right and actual authority to
bind Seller to the terms and conditions hereof. This Agreement is a valid and
binding obligation of Seller, enforceable in accordance with its terms, except
as the same may be affected by bankruptcy, insolvency, moratorium or similar
laws, or by legal or equitable principles relating to or limiting the rights of
contracting parties generally.
6.3.2 Tenant Leases. There are no leases, licenses or concessions for space
which will affect the Real Property or any portion thereof following the Close
of Escrow other than as set forth on the Schedule of Tenant Leases. Seller has
delivered to Buyer a true, correct and complete copy of each lease and agreement
listed on the Schedule of Lease. Seller has not received written notice of any
sublease and/or assignment of any Tenant Lease except as set forth on SCHEDULE
6.3.2. No outstanding written notice of any Material default has been delivered
by Seller or received by Seller with respect to any Tenant Lease, except as
disclosed on the SCHEDULE 6.3.2 annexed hereto and made a part hereof. To
Seller's knowledge, all rent under the leases listed on the Schedule of Leases
is being paid currently. All Material brokerage, leasing and other commissions
due in connection with the Tenant Leases have been paid by Seller other than
those payable with respect to the renewal or extension of such Tenant Leases or
expansion of the leased premises thereunder after the Closing Date, each of
which are payable under agreements described on SCHEDULE 6.3.2.
6.3.3 Service Contracts. There are no Service Contracts which will affect the
Property after the Closing Date except for the Approved Service Contracts. No
outstanding written notice of any Material default has been delivered by Seller
or received by Seller with respect to any Approved Service Contract, except as
disclosed on SCHEDULE 6.3.3 annexed hereto and made a part hereof.
6.3.4 Claims. There are no pending litigation or condemnation proceedings with
respect to Seller or the Property which would result in an adverse effect on the
ability of Buyer to operate the Property after the Closing, except as disclosed
on SCHEDULE 6.3.4 annexed hereto and made a part hereof. There is no pending
litigation or to Seller's knowledge, other claims of Seller with respect to the
Property attributable to the period prior to the date hereof which may result in
a material judgment in favor of Seller except as disclosed on SCHEDULE 6.3.4.
6.3.5 Employees. To Seller's Knowledge, SCHEDULE 1.1.6 sets forth a true and
complete list of all Hotel Employees as of the Execution Date together with
their positions, salaries or hourly wages, as applicable, and years of service.
Except for or pursuant to the Employment Agreements, the Collective Bargaining
Agreements, the Management Agreement and the agreements related to the
Ritz-Carlton management of the Hotel described on SCHEDULE 6.3.5 hereto, neither
Seller nor the Employer Corporation has relating to the Property (i) at any time
maintained, contributed to or participated in, (ii) or had at any time
obligation to maintain, contribute to, or participate in, or (iii) any liability
or contingent liability, direct or indirect, with respect to: any
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employment agreement, oral or written retirement or deferred compensation plan,
incentive compensation plan, stock plan, unemployment compensation plan,
vacation pay plan, severance plan, bonus plan, stock compensation plan or any
other type or form of employee-related (or independent contractor-related)
arrangement, program, policy, plan or agreement. Except as set forth on SCHEDULE
6.3.5, to Seller's knowledge there is no Material default under any of the
Employment Agreements.
6.3.6 Compliance with Laws. During the past twelve (12) months, Seller has not
received any written notice from any party, including, without limitation, from
any municipal, state, federal or other governmental authority, of a Material
violation of any zoning, building, fire, water, use, health, or other similar
statute, ordinance, or code bearing on the construction, operation or use of the
Property or any part thereof (other than as to matters previously cured), except
as disclosed on SCHEDULE 6.3.6 annexed hereto and made a part hereof and except
for violations of Environmental Laws, which are addressed in SECTION 6.3.7
below.
6.3.7 Hazardous Materials. Seller has not received any written notice from any
municipal, state, federal or other governmental authority or from any other
person during the last three (3) years of (a) any Material violation of
applicable Environmental Laws or (b) any Environmental Condition requiring
Material remediation under applicable Environmental Laws, in either case only to
the extent relating to Environmental Conditions at or on the Real Property,
except as disclosed on SCHEDULE 6.3.7 annexed hereto and made a part hereof;
6.3.8 Records and Plans. Seller will have delivered to Buyer on the Closing Date
true and correct copies of the Records and Plans.
6.3.9 Licenses and Permits. Seller has delivered to Buyer true and correct
copies of the Liquor License and all other Material Licenses and Permits and
such Licenses and Permits are identified on SCHEDULE 6.3.9 annexed hereto and
made a part hereof.
6.3.10 Management Agreements. There are no hotel management or property
management agreements, which will be binding upon Buyer after the Closing Date,
other than the Management Agreement, a true and complete copy of which will be
delivered to Buyer on the Closing Date. Seller has not sent or received any
notice of default or notice of termination under or with respect to the
Management Agreement.
6.3.11 Personal Property. Seller owns the Tangible Personal Property (other than
the Tangible Personal Property that is subject to the Equipment Leases) free and
clear of any liens and/or encumbrances other than the Permitted Encumbrances.
6.3.12 Insurance. The Seller in respect of the Real Property is insured under
those policies of casualty and general liability insurance ("Seller's
Insurance") described on SCHEDULE 6.3.12 annexed hereto, each of which is in
full force and effect as of the date hereof and will remain in full force and
effect through the Closing Date. Seller has received no notices of any Material
default or demands to cure from any applicable insurer in respect of Seller's
Insurance.
6.3.13 Real Estate Taxes. Except as set forth on SCHEDULE 6.3.13 annexed hereto
and made a part hereof, Seller has not commenced any proceedings which are
pending for the reduction of the assessed valuation of the Real Property or any
portion thereof, and other than the Permitted Encumbrances, to Seller's
Knowledge, there are no special assessments affecting the Property. Nothing in
this SECTION 6.3.13 or any other provision of this Agreement shall be construed
to limit Seller's rights to initiate or prosecute after the Close of Escrow
additional proceedings for property tax refunds for taxes relating to any
relevant taxable period or periods prior to the taxable period during which the
Proration Time occurs.
6.3.14 Liquor-Related Agreements. Except for that certain Notice dated December
1, 1977, from the Texas Comptroller of Public Accounts to Five Star Beverage,
Inc., to Seller's Knowledge, Seller has not received written notice from the
Texas Alcoholic Beverage Commission of any violation or
25
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threatened violation of any applicable laws, rules or ordinance with respect to
(i) the agreements identified on Schedule 1 to the Assignment and Assumption of
Liquor-Related Agreements (collectively, the "Liquor Agreements"), (ii)
Five-Star Beverages, Inc. (the party thereto which holds the Liquor Licenses),
or (iii) the Liquor Licenses. To Seller's Knowledge, each of the Liquor
Agreements is in full force and effect, and Seller has received no written
notice of any default by Seller thereunder. The rent payable to Seller under the
"Liquor Lease" identified on Schedule 1 to the Assignment and Assumption of
Liquor-Related Agreements has not been modified from the amount stated therein.
6.4 Buyer's Review of Records and Plans.
6.4.1 Access to Records and Plans; Specific Disclosures. Buyer acknowledges that
prior to the Closing Date, Buyer has been provided with such access to the
Records and Plans and such other information relating to the Hotel as Buyer has
deemed relevant. Buyer acknowledges that it (a) has been made aware of and given
an opportunity to inquire into the Specific Disclosure Matters described herein;
(b) has been given access to the Property and the opportunity to conduct such
inquiries and analyses as Buyer has deemed necessary or appropriate in order to
evaluate the physical condition of the Property and any and all other matters
concerning the current and future use, feasibility, or value, or any other
matter or circumstance relevant to Buyer concerning the Property or its
marketability; and (c) the Records and Plans and the other books and records of
Seller with respect to the Hotel may not be complete.
6.4.2 Limitation on Access to Records and Plans. Notwithstanding anything in
this Agreement to the contrary, Buyer acknowledges and agrees that the Records
and Plans or other information made available to or delivered to Buyer prior to,
or at the Closing, shall not include any information which is privileged,
confidential or proprietary to Seller or any of its constituent partners or
affiliates, including without limitation, (i) Seller's internal financial
analyses, any appraisals undertaken for Seller or other parties, income tax
returns, financial statements, corporate or partnership governance records,
investment advisory records, and other records concerning Seller's professional
relationships, any Hotel Employee personnel files (prior to the Closing), or any
other internal, proprietary, or confidential information, files, or records of
Seller, (ii) the work papers, memoranda, analysis, correspondence, and similar
materials prepared by or for Seller in connection with the negotiation and
documentation of the transaction contemplated hereby or any other offer to
purchase the Property received by Seller, and (iii) any documents or
communications subject to the attorney/client privilege or attorney work product
privilege. Buyer expressly agrees that its review of the Records and Plans, and
any and all other information of any type or nature, whether oral or written,
provided to Buyer by or on behalf of Seller and relating to the Property
(collectively, the "PROPERTY INFORMATION") is for informational purposes only,
and neither Seller nor any agent, advisor, officer, attorney, representative or
other person acting or purporting to act on behalf of Seller has verified either
the accuracy of the Property Information, or the adequacy of any method used to
compile the Property Information or the qualifications of any person preparing
the Property Information except that, in delivering or making available a copy
of any document or papers to Buyer, Seller has delivered or made available
copies of the originals of such documents or papers in Seller's possession or
included in the Records and Files. Except as expressly set forth in this SECTION
6, neither Seller nor any agent, advisor, officer, attorney, representative or
other person acting or purporting to act on behalf of Seller is making or giving
any representation or warranty about, or assuming any responsibility for, the
accuracy or completeness of the Property Information. Reliance by Buyer upon any
Property Information shall not create or give rise to any liability of or
against Seller or any agent, advisor, officer, attorney, representative or other
person acting or purporting to act on behalf of
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Seller. Subject to Seller's express representations and warranties set forth
herein, the consummation of the Closing shall constitute Buyer's unconditional
approval of all aspects of the Property and Buyer's unconditional acknowledgment
that Buyer has had the opportunity to request from Seller and review such
documents and materials relating of the Property as Buyer deems appropriate. All
copies of such documents delivered to Buyer shall be returned to Seller if the
Closing fails to occur for any reason.
6.5 PURCHASE AS IS. BUYER REPRESENTS, WARRANTS AND COVENANTS TO SELLER THAT
BUYER HAS INDEPENDENTLY AND PERSONALLY INSPECTED THE PROPERTY AND THE PROPERTY
INFORMATION AND THAT BUYER HAS ENTERED INTO THIS AGREEMENT BASED UPON SUCH
PERSONAL EXAMINATION AND INSPECTION. BUYER ACCEPTS THE PROPERTY, IN ITS
CONDITION ON THE CLOSE OF ESCROW AS-IS AND WITH ALL ITS FAULTS, INCLUDING
WITHOUT LIMITATION, ANY FAULTS AND CONDITIONS SPECIFICALLY REFERENCED IN THIS
AGREEMENT. NO PERSON ACTING ON BEHALF OF SELLER IS AUTHORIZED TO MAKE, AND BY
EXECUTION HEREOF, BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS SPECIFICALLY
PROVIDED IN THIS AGREEMENT, SELLER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY
NEGATES AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS,
AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR
IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH
RESPECT TO:
(A) THE VALUE OF THE PROPERTY;
(B) THE INCOME TO BE DERIVED FROM THE PROPERTY;
(C) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND USES WHICH
BUYER MAY CONDUCT THEREON;
(D) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OF THE PROPERTY;
(E) THE MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY;
(F) THE NATURE, QUALITY OR CONDITION OF THE PROPERTY, INCLUDING WITHOUT
LIMITATION, THE WATER, SOIL AND GEOLOGY;
(G) THE COMPLIANCE OF OR BY THE PROPERTY OR ITS OPERATION WITH ANY LAWS, RULES,
ORDINANCES OR REGULATIONS OF ANY APPLICABLE GOVERNMENTAL AUTHORITY OR BODY;
(H) THE MANNER OR QUALITY OF THE CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED
INTO THE PROPERTY;
(I) THE COMPLIANCE OF THE PROPERTY WITH ANY ENVIRONMENTAL LAWS OR THE AMERICANS
WITH DISABILITIES ACT;
(J) THE PRESENCE OR ABSENCE OF HAZARDOUS MATERIALS AT, ON, UNDER, OR ADJACENT TO
THE PROPERTY;
(K) THE CONTENT, COMPLETENESS OR ACCURACY OF ANY OF THE RECORDS AND PLANS OR
OTHER INFORMATION PROVIDED BY SELLER TO BUYER WITH RESPECT TO THE PROPERTY;
(L) THE CONFORMITY OF THE IMPROVEMENTS TO ANY PLANS OR SPECIFICATIONS FOR THE
PROPERTY, INCLUDING ANY PLANS AND SPECIFICATIONS THAT MAY HAVE BEEN OR MAY BE
PROVIDED TO BUYER;
(M) THE CONFORMITY OF THE PROPERTY TO PAST, CURRENT OR FUTURE APPLICABLE ZONING
OR BUILDING REQUIREMENTS;
(N) DEFICIENCY OF ANY UNDER SHORING;
(O) DEFICIENCY OF ANY DRAINAGE;
(P) THE FACT THAT ALL OR A PORTION OF THE PROPERTY MAY BE LOCATED ON OR NEAR AN
EARTHQUAKE FAULT LINE;
(Q) THE EXISTENCE OF VESTED LAND USE, ZONING OR BUILDING ENTITLEMENTS AFFECTING
THE PROPERTY;
(R) WITH RESPECT TO ANY OTHER MATTER CONCERNING THE PROPERTY (INCLUDING, WITHOUT
LIMITATION, THE TENANT LEASES, THE EQUIPMENT LEASES, ANY FIXTURES AND EQUIPMENT,
THE LICENSES AND PERMITS, THE PERSONAL PROPERTY, THE SERVICE CONTRACTS, THE
EMPLOYMENT CONTRACTS, ANY EMPLOYEE BENEFIT PLANS AND THE LIQUOR LICENSE) EXCEPT
AS MAY BE OTHERWISE EXPRESSLY STATED HEREIN;
(S) [INTENTIONALLY OMITTED]
(T) ANY OF THE SPECIFIC DISCLOSURE MATTERS; OR
(U) WITHOUT LIMITING THE OTHER DISCLAIMERS SET FORTH HEREIN BUT SUBJECT TO THE
EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT, THE
ASSIGNMENTS AND CONVEYANCES OF THE PERSONAL PROPERTY AND THE MANAGEMENT
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AGREEMENT, ARE WITHOUT ANY EXPRESS OR IMPLIED WARRANTIES OR REPRESENTATIONS OF
ANY KIND WHATSOEVER, INCLUDING, WITHOUT LIMITATION, (1) WARRANTIES AS TO THE
VALIDITY, ENFORCEABILITY OR ASSIGNABILITY OF THE MANAGEMENT AGREEMENT, (2)
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE, (3)
WARRANTIES RELATING TO THE DESIGN, CONDITION, QUALITY, WORKMANSHIP OR CAPACITY
OF THE TANGIBLE PERSONAL PROPERTY, (4) REPRESENTATIONS OR WARRANTIES THAT THE
TANGIBLE PERSONAL PROPERTY IS IN COMPLIANCE WITH ALL LAWS, STATUTES, ORDINANCES
RULES, REGULATIONS, SPECIFICATIONS OR CONTRACTS PERTAINING THERETO, (5)
WARRANTIES AGAINST PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, AND (6)
WARRANTIES AS TO THE VALIDITY, ENFORCEABILITY, OR COLLECTIBILITY OF ANY ITEM.
6.6 Limitation on Representations and Warranties of Seller. In no event shall
Buyer be entitled to seek recovery against Seller for an alleged breach of any
representation or warranty by Seller if the information, transaction, or
occurrence alleged to give rise to such breach was disclosed to, made available
to or discovered by Buyer, whether in the course of its review of the Records
and Plans or otherwise, prior to the Close of Escrow (the sole adjustment with
respect to same being as set forth in SECTION 6.7 below). Without limiting the
foregoing, each of the representations and warranties by Seller set forth herein
shall be deemed to be qualified in their entirety by the Specific Disclosure
Matters in addition to any other qualifications of such representations and
warranties.
6.7 Right to Supplement Disclosures. At any time prior to the Closing, Seller
may add additional disclosures to the Specific Disclosure Matters and the
Schedules referenced in this SECTION 6, and may make appropriate revisions
thereto, provided, however, that any such revisions do not in the aggregate
disclose any matter or matters which would reasonably be expected to have an
impact upon the value of the Property in excess of the amount of the Deposit;
and provided, further, that the receipt of any notice of termination under the
Management Agreement shall not be deemed to create any diminution in value to
the Property. In the event that Buyer or Seller discovers any matter or matters
which would be expected to exceed the Threshold Amount, then, in such event, the
provisions of SECTION 7.1.1 shall apply.
6.8 Basket. In no event will Seller be liable to Buyer for any breach of a
representation or warranty hereunder unless and to the extent the Loss actually
and directly incurred by Buyer as results of such breach together with the Loss
actually and directly incurred by Buyer as results of any other breach(s) in the
aggregate exceed the Threshold Amount, provided, that in no event shall Seller
have any liability to Buyer for any consequential damages arising from a breach
by Seller of any representation or warranty unless such breach results from the
intentional concealment by Seller.
6.9 Survival. The Trust, the Corporation and Seller each hereby covenants and
agrees with the other that the representations and warranties of the Trust, the
Corporation and Seller (as the case may be) set forth in SECTIONS 6.1.1 through
6.1.3, inclusive, SECTION 6.2.1 through SECTION 6.2.3, inclusive and SECTION
6.3.1 and SECTION 6.3.2 shall survive the Close of Escrow without limitation as
to duration. The remaining warranties and representations set forth in SECTION 6
shall survive the Close of Escrow until the date which is one (1) year following
the Closing Date, at which time such representations and warranties shall expire
unless prior to such time Buyer or Seller, as the case may be, have duly
commenced an action in a court of competent jurisdiction, alleging a breach of
such representation or warranty. Notwithstanding anything herein to the
contrary, in no event shall either Buyer or Seller have any right to make a
claim after the Closing with respect to any representation or warranty, the
breach of which such party shall have discovered prior to the Closing, unless
such party shall have notified the other party of such breach prior to the Close
of Escrow. Nothing contained in this SECTION 6.9 shall limit the right of Seller
to any remedy otherwise available under Federal or other applicable securities
law.
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SECTION 7
TITLE TO THE REAL PROPERTY:
EXTENSION OF THE CLOSING
7.1 Buyer's Review of Title. Seller has caused to be delivered to Buyer and
Buyer's Counsel a current preliminary title commitment for title insurance
issued by the Title Company showing the condition of title to the Real Property
(the "Preliminary Title Report") together with a copy of all documents
evidencing or creating the exceptions to title referenced therein.
7.1.1 Failure to Satisfy Certain Closing Conditions; Monetary Liens. On or prior
to the Close of Escrow, Seller shall be obligated (i) to cause to be insured
over or removed of record all Monetary Liens affecting the Property as of the
date hereof; and (ii) to remove or to bond over any Monetary Lien arising after
the issuance of the Preliminary Title Report which (a) was created by or with
the consent of Seller, or (b) is in an amount less than or equal to the Deposit.
In the event that any Monetary Lien not reflected on the Preliminary Title
Report exceeds the Deposit and was not created by or with the consent of Seller
or any other title defect or other matters arise which requires Seller to
supplement its disclosure pursuant to SECTION 6.7 and which in the aggregate may
create a diminution in value to the Property in excess of the Deposit, (i) the
Deposit shall be refunded by Escrow Holder to Buyer on February 28, 1998 if the
Closing does not occur by such date in accordance with the provisions hereof;
(ii) the Scheduled Closing Date shall be extended and Seller shall use all
reasonable efforts, to remove or bond over or otherwise cause the Title Company
to omit such Monetary Lien as an exception from coverage under the Title Policy
and/or remove or cure as applicable such other defect or condition as
applicable; and (iii) Buyer shall be permitted to record the Memorandum of
Contract in the real property records of the state and county in which the Real
Property is located. In the event that the Scheduled Closing Date is so extended
and Seller is able to remove or cure such Monetary Lien, remove or cure as
applicable the title defect or other condition the Close of Escrow shall occur
as soon as practicable following such removal or cure with time being of the
essence as to the performance of both Buyer's and Seller's obligations
hereunder. THE PARTIES ACKNOWLEDGE AND AGREE THAT DAMAGES WILL NOT BE AN
ADEQUATE REMEDY TO SELLER IF BUYER SHALL DEFAULT IN ITS OBLIGATION TO CLOSE IN
ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 7.1.1 AND CONSEQUENTLY THAT
BUYER'S OBLIGATIONS UNDER THIS SECTION 7.1.1 SHALL BE SPECIFICALLY ENFORCEABLE
AGAINST THE TRUST. IN CONSIDERATION FOR THE REFUND TO BUYER OF THE DEPOSIT
PROVIDED FOR UNDER THIS SECTION 7.1.1, THE RIGHT OF BUYER TO RECORD THE
MEMORANDUM OF CONTRACT PURSUANT TO THIS SECTION 7.1.1, SELLER'S AGREEMENT TO
ENTER INTO THE INTERIM MANAGEMENT AGREEMENT PURSUANT TO THE PROVISIONS OF THIS
SECTION 7.1.1 (UNDER WHICH AGREEMENT THE VALUE OF THE HOTEL MAY BE AFFECTED BY
THE PERFORMANCE BY THE MANAGER OF ITS RESPONSIBILITIES THEREUNDER) AND TO
ENCUMBER THE PROPERTY WITH THIS AGREEMENT FOR A PERIOD OF UP TO FIVE (5) YEARS
IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 17.20 AND IN LIGHT OF THE
RISKS WHICH SELLER WILL BE ASSUMING AS A RESULT IN RELATION TO THE VALUE OF THE
EQUITY PURCHASE PRICE TO BE DELIVERED IF AND WHEN THE CLOSING OCCURS HEREUNDER,
THE PARTIES HAVE AGREED THAT THE PROVISIONS OF THIS SECTION 7.1.1 ARE
SPECIFICALLY ENFORCEABLE AGAINST THE TRUST AS AND TO THE EXTENT PROVIDED IN THE
PRECEDING SENTENCE. In the event that a Monetary Lien cannot be removed or cured
or a title defect or other condition cannot be removed or cured as required
hereunder to close within five (5) years of the date of this Agreement, this
Agreement shall terminate and the parties hereto shall have no further
obligations.
7.1.2 [Intentionally Omitted]
7.2. Title Insurance Policy. Buyer's title to the Real Property shall be insured
at Closing by an ALTA extended coverage owner's policy or policies of title
insurance in the amount of the Purchase Price (the "Title Policy") issued by the
Title Company, insuring title to the Real Property vested in Buyer, subject only
to the Permitted Encumbrances, together with such
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customary endorsements or affirmative insurance as may be reasonably requested
by Buyer and purchased at Buyer's sole cost and expense.
7.3 Title to Real Property. At the Close of Escrow, title to the Real Property
will be conveyed to Buyer by Seller pursuant to the Deed, subject only to the
matters of title respecting the Property shown on SCHEDULE 7.3 annexed hereto
and, if the Closing is delayed pursuant to SECTION 7.1.1, any additional
easements, covenants, conditions, restrictions or other matters entered into
with the prior written consent of Buyer which consent shall not be unreasonably
withheld, delayed or conditioned (collectively, the "Permitted Encumbrances");
Buyer agrees to rely exclusively on the Title Policy for protection against any
title defects except as set forth in SECTION 7.1.2. Buyer shall have no claim
following the Closing against Seller on account of the Permitted Encumbrances.
Buyer's agreement under this SECTION 7.1 shall survive the execution, delivery,
and recordation of the Deed.
SECTION 8
INTERIM ACTIVITIES
During the period from the Execution Date through the Close of Escrow, Seller
shall (subject to the provisions of the Interim Management Agreement if entered
into in accordance with the provisions of this Agreement) cause the Property to
be continued to be operated in ordinary course as a hotel consistent with
current operating practices during the period since Manager has been manager of
the Hotel. Buyer shall have the right to enter onto and inspect the Property,
from and after the date hereof, through the Closing Date to inspect the Property
and otherwise perform its due diligence provided such inspections are performed
upon prior notice to Seller and so as not to interfere with the operation of the
Property or to disclose the pendency of the transaction contemplated hereby. All
fees and expenses of any kind relating to the inspection of the Property by
Buyer will be paid for by Buyer. Buyer agrees to keep the Property free from any
liens arising out of or in connection with Buyer's or its agents entry or the
Property. Buyer shall at its sole cost and expense, clean up and repair the
Property as reasonably necessary after Buyer's or its agents entry thereon.
Buyer shall hold harmless, indemnify and defend Seller from all Losses relating
to any action by Buyer, its Affiliates and/or agents at or on the Property prior
to Closing. Any of Buyer's agents shall be bound by the provisions of SECTION
17.19.
SECTION 9
CONDITIONS PRECEDENT TO CLOSING
9.1 Conditions Precedent to Buyer's Obligations. The Close of Escrow and the
obligation of Buyer to purchase the Property is subject to the satisfaction, not
later than the Scheduled Closing Date, (subject to extensions as provided in
Section 7.1) of the following conditions:
9.1.1 Seller's Deliveries. Seller shall have delivered the items described in
SECTION 4.2 and shall be prepared to deliver the items described in SECTION 4.4;
9.1.2 Title Policy. The Title Company shall be unconditionally prepared (subject
only to payment of all necessary title insurance premiums and other charges) to
issue to Buyer the Title Policy insuring Buyer's title to the Real Property
subject only to the Permitted Encumbrances;
9.1.3 Performance Under Related Agreement. All conditions precedent to the
closing of the transactions contemplated by that certain Purchase and Sale
Agreement and Joint Escrow Instructions (the "Related Agreement") dated as of
the date hereof by and between Buyer and Savanah Limited Partnership, a District
of Columbia limited Partnership, shall have been satisfied or waived and the
Seller and Escrow Holder thereunder shall be ready, willing and able to perform
thereunder, and there shall be no default of Seller under such agreement.
9.1.4 [Intentionally Omitted].
9.1.5 Seller Performance. Seller shall have performed in all material respects
all of the obligations of Seller under this Agreement, to the extent
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required to be performed at or prior to the Close of Escrow.
9.1.6 Representations and Warranties of Seller. The Seller's representations and
warranties set forth in SECTION 6.3 shall be true, correct and complete, as of
the Close of Escrow subject to modification thereof to the extent permitted
under SECTION 6.7 and subject further to the applicable provisions of SECTION
7.1.1.
The conditions set forth in this SECTION 9.1 are solely for the benefit of Buyer
and may be waived only by Buyer. Buyer shall at all times have the right to
waive any such condition. Any such waiver or waivers shall be in writing and
shall be delivered to Seller and Escrow Holder.
9.2 Conditions Precedent to Seller's Obligations. The Close of Escrow and
Seller's obligation with respect to the transactions contemplated by this
Agreement are subject to the satisfaction, not later than the Scheduled Closing
Date, of the following conditions:
9.2.1 Funds and Documents. Buyer shall have delivered to Escrow Holder, prior to
the Closing Date, for disbursement as directed by Seller, the Paired Shares and
all cash or other immediately available funds due from Buyer in accordance with
SECTION 4 of this Agreement and the documents described in SECTION 4.3;
9.2.2 Representations and Warranties of Buyer. The Trust's representations and
warranties set forth in SECTION 6.1 and the Corporation's representations and
warranties set forth in SECTION 6.2 shall be true, correct and complete, as of
the Close of Escrow;
9.2.3 No Material Changes. There shall have been no casualty or condemnation for
which Buyer has elected to terminate this Agreement pursuant to SECTION 12 or
SECTION 13 of this Agreement;
9.2.4 [Intentionally Omitted]
9.2.5 Performance Under Related Agreement. All conditions precedent to the
closing of the transactions contemplated by the Related Agreement shall have
been satisfied or waived and the Buyer and Escrow Holder thereunder shall be
ready, willing and able to perform thereunder and there shall be no default of
Buyer under such agreement.
The conditions set forth in this SECTION 9.2 are solely for the benefit of
Seller and may be waived only by Seller. Seller shall at all times have the
right to waive any such condition. Any such waiver or waivers shall be in
writing and shall be delivered to Buyer and Escrow Holder.
9.3 Failure of Condition. Except as otherwise provided in this Agreement, if the
Escrow fails to close on the Outside Closing Date for any reason whatsoever,
including, without limitation, a failure of a condition precedent set forth in
this SECTION 9, either Buyer or Seller, if not then in default under this
Agreement, may terminate the Escrow and this Agreement upon notice to the other;
and, thereupon:
9.3.1 This Agreement and the Escrow shall terminate;
9.3.2 The costs of the Escrow through the Scheduled Closing Date shall be
governed by SECTION 4.8;
9.3.3 All monies paid into the Escrow and all documents deposited in the Escrow
shall be returned to the party paying or depositing the same together with
interest earned thereon; and
9.3.4 Each party shall be released from all obligations under this Agreement
except for the obligations that are expressly stated to survive the termination
of this Agreement.
SECTION 10
BROKER
Buyer and Seller each represent and warrant to the other that it has not dealt
with any broker, finder or other middleman in connection with this Agreement, or
the transactions contemplated hereby and that no broker, finder, middleman or
other person has claimed, or has the right to claim a commission, finder's fee
or other brokerage fee in connection with this Agreement or the transactions
contemplated hereby. Each party shall indemnify, protect, defend and hold the
other party harmless from and against any costs, claims or expenses (including
actual attorneys' fees and
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expenses), arising out of the breach by the indemnifying party of any of its
representations, warranties or agreements contained in this SECTION 10. The
representations and obligations under this SECTION 10 shall survive the Close of
Escrow, or, if the Close of Escrow does not occur, the termination of this
Agreement.
SECTION 11
REMEDIES FOR SELLER'S DEFAULT
11.1 Buyer's Remedies in General. If Buyer shall discover prior to the Close of
Escrow any default in any of Seller's obligations under this Agreement (a
"Seller Default"), Buyer shall notify Seller thereof, and Seller shall have a
reasonable period of time (not in excess of thirty (30) days) unless extended by
Buyer in its sole discretion in which to cure such default, in which case the
Scheduled Closing Date shall be extended during the continuation of such cure
period. If there shall be any Seller Default discovered by Buyer prior to the
Close of Escrow and not cured by the Scheduled Closing Date, then Buyer's sole
right and remedy other than with respect to a breach of a representation and
warranty which shall be subject to the provisions of SECTION 6.7, shall be to
compel specific performance of this Agreement; provided, however, that Buyer
shall only be entitled to compel specific performance of this Agreement if, as
of the time of Seller's default, Buyer shall (a) not be in default hereunder,
(b) shall be ready, willing and able to perform its obligations hereunder, and
(c) shall have waived all contingencies to closing other than those relating to
Seller's default.
11.2 MATERIAL INDUCEMENT. BUYER SPECIFICALLY ACKNOWLEDGES THAT THE LIMITATIONS
ON DAMAGES AND SURVIVAL AND OTHER REMEDIES WHICH BUYER MAY RECOVER FROM AND
ENFORCE AGAINST SELLER UNDER THIS AGREEMENT ARE A SPECIFIC AND MATERIAL
INDUCEMENT TO SELLER TO ENTER INTO THIS TRANSACTION.
SECTION 12
DAMAGE TO OR DESTRUCTION OF THE PROPERTY
12.1 Insured Casualty.
12.1.1 If, prior to the Close of Escrow, the Property is damaged or destroyed,
whether by fire or other insured casualty, Seller shall promptly notify Buyer of
such damage or destruction and of the good-faith estimate of a reputable
licensed contractor selected by Seller and reasonably approved by Buyer of the
cost to repair the damage and Seller's good-faith belief that such casualty is
insured (the "Insured Casualty Notice"). If the Insured Casualty Notice
indicates that such casualty is a Material Casualty, Buyer may elect to be
released from its obligations hereunder (including its obligation to purchase
the Property) by delivering to Seller written notice of Buyer's intent to do so
within ten (10) days after the date Buyer receives the Insured Casualty Notice.
In such event, the Deposit together with all interest accrued thereon shall be
promptly returned to Buyer.
12.1.2 If the casualty is insured, and (i) it is not a Material Casualty, or
(ii) it is a Material Casualty, but Buyer elects not to terminate this Agreement
in accordance with this SECTION 12.1, then the Escrow and this Agreement shall
remain in full force and effect, the Closing shall occur on or before the
Outside Closing Date, and Seller shall assign to Buyer, as a condition precedent
to the Close of Escrow, all of Seller's right, title and interest in and to any
of the casualty insurance proceeds or claims therefor with respect to such
damage or destruction, together with any and all rental loss or business
interruption insurance of Seller, if any, payable with respect to the Property
for any period after the Proration Time and any and all claims against other
persons for such damage or destruction. Additionally, if the Escrow and this
Agreement remain in full force and effect, Seller shall pay to Buyer, by way of
a reduction in the Cash Portion of the Closing Payment, an amount equal to the
deductible under the casualty insurance. Within twelve (12) months following the
Close of Escrow, Buyer shall upon thirty (30) days written notice by Seller,
present reasonably satisfactory evidence to Seller that Buyer applied the
proceeds of such insurance to the Property. If Buyer fails to present such
evidence or such evidence is not reasonably satisfactory to Seller, Buyer shall
promptly, but
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in any event within thirty (30) days of demand therefor from Seller, pay to
Seller the proceeds of the casualty insurance assigned by Seller to Buyer as
provided herein, together with an amount equal to the deductible under such
insurance for which Buyer received a credit to the Purchase Price.
12.2 Uninsured Casualty.
12.2.1 If, prior to the Close of Escrow, all or any portion of the property is
damaged or destroyed by an uninsured casualty (including, without limitation, a
casualty as to which coverage has been disclaimed by Seller's insurers), Seller
shall promptly notify Buyer of such damage or destruction and of the Seller's
reasonable estimate of the cost to Seller to repair the same of a reputable
licensed contractor selected by Seller and reasonably approved by Buyer (the
"Uninsured Estimate to Repair") and Seller's reasonable belief that such
casualty is uninsured (the "Uninsured Casualty Notice").
12.2.2 If such Uninsured Estimate to Repair indicates the occurrence of a
Material Casualty, either Seller or Buyer may elect to terminate this Agreement
by giving to the other party written notice of its intent to do so within ten
(10) days after the Seller delivers the Uninsured Casualty Notice to Buyer. If
this Agreement is terminated pursuant to this SECTION 12.2.2, the Deposit
together with interest accrued thereon shall be promptly returned to Buyer.
12.2.3 If the casualty is uninsured, and (i) it is not a Material Casualty, or
(ii) it is a Material Casualty and Buyer and Seller have not elected to
terminate this Agreement in accordance with SECTION 12.2.2, then the Escrow and
this Agreement shall remain in full force and effect, the Closing shall occur on
or before the Outside Closing Date, and Buyer shall be entitled to a reduction
in the Purchase Price in an amount equal to the Uninsured Estimate to Repair.
12.2.4 If and to the extent that the Purchase Price is adjusted pursuant to this
SECTION 12.2 as a result of a disclaimer of coverage by Seller's insurers, Buyer
shall not be entitled to insurance proceeds due under Seller's policies, or to
be assigned any claim under or with respect to Seller's policies, and Seller
shall retain all rights thereunder or with respect thereto and to proceeds
therefrom, it being the intent of this SECTION 12 that there be no double
recovery by, or double compensation of, Buyer for the casualty.
SECTION 13
CONDEMNATION
If, prior to the Close of Escrow, a Material Taking has occurred or is pending,
Seller shall immediately notify Buyer of such fact. In such event, Buyer may
elect upon written notice to Seller given not later than fifteen (15) days after
receipt of Seller's notice to terminate this Agreement. If Buyer does not
exercise option which Buyer may have pursuant to this SECTION 13 to terminate
this Agreement, or if any such taking is not a Material Taking, then neither
party shall have the right to terminate this Agreement, but Seller shall assign
and turn over, and Buyer shall be entitled to receive and keep, all awards for
the taking of any of the Real Property by eminent domain which accrue to Seller
(other than those relating to loss of use prior to the Closing), and the parties
shall proceed to the Close of Escrow pursuant to the terms hereof, without
modification of the terms of this Agreement and without any reduction in the
Purchase Price.
SECTION 14
EMPLOYEES
14.1 Hiring of Hotel Employees; WARN Act Compliance. Buyer agrees to make an
offer of employment to all existing Hotel Employees as of the Close of Escrow,
on terms and conditions generally comparable to their existing terms and
conditions of employment (to the extent such terms and conditions have been
disclosed by Seller and/or its agents to Buyer) and to make all reasonable
efforts to retain such employees for a reasonable period of time. Without
limiting the foregoing, Buyer shall offer to maintain without loss of employment
(as defined in the WARN Act) the employment at the Property (other
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than upon good cause for termination) of such number of Hotel Employees and on
such terms and conditions as shall not result in, and only to the extent
necessary to prevent, a plant closing or mass layoff as defined in the WARN Act.
Buyer (i) shall also cause each of the health and medical benefit plans
maintained for Hotel Employees to waive any preexisting condition in connection
with employment at the Property that was not excluded under the applicable
program as of the Closing Date, (ii) shall also cause each of such benefit plans
to take into account any deductibles or coinsurance amounts incurred by each
Hotel Employee for the year in which the Closing Date occurs, and (iii) shall
also cause each of the health and medical benefit plans to deem each Hotel
Employee to be eligible for participation in such plan as of the Close of
Escrow. In the event that Buyer fails to comply with any of the foregoing
covenants, Buyer agrees that Buyer shall be solely responsible for the payment
of any and all costs, charges, penalties, compensation, severance pay, benefits
and liabilities, arising under the WARN Act, and any other applicable law, rule
or regulation on account thereof, and Buyer agrees to indemnify, defend and hold
Seller and the Employer Corporation and their directors, officers, agents,
affiliates, principals, partners, shareholders representatives and controlling
persons harmless from and against any and all claims, causes of action,
judgments, damages, penalties and liabilities asserted under the WARN Act or any
other applicable law, rule or regulation, whether against Buyer or Seller, the
Employer Corporation or any other such indemnified party and whether based on
employment of any of the Hotel Employees prior to or following the Closing,
arising from Buyer's failure to comply with the foregoing covenants
(collectively, "Termination Charges"). Following the Closing, if Buyer desires
to terminate the employment of any Hotel Employees other than for cause, Buyer
shall be solely responsible for complying with all applicable provisions of the
WARN Act and all other applicable laws, rules and regulations with respect to
such termination, including without limitation, the payment of all costs and
termination payments owing under the WARN Act and all other applicable laws,
rules and regulations to any of such employees. Buyer shall assume all
obligations under the Employment Agreement for the Director of Finance
attributable to the period from and after the Closing Date (it being agreed that
the Director of Finance may resign thereunder at any time without penalty).
14.2 Collective Bargaining Agreements. Without limiting the provisions of
SECTION 14.1, immediately upon the Close of Escrow, without the necessity of
further action by Buyer, Buyer shall assume each collective bargaining agreement
or other labor union contracts identified on SCHEDULE 14.2 (the "Collective
Bargaining Agreements"). Buyer further agrees to indemnify Seller and the
Employer Corporation and their directors, officers, employees, agents,
affiliates, principals, partners, shareholders, representatives and controlling
persons for any and all liability to the bargaining agents or Hotel Employees,
resulting from the failure of Buyer to comply with the terms and conditions of
any of the Collective Bargaining Agreements with respect to periods beginning
after the Close of Escrow.
14.3 Continuation of Benefits.
14.3.1 Except as provided in SECTION 14.3.2, on and after the Closing Date,
Seller (or any insurer at Seller's cost) shall continue to process and pay (or
cause applicable insurers and third party administrators, including ITT
Sheraton, to process and pay) in an expeditious manner and with respect to all
covered Hotel Employees (and, to the extent applicable, their covered spouses,
dependents and beneficiaries) all claims under the Employment Agreements that
provide health and medical, or other welfare, benefits submitted for covered
expenses with respect to occurrences commencing on or prior to the Closing Date,
including, but not limited to: (A) covered hospital benefits for any
confinements; (B) covered life and survivor income benefits, if any, for deaths
which occur on or prior to the Closing Date; (C) workers' compensation benefits
for disabilities resulting from a work-related accident which occurred on or
prior to the Closing Date; (D) all covered
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benefits that are being, or that may be, paid to, or with respect to, any of
such individuals who are on short or long term disability, or medical, personal
or other leaves of absence as of the Closing Date; (E) covered benefits under
any "spending account," or similar arrangement, under any "cafeteria plan" (as
defined under Section 125 of the Internal Code) with respect to salary reduction
elections made prior to the Closing Date; and (F) covered benefits under all
other such Employment Agreements which accrue on or before the Closing Date;
but, only in each instance, to the extent that Buyer shall not have received a
credit against the Purchase Price on account of such item.
14.3.2 Buyer (or any plan maintained by Buyer) will provide continued health and
medical coverage as required under Section 4980B of the Code, Part 6 of Title I
of ERISA or any other applicable federal, state or local law or ordinance to all
current and former Hotel Employees (and their spouses, dependents and
beneficiaries) with respect to whom a "qualifying event" (as such term is
defined under Sections 4980B(f)(3) of the Code or 603 of ERISA) or other
triggering event described under the applicable federal, state or local laws or
ordinances occurred on or before the Closing Date.
14.3.3 Buyer shall maintain supplies of claims forms necessary for Hotel
Employees to make claims under Employment Agreements that provide health,
medical or other welfare benefits with respect to occurrences commencing on or
prior to the Closing Date, and shall furnish such forms to the Hotel Employees
when needed and otherwise assist the Hotel Employees in presenting such claims.
14.4 Buyer and Seller intend by this Agreement to comply with Section 4204 of
ERISA, so as to prevent Seller from incurring at the Closing Date a complete or
partial withdrawal in respect of any employee benefit plans, if any, in which
the Hotel Employees currently participate that are "multiemployer plans," as
defined in Section 4001(a)(3) of ERISA (and which have been disclosed to Buyer
on the Schedule of Employment Agreements), determined as if Buyer is the "buyer"
referred to in such Section 4204. Accordingly, with respect to such
multiemployer plans, Buyer agrees as follows:
(A) For the first plan year of each such multiemployer plan commencing after the
Close of Escrow, and for each of the succeeding four plan years for each such
plan, Buyer shall assume the obligation to contribute to each such plan with
respect to operations conducted with business assets acquired from Seller for
substantially the same number of contribution base units (as defined in Section
4001(a)(11) of ERISA) for which Seller had an obligation to contribute to such
plan.
(B) Prior to each such multiemployer plan's first plan year beginning after the
Close of Escrow, Buyer, shall apply to such plan for a variance from the
requirement of Section 4204(a)(1)(b) of ERISA, that a bond be obtained or an
amount be held in escrow as provided in said Section. In the event any such plan
determines that the request does not qualify for a variance on it, Buyer shall
obtain any required bond or establish any required escrow within thirty (30)
days after the date on which it receives notice of the plan's decision, and
shall maintain such bond or escrow until the earliest of: (i) the date a
variance is obtained from the plan; (ii) the date a variance or exemption is
obtained from the Pension Benefit Guaranty Corporation; or (iii) the last day of
the fifth (5th) plan year commencing after the Close of Escrow; which bond or
escrow shall be paid to such plan if Buyer withdraws therefrom or fails to make
a contribution to such plan when due, at any time during the first (1st) five
(5) plan years of such plan beginning after the Closing Date. In order to comply
with subsection (a)(1)(C) of such Section 4204, if Buyer withdraws in a complete
withdrawal or a partial withdrawal from any multiemployer plan with respect to
which Buyer has assumed an obligation to contribute pursuant to this Agreement
and such withdrawal or partial withdrawal occurs during the five (5) plan years
commencing with the first (1st) plan year beginning after the date of the Close
of Escrow, Seller shall be secondarily liable for any withdrawal liability it
would have had to such multiemployer plan on the date of the Close of Escrow
under Title IV of ERISA. Buyer agrees to provide
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Seller with reasonable advance notice of its anticipated failure to pay any
withdrawal liability and to furnish Seller promptly with a copy of any notice of
withdrawal liability it may receive with respect to such plans.
14.5 Indemnification. Buyer and Seller (as applicable, the "Indemnitor") agrees
to indemnify, defend, protect and hold the other and, the Employer Corporation
in the case of Seller, and their directors, officers, agents, affiliates,
principals, partners, shareholders, representatives and controlling persons (as
applicable, the "Indemnitee") harmless from and against any and all claims,
damages, liabilities, losses, and expenses, (including attorneys' fees and
costs) paid, suffered or incurred by the Indemnitee, arising out of or related
to Indemnitor's failure to comply with any of the covenants, obligations, or
duties contained in SECTION 14.
14.6 Survival. The provisions of this SECTION 14 shall survive the Close of
Escrow.
SECTION 15
COOPERATION
15.1 Seller has advised Buyer that it may be necessary after the Close of Escrow
for Seller (or its representatives) to audit the Records and Plans with respect
to the period prior to the Closing Date. In addition, Seller may require access
to the such Books and Records in connection with any litigation by or against
Seller and its Affiliates with respect to the Property, any tax audit,
examination or challenge or similar proceeding, or any calculation of sums
payable under SECTION 5. Accordingly, Buyer hereby: (i) agrees to retain the
Records and Plans with respect to the period prior to the Closing Date at the
Property for a period of seven (7) years after the Close of Escrow or such
additional period as may reasonably be requested by Seller; (ii) grants Seller,
its Affiliates and their respective representatives access to the such Records
and Plans and the Property after the Close of Escrow, at reasonable times and
upon reasonable prior notice, for such purposes; (iii) subject to the rights of
guests in guest rooms, tenants under tenant leases, grants Seller, its
Affiliates, and their respective representatives access to the Property after
the Close of Escrow for the purpose of conducting such inspections and/or
testing (including destructive testing) of the Property as may be necessary or
advisable in connection with any litigation and other proceedings to which
Seller is a party (provided that Seller shall give Buyer prior notice of the
scope of such inspections and testing) which shall be scheduled for such periods
as shall be reasonably agreeable to the parties;
15.1.1 All inspections fees, appraisal fees, engineering fees and other expenses
of any kind relating to the inspection of the Property by Seller or Seller's
Affiliate will paid for by Seller and/or Seller's Affiliate.
15.1.2 Prior to Seller or Seller's Affiliate's entry on the Property for the
purpose of conducting inspections and/or tests, Seller or Seller's Affiliate
shall provide Buyer with certificates of insurance from Seller's agents from an
insurance carrier and for such risks and policy limits as Seller shall
reasonably approve.
15.1.3 Seller agrees to keep the Property free from any liens arising out of or
in connection with such testing and inspection.
15.1.4 Seller, shall, at its sole cost and expense, clean up and repair the
Property as reasonably necessary, after Seller's or Seller's agents, entry
thereon.
15.1.5 Seller shall hold harmless, indemnify and defend Buyer for all losses
relating to any action by Seller, its Affiliates and/or agents at or on the
Property after the Closing.
15.1.6 Buyer agrees to cooperate with Seller, its Affiliates and their
respective representatives in connection with any such litigation or proceedings
with respect to the Property, any such tax audit, examination or challenge or
similar proceeding, or any such calculation of sums payable under SECTION 5,
said cooperation to be at no material cost or expense to Buyer.
15.2 Seller shall cooperate with Buyer in connection with the assignment of
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all transferable Licenses and Permits to Buyer and the application for and
procurement of replacements of any non-transferable Licenses and Permits.
SECTION 16
NOTICES
16.1 Addresses. Whenever any notice, demand or request is required or permitted
hereunder, such notice, demand or request shall be made in writing and shall be
(a) sent via a nationally recognized overnight courier service fully prepaid,
(b) deposited in the United States by mail, registered or certified, return
receipt requested, postage prepaid, or (c) sent via telefacsimile, provided that
the original of such notice, demand or request shall also be sent via one of the
methods described in (a) and (b) above, in each case to the addressees (and
individuals) set forth below:
As to Seller:
New Remington Partners
c/o Al Anwa USA Incorporated
1925 Century Park East
Suite 1900
Los Angeles, CA 90067
Attn: General Counsel
Telefacsimile: (310) 229-2939
With a copy to Seller's Additional Addressees:
Gordon Eng, Esq.
19191 S. Vermont Avenue
Suite 420
Torrance, CA 90502
Telefacsimile: (310) 207-1006
Morrison & Foerster LLP
555 West Fifth Street, Suite 3500
Los Angeles, CA 90013-1024
Attn: Thomas R. Fileti, Esq.
Telefacsimile: (213) 892-5454
As to Buyer:
Starwood Lodging Corporation
Starwood Lodging Trust
2231 E. Camelback Road
Suite 400
Phoenix, AZ 85016
Attn: Steven R. Goldman
Telefacsimile: (602) 852-0115
With a copy to Buyer's Additional Addressee:
Greenberg Traurig Hoffman Lipoff Rosen & Quentel
153 East 53rd Street
New York, NY 10022
Attn: Andrew E. Zobler, Esq.
Telefacsimile: (212) 223-7161
As to Escrow Holder:
Chicago Title Insurance Company
700 South Flower Street, Suite 900
Los Angeles, CA 90017
Attn: Maggie Watson
Telefacsimile: (213) 488-4388
16.2 Receipt of Notices. Any notice, demand or request that shall be delivered
to Buyer and its Additional Addressee in the manner aforesaid shall be deemed
sufficiently given to and received by Buyer for all purposes hereunder, and any
notice, demand or request that shall be delivered to
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Seller and its Additional Addresses in the manner aforesaid shall be deemed
sufficiently given to and received by Seller for all purposes hereunder (i) the
next business day following the day such notice, demand or request is delivered
by a nationally recognized overnight courier service fully prepaid, to such
party and its Additional Addressee, (ii) if sent via registered or certified
mail, at the time of receipt by such party and its Additional Addressee, or
(iii) if sent via telefacsimile, as of the date and time stated upon
confirmation reports generated by the sending party's telefacsimile machine
confirming the delivery of such notice, demand or request to such party and its
Additional Addressee.
16.3 Refusal of Delivery. The inability to deliver any notice, demand or request
because the individual to whom it is properly addressed in accordance with this
SECTION 16 refused delivery thereof or no longer can be located at that address
shall constitute delivery thereof to such individual.
16.4 Change of Address. Each party shall have the right from time to time to
designate by written notice to the other parties hereto such other person or
persons and such other place or places as said party may desire written notices
to be delivered or sent in accordance herewith.
SECTION 17
GENERAL PROVISIONS
17.1 Amendment. Except as provided in SECTION 4.1, no provision of this
Agreement or of any documents or instrument entered into, given or made pursuant
to this Agreement may be amended, changed, waived, discharged or terminated
except by an instrument in writing, signed by the party against whom enforcement
of the amendment, change, waiver, discharge or termination is sought.
17.2 Time of Essence. All times provided for in this Agreement for the
performance of any act will be strictly construed, time being of the essence.
17.3 Entire Agreement. This Agreement and other documents delivered at Closing,
set forth the entire agreement and understanding of the parties in respect of
the transactions contemplated by this Agreement, and supersede all prior
agreements, arrangements and understandings relating to the subject matter
hereof and thereof. No representation, promise, inducement or statement of
intention has been made by Seller or Buyer which is not embodied in this
Agreement, or in the attached Exhibits or the written certificates, schedules or
instruments of assignment or conveyance delivered pursuant to this Agreement,
and neither Buyer nor Seller shall be bound by or liable for any alleged
representations, promise, inducement or statement of intention not therein so
set forth.
17.4 No Waiver. No failure of any party to exercise any power given such party
hereunder or to insist upon strict compliance by the other party with its
obligations hereunder shall constitute a waiver of any party's right to demand
strict compliance with the terms of this Agreement.
17.5 Counterparts. This Agreement, any document or instrument entered into,
given or made pursuant to this Agreement or authorized hereby, and any amendment
or supplement thereto may be executed in two or more counterparts, and, when so
executed, will have the same force and effect as though all signatures appeared
on a single document. Any signature page of this Agreement or of such an
amendment, supplement, document or instrument may be detached from any
counterpart without impairing the legal effect of any signatures thereon, and
may be attached to another counterpart identical in form thereto but having
attached to it one or more additional signature pages.
17.6 Costs and Attorneys' Fees. If any legal action or any arbitration or other
proceeding is brought for the enforcement of this Agreement or any document or
instrument entered into, given or made pursuant to this Agreement or authorized
hereby or thereby (including, without limitation, the enforcement of any
obligation to indemnify, defend or hold harmless provided for herein or
therein), or because of an alleged dispute, default, or misrepresentation in
connection with any of the provisions of this Agreement or of such document or
instrument, or if Escrow Holder commences any action
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with respect to the Escrow(s), the successful or prevailing party shall be
entitled to recover actual attorneys' fees, charges and other costs incurred in
that action or proceeding, in addition to any other relief to which it may be
entitled.
17.7 Payments; Interests. Except as otherwise provided herein, payment of all
amounts required by the terms of this Agreement shall be made in the United
States and in immediately available funds of the United States of America which,
at the time of payment, is accepted for the payment of all public and private
obligations and debts. Unless the parties otherwise agree, payments shall be
made through the Escrow Holder. If any payment due under this Agreement is not
paid when due, it shall thereafter bear interest at a variable rate equal to the
rate announced from time to time by Citibank, N.A. as its prime or reference
rate, plus five percent (5%) per annum, but in no event more than the maximum
rate, if any, allowed by law to be charged by the party receiving the interest
on such type of indebtedness.
17.8 Transfer By Buyer. Buyer shall not have the right to assign this Agreement,
but shall be permitted to designate an Affiliate or Affiliates to take title to
the Property. In the event that Buyer elects to so designate any Affiliate or
Affiliates to take title to the Property hereunder, (i) Buyer shall upon close
of Escrow be released of all obligations hereunder other than pursuant to
SECTION 6, SECTION 7.1, SECTION 10, SECTION 17.18, SECTION 17.19 and SECTION
17.20 or arising prior to the Close of Escrow, (ii) such Affiliate or Affiliates
shall assume all of Buyer's obligations hereunder; and (iii) such Affiliate of
Affiliates shall represent and warrant to Seller that such entities are duly
organized and validly existing and otherwise as to the matters covered in
SECTION 6.1.1 and SECTION 6.1.2 as applicable.
17.9 Parties in Interest. Subject to SECTION 17.8, the rights and obligations of
the parties hereto shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors, assigns, heirs and the legal
representatives of their respective estates. Nothing in this Agreement is
intended to confer any right or remedy under this Agreement on any person other
than the parties to this Agreement and their respective successors and permitted
assigns, or to relieve or discharge the obligation or liability of any person to
any party to this Agreement or to give any person any right of subrogation or
action over or against any party to this Agreement.
17.10 Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the state in which the Real Property is
located without giving effect to the conflict-of-law rules and principles of
that state.
17.11 Incorporation of Recitals and Exhibits. The Recitals and Exhibits attached
to this Agreement are incorporated into and made a part of this Agreement.
17.12 Construction of Agreement. The language in all parts of this Agreement
shall be in all cases construed simply according to its fair meaning and not
strictly for or against any of the parties hereto. Headings at the beginning of
sections of this Agreement are solely for the convenience of the parties and are
not a part of this Agreement. When required by the context, whenever the
singular number is used in this Agreement, the same shall include the plural,
and the plural shall include the singular, the masculine gender shall include
the feminine and neuter genders, and vice versa. As used in this Agreement, the
term "Seller" shall include the respective permitted successors and assigns of
Seller, and the term "Buyer" shall include the permitted successors and assigns
of Buyer, if any.
17.13 Severability. If any term or provision of this Agreement is determined to
be illegal, unconscionable or unenforceable, all of the other terms, provisions
and sections hereof will nevertheless remain effective and be in force to the
fullest extent permitted by law.
17.14 Announcements. Seller and Buyer shall consult with each other and provide
each other one (1) Business Day prior notice with regard to all press
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releases and other announcements issued at or prior to the Close of Escrow and
during the one year period thereafter concerning the existence of this Agreement
or the sale of the Property and, except as permitted under SECTION 17.19,
neither Seller nor Buyer shall issue any such press release or other such
publicity prior to the Close of Escrow without the prior written consent of the
other party, which consent may be withheld in such other party's sole and
absolute discretion. Buyer will not issue any public announcement with respect
to Seller (other than to describe the transaction contemplated hereby to the
extent permitted hereunder) without the prior written consent of Seller which
may be withheld in its sole and absolute discretion. The agreements of the
parties in this SECTION 17.14 shall survive the Close of Escrow or any
termination of this Agreement.
17.15 Submission of Agreement. The submission of this Agreement to Buyer or its
broker, agent or attorney for review or signature does not constitute an offer
to sell the Property to Buyer or the granting of an option or other rights with
respect to the Property to Buyer. No agreement with respect to the purchase and
sale of the Property shall exist, and this writing shall have no binding force
or effect, until this Agreement shall have been executed and delivered by Buyer
and by Seller and Buyer shall have deposited the Deposit with Escrow Holder.
17.16 Further Assurances. Buyer and Seller agree to execute such instructions to
the Escrow Holder and such other instruments and take such further actions
either before or after the Close of Escrow as may be reasonably necessary to
carry out the provisions of this Agreement provided that no material additional
cost or liability shall be created thereby.
17.17 Cooperation. Buyer and Seller shall cooperate with the other to carry out
the purpose of this Agreement (provided, such cooperation shall not require
either party to expend any sum not otherwise required pursuant to the other
provisions of this Agreement). This SECTION 17.17 shall survive the Close of
Escrow.
17.18 Moratorium on Re-Sale. In the event Buyer does not consummate the proposed
acquisition of ITT Corporation, substantially as such transaction is described
in the Starwood Disclosure, the Buyer covenants and agrees that it will not sell
the Property to any third-party for a period (the "Transfer Restriction Period")
commencing upon the Close of Escrow and expiring upon the later of (a) five (5)
years following the Close of Escrow, and (b) settlement of or the final
non-appealable judgment is issued in connection with the existing litigation
between Seller and the Ritz Carlton Hotel Company, LLC and their respective
affiliates, provided, however, the foregoing prohibition shall not apply to a
sale of all or substantially all of the assets of Buyer, the merger of Buyer
into another entity or the transfer of the Property to a subsidiary and/or
Affiliate of Buyer but shall be binding upon the party succeeding to all or
substantially all of the assets of Buyer, the surviving entity in such merger,
or such subsidiary or Affiliate. In the event Buyer does consummate the proposed
acquisition of ITT Corporation described above, Buyer covenants and agrees that
it will not sell the Property to Marriott International, Inc., Host Marriott,
the Ritz Carlton Hotel Company, L.L.C. or any of their respective affiliates,
successors and assigns, or any other party that Buyer reasonably believes will
sell, and/or operate the Property pursuant to a franchise or operating agreement
with any of the above-described entities, (collectively, "Excluded Parties")
during the Transfer Restriction Period and shall cause any permitted purchaser
of the Property during the Transfer Restriction Period to covenant and agree not
to sell the Property to any Excluded Party for the balance of the Transfer
Restriction Period. The provisions of this SECTION 17.18 shall be specifically
enforceable. Buyer hereby waives any requirement for Seller to post a bond in
order to seek or obtain any temporary restraining order or other injunctive
relief pursuant to this SECTION 17.18. The parties acknowledge and agree that
the provisions of this Section 17.18 form a material part of the consideration
to Seller for entering into this Agreement. The parties agree that these
provisions are reasonable in light
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of Seller's ongoing litigation with Ritz Carlton Hotel Company and its
affiliates.
17.19 Confidentiality. Buyer shall hold as confidential all information
concerning the transaction contemplated by this Agreement, Seller and the
Property disclosed in connection with this transaction and Buyer shall not,
prior to the Close of Escrow, release any such information relating to the
transaction, Seller or the Property to any governmental agencies or third
parties without Seller's prior written consent except as may be required by law
and in such case subject to the provisions of SECTION 17.14. Seller hereby gives
its consent to Buyer's disclosure of information relating to the transaction
contemplated hereby to Buyer's Counsel and other consultants, in each instance
to the extent reasonably necessary to verify information given to Buyer by
Seller or otherwise to carry out the purposes of this Agreement and provided in
each instance, such consultants agree in writing to be bound by the
confidentiality provisions of this SECTION 17.19. If the Close of Escrow shall
fail to occur for any reason, neither party shall issue any press release,
publicity or other public announcement of the subject matter of this Agreement,
or to make any other disclosure concerning the subject matter of this Agreement
(except as may be required by law and in such case subject to the provisions of
SECTION 17.14.), without the prior written consent of the other party, which
consent may be withheld in such other party's sole and absolute discretion. The
agreements of the parties in this SECTION 17.19 shall survive any termination of
this Agreement.
17.20 Interim Management Agreement. Seller shall provide Manager with a notice
of termination of the Management Agreement on January 2, 1998 or as soon
thereafter as Seller shall have obtained any required lender consent thereto.
Seller shall on or prior to January 2, 1998 seek any required lender consent and
use all reasonable commercial efforts to obtain same as promptly as possible.
Buyer and Seller shall enter into a management agreement with respect to the
Property in the form attached as EXHIBIT 17.20 hereto (the "Interim Management
Agreement") which shall be effective (and the Interim Management Agreement shall
be dated as of such effective date) on the earlier of (a) thirty days from the
date of delivery to Manager of such termination notice and (b) the effective
date of a written waiver of Manager of the notice of termination required under
the Management Agreement. Buyer shall advance any fee payable to Manager under
the Management Agreement on account of the termination thereof up to $80,620.00.
Buyer shall be deemed to have waived delivery of all items under SECTIONS
4.2.1.15, 4.2.1.16, 4.2.1.17 and 4.2.1.19 in the event the Management Agreement
is terminated in accordance with the provisions of this SECTION 17.20 prior to
the Closing Date.
17.21 Starwood Lodging Trust. The parties hereto understand and agree that the
name "Starwood Lodging Trust" is a designation of the Trust and its trustees (as
trustees but not personally) under the Trust's Declaration of Trust, and all
persons dealing with the Trust shall look solely to the Trust's assets for the
enforcement of any claims against the Trust, and that the Trustees, officers,
agents and security holders of the Trust assume no personal liability for
obligations entered into on behalf of the Trust, and their respective individual
assets shall not be subject to the claims of any person relating to such
obligations.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Buyer and Seller have caused this Agreement to be executed
as of the day and year first above written.
"Seller"
NEW REMINGTON PARTNERS,
a Texas general partnership
By: REMINGTON VENTURERS, INC.,
a Texas corporation,
a General Partner
By: /s/ Mansor Dalaan
----------------------------------
Name: Mansor Dalaan
Title: President
By: REMINGTON VENTURERS II, INC.,
a Texas corporation,
a General Partner
By: /s/ Mansor Dalaan
----------------------------------
Name: Mansor Dalaan
Title: President
"Buyer"
STARWOOD LODGING TRUST,
a Maryland real estate investment trust
By: /s/ Steven R. Goldman
----------------------------------
Name: Steven R. Goldman
Title: Senior Vice President
STARWOOD LODGING CORPORATION,
a Maryland corporation
By: /s/ Michael C. Mueller
----------------------------------
Name: Michael C. Mueller
Title: Vice President
"Escrow Agent"
CHICAGO TITLE INSURANCE COMPANY,
a Missouri corporation
By: /s/ Maggie G. Watson*
----------------------------------
Name: Maggie G. Watson
Title: Authorized Signatory
*Subject to receiving mutual
instructions in the event
paragraph #3.5 becomes operative
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TABLE OF CONTENTS
SECTION 1 - DEFINITIONS 1
1.1 Defined Terms 1
1.2 Other Definitional Provisions 10
SECTION 2 - PURCHASE AND SALE OF PROPERTY 11
SECTION 3 - PURCHASE PRICE; PAYMENT; BUYER'S DEFAULT; LIQUIDATED DAMAGES 11
3.1 Purchase Price 11
3.2 Payment 11
3.3 Investment of Escrowed Funds 11
3.4 Allocation of Purchase Price 12
3.5 Default by Buyer Prior to Closing; Liquidated Damages 12
SECTION 4 - ESCROW; CLOSING; COSTS 13
4.1 Escrow 13
4.2 Seller's Deliveries to Escrow Holder 13
4.2.1.1 Deed 13
4.2.1.2 Assignment and Assumption of Tenant Leases 13
4.2.1.3 General Assignment 14
4.2.1.4 Assignment and Assumption of Management Agreement 14
4.2.1.5 Bill of Sale 14
4.2.1.6 Stock Agreement 14
4.2.1.7 Liquor Licenses Management Agreement 14
4.2.1.8 [Intentionally Omitted] 14
4.2.1.9 [Intentionally Omitted] 14
4.2.1.10 [Intentionally Omitted] 14
4.2.1.8 Houston Master Lease 14
4.2.1.12 Houston Right of First Offer Agreement 14
4.2.1.13 Non-Foreign Person Certificate 15
4.2.1.14 Transfer Tax Forms 15
4.2.1.15 Certified Rent Roll 15
4.2.1.16 Certified Operating Statement 15
4.2.1.17 Guest Ledger 15
4.2.1.18 Closing Certificate 15
4.2.1.19 Schedule of Bookings 15
4.2.1.20 Title Requirements 15
4.2.1.21 Payoff Letters 15
4.2.1.22 Notices to Tenants 16
4.2.1.23 Opinion of Seller's Counsel 16
4.2.1.24 Other 16
4.3 Buyer's Deliveries to Escrow Holder 16
4.3.1.1 The Cash Purchase Price 16
4.3.1.2 Stock Certificates 16
4.3.1.3 Assignment and Assumption of Management Agreement 16
4.3.1.4 Value Letter 16
4.3.1.5 Opinion of Buyer's Counsel 17
4.3.1.6 Stock Agreement 17
4.3.1.7 [Intentionally Omitted] 17
4.3.1.8 Assignment and Assumption of Liquor-Related Agreements 17
4.3.1.9 [Intentionally Omitted] 17
4.3.1.10 Houston Master Lease 17
4.3.1.11 Houston Right of First Offer 17
4.3.1.12 Closing Certificate 17
4.3.1.13 The Assignment and Assumption of Tenant Leases 17
4.3.1.14 The General Assignment and Assumption Agreement 17
4.3.1.15 Transfer Tax Forms 17
4.3.1.16 Other 17
4.4 Seller's Deliveries to Buyer 17
4.4.1 Tenant Leases/Tenant Deposits 17
4.4.2 Service Contracts 18
4.4.3 Licenses and Permits 18
4.4.4 Records and Plans 18
4.5 Possession 18
4.6 Evidence of Authorization 18
4.7 Close of Escrow 18
43
<PAGE> 44
4.8 Costs of Escrow 19
4.9 Other Costs 20
4.10 Maintenance of Confidentiality by Escrow Holder 20
SECTION 5 - PRORATIONS AND ASSUMPTION OF OBLIGATIONS 20
5.1 General 20
5.2 General and Specific Prorations 20
5.3 Deposits 23
5.4 Tenant Leases 23
5.5 Service Contracts and Other Intangible Property 23
5.6 Tax Refunds and Proceedings 23
5.7 Guest Baggage 24
5.8 Safe Deposit Boxes 24
5.9 Advance Bookings 24
Special Purchase Price Adjustment 24
SECTION 6 - REPRESENTATIONS AND WARRANTIES; CONDITION OF PROPERTY 24
6.1 Of the Trust 24
6.1.1 Power and Authority 24
6.1.2 Authorization; Valid Obligation 25
6.1.3 Capital Structure 25
6.1.4 SEC Documents and Other Reports 25
6.1.5 Absence of Certain Changes or Events 25
6.1.6 Actions and Proceedings 25
6.1.7 REIT Status 25
6.1.8 Partnership Status 25
6.1.9 Hart-Scott-Rodino Act 25
6.2 Of the Corporation 25
6.2.1 Power and Authority 25
6.2.2 Authorization; Valid Obligation 25
6.2.3 Capital Structure 25
6.2.4 SEC Documents and Other Reports 25
6.2.5 Absence of Certain Changes or Events 25
6.2.6 Actions and Proceedings 25
6.2.8 Hart-Scott-Rodino 25
6.3 Of Seller 25
6.3.1 Regarding Seller's Authority 25
6.3.2 Tenant Leases 25
6.3.3 Service Contracts 25
6.3.4 Claims 25
6.3.5 Employees 25
6.3.6 Compliance with Laws 25
6.3.7 Hazardous Materials 25
6.3.8 Records and Plans 25
6.3.9 Licenses and Permits 25
6.3.10 Management Agreements 25
6.3.11 Personal Property 25
6.3.12 Insurance 25
6.3.13 Real Estate Taxes 25
6.3.14 Liquor Related Agreements 25
6.4 Buyer's Review of Records and Plans 25
6.4.1 Access to Records and Plans; Specific Disclosures 25
6.4.2 Limitation on Access to Records and Plans 25
6.5 PURCHASE AS IS 25
6.6 Limitation on Representations and Warranties of Seller 25
6.7 Right to Supplement Disclosures 25
6.8 Basket 25
6.9 Survival 25
SECTION 7 - TITLE TO THE REAL PROPERTY: EXTENSION OF THE CLOSING 25
7.1 Buyer's Review of Title 25
7.1.1 Failure to Satisfy Certain Closing Conditions; Monetary Liens 25
7.1.2 [Intentionally Omitted] 25
7.2 Title Insurance Policy 25
7.3 Title to Real Property 25
44
<PAGE> 45
SECTION 8 - INTERIM ACTIVITIES 25
SECTION 9 - CONDITIONS PRECEDENT TO CLOSING 25
9.1 Conditions Precedent to Buyer's Obligations 25
9.1.1 Seller's Deliveries 25
9.1.2 Title Policy 25
9.1.3 Performance Under Related Agreement 25
9.1.4 [Intentionally Omitted] 25
9.1.5 Seller Performance 25
9.1.6 Representations and Warranties of Seller 25
9.2 Conditions Precedent to Seller's Obligations 25
9.2.1 Funds and Documents 25
9.2.2 Representations and Warranties of Buyer 25
9.2.3 No Material Changes 25
9.2.4 [Intentionally Omitted] 25
9.2.5 Performance Under Related Agreement 25
9.3 Failure of Condition 25
SECTION 10 - BROKER 25
SECTION 11 - REMEDIES FOR SELLER'S DEFAULT 25
11.1 Buyer's Remedies in General 25
11.2 MATERIAL INDUCEMENT 25
SECTION 12 - DAMAGE TO OR DESTRUCTION OF THE PROPERTY 25
12.1 Insured Casualty 25
12.2 Uninsured Casualty 25
SECTION 13 - CONDEMNATION 25
SECTION 14 -EMPLOYEES 25
14.1 Hiring of Hotel Employees; WARN Act Compliance 25
14.2 Collective Bargaining Agreements 25
14.3 Continuation of Benefits 25
14.5 Indemnification 25
14.6 Survival 25
SECTION 15 - COOPERATION 25
SECTION 16 - NOTICES 25
16.1 Addresses 25
16.2 Receipt of Notices 25
16.3 Refusal of Delivery 25
16.4 Change of Address 25
SECTION 17 - GENERAL PROVISIONS 25
17.1 Amendment 25
17.2 Time of Essence 25
17.3 Entire Agreement 25
17.4 No Waiver 25
17.5 Counterparts 25
17.6 Costs and Attorneys' Fees 25
17.7 Payments; Interests 25
17.8 Transfer By Buyer 25
17.9 Parties in Interest 25
17.10 Applicable Law 25
17.11 Incorporation of Recitals and Exhibits 25
17.12 Construction of Agreement 25
17.13 Severability 25
17.14 Announcements 25
17.15 Submission of Agreement 25
17.16 Further Assurances 25
17.17 Cooperation 25
17.18 Moratorium on Re-Sale 25
17.19 Confidentiality 25
17.20 Interim Management Agreement 25
45
<PAGE> 46
EXHIBITS
Exhibit A Legal Description
Exhibit B Memorandum of Contract
Exhibit 4.2.1.1 Deed
Exhibit 4.2.1.2 Assignment and Assumption of Tenant Leases
Exhibit 4.2.1.3 General Assignment and Assumption Agreement
Exhibit 4.2.1.4 Assignment and Assumption of Management Agreement
Exhibit 4.2.1.5A Bill of Sale for Capitalized Tangible Property
Exhibit 4.2.1.5B Bill of Sale for Expensed Tangible Property
Exhibit 4.2.1.6 Stock Agreement
Exhibit 4.2.1.7 Assignment and Assumption of Liquor-Related Agreements
Exhibit 4.2.1.11 Master Lease
Exhibit 4.2.1.12 Right of First Offer Agreement
Exhibit 4.2.1.13 Non-Foreign Person Certificate
Exhibit 17.20 Interim Management Agreement
SCHEDULES
Schedule 1.1.1 Approved Service Contracts
Schedule 1.1.2 Employment Agreements
Schedule 1.1.3 Equipment Leases
Schedule 1.1.4 Excluded Property
Schedule 1.1.5 [Intentionally Omitted]
Schedule 1.1.6 Hotel Employees
Schedule 1.1.7 Schedule of Tenant Leases
Schedule 1.1.8 Seller's Due Diligence and Seller's Knowledge
Schedule 1.1.9 Specific Disclosure Matters
Schedule 3.4 Allocation of Purchase Price
Schedule 4.2.1.11 Houston Adjacent Assets
Schedule 6.3.2 Material Defaults Under Tenant Lease
Schedule 6.3.3 Material Defaults Under Approved Service Contracts
Schedule 6.3.4 Material Claims
Schedule 6.3.5 Material Defaults Under Employment Agreements
Schedule 6.3.6 Material Violations
Schedule 6.3.7 Material Environmental Conditions
Schedule 6.3.9 Licenses and Permits
Schedule 6.3.12 Seller's Insurance
Schedule 6.3.13 Pending Tax Protests
Schedule 7.3 Permitted Encumbrances
Schedule 14.2 Collective Bargaining Agreements
46
<PAGE> 1
Exhibit 10.54
STOCK AGREEMENT
by and among
NEW REMINGTON PARTNERS
a Texas general partnership
as Stock Purchaser
and
STARWOOD HOTELS & RESORTS TRUST,
a Maryland Real Estate Investment Trust
and
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.,
a Maryland Corporation,
Dated as of January 15, 1998
<PAGE> 2
STOCK AGREEMENT
THIS STOCK AGREEMENT (this "Agreement") is entered into as of
January 15, 1998 (the "Closing Date") by and between NEW REMINGTON PARTNERS, a
Texas general partnership, ("Stock Purchaser"), STARWOOD HOTELS & RESORTS TRUST,
a Maryland real estate investment trust (the "Trust"), and STARWOOD HOTELS &
RESORTS WORLDWIDE, INC., a Maryland corporation (the "Corporation", and, with
the Trust, "Starwood Lodging").
R E C I T A L S
A. Stock Purchaser has agreed to acquire from Starwood
Lodging, and Starwood Lodging has agreed to issue and deliver to Stock
Purchaser, Paired Shares in partial consideration for certain assets owned by
Stock Purchaser.
B. The parties desire to enter into this Agreement in order to
set forth certain terms and conditions under which the Paired Shares are to be
issued to and held by Stock Purchaser.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements contained in this Agreement and for other good and
valuable consideration, the receipt and adequacy of which are hereby mutually
acknowledged, Starwood Lodging and Stock Purchaser agree as follows:
SECTION 1
DEFINITIONS
1.1 Defined Terms.
"Accredited Investor" shall have the meaning ascribed to that
term in Rule 501 promulgated by the SEC under the Securities Act.
"Affiliate" shall mean, with respect to any Person, any other
Person that controls, is controlled by or is under common control with such
first Person.
"Applicable Percentage" shall mean: (a) if Starwood Lodging
delivers Registered Shares to Stock Purchaser pursuant to Section 2.1 hereof,
100% and (b) if Starwood Lodging delivers Unregistered Shares pursuant to
Section 2.1 hereof, 91.95%.
"Business Day" shall mean any day on which the New York Stock
Exchange is open for business.
"Closing Date" shall mean the date hereof.
"Equity Value" shall mean Twenty-Six Million Six Hundred
Sixty-Five Thousand Five Hundred Dollars ($26,665,500), divided by the
Applicable Percentage, rounded to the nearest whole number.
"ITT Closing" shall have the meaning set forth in the
Registration Rights Agreement.
"Joinder Agreement" means an agreement to be bound by this
Agreement in the form of Attachment A hereto.
"LIBOR" means the average of the interbank offered rates for
three-month dollar
<PAGE> 3
deposits in the London market based on quotations at five (5) major banks, as
published from time to time in The Wall Street Journal. If The Wall Street
Journal ceases to publish such a compilation of interbank offered rates, or if
The Wall Street Journal ceases to be published, then Starwood Lodging shall
propose a substitute method of determining the interest rate generally known as
the three-month LIBOR rate, which method, absent manifest error, shall be
binding on all holders of the Subject Shares and Starwood Lodging.
"Lock Price" shall mean $53.75 per Paired Share if the Closing
Date occurs on or before the 60th day after seven Business Days after January
15, 1998 (or thereafter because of a default by the Trust or the Corporation),
and the Market Price as of the Closing Date if the Closing Date occurs
thereafter for any reason other than a default by the Trust or the Corporation,
provided, however, that in the event that, at any time during the period between
December 30, 1997 and the Settlement Date, the Corporation or the Trust effects
any reclassification, stock split or stock dividend with respect to their stock,
any change or conversion of stock into other securities, or any other dividend
or distribution with respect to the Paired Shares, other than (i) dividends
contemplated by the Starwood Lodging Disclosure in effect as of December 30,
1997, or (ii) dividends in the aggregate not to exceed the greater of (a) the
current rate (as of December 30, 1997) of their dividends (together with any
increases in such rate in the ordinary course) and (b) the Trust's "real estate
investment taxable income" (as such term is defined for purposes of the Internal
Revenue Code) without regard to any net capital gains or the deduction for
dividends paid, appropriate and proportionate adjustments shall be made to the
Lock Price.
"Market Price" shall mean, as of any date, the average closing
prices of the Paired Shares on the New York Stock Exchange during the ten
consecutive Business Days immediately preceding such date.
"Open Market Sale" means one or more sales of Stock Agreements
Shares (including "short sales" initiated with the intention of delivering Stock
Agreements Shares) made or proposed to be made by placing one or more sale
orders or offers to sell with one or more securities brokers or dealers with a
view toward the consummation of one or more sale transactions that are required
to be, or that actually are, reported to the New York Stock Exchange or the
National Association of Securities Dealers.
"Orderly Market Disposition" means the sale of Stock
Agreements Shares by placing one or more sell orders with one or more securities
brokers or dealers with a view toward the disposition in the market of such
Stock Agreements Shares.
"Other Stock Agreements" shall mean, collectively, (i) that
certain Stock Agreement, dated as of January 15, 1998, among Savanah Limited
Partnership, as stock purchaser, and Starwood Lodging, (ii) that certain Stock
Agreement, dated as of January 15, 1998, among N.Y. Overnight Partners, L.P., as
stock purchaser, and Starwood Lodging and (iii) that certain Stock Agreement,
dated as of January 15, 1998, among D.C. Overnight Partners, L.P., as stock
purchaser, and Starwood Lodging.
"Paired Shares" shall mean one share of beneficial interest,
par value $.01 per share, of the Trust, and one share of common stock, par value
$.01 per share, of the Corporation that are subject to the Pairing Agreement.
For purposes of calculating the number of Paired Shares to be delivered
hereunder, each pair of the shares of the stock of the Trust and the Corporation
shall be considered one share.
"Pairing Agreement" shall mean the Pairing Agreement dated as
of June 25, 1980, as amended, between the Trust and the Corporation providing,
in relevant part, for the pairing of all outstanding shares of the Corporation
and the Trust.
"Payment Rights" shall have the meaning set forth in Section 5
hereof.
<PAGE> 4
"Person" shall have the meaning set forth in the Registration
Rights Agreement.
"Proposed Disposition Shares" shall have the meaning set forth
in Section 3 hereof.
"Put Price" and "Put Right" shall have the meaning set forth
in Section 2.4 hereof.
"Registered Shares" means Subject Shares the issuance of which
to Stock Purchaser has been registered under the Securities Act.
"Registration Rights Agreement" means the Registration Rights
Agreement by and among Stock Purchaser, the Trust and the Corporation in the
form of Attachment B hereto.
"Registration Statement" shall have the meaning set forth in
the Registration Rights Agreement.
"Required Effectiveness Date" shall have the meaning set forth
in the Registration Rights Agreement.
"Response Date" shall have the meaning set forth in Section 3
hereof.
"Restricted Group" shall mean two (2) or more Restricted
Holders acting in concert or under common direction.
"Restricted Holder" shall mean Stock Purchaser and any other
Person who shall have acquired any Stock Agreements Shares in a Transfer not
constituting an Open Market Sale. A Restricted Holder shall not include any
Person who shall have acquired any Stock Agreements Shares in a Transfer not
constituting an Open Market Sale if such Transfer occurs after the first Open
Market Sale of such Stock Agreements Shares.
"Sale Notice" shall have the meaning set forth in Section 3
hereof.
"SEC" shall mean the United States Securities and Exchange
Commission.
"SEC Documents" means all documents required to have been
filed by the Trust or the Corporation with the SEC since January 1, 1996 and
through the date hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Settlement Date" shall mean, if Starwood Lodging shall
deliver Unregistered Shares pursuant to Section 2.1 hereof, the date on which
Starwood Lodging or its counsel shall notify Stock Purchaser that (i) the
Registration Statement has been declared effective by the SEC, (ii) that the
Subject Shares have been registered, on the terms and subject to the provisions
of the Registration Rights Agreement, for Transfer by the selling shareholders
named therein in Open Market Sales and in such other manner as is provided in
the Registration Statement, and (iii) that Starwood Lodging has completed all
deliveries and other actions required to enable trading of the Subject Shares on
the New York Stock Exchange; provided, however, that if such notice is given
later than 1:00 PM Eastern Time, the Settlement Date shall be deemed for all
purposes to occur on the Business Day following the date of such notice.
"Starwood Lodging Disclosure" shall mean, collectively, the
Form S-3 filed by the Corporation and the Trust with the SEC on November 12,
1997, and the Form S-4 filed by the Corporation and the Trust with the SEC on
November 20, 1997, as the same has been or may hereafter be amended by any
filing with the SEC made by the Trust or the Corporation.
<PAGE> 5
"Stock Agreements Shares" shall mean the aggregate of the
Subject Shares and the other Paired Shares delivered pursuant to the Other Stock
Agreements.
"Stock Purchaser Affiliates" shall have the meaning set forth
in Section 6.1 hereof.
"Subject Shares" means the 539,535 Paired Shares delivered by
Starwood Lodging pursuant to Section 2.1 hereof.
"Transfer" shall have the meaning set forth in the
Registration Rights Agreement.
"Transfer Agent" shall mean the transfer agent for the Paired
Shares.
"Unregistered Shares" means Subject Shares the issuance of
which to Stock Purchaser has not been registered under the Securities Act.
1.2 Other Definitional Provisions. The terms "hereof,"
"hereto," "hereunder" and similar terms when used in this Agreement shall refer
to this Agreement generally, rather than to the section in which such term is
used, unless otherwise specifically provided. Unless the context otherwise
requires, any defined term used in the plural shall refer to all members of the
relevant class, and any defined term used in the singular shall refer to any one
or more of the members of the relevant class.
SECTION 2
CALCULATION OF SUBJECT SHARES
2.1 Calculation of Subject Shares. Starwood Lodging shall
deliver to Stock Purchaser on the Closing Date Paired Shares in an amount equal
to the Equity Value divided by the Lock Price. Starwood Lodging shall have the
option to deliver Registered Shares or Unregistered Shares on the Closing Date.
2.2 Delivery Requirements for Paired Shares. The Paired
Shares to be delivered hereunder shall be properly endorsed and certificated
Paired Shares in the amount required to be delivered in accordance with the
provisions of this Agreement. If Registered Shares are delivered, such shares
shall be unlegended and fully and freely transferable without any consent of,
registration with or notice to any Person (except as provided for in Sections 3
and 4 hereof and in the Pairing Agreement). If Unregistered Shares are issued,
each certificate evidencing Subject Shares shall be stamped or otherwise
imprinted with a legend in substantially the following form (and no other
restrictive legends):
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT. THE SALE, PLEDGE OR OTHER TRANSFER OF THIS CERTIFICATE OR
THE SHARES EVIDENCED HEREBY IS SUBJECT TO THE TERMS OF A
REGISTRATION RIGHTS AGREEMENT DATED AS OF JANUARY 15, 1998
BETWEEN THE ISSUER AND THE HOLDER HEREOF.
There shall be no legend on the Paired Shares reflecting the restrictions in
Sections 3 or 4
<PAGE> 6
hereof.
2.3 Other Deliveries. Concurrently with the delivery of the
Paired Shares, Starwood Lodging shall deliver to Stock Purchaser any statements,
such as a transfer or conveyance tax forms or returns required by applicable
federal or New York law to be executed by Starwood Lodging, as may reasonably be
requested by Stock Purchaser in order to effect the delivery of the Subject
Shares to Stock Purchaser.
2.4 Registration Rights and Requirements.
(a) If Starwood Lodging delivers Unregistered Shares pursuant
to Section 2.1 hereof, Stock Purchaser and Starwood Lodging shall on the Closing
Date execute and deliver to each other the Registration Rights Agreement and the
parties thereto shall perform their respective obligations thereunder. If
Starwood Lodging delivers Registered Shares pursuant to Section 2.1 hereof, the
Registration Rights Agreement shall not be executed or delivered and none of the
parties shall have any obligations thereunder.
(b) If Starwood Lodging delivers Unregistered Shares pursuant
to Section 2.1 hereof, and if the Settlement Date shall not have occurred on or
before the seventh Business Day after the Required Effectiveness Date, Starwood
Lodging shall pay to each Restricted Holder, on the Settlement Date, an amount
equal to the "Interest Factor." For each Restricted Holder, the "Interest
Factor" shall be an amount equal to the product of (i) LIBOR plus 2% per annum
for each day after the seventh Business Day after the Required Effectiveness
Date to and including the earlier of the Settlement Date or the date that is 60
days after the Required Effectiveness Date, multiplied by (ii) the Market Price
multiplied by the number of Subject Shares held by such Restricted Holder on the
date of such payment.
(c) In the event that the Settlement Date shall not have
occurred by the date that is 60 days after the Required Effectiveness Date, each
Person who is a Restricted Holder as of such date shall have the
non-transferrable right (its "Put Right"), exercisable at any one time for each
such Restricted Holder after such 60th day and through the earlier to occur of
(i) the Settlement Date, and (ii) the day immediately prior to the first
anniversary of the Closing, to "put" some or all of the Subject Shares held by
such Restricted Holder to Starwood Lodging for an amount per share equal to the
Put Price; provided, however, that the Put Right shall not be exercisable by any
Restricted Holder for a number of Subject Shares that is less than the lesser of
(i) 100,000, or (ii) the number of Subject Shares then held by such Restricted
Holder. Such right shall be exercised by such Restricted Holder giving Starwood
Lodging notice of its election to exercise its Put Right and the number of
Subject Shares to be purchased by Starwood Lodging, whereupon Starwood Lodging
shall purchase such shares at 9:00 a.m. (Eastern Time) on the second Business
Day following its receipt of such notice, with payment to be delivered (against
delivery to Starwood Lodging of such shares free of all rights of other Persons)
on the third Business Day thereafter in cash or immediately available funds to
such account as such Restricted Holder may designate in such notice. The Put
Price shall be the Market Price determined as of the date such notice is given.
Starwood Lodging shall have the right to satisfy its obligations under the Put
Rights by designating another Person as the purchaser of such shares, and such
obligations shall be deemed satisfied upon such other Person's purchase of such
shares for the Put Price and at the time and in the manner set forth herein.
Such designation shall not affect Starwood Lodging's obligation to pay the
Interest Factor as provided herein.
(d) The Interest Factor and the right of each Restricted
Holder to receive the Put Price in the event it elects to exercise its Put Right
shall be each Restricted Holder's sole and exclusive monetary remedies arising
from Starwood Lodging's failure to cause the
<PAGE> 7
Settlement Date to occur on or before the seventh Business Day after the
Required Effectiveness Date and shall be deemed liquidated damages in respect of
such failure; and each Restricted Holder shall be deemed to have waived its
other monetary remedies. However, from and after the seventh Business Day after
the Required Effectiveness Date, each Holder shall at all times have such
equitable remedies as may be available under applicable law.
SECTION 3
NOTICE PROCEDURES REGARDING OPEN MARKET SALE
OF STOCK AGREEMENTS SHARES
3.1 If, at any time any Restricted Holder or Restricted Group
elects to Transfer, in an Open Market Sale, more than 100,000 Stock Agreements
Shares on any single Business Day (300,000 Stock Agreements Shares from and
after the first Business Day after the ITT Closing), prior to executing such
Transfer the designated representative of such Restricted Holder or Restricted
Group shall provide Starwood Lodging's representative, the Chief Financial
Officer of the Trust (or any successor representative identified by a notice
given hereunder), with telephonic notice at (602) 852-3900 along with a
confirmation of such notice by telefacsimile to Starwood Lodging and Starwood
Lodging's additional addressees as provided in Section 7.1 hereof. Such notice
(the "Sale Notice") shall indicate the number of Stock Agreements Shares which
such Restricted Holder or Restricted Group has determined to Transfer in an Open
Market Sale (the "Proposed Disposition Shares") on such day or days and shall
comply with Section 3.5 hereof (if applicable). Such notice shall be deemed
given on the Business Day the telephonic notice described above is given so long
as such notice is given by 5:00 P.M., Eastern time, on such day; if given after
that time, it shall be deemed given on the next Business Day. In the event that,
at any time while this Section 3.1 is in effect, the Corporation or the Trust
effects any reclassification, stock split or stock dividend with respect to
their stock, any change or conversion of stock into other securities, or any
other dividend or distribution with respect to the Paired Shares, other than (i)
dividends contemplated by the Starwood Lodging Disclosure as in effect on
December 30, 1997, or (ii) dividends in the aggregate not to exceed the greater
of (a) the current rate (as of December 30, 1997) of their dividends (together
with any increases in such rate in the ordinary course) and (b) the Trust's
"real estate investment taxable income" (as such term is defined for purposes of
the Internal Revenue Code) without regard to any net capital gains or the
deduction for dividends paid, appropriate and proportionate adjustments shall be
made to the numbers of Stock Agreements Shares set forth in the first sentence
of this Section 3.1.
3.2 No later than noon, Eastern time, on the second Business
Day after the Sale Notice is given as described above, Starwood Lodging may
provide the representative(s) of such Restricted Holder or Restricted Group with
telephonic notice, along with a confirmation of such notice to such
representatives by telefacsimile, that Starwood Lodging is irrevocably offering
to purchase or place all of the Proposed Disposition Shares at a price per share
equal to the average of the closing prices on the New York Stock Exchange on the
first and second Business Days following the giving of the Sale Notice. Such
notice shall be given as provided in Section 3.5 hereof. It shall be a condition
to such notice and the consummation of such transaction that such transaction
not constitute a violation of Regulation M promulgated by the SEC. If Starwood
Lodging fails to make such an offer within such period, it shall have no further
rights under this Section 3 with respect to any Orderly Market Disposition by
such Restricted Holder or Restricted Group of Stock Agreements Shares up to the
amount of the Proposed Disposition Shares that is commenced not later than the
seventh Business Day after the Sale Notice is given.
3.3 If Starwood Lodging duly makes such an offer, such
Restricted Holder or
<PAGE> 8
Restricted Group shall elect by telephonic notice to Starwood Lodging's
representative delivered and confirmed as described above, given by 8:30 a.m.
(Eastern Time) on the Business Day following receipt of Starwood Lodging's offer
(such day is referred to herein as the "Response Date"), in their sole and
absolute discretion, to either (i) proceed with such proposed disposition, in
which instance Starwood Lodging shall purchase or place the Proposed Disposition
Shares at 9:00 a.m. (Eastern Time), on the Response Date, with payment to be
delivered (against delivery to Starwood Lodging of the Proposed Disposition
Shares free of all rights of other Persons) on the third Business Day after the
Response Date in cash or immediately available funds to such account as such
Restricted Holder may designate by notice to Starwood Lodging, or (ii) not to
proceed with such proposed disposition, in which instance the Sale Notice shall
be withdrawn and such Restricted Holder shall continue to hold the Proposed
Disposition Shares subject to the terms of this Section 3 (to the extent
applicable). If such Restricted Holder shall fail to so elect by 8:30 a.m.
(Eastern Time) on the Response Date, it shall irrevocably be deemed to have
elected not to proceed with such proposed disposition.
3.4 On the first anniversary of the Settlement Date, the
provisions of this Section 3 shall automatically lapse and be of no further
force or effect with respect to each Restricted Holder that holds less than
500,000 Stock Agreements Shares (except (i) to the extent that such Restricted
Holder acts on or after such date as a member of a Restricted Group that holds
in the aggregate 500,000 or more Stock Agreements Shares, and (ii) to the extent
such Restricted Holder, either alone or as a member of a Restricted Group, has
given or was required to have given Starwood Lodging a Sale Notice prior to such
date and as to which the procedures in this Section 3 have not been fully
performed).
3.5 Any notice given by Starwood Lodging pursuant to Section
3.2 hereof to Stock Purchaser shall be given telephonically to Mansor Dalaan at
(310) 229-2929 and by telefacsimile to (310) 229-2927, or to such other
telephone and telefacsimile numbers as may be set forth for such purpose in the
Sale Notice. Any notice given by Starwood Lodging pursuant to Section 3.2 hereof
to any other Restricted Holder or Restricted Group shall be given to the
telephone and telefacsimile numbers as may be set forth for such purpose in the
Sale Notice, and no Sale Notice from a Restricted Holder other than Stock
Purchaser or from any Restricted Group shall be deemed properly given in
accordance with Section 3.1 unless such numbers are set forth in such Sale
Notice.
3.6 Time is of the essence in the performance by the parties
of their obligations under this Section 3.
SECTION 4
TRANSFERS NOT CONSTITUTING AN OPEN MARKET SALE; SHORT SALES
4.1 Each Restricted Holder covenants and agrees that, as a
condition to any Transfer by a such Restricted Hol er of Subject Shares in a
transaction that does not constitute an Open Market Sale, such Restricted Holder
will obtain and deliver to Starwood Lodging a Joinder Agreement duly executed by
the transferee or the intended transferee; and any purported Transfer of Subject
Shares made in breach of this provision shall be null and void ab initio.
4.2 Each Restricted Holder covenants and agrees that, prior to
the effectiveness of the Registration Statement, it will not "sell short" (as
such term is commonly understood in the brokerage industry) any Paired Shares,
whether "against the box" or otherwise.
<PAGE> 9
SECTION 5
PAYMENT RIGHTS
On the Settlement Date, Starwood Lodging shall pay to Stock
Purchaser in cash or other immediately available funds an amount equal to the
amount, if any, by which the Lock Price exceeds the Market Price as of the
Settlement Date, multiplied by the number of Paired Shares delivered by Starwood
Lodging to Stock Purchaser hereunder. Stock Purchaser's right to receive the
payments from Starwood Lodging described in this section are referred to herein
as the "Payment Rights." Pursuant to a written instrument a copy of which is
delivered to Starwood Lodging promptly following its execution by Stock
Purchaser, Stock Purchaser may distribute to its partners or their shareholders
or assign to any other Person all or any portion of the Payment Rights either
together with or separately from the Paired Shares delivered hereunder.
SECTION 6
REPRESENTATIONS AND WARRANTIES
6.1 Stock Purchaser represents and warrants to Starwood
Lodging as follows:
(a) Stock Purchaser has the power and authority to enter into
this Agreement and the Registration Rights Agreement and to perform its
obligations hereunder and thereunder. The execution and delivery hereof and
thereof and the performance by Stock Purchaser of its obligations hereunder and
thereunder will not violate or constitute an event of default under any material
term or material provision of any agreement, document, instrument, judgment,
order or decree to which Stock Purchaser is a party or by which it is bound, or
violate any law, rule or regulation the violation of which would have a material
adverse effect upon the principal benefits intended to be provided under this
Agreement or the Registration Rights Agreement.
(b) The individuals executing this Agreement and the
Registration Rights Agreement on behalf of Stock Purchaser have the legal power,
right and actual authority to bind Stock Purchaser to the terms and conditions
hereof and thereof. Each of this Agreement and the Registration Rights Agreement
is a valid and binding obligation of Stock Purchaser, enforceable in accordance
with its terms, except as the same may be affected by bankruptcy, insolvency,
moratorium or similar laws, or by legal or equitable principles relating to or
limiting the rights of contracting parties generally.
(c) Stock Purchaser is acquiring the Subject Shares to be
issued to it for investment, solely for the account of itself, on behalf of its
partners and Persons who are stockholders of such partners, or on behalf of
certain Persons each of whom is both an Affiliate of a partner of Stock
Purchaser and a creditor of Stock Purchaser (collectively, such partners and
other Persons the "Stock Purchaser Affiliates"). Neither Stock Purchaser nor any
of the Affiliates of Stock Purchaser is acquiring Subject Shares with a view to
or for sale in connection with any distribution of such Subject Shares in
violation of applicable securities laws.
(d) Stock Purchaser and each of the Stock Purchaser Affiliates
is an Accredited Investor.
(e) Stock Purchaser has obtained and reviewed the Starwood
Lodging Disclosure and the SEC Documents that have been filed with the SEC
through the date hereof.
6.2
<PAGE> 10
By its execution of its Joinder Agreement, each Restricted
Holder other than Stock Purchaser shall be deemed to have represented and
warranted to Starwood Lodging, as of the date of its delivery of such Joinder
Agreement, as follows:
(a) Such Restricted Holder has the power and authority to
enter into this Agreement, the Registration Rights Agreement and its Joinder
Agreement and to perform its obligations hereunder and thereunder. The execution
and delivery hereof and thereof and the performance by such Restricted Holder of
its obligations hereunder and thereunder will not violate or constitute an event
of default under any material term or material provision of any agreement,
document, instrument, judgment, order or decree to which such Restricted Holder
is a party or by which it is bound, or violate any law, rule or regulation the
violation of which would have a material adverse effect upon the principal
benefits intended to be provided under this Agreement or the Registration Rights
Agreement.
(b) The individuals executing this Agreement, the Registration
Rights Agreement and its Joinder Agreement on behalf of such Restricted Holder
have the legal power, right and actual authority to bind such Restricted Holder
to the terms and conditions hereof and thereof. Each of this Agreement, the
Registration Rights Agreement and its Joinder Agreement is a valid and binding
obligation of such Restricted Holder, enforceable in accordance with its terms,
except as the same may be affected by bankruptcy, insolvency, moratorium or
similar laws, or by legal or equitable principles relating to or limiting the
rights of contracting parties generally.
(c) Such Restricted Holder is acquiring the Subject Shares
Transferred or to be Transferred to it for investment, solely for the account of
itself and not with a view to or for sale in connection with any distribution of
such Subject Shares in violation of applicable securities laws; provided,
however, that if such Restricted Holder is Stock Purchaser Affiliate, such
Restricted Holder may acquire the Subject Shares on behalf of Persons who are
stockholders of such Restricted Holder if each of such Persons is an Accredited
Investor.
(d) Such Restricted Holder is an Accredited Investor.
(e) Such Restricted Holder has had the opportunity, prior to
making the determination to acquire any Subject Shares, to obtain and review the
Starwood Lodging Disclosure and the SEC Documents that have been filed with the
SEC through the date of the execution of such Restricted Holder's Joinder
Agreement.
6.3 The Trust hereby represents and warrants to Stock
Purchaser as follows:
(a) The Trust has the power and authority to enter into this
Agreement and the Registration Rights Agreement and to consummate the
transactions herein contemplated; neither the execution and delivery of this
Agreement or the Registration Rights Agreement by the Trust, nor the performance
by the Trust of the Trust's obligations hereunder or thereunder will violate or
constitute an event of default under any material terms or material provisions
of any agreement, document, instrument, judgment, order or decree to which the
Trust is a party or by which the Trust is bound, or violate any law, rule or
regulation the violation of which would have a material adverse effect upon the
principal benefits intended to be provided under this Agreement or the
Registration Rights Agreement.
(b) The individuals executing this Agreement and the
Registration Rights Agreement and the documents referenced herein on behalf of
the Trust have the legal power, right and actual authority to bind the Trust to
the terms and conditions hereof. This Agreement
<PAGE> 11
and the Registration Rights Agreement is a valid and binding obligation of
Trust, enforceable in accordance with its terms, except as the same may be
affected by bankruptcy, insolvency, moratorium or similar laws, or by legal or
equitable principles relating to or limiting the rights of contracting parties
generally.
(c) All Paired Shares to be delivered in accordance with
Section 2.1 hereof will, when so issued, be duly authorized, validly issued,
fully paid and nonassessable and free of preemptive rights and will be paired
with each other in the same ratio as all other shares are paired with each other
pursuant to the Pairing Agreement.
(d) The Trust has filed all of the SEC Documents. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of applicable law, and, at the respective times they were filed,
none of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements (including, in each
case, any notes thereto) of the Trust included in the SEC Documents complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto as of their
respective dates of filing, were prepared in accordance with generally accepted
accounting principles (except, in the case of the unaudited statements, as
permitted by Regulation S-X of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly presented the consolidated financial position of the Trust and its
consolidated subsidiaries as of the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described therein).
Except as disclosed in the SEC Documents or as required by generally accepted
accounting principles, the Trust has not, since December 31, 1996, made any
change in the accounting practices or policies applied in the preparation of
their financial statements.
(e) Except as disclosed in the SEC Documents or the Starwood
Lodging Disclosure, since December 31, 1996 and through the date hereof, (i)
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 change in or effect on the financial condition, properties, business,
results of operations or prospects of the Trust and its subsidiaries taken as a
whole, or (ii) there has not been any split, combination or reclassification of
any of the capital stock or units of the Trust or its operating partnership or
any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of, or in substitution for shares of such capital stock.
(f) Except as set forth in the SEC Documents or the Starwood
Lodging Disclosure or in a separate writing provided to Stock Purchaser on or
before the date hereof, as of the date hereof: there are no outstanding orders,
judgments, injunctions, awards or decrees of any governmental entity against or
involving the Trust or any of its subsidiaries, or against or involving any of
the directors, officers or employees of the Trust 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 change in or effect on the financial condition, properties,
business, results of operations or prospects of the Trust and its subsidiaries
taken as a whole; and there are no actions, suits or claims or legal,
administrative or arbitrative proceedings or investigations pending or, to the
knowledge of the Trust, threatened against or involving the Trust 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
<PAGE> 12
adverse change in or effect on the financial condition, properties, business,
results of operations or prospects of the Trust and its subsidiaries taken as a
whole. As of the date hereof, there are no actions, suits or other litigation,
legal or administrative proceedings or governmental investigations pending or,
to the knowledge of the Trust, threatened against or affecting the Trust 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 and the Registration Rights Agreement.
6.4 The Corporation hereby represents and warrants to Stock
Purchaser as follows:
(a) The Corporation has the power and authority to enter into
this Agreement and the Registration Rights Agreement and to consummate the
transactions herein contemplated; neither the execution and delivery of this
Agreement or the Registration Rights Agreement by the Corporation, nor the
performance by the Corporation of the Corporation's obligations hereunder or
thereunder will violate or constitute an event of default under any material
terms or material provisions of any agreement, document, instrument, judgment,
order or decree to which the Corporation is a party or by which the Corporation
is bound, or violate any law, rule or regulation the violation of which would
have a material adverse effect upon the principal benefits intended to be
provided under this Agreement or the Registration Rights Agreement.
(b) The individuals executing this Agreement and the
Registration Rights Agreement and the documents referenced herein on behalf of
the Corporation have the legal power, right and actual authority to bind the
Corporation to the terms and conditions hereof. This Agreement and the
Registration Rights Agreement is a valid and binding obligation of Corporation,
enforceable in accordance with its terms, except as the same may be affected by
bankruptcy, insolvency, moratorium or similar laws, or by legal or equitable
principles relating to or limiting the rights of contracting parties generally.
(c) All Paired Shares to be delivered in accordance with
Section 2.1 hereof will, when so issued, be duly authorized, validly issued,
fully paid and nonassessable and free of preemptive rights and will be paired
with each other in the same ratio as all other shares are paired with each other
pursuant to the Pairing Agreement.
(d) The Corporation has filed all of the SEC Documents. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of applicable law, and, at the respective times they were
filed, none of the SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The consolidated financial statements
(including, in each case, any notes thereto) of the Corporation included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto as of their respective dates of filing, were prepared in
accordance with generally accepted accounting principles (except, in the case of
the unaudited statements, as permitted by Regulation S-X of the SEC) applied on
a consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto) and fairly presented the consolidated financial
position of the Corporation and its consolidated subsidiaries as of the
respective dates thereof and the consolidated results of their operations and
their consolidated cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein). Except as disclosed in the SEC Documents or as
required by generally accepted accounting principles, the Corporation has not,
since December 31, 1996, made any change in the accounting practices or policies
applied in the preparation of their financial statements.
<PAGE> 13
(e) Except as disclosed in the SEC Documents or the Starwood
Lodging Disclosure, since December 31, 1996 and through the date hereof, (i)
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 change in or effect on the financial condition, properties, business,
results of operations or prospects of the Corporation and its subsidiaries taken
as a whole, or (ii) there has not been any split, combination or
reclassification of any of the capital stock or units of the Corporation or its
operating partnership or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of, or in substitution for shares of
such capital stock.
(f) Except as set forth in the SEC Documents or the Starwood
Lodging Disclosure or in a separate writing provided to Stock Purchaser on or
before the date hereof, as of the date hereof: there are no outstanding orders,
judgments, injunctions, awards or decrees of any governmental entity against or
involving the Corporation or any of its subsidiaries, or against or involving
any of the directors, officers or employees of the Corporation 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 change in or effect on the financial
condition, properties, business, results of operations or prospects of the
Corporation and its subsidiaries taken as a whole; and there are no actions,
suits or claims or legal, administrative or arbitrative proceedings or
investigations pending or, to the knowledge of the Corporation, threatened
against or involving the Corporation 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 change in or effect on the
financial condition, properties, business, results of operations or prospects of
the Corporation and its subsidiaries taken as a whole. As of the date hereof,
there are no actions, suits or other litigation, legal or administrative
proceedings or governmental investigations pending or, to the knowledge of the
Corporation, threatened against or affecting the Corporation 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 and the Registration Rights Agreement (other than
those arising in connection with the Registration Statement or the performance
by the Corporation of its obligations under the Registration Rights Agreement).
SECTION 7
NOTICES
7.1 Addresses. Except for the notices given pursuant to
Section 3, whenever any notice, demand or request is required or permitted
hereunder, such notice, demand or request shall be made in writing and shall be
(a) sent via a nationally recognized overnight courier service fully prepaid,
(b) deposited in the United States by mail, registered or certified, return
receipt requested, postage prepaid, or (c) sent via telefacsimile, provided that
the original of such notice, demand or request shall also be sent via one of the
methods described in (a) and (b) above, in each case to the addressees (and
individuals) set forth below:
As to Stock Purchaser:
c/o Al Anwa USA, Inc.
1925 Century Park East, Suite 1900
Los Angeles, CA 90067
Attn: Tarek Ayoubi
Telefacsimile: (310) 229-2939
<PAGE> 14
With a copy to Stock Purchaser's additional addressees:
Morrison & Foerster LLP
555 West Fifth Street, Suite 3500
Los Angeles, CA 90013-1024
Attn: Thomas R. Fileti, Esq.
Telefacsimile: (213) 892-5454
Gordon K. Eng, Esq.
19191 South Vermont Avenue, Suite 420
Torrance, California 90502
Telefacsimile: (310) 207-1066
As to Starwood Lodging:
Starwood Hotels & Resorts Trust
2231 E. Camelback Rd., Suite 410
Phoenix, AZ 85016
Attn: Ronald C. Brown or Chief Financial Officer
Telefacsimile: (602) 852-0115
Starwood Hotels & Resorts Worldwide, Inc.
2231 E. Camelback Rd., Suite 400
Phoenix, AZ 85016
Attn: Alan M. Schnaid or Vice President
Telefacsimile: (602) 852-0115
With a copy to Starwood Lodging's additional addressees:
Greenberg Traurig Hoffman Lipoff Rosen & Quentel
153 East 53rd Street
New York, NY 10022
Attn: Andrew E. Zobler, Esq.
Telefacsimile: (212) 223-7161
Sidley & Austin
555 West Fifth Street, Suite 4000
Los Angeles, CA 90013
Attn: Sherwin L. Samuels, Esq.
and Kenneth H. Levin, Esq.
Telefacsimile: (213) 896-6600
If to any Restricted Holder other than Stock Purchaser: to the address and
telefacsimile number set forth in such Restricted Holder's Joinder Agreement (or
to any other address or telefacsimile number provided to Starwood Lodging in
writing pursuant to a notice given by such Restricted Holder pursuant to this
Section 7.1).
7.2 Receipt of Notices. Any notice, demand or request that
shall be delivered to Starwood Lodging and its Additional Addressee in the
manner aforesaid shall be deemed sufficiently given to and received by Starwood
Lodging for all purposes hereunder, and any notice, demand or request that shall
be delivered to Stock Purchaser and its Additional Addressee in the manner
aforesaid shall be deemed sufficiently given to and received by Stock
<PAGE> 15
Purchaser for all purposes hereunder (i) the next business day following the day
such notice, demand or request is delivered by a nationally recognized overnight
courier service fully prepaid, to such party and its Additional Addressee, (ii)
if sent via registered or certified mail, at the time of receipt by such party
and its Additional Addressee, or (iii) if sent via telefacsimile, as of the date
and time stated upon confirmation reports generated by the sending party's
telefacsimile machine confirming the delivery of such notice, demand or request
to such party and its Additional Addressee.
7.3 Refusal of Delivery. The inability to deliver any notice,
demand or request because the individual to whom it is properly addressed in
accordance with this Section 7 refused delivery thereof or no longer can be
located at that address shall constitute delivery thereof to such individual.
7.4 Change of Address. Each party shall have the right from
time to time to designate by written notice to the other parties hereto such
other Person or Persons and such other place or places as said party may desire
written notices to be delivered or sent in accordance herewith.
SECTION 8
GENERAL PROVISIONS
8.1 Amendment. No provision of this Agreement or of any
documents or instrument entered into, given or made pursuant to this Agreement
may be amended, changed, waived, discharged or terminated except by an
instrument in writing, signed by the party against whom enforcement of the
amendment, change, waiver, discharge or termination is sought.
8.2 Time of Essence. All times provided for in this Agreement
for the performance of any act will be strictly construed, time being of the
essence.
8.3 Entire Agreement. This Agreement and other documents
delivered pursuant to this Agreement set forth the entire agreement and
understanding of the parties in respect of the transactions contemplated by this
Agreement, and supersede all prior agreements, arrangements and understandings
relating to the subject matter hereof and thereof. No representation, promise,
inducement or statement of intention with respect to the subject matter hereof
has been made by Stock Purchaser or Starwood Lodging which is not embodied in
this Agreement, and neither Starwood Lodging nor Stock Purchaser shall be bound
by or liable for any alleged representations, promise, inducement or statement
of intention not therein so set forth.
8.4 No Waiver. No failure of any party to exercise any power
given such party hereunder or to insist upon strict compliance by the other
party with its obligations hereunder shall constitute a waiver of any party's
right to demand strict compliance with the terms of this Agreement.
8.5 Counterparts. This Agreement, any document or instrument
entered into, given or made pursuant to this Agreement or authorized hereby, and
any amendment or supplement thereto may be executed in two or more counterparts,
and, when so executed, will have the same force and effect as though all
signatures appeared on a single document. Any signature page of this Agreement
or of such an amendment, supplement, document or instrument may be detached from
any counterpart without impairing the legal effect of any signatures thereon,
and may be attached to another counterpart identical in form thereto but having
attached to it one or more additional signature pages.
<PAGE> 16
8.6 Costs and Attorneys' Fees. If any legal action or any
arbitration or other proceeding is brought for the enforcement of this Agreement
or because of an alleged dispute, default, or misrepresentation in connection
with any of the provisions of this Agreement the successful or prevailing party
shall be entitled to recover reasonable attorneys' fees, charges and other costs
incurred in that action or proceeding, in addition to any other relief to which
it may be entitled.
8.7 Payments; Interests. Except as otherwise provided herein,
payment of all amounts required by the terms of this Agreement shall be made in
the United States and in immediately available funds of the United States of
America which, at the time of payment, is accepted for the payment of all public
and private obligations and debts. If any payment due under this Agreement is
not paid when due, it shall thereafter bear interest at a variable rate equal to
the rate announced from time to time by Citibank, N.A. as its prime or reference
rate, plus five percent (5%) per annum, but in no event more than the maximum
rate, if any, allowed by law to be charged by the party receiving the interest
on such type of indebtedness.
8.8 Parties in Interest. The rights and obligations of the
parties hereto shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors, heirs and the legal
representatives of their respective estates. However, none of Stock Purchaser's
rights under this Agreement shall be assignable except (i) in the case of the
Payment Rights, as provided in Section 5 hereof, and (ii) in the case of all
other rights of Stock Purchaser or another Restricted Holder, to a transferee of
Subject Shares in a transaction not constituting an Open Market Sale if such
transferee delivers a Joinder Agreement in compliance with Section 4 hereof.
Nothing in this Agreement is intended to confer any right or remedy under this
Agreement on any Person other than the parties to this Agreement and their
respective successors and assigns, or to relieve or discharge the obligation or
liability of any Person to any party to this Agreement or to give any Person any
right of subrogation or action over or against any party to this Agreement.
8.9 Applicable Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without giving effect to the conflict-of-law rules and principles of that state.
8.10 Incorporation of Recitals. The recitals of this Agreement
are incorporated into and made a part of this Agreement.
8.11 Construction of Agreement. The language in all parts of
this Agreement shall be in all cases construed simply according to its fair
meaning and not strictly for or against any of the parties hereto. Headings at
the beginning of sections of this Agreement are solely for the convenience of
the parties and are not a part of this Agreement. When required by the context,
whenever the singular number is used in this Agreement, the same shall include
the plural, and the plural shall include the singular, the masculine gender
shall include the feminine and neuter genders, and vice versa. As used in this
Agreement, the term "Stock Purchaser" shall include the respective permitted
successors and assigns of Stock Purchaser, and the term "Starwood Lodging" shall
include the permitted successors and assigns of Starwood Lodging, if any.
8.12 Severability. If any term or provision of this Agreement
is determined to be illegal, unconscionable or unenforceable, all of the other
terms, provisions and sections hereof will nevertheless remain effective and be
in force to the fullest extent permitted by law.
8.13 Further Assurances. Starwood Lodging and Stock Purchaser
agree to execute upon the request of the other party such instruments and take
such actions as may be reasonably necessary to carry out the provisions of this
Agreement provided that no material
<PAGE> 17
additional cost or liability shall incurred thereby by the party of whom such
request is made.
8.14 Starwood Lodging Trust. The parties hereto understand and
agree that the name "Starwood Lodging Trust" is a designation of the Trust and
its trustees (as trustees but not personally) under the Trust's Declaration of
Trust, and all persons dealing with the Trust shall look solely to the Trust's
assets for the enforcement of any claims against the Trust, and that the
Trustees, officers, agents and security holders of the Trust assume no personal
liability for obligations entered into on behalf of the Trust, and their
respective individual assets shall not be subject to the claims of any person
relating to such obligations.
<PAGE> 18
IN WITNESS WHEREOF, Starwood Lodging and Stock Purchaser have
caused this Agreement to be executed as of the day and year first above written.
"Stock Purchaser"
NEW REMINGTON PARTNERS,
a Texas general partnership
By: REMINGTON VENTURERS, INC.,
a Texas corporation,
a General Partner
By: /s/ Mansor Dalaan
-----------------------------
Mansor Dalaan
President
By: REMINGTON VENTURERS II, INC.,
a Texas corporation,
a General Partner
By: /s/ Mansor Dalaan
-----------------------------
Mansor Dalaan
President
"Starwood Lodging"
STARWOOD HOTELS & RESORTS TRUST,
a Maryland Real Estate Investment Trust
By: /s/ Steven R. Goldman
------------------------------
Steven R. Goldman
Senior Vice President
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.,
a Maryland Corporation
By: /s/ Nir E. Margalit
------------------------------
Nir E. Margalit
Secretary
<PAGE> 19
ATTACHMENT A
to Stock Agreement
AGREEMENT TO BE BOUND
BY THE STOCK AGREEMENT
(JOINDER AGREEMENT)
The undersigned, being the transferee or the intended
transferee of _____________ Paired Shares (the "Subject Shares") of Starwood
Lodging Trust, a Maryland real estate investment trust, and Starwood Lodging
Corporation, a Maryland corporation (together, the "Company"), as a condition to
the transfer to and acquisition by the undersigned of such Subject Shares,
acknowledges that certain sales or other transfers of such Subject Shares are
governed by the Stock Agreement (the "Stock Agreement"), dated as of January 15,
1998 initially among the Company and New Remington Partners, a Texas general
partnership, and the undersigned hereby (1) acknowledges receipt of a copy of
the Stock Agreement, and (2) agrees to be bound as a "Restricted Holder" by the
terms of the Stock Agreement, as the same has been or may be amended from time
to time (including without limitation the representations and warranties of the
undersigned set forth therein that will be deemed made by virtue hereof).
The undersigned is hereby advised that the Subject Shares have
not been registered under the Securities Act of 1933 and in such event cannot be
resold unless they are registered under said act or unless an exemption from
registration under said act is available.
The following is the undersigned's representative and such
representative's address, telephone number and fax number for all purposes under
the Stock Agreement:
_________________________________
_________________________________
_________________________________
Agreed to this ____ day of __________, ____.
_________________________________
By: __________________________
Its: __________________________
<PAGE> 20
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as
of January 15, 1998 among STARWOOD HOTELS & RESORTS TRUST, a Maryland real
estate investment trust (the "Trust"), STARWOOD HOTELS & RESORTS WORLDWIDE,
INC., a Maryland corporation (the "Corporation" and, together with the Trust,
the "Company"), and NEW REMINGTON PARTNERS, a Texas general partnership
("Shareholder").
RECITALS
WHEREAS, pursuant to a Stock Agreement of even date herewith
and by and among the parties hereto (the "Stock Agreement"), the Company is
issuing and delivering to Shareholder certain Paired Shares; and
WHEREAS, the Stock Agreement provides that if such Paired
Shares are Unregistered Shares, the Company shall effect the registration of
such Paired Shares under the Securities Act; and
WHEREAS, the parties desire to set forth their rights and
obligations with respect to such registration and certain other matters;
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions. Each capitalized term used in this Agreement but not defined
herein shall have the meaning ascribed to such term in the Stock Agreement; and
as used in this Agreement the following terms shall have the following meanings:
"Commission" means the Securities and Exchange Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Holder Information" means, with respect to a Selling Holder,
(i) such information regarding such Selling Holder as is required by Section 507
of Regulation S-K promulgated by the Commission under the Securities Act, (ii)
information as to whether (and if so, in what manner) the intended method of
disposition of such Holder's Registrable Shares differs from the Plan of
Distribution, and (iii) any such additional information as may be required to be
included in the Registration Statement by a Selling Holder; in each case as
shall be required to effect the registration of such Registrable Shares pursuant
to the Registration Statement, the disclosures required in the Prospectus with
respect thereto and the offer and Transfer of such Registrable Shares pursuant
to the Prospectus.
"Holders" means (i) Shareholder, and (ii) any other Person who
acquires any of the Registrable Shares from Shareholder or another Holder if
(a) the Transferor and such Person shall have delivered to the Company a written
notice of such Transfer setting forth the name of such Person, and (b) such
Person shall have executed and delivered to the Company a properly completed
Joinder Agreement; in each case at such times as such Persons shall own
Registrable Shares.
"ITT Closing" means the consummation of the acquisition of ITT
Corporation by the Company.
<PAGE> 21
"ITT Termination" means the issuance by the Company of a press
release stating that the Company will not consummate the acquisition of ITT
Corporation.
"Joinder Agreement" means an agreement to be bound by this
Agreement in the form of Annex A hereto.
"Paired Shares" means (i) "paired shares" (as such term is
defined in the Purchase and Sale Agreement), and (ii) shares of capital stock of
the Trust or the Corporation issued by the Trust or the Corporation in respect
of or in exchange for paired shares in connection with any stock dividend or
distribution, stock split-up, recapitalization, recombination or exchange by the
Trust or the Corporation generally of such paired shares.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or other entity, or government or other agency or
political subdivision thereof.
"Proposed Plan of Distribution" means a draft of the portion
of the Registration Statement that describes the intended methods of disposition
of the Registrable Shares by the Selling Holders.
"Prospectus" means, with respect to the Registration Statement
and each amendment thereto, the form of prospectus included therein.
"Registrable Shares" means, as of any date of determination,
(i) the Paired Shares that are Unregistered Shares and that constitute the
Subject Shares; (ii) any shares or other securities issued as (or issuable upon
the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange by
the Trust or the Corporation generally for, or in replacement by the Trust or
the Corporation generally of, such Paired Shares; and (iii) any securities
issued in exchange for such Paired Shares in any merger or reorganization of the
Company; in each case that continue to be owned by a Holder on such date of
determination.
"Registration Statement" means a registration statement on
Form S-3, as amended from time to time, registering the offer and sale by the
Selling Holders of such Selling Holders' Registrable Shares included therein for
offer and Transfer on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act.
"Required Effectiveness Date" means the later of (i) the 30th
day after the Closing Date, or (ii) the earliest of:
(a) The 30th day after the date of the ITT Closing;
(b) The 30th day after the date of the ITT Termination; and
(c) If neither the ITT Closing nor the ITT Termination has
occurred prior to April 1, 1998, the 30th day after a demand for registration is
made by notice given by Shareholder to the Company on or after April 1, 1998;
provided, however, that in the event that, following the initial filing of the
Registration Statement, the Company is advised by the Commission that the
Registration Statement will be reviewed, each of the time periods set forth
above shall be extended for 20 days.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
<PAGE> 22
"Selling Holders" means
(a) each Holder (i) who complies with Sections 3.1.1 hereof,
(ii) who holds not less than 100,000 Subject Shares at the both at the time such
notice is given and the date the Registration Statement is declared effective
(or such lesser number as the Company, in its sole and absolute discretion,
shall determine for such Holder), and (iii) whose Registrable Shares are
included in the Registration Statement; and
(b) each Transferee of such a Holder who (x) provides such
Transferee's Holder Information promptly after its acquisition of Subject
Shares and prior to the Company's request for acceleration of the Registration
Statement, and (y) satisfies the conditions set forth in clauses (ii) and (iii)
above.
"Transfer" means the act of selling, giving, transferring,
creating a trust (voting or otherwise), assigning or otherwise disposing of
(other than pledging, hypothecating or otherwise transferring as security) (and
correlative words shall have correlative meanings).
"Transferee" means a Person to whom Registerable Shares are
Transferred.
"Violation" shall have the meaning set forth in Section 5.1
hereof.
2. Registration Obligations of the Company. The Company shall:
2.1 File the Registration Statement with the Commission not
later than 15 days prior to the Required Effectiveness Date (determined without
reference to the proviso included in the definition of such term) and thereafter
use its best efforts to cause the Registration Statement to be declared
effective on the Required Effectiveness Date.
2.2 Furnish to the Shareholder a copy of the Registration
Statement for its review and comment not later than concurrently with the filing
of the Registration Statement with the Commission.
2.3 The Company shall give notice to the Shareholder of the
expected effectiveness of the Registration Statement no later than the date
acceleration of such effectiveness is requested of the Commission; provided,
however, that in no event shall the Company have any liability for any failure
to give such notice.
2.4 Include in the Registration Statement the number of each
Holder's Registrable Shares for each Holder as shall be specified for such
Holder pursuant to Section 3.1 hereof.
2.5 Use its best efforts to keep the Registration Statement
effective until the earlier of (i) one year after the Closing Date, or (ii) such
date as of which all the Selling Holders have completed the distribution or
other disposition of the Registrable Shares registered under the Registration
Statement. If the Registration Statement is terminated pursuant to clause (i)
above, the Company shall timely file with the Commission all reports and other
information required to enable all holders of Registrable Shares to Transfer
such shares pursuant to Rule 144 promulgated by the Commission under the
Exchange Act, as amended.
2.6 During the effectiveness of the Registration Statement,
upon notice to the Company by a Selling Holder of a Transfer of Registrable
Shares pursuant to the Registration
<PAGE> 23
Statement and receipt (i) by the Company of a certificate from such Selling
Holder in the form of Annex B attached hereto, and (ii) by counsel for the
Company of a certificate from such Selling Holder in the form of Annex C
attached hereto, in each case representing that such Registrable Shares were
offered and have been Transferred by such Selling Holder in a manner consistent
with the description set under the caption "Plan of Distribution" in the
Prospectus, the Company shall use its best efforts to cause such Registrable
Shares to be reissued as soon as practicable (and not later than three Business
Days following receipt by the Company and such counsel of such certificates) in
the name of the transferee free of any restrictive legend under the Securities
Act and to take all such actions as may be reasonably required to cause its
transfer agent to comply with the undertakings set forth in this section.
2.7 Use its best efforts to amend the Registration Statement
or supplement the Prospectus so that they will remain current and in compliance
with the requirements of the Securities Act for the period specified in Section
2.4 hereof, and use its best efforts to give the Selling Holders notice of the
happening of any event or development as a result of which the Registration
Statement or Prospectus may contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements made therein not misleading. In the event that any Registrable
Shares included in the Registration Statement remain unsold at the end of the
period during which the Company is obligated to use its best efforts to maintain
the effectiveness of the Registration Statement, the Company may file a
post-effective amendment to the Registration Statement for the purpose of
de-registering such unsold Registrable Shares.
2.8 Furnish to each Selling Holder, without charge, such
numbers of copies of the Registration Statement, any pre-effective or
post-effective amendment thereto, the final Prospectus, and any amendments or
supplements thereto, in each case in conformity with the requirements of the
Securities Act, and such other related documents, as each Selling Holder may
reasonably request in order to facilitate the Transfer of the Registrable Shares
owned by such Selling Holder.
2.9 Use its best efforts to register and qualify the
Registrable Shares covered by the Registration Statement under such securities
laws of such states or jurisdictions as shall be reasonably requested by the
Selling Holders; provided, however, that neither the Trust nor the Corporation
shall be required in connection therewith or as a condition thereto to qualify
to do business or to file a general consent to service of process in any such
states or jurisdictions.
2.10 Promptly notify each Selling Holder of any stop order
issued or threatened to be issued by the Commission or any of the jurisdictions
referred to in Section 2.9 hereof in connection with the Registration Statement
(and use its best efforts to prevent the entry of such stop order or to remove
it if entered as promptly as practicable).
2.11 Use its best efforts to cause the Registrable Shares
covered by the Registration Statement, if the Paired Shares are then listed on a
securities exchange or included for quotation in a recognized trading market, to
continue to be so listed or included.
3. The Holders' Obligations.
3.1 The obligations of the Company under Section 2 with respect to each
Holder are subject to the satisfaction of each of the following conditions:
3.1.1 Not later than 10 days after the later of (i)
the date hereof, or (ii) the date on which the Company delivers the
Proposed Plan of Distribution to the Shareholder
<PAGE> 24
(or such later date as the Company, in its sole and absolute
discretion, shall determine), such Holder shall furnish all of its
Holder Information to the Company, if such Holder Information discloses
that such Holder holds not less than 100,000 Subject Shares (or such
lesser number as the Company, in its sole and absolute discretion,
shall determine for such Holder).
3.1.2 Prior to the effectiveness of the Registration
Statement, such Holder shall furnish to the Company by a notice such
amendments and supplements to its Holder Information provided pursuant
to Section 3.1.1 hereof as may be necessary in order to assure that the
Holder Information included in the Registration Statement for each
Selling Holder does not include a misstatement of a material fact or
omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
3.1.3 Such Holder shall cooperate with the Company in
the preparation of the Registration Statement in the manner and to the
extent reasonably requested by the Company, including accurately and
fully completing, executing and delivering to the Company such
documents as the Company may reasonably request in order to permit the
Company to obtain the Holder Information or to otherwise comply with
all applicable laws or to obtain acceleration of the effectiveness of
the Registration Statement.
3.1.4 Such Holder shall not have breached any of its
obligations to the Company set forth in this Section 3.1 or in Sections
3 or 4 of the Stock Agreement; provided, however, that if such breach
is one that is capable of being cured and is actually cured by such
Holder in all material respects, the obligations of the Company to such
Holder that arises, or which the Company is obligated to perform in
whole or in part, after such cure shall be reinstated on the terms and
subject to the conditions set forth herein. A Transferee of Subject
Shares who is otherwise entitled to have such shares included in the
Registration Statement shall be deemed not have breached its obligation
to provide its Holder Information to the Company if it provides such
information promptly after its acquisition of such shares and prior to
the Company's request for acceleration of the Registration Statement
3.1.5 Such Holder shall not have made any material
misrepresentation pursuant to Section 6 of the Stock Agreement.
3.2 No action taken or omitted to be taken by or on behalf of
any Holder shall adversely affect the rights of any other Holder hereunder.
3.3 After the effectiveness of the Registration Statement,
each Selling Holder (and each transferee thereof) shall furnish to the Company
by a notice such amendments and supplements to its Holder Information provided
pursuant to Section 3.1 hereof as may be necessary in order to assure that the
Holder Information included in the Registration Statement for such Holder does
not include a misstatement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
4. Expenses of Registration. The Company shall pay all expenses incurred in
connection with the registration, filing and qualification of the Registrable
Shares, including all registration, filing and NASD or securities exchange fees;
all fees and expenses of complying with securities or blue sky laws; all word
processing, duplicating and printing expenses; and the fees and disbursements of
counsel and accountants for the Company; but excluding all discounts,
commissions or fees of selling brokers or similar securities industry
professionals and all fees and expenses of counsel and accountants for the
Selling Holders.
<PAGE> 25
5. Indemnification; Contribution.
5.1 To the extent permitted by applicable law, the Company
shall indemnify and hold harmless each Selling Holder; each Person, if any, who
controls such Selling Holder within the meaning of the Securities Act; and each
officer, director, partner and employee of such Selling Holder and such
controlling Person; against any and all losses, claims, damages, liabilities and
expenses incurred by such party pursuant to any actual or threatened action,
suit, proceeding or investigation, or to which any of the foregoing Persons may
become subject under the Securities Act, to the extent such losses, claims,
damages, liabilities and expenses arise out of or are based upon any of the
following (collectively a "Violation"):
5.1.1 Any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement,
including any final Prospectus, or any amendments or supplements
thereto;
5.1.2 The omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading; or
5.1.3 Any violation or alleged violation by the
Company of the Securities Act, the Exchange Act or any applicable state
securities law;
provided, however, that the indemnification required by this Section 5.1 shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or expense if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld or delayed), nor shall
the Company be liable in any such case for any such loss, claim, damage,
liability or expense incurred by a Selling Holder (or any Person, if any, who
controls such Selling Holder within the meaning of the Securities Act, or any
officer, director, partner and employee of such Selling Holder and such
controlling Person) to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with the Holder
Information or other information furnished to the Company by or on behalf of
such Selling Holder expressly for use in connection with the Registration
Statement.
5.2 To the extent permitted by applicable law, each Selling
Holder shall indemnify and hold harmless the Company; each of its directors,
each of its officers who shall have signed the Registration Statement; each
Person, if any, who controls the Company within the meaning of the Securities
Act; any other Selling Holder, any controlling Person of any such other Selling
Holder and each officer, director, partner, and employee of such other Selling
Holder and such controlling Person; against any and all losses, claims, damages,
liabilities and expenses, incurred by such party pursuant to any actual or
threatened action, suit, proceeding or investigation, or to which any of the
foregoing Persons may otherwise become subject under the Securities Act, to the
extent such losses, claims, damages, liabilities and expenses arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with the
Holder Information or other information furnished to the Company by or on behalf
of that Selling Holder expressly for use in connection with the Registration
Statement.
5.3 Promptly after receipt by an indemnified party under this
Section 5 of notice of the commencement of any action, suit, proceeding,
investigation or threat thereof made in writing for which such indemnified party
may make a claim under this Section 5, such indemnified party shall deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so
<PAGE> 26
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties. The
failure of an Indemnified Party to deliver written notice to the indemnifying
party within a reasonable time following the commencement of any such action
shall not relieve such indemnifying party of any liability to the indemnified
party under this Section 5 unless such failure is prejudicial to such
indemnifying party's ability to defend such action. Any fees and expenses
incurred by the indemnified party (including any fees and expenses incurred in
connection with investigating or preparing to defend such action or proceeding)
shall be paid to the indemnified party, as incurred, within 30 days of written
notice thereof to the indemnifying party (regardless of whether it is ultimately
determined that an indemnified party is not entitled to indemnification
hereunder). Any such indemnified party shall have the right to employ separate
counsel in any such action, claim or proceeding and to participate in the
defense thereof, but the fees and expenses of such counsel shall be the expenses
of such indemnified party unless (i) the indemnifying party has agreed to pay
such fees and expenses, or (ii) the indemnifying party shall have failed to
promptly assume the defense of such action, claim or proceeding, or (iii) the
named parties to any such action, claim or proceeding (including any impleaded
parties) include both such indemnified party and the indemnifying party, and
such indemnified party shall have been advised by counsel that there may be one
or more legal defenses available to it which are different from or in addition
to those available to the indemnifying party and that the assertion of such
defenses would create a conflict of interest such that counsel employed by the
indemnifying party could not faithfully represent the indemnified party (in
which case, if such indemnified party notifies the indemnifying party in writing
that it elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the defense of
such action, claim or proceeding on behalf of such indemnified party, it being
understood, however, that the indemnifying party shall not, in connection with
any one such action, claim or proceeding or separate but substantially similar
or related actions, claims or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all such indemnified parties, unless
in the reasonable judgment of such indemnified party a conflict of interest
would exist between such indemnified party and any other of such indemnified
parties with respect to such action, claim or proceeding, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels). No indemnifying party shall be liable to an
indemnified party for any settlement of any action, proceeding or claim without
the written consent of the indemnifying party, which consent shall not be
unreasonably withheld or delayed.
5.4 If the indemnification required by this Section 5 from the
indemnifying party is determined by a court of competent jurisdiction to be
unavailable to an indemnified party hereunder in respect of any losses, claims,
damages, liabilities or expenses referred to in this Section 5:
5.4.1 The indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect
the relative fault of the indemnifying party and indemnified parties in
connection with the actions which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among
other things, whether any Violation has been committed by, or relates
to information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such Violation. The
amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 5.1 and 5.2,
any legal or other fees or expenses reasonably incurred by such party
<PAGE> 27
in connection with any investigation or proceeding.
5.4.2 The parties hereto agree that it would not be
just and equitable if contribution pursuant to this Section 5.4 were
determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred
to in Section 5.4.1. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any Person who was not guilty of a
fraudulent misrepresentation.
5.5 If indemnification is available under this Section 5, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in this Section 5 without regard to the relative fault of such
indemnifying party or indemnified party or any other equitable consideration
referred to in Section 5.4.
5.6 The obligations of the Company and the Selling Holders
under this Section 5 shall survive the completion of any offering of Registrable
Shares pursuant to the Registration Statement and any termination of this
Agreement.
6. Amendment, Modification and Waivers; Further Assurances.
6.1 This Agreement may be amended with the consent of the
Company and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it; in each case only if the
Company shall have obtained the written consent of Holders holding more than 50%
of the Registrable Shares. Such amendment, action or omission shall not require
the consent of any other Holder. In addition, the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, that affects the rights hereunder of a specific Holder with the written
consent of such Holder.
6.2 No waiver of any terms or conditions of this Agreement
shall operate as a waiver of any other breach of such terms and conditions or
any other term or condition, nor shall any failure to enforce any provision
hereof operate as a waiver of such provision or of any other provision hereof.
No written waiver hereunder, unless it by its own terms explicitly provides to
the contrary, shall be construed to effect a continuing waiver of the provisions
being waived and no such waiver in any instance shall constitute a waiver in any
other instance or for any other purpose or impair the right of the party against
whom such waiver is claimed in all other instances or for all other purposes to
require full compliance with such provision.
6.3 Each of the parties hereto shall execute all such further
instruments and documents and take all such further action as any other party
hereto may reasonably require in order to effectuate the terms and purposes of
this Agreement.
7. Miscellaneous.
7.1 Business Day. Whenever this Agreement requires that an
action be taken or a notice be given on a date that would otherwise not be a
Business Day, the time period for taking such action or giving such notice shall
be extended to the first day thereafter that is a Business Day.
7.2 Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the state of New York, without giving
regard to the conflict of laws principles thereof.
7.3 Notices. All notices, requests, demands, consents,
approvals, designations
<PAGE> 28
and other deliveries and communications called for or contemplated by this
Agreement shall be in writing and shall be given (i) in the case of Shareholder
or the Company, to the address and in the manner set forth in Section 7 of the
Stock Agreement, and (ii) in the case of any Holder other than Shareholder, in
the manner set forth in Section 7 of the Stock Agreement and to the address
provided to the Company in such Holder's Joinder Agreement.
7.4 Entire Agreement; Integration. This Agreement, together
with the Stock Agreement, supersedes all prior agreements between or among any
of the parties hereto with respect to the subject matter contained herein and
therein, and such agreements embody the entire understanding among the parties
relating to such subject matter.
7.5 Section Headings. Section headings are for convenience of
reference only and shall not affect the meaning of any provision of this
Agreement.
7.6 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, and all of which shall
together constitute one and the same instrument. All signatures need not be on
the same counterpart.
7.7 Severability. If any provision of this Agreement shall be
invalid or unenforceable, such invalidity or unenforceability shall not affect
the validity and enforceability of the remaining provisions of this Agreement,
unless the result thereof would be unreasonable, in which case the parties
hereto shall negotiate in good faith as to appropriate amendments hereto.
7.8 Termination. This Agreement may be terminated at any time
by a written instrument signed by the parties hereto. Unless sooner terminated
in accordance with the preceding sentence, this Agreement (other than Section 5
hereof) shall terminate in its entirety on such date as there shall be no
Registrable Shares.
7.9 Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision hereof is
validly asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees (including any fees incurred in any appeal) in
addition to its costs and expenses and any other available remedy.
7.10 No Third Party Beneficiaries or Assignees. Nothing herein
expressed or implied is intended to confer upon any person, other than the
parties hereto or the Holders (to the extent expressly provided herein) any
rights, remedies, obligations or liabilities under or by reason of this
Agreement. Neither this Agreement not the rights or obligations hereunder may be
assigned or otherwise transferred by any Holder except as permitted herein with
respect to a Transfer of Registrable Shares.
7.11 Starwood Lodging Trust. The parties hereto understand and
agree that the name "Starwood Lodging Trust" is a designation of the Trust and
its trustees (as trustees but not personally) under the Trust's Declaration of
Trust, and all persons dealing with the Trust shall look solely to the Trust's
assets for the enforcement of any claims against the Trust, and that the
Trustees, officers, agents and security holders of the Trust assume no personal
liability for obligations entered into on behalf of the Trust, and their
respective individual assets shall not be subject to the claims of any person
relating to such obligations.
<PAGE> 29
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of the date first written above.
"Shareholder"
NEW REMINGTON PARTNERS,
a Texas general partnership
By: REMINGTON VENTURERS, INC.,
a Texas corporation,
a General Partner
By: /s/ Mansor Dalaan
--------------------
Mansor Dalaan
President
By: REMINGTON VENTURERS II, INC.,
a Texas corporation,
a General Partner
By: /s/ Mansor Dalaan
--------------------
Mansor Dalaan
President
STARWOOD HOTELS & RESORTS TRUST
a Maryland real estate investment trust
By: /s/ Steven R. Goldman
------------------------------
Steven R. Goldman
Senior Vice President
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
a Maryland corporation
By: /s/ Nir E. Margalit
----------------------------
Nir E. Margalit
Secretary
<PAGE> 30
ANNEX A
to Registration
Rights Agreement
AGREEMENT TO BE BOUND
BY THE REGISTRATION RIGHTS AGREEMENT
The undersigned, being the transferee or the intended
transferee of _________ Paired Shares (the "Registrable Shares") of Starwood
Hotels & Resorts Trust, a Maryland real estate investment trust, and Starwood
Lodging Corporation, a Maryland corporation (together, the "Company"), as a
condition to the transfer to and acquisition by the undersigned of such
Registrable Shares, acknowledges that matters pertaining to the sale and
registration of such Registrable Shares are governed by the Registration Rights
Agreement (the "Registration Rights Agreement"), dated as of January 15, 1998,
initially among the Company and New Remington Partners, a Texas general
partnership, and the undersigned hereby (1) acknowledges receipt of a copy of
such agreement, and (2) agrees to be bound as a "Holder" by the terms of the
Registration Rights Agreement, as the same has been or may be amended from time
to time.
Agreed to this ____ day of __________, ____.
___________________________________
By: __________________________
Its: __________________________
Address, telephone number and
telecopy number for notices:
_________________________________
_________________________________
_________________________________
_________________________________
<PAGE> 31
ANNEX B
to Registration
Rights Agreement
[Letterhead of Selling Holder]
____________, 199__
BY TELECOPIER
Starwood Hotels & Resorts Trust
2231 E. Camelback Road, Suite 410
Phoenix, Arizona 85016
Attention: Ronald C. Brown or Chief Financial Officer
Starwood Hotels & Resorts Worldwide, Inc.
2231 E. Camelback Road, Suite 400
Phoenix, Arizona 85016
Attention: Alan M. Schnaid or Vice President
Re: Starwood Hotels & Resorts
Ladies and Gentlemen:
Reference is made to the prospectus (the "Prospectus")
included in the Registration Statement on Form S-3 (Registration No.
___________) filed by Starwood Hotels & Resorts Trust (the "Trust") and Starwood
Hotels & Resorts Worldwide, Inc. (the "Corporation" and, together with the
Trust, the "Company") with the Securities and Exchange Commission on _________,
1998, under the Securities Act of 1933, as amended (the "Securities Act"),
relating to the registration for resale by the shareholders named therein of
certain shares of beneficial interest, par value $.01 per share, of the Trust,
and shares of common stock, par value $.01 per share, of the Corporation (the
"Paired Shares"), including _______ Paired Shares held by the undersigned.
___________ of the Paired Shares held by the undersigned were
offered for sale and have been sold by the undersigned in a manner consistent
with the description set under the caption "Plan of Distribution" in the
Prospectus. Thus, the undersigned requests that new certificates evidencing such
Paired Shares be issued in the name of _________________________, the
transferee, free of any restrictive legend under the Securities Act.
Very truly yours,
[Name and signature of Selling Holder]
<PAGE> 32
ANNEX C
to Registration
Rights Agreement
[Letterhead of Selling Holder]
____________, 199__
BY TELECOPIER
Sidley & Austin
555 West Fifth Street
Los Angeles, California 90013
Attention: Sherwin L. Samuels, Esq.,
Kenneth H. Levin, Esq. and
James V. Robertson, Esq.
Re: Starwood Hotels & Resorts
Ladies and Gentlemen:
Reference is made to the prospectus (the "Prospectus")
included in the Registration Statement on Form S-3 (Registration No.
___________) filed by Starwood Hotels & Resorts Trust (the "Trust") and Starwood
Hotels & Resorts Worldwide, Inc. (the "Corporation" and, together with the
Trust, the "Company") with the Securities and Exchange Commission on _________,
1998, under the Securities Act of 1933, as amended (the "Securities Act"),
relating to the registration for resale by the shareholders named therein of
certain shares of beneficial interest, par value $.01 per share, of the Trust,
and shares of common stock, par value $.01 per share, of the Corporation (the
"Paired Shares"), including _______ Paired Shares held by the undersigned.
The undersigned understands that you have been requested by
the Company to deliver an opinion to the Company's transfer agent that, upon the
sale by the undersigned of the Paired Shares, certificates evidencing such
shares may be issued to the transferee(s) without any restrictive legend under
the Securities Act. For the purpose of facilitating the delivery by you of such
opinion, the undersigned, hereby represents that _______ of the Paired Shares
held by the undersigned were offered for sale and have been sold in a manner
consistent with the description set under the caption "Plan of Distribution" in
the Prospectus.
The undersigned understands that you will be relying on the
foregoing representations in rendering your opinion, and the undersigned
consents to such reliance.
Very truly yours,
[Name and signature of Selling Holder]
<PAGE> 1
Exhibit 10.55
ASPEN EXECUTION
PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
By
And Between
SAVANAH LIMITED PARTNERSHIP,
a District of Columbia Limited Partnership,
As Seller
And
STARWOOD LODGING TRUST,
a Maryland Real Estate Investment Trust
And
STARWOOD LODGING CORPORATION,
a Maryland Corporation,
As Buyer.
Dated As Of: December 30, 1997
Relating to the
Aspen Luxury Collection Hotel
Aspen, Colorado
<PAGE> 2
PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
THIS PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (this
"Agreement") is entered into as of the 30th day of December, 1997, by and
between SAVANAH LIMITED PARTNERSHIP, a District of Columbia limited partnership
("Seller"), and STARWOOD LODGING TRUST, a Maryland Real Estate Investment Trust
(the "Trust"), and STARWOOD LODGING CORPORATION, a Maryland corporation (the
"Corporation"; the Trust and the Corporation being referred to herein
collectively as, "Buyer").
A. Seller owns that certain parcel of land described in EXHIBIT A
attached hereto and made a part hereof, which is improved with a hotel building
and certain related improvements, all as more particularly set forth in this
Agreement.
B. Seller desires to sell, and Buyer desires to purchase, the above
described land and hotel together with the related improvements upon the terms
and subject to the conditions set forth in this Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements contained in this Agreement and for other good and
valuable consideration, the receipt and adequacy of which are hereby mutually
acknowledged, Buyer and Seller agree as follows:
SECTION 1
DEFINITIONS
1.1 Defined Terms
"Accounts Receivable" shall mean, collectively, all Cash Equivalent
Receivables, all Invoiced Receivables and all Other Accounts Receivable.
"Affiliate" shall have the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Exchange Act.
"Anthem" shall have the meaning set forth in SECTION 14.3.1(ii).
"Approved Service Contracts" shall mean the Service Contracts
identified on SCHEDULE 1.1.1 annexed hereto and made a part hereof and any other
Service Contracts cancelable upon thirty (30) or fewer days notice without
penalty, which Service Contracts Buyer shall assume as of the Closing pursuant
to the General Assignment and Assumption Agreement.
"Aspen Subdivision" shall mean the land subject to that certain
First Amended Plat of Aspen Mountain Subdivision and Planned Unit Development
Agreement between the City of Aspen, Colorado and John M. Roberts, Jr., recorded
October 3, 1988, in Book 574 at Page 792 of the Real Property records of Pitkin
County, Colorado.
"Assignment and Assumption of Management Agreement" shall have the
meaning set forth in SECTION 4.2.1.4.
"Assignment and Assumption of Tenant Leases" shall have the meaning
set forth in SECTION 4.2.1.2.
"Bill of Sale" shall have the meaning set forth in SECTION 4.2.1.5.
"Business Day" shall mean any day other than Saturday or Sunday on
which the New York Stock Exchange is open for business.
"Booking" shall mean a contract or reservation for the use of guest
rooms, banquet facilities, meeting rooms, and/or conference facilities at the
Hotel.
<PAGE> 3
"Buyer's Counsel" shall mean the law firm of Greenberg Traurig
Hoffman Lipoff Rosen & Quentel acting through Andrew E. Zobler, Esq.
"Buyer Default" shall have the meaning set forth in SECTION 3.5.1.
"Cash Equivalent Receivables" shall mean all Guest Ledger
Receivables which are in the form of drafts or checks written on any bank or
other financial institution, certified checks, money orders, amounts owed to
Seller from credit card, debit card, travel and entertainment card or traveler's
check companies, and are in such other forms which are considered to be cash
equivalents under generally acceptable accounting principles, whether or not
such Guest Ledger Receivables have been presented or billed to any such bank,
financial institution or other company as of the Closing Date.
"Cash Purchase Price" shall mean (a) Nine Million Dollars
($9,000,000.00) plus (b) the Overage Cash Payment, if any, as adjusted pursuant
to SECTION 3.2.2.
"Closing" or "Close of Escrow" shall have the meaning set forth in
SECTION 4.7.2.
"Closing Agent" shall have the meaning set forth in SECTION 4.8.10.
"Closing Date" shall mean the day on which the Closing occurs
hereunder.
"Closing Payment" shall have the meaning set forth in SECTION
3.2.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder.
"Collective Bargaining Agreements" shall have the meaning set forth
in SECTION 14.2.
"Conveyance Documents" shall mean the Deed, the Assignment and
Assumption of Management Agreement, the Assignment and Assumption of Tenant
Leases, the Bill of Sale and the General Assignment and Assumption Agreement.
"Deed" shall have the meaning set forth in SECTION 4.2.1.1.
"Deposit" shall mean an amount equal to $10,000,000.00 held in
accordance with the provisions of SECTION 3 hereof together with all interest
accrued thereon.
"Employer Corporation" shall mean Luxury Holdings, Inc. (formerly
known as TQM Inc.).
"Employment Agreements" shall mean the Collective Bargaining
Agreements and Employee Benefit Plans (as defined in Section 3(3) of ERISA),
affecting Hotel Employees, including pension, profit sharing, employee benefit
and similar plans, if any, and agreements with regard to any Hotel Employee each
of which are identified on or expressly described in the materials identified on
SCHEDULE 1.1.2 annexed hereto and made a part hereof.
"Environmental Condition" shall mean any condition with respect to
soil, surface waters, groundwater, land, stream sediments, surface or subsurface
strata, ambient air and any environmental medium comprising or surrounding the
Real Property, which results in any damage, loss, cost, expense, claim, demand,
order or liability to or against Seller or Buyer by any third party (including,
without limitation, any government entity) as a result of a violation of any
applicable Environmental Laws.
"Environmental Laws" shall mean all presently applicable statutes,
regulations, rules, ordinances, codes, licenses, permits and orders of any and
all governmental agencies, departments, commissions, boards, bureaus or
instrumentalities of the United States, states and political subdivisions
thereof, and all applicable judicial and administrative and regulatory decrees,
judgments and orders relating to the protection of the environment, including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of
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1980, as amended, 42 U.S.C. 9061 et seq.; the Hazardous Materials Transportation
Act, as amended, 49 U.S.C. 1801, et seq.; the Resource Conservation and Recovery
Act, as amended, 42 U.S.C. 6901, et seq.; the Federal Water Pollution Control
Act, as amended, 33 U.S.C. 1251, et seq.; and analogous state laws and
regulations.
"Equipment Leases" shall mean all leases of equipment, vehicles,
furniture or other personal property leased by, or on behalf of, Seller and
located at, or used in the operation of the Real Property, together with any and
all amendments thereto, which are identified on SCHEDULE 1.1.3 annexed hereto.
"Equity Purchase Price" shall mean the number of Paired Shares with
a value as determined pursuant to the Stock Agreement equal to $152,637,000.00
to be delivered in accordance with the applicable provisions of the Stock
Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the regulations promulgated thereunder.
"Escrow" shall mean an escrow opened with the Escrow Holder for the
purchase and sale of the Property in accordance with the provisions of this
Agreement.
"Escrow Holder" shall mean the Title Company unless otherwise
agreed in writing by Buyer and Seller.
"Escrow Instructions" shall have the meaning set forth in SECTION
4.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Excluded Property" shall mean all Seller's right, title and
interest in and to: (a) those claims of Seller attributable to the period prior
to the Closing Date and described on SCHEDULE 1.1.4 annexed hereto and made a
part hereof, or which Seller is entitled to assert under the express provisions
of SECTION 5; (b) all insurance proceeds under Seller's Insurance and workers'
compensation policies, including return premiums and dividends thereon and all
claims thereunder in each case to the extent attributable to acts or occurrences
prior to the Closing Date; (c) all accounts owned or maintained by Seller, or
Manager on Seller's behalf, in connection with the Hotel, including all
operating and reserve accounts; (d) any books, records, files or papers
specifically described in SECTION 6.3.2 as excluded from the Property
Information; and (e) up to five (5) of the items of art work selected by Seller
subject to Buyer's reasonable approval, provided, however, Seller shall replace
each such item of art work prior to the Closing Date with a similar item of art
work subject to Buyer's reasonable agreement that such art work is consistent
with the quality, character and decor of the Hotel.
"Excluded Parties" shall have the meaning set forth in SECTION
17.18
"Execution Date" shall mean the date hereof.
"General Assignment and Assumption Agreement" shall have the
meaning set forth in SECTION 4.2.1.3.
"Guest Ledger Receivables" shall mean amounts, including, without
limitation, room charges, accrued to the accounts of guests occupying rooms at
the Hotel or group, conference or banquet customers of Seller at the Hotel.
"Hart-Scott-Rodino Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and the rules and regulations promulgated thereunder,
as the same has been amended from time to time.
"Hotel" shall mean the hotel located on the Land and commonly known
as the Aspen Luxury Collection Hotel.
"Hotel Employees" shall mean all full-time, part-time or temporary
employees of
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Seller and/or the Employer Corporation (but not employees of Manager or any of
its affiliates) who are employed by Seller and/or the Employer Corporation
exclusively at or in connection with the Hotel as of the Closing Date and who
are listed on SCHEDULE 1.1.6 annexed hereto and made a part hereof.
"Improvements" shall mean Seller's right, title and interest in and
to the hotel building and other improvements now or hereafter located on the
Land.
"Insured Casualty Notice" shall have the meaning set forth in
SECTION 12.1.1.
"Intangible Property" shall mean all of Seller's right, title and
interest in and to the following, in each case excluding any Excluded Property:
(i) Licenses and Permits; (ii) trademark rights, and other intangible property,
rights, titles, interests, privileges and appurtenances related to or used in
connection with the Hotel or its operations; (iii) warranties and guaranties of
architects, engineers, contractors, subcontractors, suppliers or materialmen
involved in the repair, construction, maintenance, design, reconstruction or
operation of the Hotel, or any equipment or systems constituting a part of the
Hotel; (iv) Approved Service Contracts; (v) Equipment Leases; (vi) Bookings; and
(vii) computer programs, software and documentation thereof (subject to the
limitations of any applicable license agreements pertaining thereto), and
including all electronic data processing systems, program specifications, source
codes, logs, input data and report layouts and forms, record file layouts,
diagrams, functional specifications and variable descriptions, flow charts and
other related materials used in connection therewith; and (viii) any goodwill
associated with the operation of the Hotel.
"Interim Management Agreement" shall have the meaning set forth in
SECTION 17.20 hereto.
"Invoiced Receivables" shall mean all Guest Ledger Receivables
other than Cash Equivalent Receivables whether or not such Guest Ledger
Receivables have been invoiced by Seller as of the Closing Date.
"Land" shall mean Seller's right, title and interest in and to the
land described on EXHIBIT A annexed hereto and made a part hereof.
"Licenses and Permits" shall mean all licenses, permits,
registrations, certificates, authorizations and governmental approvals other
than the Liquor License obtained in connection with the design, construction,
rehabilitation, use and/or operation of the Hotel.
"LIBOR Rate" shall mean the average of interbank offered rates for
three-month dollar deposits in the London market based on quotations at five (5)
major banks, as published from time to time in The Wall Street Journal. If The
Wall Street Journal ceases to publish such a compilation of interbank offered
rates, or if The Wall Street Journal ceases to be published, then Buyer shall
propose a substitute method of determining the interest rate generally known as
the three-month LIBOR rate, which method, absent manifest error, shall be
binding on Seller and Buyer.
"Liquor License" shall mean all licenses, permits, registrations,
certificates, authorizations and governmental approvals with respect to service
of alcoholic beverages at the Hotel.
"Liquor License Management Agreement" shall have the meaning set
forth in SECTION 4.2.1.8.
"Lock Price" shall have the meaning set forth in the Stock
Agreement.
"Losses" shall mean any and all losses, liabilities, obligations,
damages, claim or expense, including without limitation, reasonable attorneys'
and accountants' fees and
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<PAGE> 6
disbursements related thereto.
"Manager" means Sheraton Operating Corporation, a wholly-owned
subsidiary of ITT Sheraton Corporation.
"Management Agreement" shall mean that certain Management Agreement
entered into as of August 13, 1997 between Seller and Manager.
"Market Price" shall have the meaning set forth in the Stock
Agreement.
"Material" shall mean $5,000 for any single occurrence and $15,000
in the aggregate for any group of occurrences whether or not related.
"Material Casualty" shall mean a casualty or casualties that, in
the aggregate: (i) causes in excess of $10,000,000.00 worth of damage to the
Hotel; or (ii) will take twelve (12) months or longer from the date of the
casualty to fully remediate.
"Material Taking" shall mean an exercise by an applicable
governmental authority of the power of condemnation or eminent domain that
results in: (a) the taking of more than twenty percent (20%) of the Real
Property; (b) a material reduction or restriction in access to the Property; or
(c) the inability to operate the Hotel in substantially the same manner (without
material additional expense) as it was operated prior to such taking.
"Memorandum of Contract" shall mean a memorandum of this Agreement
in the form attached as EXHIBIT B hereto.
"Monetary Lien" shall mean any monetary lien affecting the Real
Property of an ascertainable amount, other than any lien for taxes or
assessments which are not yet due and payable.
"Non-Foreign Person Certificate" shall have the meaning set forth
in SECTION 4.2.1.13.
"Other Accounts Receivable" shall mean any and all rents,
additional rent, deposits, and other sums and charges owing to Seller that are
in any way attributable to the operation of the business at the Hotel,
including, without limitation, all rents and/or license fees due from Tenants
under Tenant Leases, and including any such amounts which are past due, but
excluding Guest Ledger Receivables.
"Overage Cash Payment" shall mean the portion of the Equity
Purchase Price which is payable in cash at Closing as provided in SECTION
3.2.2.1, if any.
"Ownership Limitation" shall mean the limitations contained in the
declaration of trust for the Trust and the Corporation's articles of
incorporation prohibiting actual or constructive ownership by any one person or
group of related persons of more than 8% of the issued and outstanding Paired
Shares taking into account the attribution rules of Section 544(a) of the Code
as modified by Section 856(h) of the Code or Section 318(a) of the Code as
modified by Section 856(d)(5) of the Code.
"Paired Shares" shall mean one share of beneficial interest, par
value $.01 per share of the Trust, and one share of common stock, par value $.01
per share, of the Corporation that are subject to the Pairing Agreement, which
shares shall be transferable as provided in the Stock Agreement and the Pairing
Agreement.
"Pairing Agreement" shall mean the Pairing Agreement dated as of
June 25, 1980, as amended, between the Trust and the Corporation providing, in
relevant part, for the pairing of all outstanding beneficial interests of the
Trust and shares of the Corporation.
"PCL Litigation" shall have the meaning set forth in SECTION 5.10.
"Permitted Encumbrances" shall have the meaning set forth in
SECTION 7.3.
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<PAGE> 7
"Person" shall mean any natural person, partnership, corporation,
association, limited liability company, trust or any other legal entity.
"Personal Property" shall mean collectively the Tangible Personal
Property and the Intangible Property.
"Preliminary Title Report" shall have the meaning set forth in
SECTION 7.1.
"Property" shall mean collectively the Real Property, the Personal
Property, the Tenant Leases, and the Accounts Receivable, but shall exclude the
Excluded Property.
"Property Information" shall have the meaning set forth in SECTION
6.4.2.
"Proration Time" shall mean 12:01 a.m. Mountain Time on the Closing
Date.
"PUD Cooperation Agreement" shall have the meaning set forth in
SECTION 4.2.1.10.
"Purchase Price" shall mean the sum of the Cash Purchase Price and
the Equity Purchase Price.
"Real Property" shall mean the Land and the Improvements, together
with Seller's right, title and interest in and to all rights of way, easements,
water or littoral rights, rights to any minerals, oil, gas and other hydrocarbon
substances, or any portion thereof, relating to the Land, and Seller's right,
title and interest in and to all streets, alleys, strips and gores abutting the
Land, if any.
"Records and Plans" shall mean, all financial records showing the
income and expenses of the Hotel for the prior three (3) calendar years and for
the current year to date, certificates of occupancy, records of the Hotel's
operations (including utility bills), building plans, specifications and
drawings, lists of Personal Property, surveys, tax bills for the Real Property
for the last three (3) years and for the current year to date, copies of the
Service Contracts, Licenses and Permits and other documents related to the use,
maintenance, repair, management, construction and/or operation of the Hotel, in
each case, to the extent located on-site at the Hotel, or to Seller's Knowledge,
otherwise under the control of Seller.
"Related Agreement" shall have the meaning set forth in SECTION
9.1.3.
"Schedule of Advance Bookings" means the Schedule of Advance
Bookings delivered pursuant to SECTION 4.2.1.19.
"Schedule of Tenant Leases" means the Schedule of Tenant Leases set
forth in SCHEDULE 1.1.7 annexed hereto and made a part hereof.
"Scheduled Closing Date" shall mean January 15, 1998, as such date
may be extended in accordance with the provisions of SECTION 7.1 - time being of
the essence.
"SEC" shall mean the United States Securities and Exchange
Commission. "SEC Documents" shall have the meaning set forth in SECTION 6.1.4.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller Default" shall have the meaning set forth in SECTION 11.1.
"Seller's Closing Certificate" shall have the meaning set forth in
SECTION 4.2.1.18.
"Seller's Counsel" shall mean Morrison & Foerster LLP acting
through Thomas R. Fileti, Esq.
"Seller's Due Diligence" shall mean the information gathering and
review process described on SCHEDULE 1.1.8.
"Seller's Insurance" shall have the meaning set forth in SECTION
6.3.12.
"Seller's Knowledge" shall mean with respect to any representation
or warranty
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so qualified, the knowledge of the person(s) identified on SCHEDULE 1.1.8
annexed hereto and made a part hereof, on the date on or as of which such
representation or warranty is made, following the completion by such person(s)
of Seller's Due Diligence, but without any other duty to investigate or inquire
and without attribution to any such identified person(s) of facts and matters
otherwise within the personal knowledge of any other officers, employees, or
agents of Seller or any third parties (including, but not limited to, the
Manager or any previous manager of the Hotel), but not within the actual current
knowledge of such named person(s). It is understood that none of the individuals
identified on SCHEDULE 1.1.8 shall have any personal liability for any of
Seller's representations, warranties and other obligations under this Agreement.
"Service Contracts" shall mean any and all service contracts,
landscaping contracts, maintenance agreements, open purchase orders and other
contracts for the provision of services, materials or supplies to or for the
benefit of the Property, except for the Management Agreement, together with any
and all amendments thereto.
"Specific Disclosure Matters" shall mean certain disclosures and
information provided or disclosed by Seller to Buyer described on SCHEDULE 1.1.9
annexed hereto and made a part hereof.
"Starwood Disclosure" shall mean collectively, the Form S-3 filed
by the Corporation and the Trust with the SEC on November 12, 1997, and the Form
S-4 filed by the Corporation and the Trust with the SEC on November 20, 1997, as
the same may be amended by any filing with the SEC made by the Trust or the
Corporation as amended to date and from time to time thereafter.
"Starwood Operating Partnership" shall mean SLC Operating Limited
Partnership, a Delaware limited partnership.
"Starwood Realty Partnership" shall mean SLT Realty Limited
Partnership, a Delaware limited partnership.
"State" shall mean the state in which the Hotel is located.
"Stock Agreement" shall have the meaning set forth in SECTION
4.2.1.6.
"Survey" shall mean an as-built ALTA survey of the Real Property
certified to the Title Company meeting all State land survey requirements.
"Tangible Personal Property" shall mean, in each case to the extent
owned by Seller and excluding any and all of the Excluded Property: (i) all
Records and Plans; (ii) all "Inventories", as such term is defined in the
Uniform System of Accounts; (iii) all depreciable personal property; and (iv)
all other tools, vehicles, supplies, artwork, furniture, furnishings, machinery,
equipment, licensed software and personal computer based security systems, if
any, specialized hotel equipment and other tangible personal property, used in
connection with the ownership, operation or maintenance of the Property,
including, without limitation, all china, glassware, silverware, linens, towels,
curtains, uniforms, engineering, maintenance, and housekeeping supplies,
draperies, materials and carpeting, used or intended for use, but not for sale,
in connection with the operation of the Hotel, all equipment used in the
operation of the kitchen, dining rooms, lounges, bars, laundry, dry cleaners,
lobby, reservation desk and all merchandise, food and beverages held for sale in
connection with the operation of the Hotel, which are on hand on the Closing
Date; provided, however, that to the extent that any applicable law prohibits
the transfer of alcoholic beverages from Seller to Buyer, such beverages shall
not be considered a part of the Tangible Personal Property.
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<PAGE> 9
"Tenant" shall mean a tenant, licensee or concessionaire occupying
space at any portion of the Property pursuant to a Tenant Lease.
"Tenant Lease" shall mean a lease, concession agreement or license
agreement entered into by or on behalf of Seller with a third party for the use
of any part of the Real Property, including those leases, concession agreements
and license agreements shown on the Schedule of Tenant Leases, together with any
amendments thereto but excluding Bookings.
"Tenant Security Deposits" shall mean all security deposits or
other security of Tenants under the Tenant Leases, plus accrued interest, if
any, payable thereon.
"Termination Charges" shall have the meaning set forth in SECTION
14.1.
"Termination Notice" shall have the meaning set forth in SECTION
3.5.1.
"Threshold Amount" shall mean One Million Dollars ($1,000,000).
"Title Company" shall mean Chicago Title Insurance Company.
"Title Policy" shall have the meaning set forth in SECTION 7.2.
"Transfer Restriction Period" shall have the meaning set forth in
SECTION 17.18.
"Uninsured Casualty Notice" shall have the meaning set forth in
SECTION 12.2.1.
"Uninsured Estimate to Repair" shall have the meaning set forth in
SECTION 12.2.1.
"Uniform System of Accounts" shall mean the Uniform System of
Accounts for Hotels, prepared by The Hotel Association of New York City, Inc.,
in effect as of the date hereof.
"Utility Deposits" shall mean Seller's right, title and interest in
and to all deposits delivered by Seller to utilities, governmental agencies,
suppliers or others pursuant to an Approved Service Contract or otherwise in
connection with the Real Property.
"Value Letter" shall have the meaning set forth in SECTION 4.3.1.4.
"WARN Act" shall mean the Workers Adjustment and Retraining
Notification Act and the Regulations promulgated thereunder, as the same has
been amended.
1.2 Other Definitional Provisions. The terms "hereof," "hereto,"
"hereunder" and similar terms when used in this Agreement shall refer to this
Agreement generally, rather than to the section in which such term is used,
unless otherwise specifically provided. Unless the context otherwise requires,
any defined term used in the plural shall refer to all members of the relevant
class, and any defined term used in the singular shall refer to any one or more
of the members of the relevant class.
SECTION 2
PURCHASE AND SALE OF PROPERTY
On the terms and subject to the conditions of this Agreement, Seller
agrees to sell the Property to Buyer, and Buyer agrees to purchase the Property
from Seller all as hereinafter provided. Notwithstanding any other provision of
this Agreement, there shall be excluded from the Property being conveyed
hereunder the Excluded Property.
SECTION 3
PURCHASE PRICE; PAYMENT;
BUYER'S DEFAULT; LIQUIDATED DAMAGES
3.1 Purchase Price. The purchase price for the Property shall be the
Purchase Price.
3.2 Payment. The Purchase Price shall be paid as follows:
3.2.1 Upon the execution hereof, Buyer shall deliver to Escrow
Holder, in cash or other immediately available funds, the Deposit, to be held by
Escrow Holder strictly in
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accordance with the provisions of this Agreement. If the Close of Escrow shall
occur, Seller shall be entitled to receive the Deposit as a credit against the
Purchase Price.
3.2.2 At least one (1) day prior to the Scheduled Closing Date
(unless extended pursuant to SECTION 7.1), Buyer shall deliver to Escrow Holder
an amount (the "Closing Payment") payable in the form specified in SECTIONS
3.2.2.1 and 3.2.2.2 below, equal to the Purchase Price less the amount of the
Deposit. The Closing Payment shall be paid as follows:
3.2.2.1 The Equity Purchase Price shall be delivered in
Paired Shares without adjustment for the pro-rations hereunder, which shares
shall be delivered in accordance with and subject to and transferable in
accordance with the provisions of the Stock Agreement and the Pairing Agreement.
If any portion of the Equity Purchase Price cannot be paid in Paired Shares on
account of the Ownership Limitation, a cash payment in an amount equal to the
product of (a) the number of Paired Shares which are not delivered hereunder or
under the Stock Agreement because of the Ownership Limitation and (b) the Lock
Price (the "Overage Cash Payment") shall be paid in cash or other immediately
available funds.
3.2.2.2 The balance of the Closing Payment shall be paid in
cash or other immediately available funds adjusted for the pro-rations provided
for expressly in this Agreement.
3.3 Investment of Escrowed Funds. Escrow Holder shall invest and
reinvest any funds deposited by Buyer in the Escrow only in bonds, notes,
Treasury bills or other securities having maturities of thirty (30) days or less
and constituting direct obligations of, or fully guaranteed by, the United
States of America (and provided, further, that such direct obligations or
guarantees, as the case may be, are entitled to the full faith and credit of the
United States of America) or such other investments as Buyer may direct and
Seller may approve, until Escrow Holder is required to deliver or use such funds
or any interest earned thereon in accordance with the provisions of this
Agreement. All interest accruing on the Deposit shall be paid to the party
ultimately entitled to the Deposit. All risk of loss on funds held in Escrow
shall be borne by Buyer or Escrow Holder.
3.4 Allocation of Purchase Price. The Purchase Price shall be allocated
among the assets and property that comprise the Property as proposed by Seller
prior to Closing subject to the reasonable approval of Buyer, and such
allocation shall be used by Seller and Buyer in connection with the preparation
of their respective income tax, sales tax, transfer tax, and any other
applicable tax returns. Seller and Buyer shall not, nor shall they permit their
respective Affiliates to, take a federal or state income tax position with any
taxing or other public authorities in any jurisdiction which is materially
inconsistent with the allocation so agreed upon by the parties.
3.5 Default by Buyer Prior to Closing; Liquidated Damages.
3.5.1 EXCEPT AS PROVIDED TO THE CONTRARY IN SECTION 7.1.1., IF
BUYER BREACHES ITS OBLIGATION TO PURCHASE THE PROPERTY UNDER THIS AGREEMENT AND
FAILS TO CURE SUCH BREACH ON OR BEFORE THE SCHEDULED CLOSING DATE (A "BUYER
DEFAULT"), THEN UPON WRITTEN NOTICE OF TERMINATION (A "TERMINATION NOTICE") FROM
SELLER TO BUYER AND ESCROW HOLDER, THE ESCROW AND THIS AGREEMENT SHALL TERMINATE
AND ESCROW HOLDER SHALL DISBURSE FROM THE ESCROW THE DEPOSIT TO SELLER AS
LIQUIDATED DAMAGES, WHICH SHALL BE SELLER'S SOLE REMEDY AT LAW OR IN EQUITY FOR
THE BUYER DEFAULT, AND THEREAFTER NEITHER
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PURCHASER NOR SELLER SHALL HAVE ANY FURTHER LIABILITY HEREUNDER, EXCEPT THAT
BUYER SHALL REMAIN OBLIGATED FOR PERFORMANCE OF ITS OBLIGATIONS UNDER SECTIONS
8, 10, 17.14, 17.19 AND ANY OTHER PROVISION HEREOF WHICH BY ITS EXPRESS TERMS
SURVIVES THE TERMINATION OF THIS AGREEMENT. NOTHING CONTAINED HEREIN SHALL LIMIT
SELLER'S RIGHT TO OBTAIN SPECIFIC PERFORMANCE OF BUYER'S OBLIGATION TO CLOSE
PURSUANT TO SECTION 7.1.1.
3.5.2 THE PARTIES ACKNOWLEDGE AND AGREE BY INITIALING THIS SECTION
3.5.2 THAT IF A BUYER DEFAULT OCCURS ON OR PRIOR TO THE SCHEDULED CLOSING DATE
AND IF, AS A RESULT OF SUCH BUYER DEFAULT, CLOSE OF ESCROW FAILS TO OCCUR,
SELLER WILL INCUR CERTAIN COSTS AND OTHER DAMAGES IN AN AMOUNT THAT WOULD BE
EXTREMELY DIFFICULT OR IMPRACTICAL TO ASCERTAIN; AND THE DEPOSIT BEARS A
REASONABLE RELATIONSHIP TO THE DAMAGES WHICH THE PARTIES ESTIMATE MAY BE
SUFFERED BY SELLER BY REASON OF SUCH FAILURE OF THE CLOSE OF ESCROW TO OCCUR AND
THAT SELLER'S RETENTION OF THE DEPOSIT IS FAIR AND REASONABLE COMPENSATION TO
SELLER BY REASON OF SUCH FAILURE OF THE CLOSE OF ESCROW TO OCCUR.
INITIALS: /s/ MD /s/ SRG /s/ MCM
__________________________ _________________________
Seller Buyer
SECTION 4
ESCROW; CLOSING; COSTS
4.1 Escrow. The purchase and sale of the Property shall be consummated
through the Escrow. Immediately upon the execution of this Agreement, the
parties shall deposit a copy of this Agreement with Escrow Holder. This
Agreement, together with any general provisions agreed to in writing by Buyer
and Seller for the benefit of Escrow Holder, shall constitute the escrow
instructions for the transfer of the Property (the "Escrow Instructions"). In
the event of any conflict between this Agreement and such general provisions,
this Agreement shall control unless otherwise expressly agreed in writing by
Buyer, Seller and Escrow Holder. If any requirements relating to the duties or
obligations of Escrow Holder are not acceptable to Escrow Holder, or if Escrow
Holder requires additional instructions, the parties shall make such deletions,
substitutions and additions to the Escrow Instructions as Buyer's Counsel and
Seller's Counsel shall mutually approve and which do not substantially alter
this Agreement or its intent. Written instructions from Seller's Counsel, in the
case of Seller, or from Buyer's Counsel, in the case of Buyer, shall be accepted
by Escrow Holder and shall be binding upon the party whose counsel gave such
instructions to Escrow Holder.
4.2 Seller's Deliveries to Escrow Holder.
4.2.1 Prior to the Scheduled Closing Date (subject to extension
pursuant to SECTION 7.1), Seller shall deliver to Escrow Holder the following
documents duly executed and, where applicable, acknowledged by Seller, each of
which shall be undated and the delivery of each of which shall be a condition
precedent to the obligation of Buyer to close hereunder.
4.2.1.1 Deed. A deed with respect to the Real Property in the
form of EXHIBIT 4.2.1.1 annexed hereto and made a part hereof, sufficient to
transfer all of Seller's right, title and interest in and to the Real Property,
subject only to the matters of record as of the Closing Date, from Seller to
Buyer (the "Deed");
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4.2.1.2 Assignment and Assumption of Tenant Leases. An
Assignment and Assumption of Tenant Leases in the form of EXHIBIT 4.2.1.2
annexed hereto and made a part hereof pursuant to which Seller shall assign the
Tenant Leases to Buyer and Buyer shall assume all of Seller's obligations
thereunder (the "Assignment and Assumption of Tenant Leases");
4.2.1.3 General Assignment. A General Assignment and
Assumption Agreement in the form of EXHIBIT 4.2.1.3 annexed hereto and made a
part thereof pursuant to which Seller shall assign to Buyer all of Seller's
right, title and interest in and to all of the Intangible Property and Buyer
shall assume all obligations thereunder (the "General Assignment and Assumption
Agreement");
4.2.1.4 Assignment and Assumption of Management Agreement. An
Assignment and Assumption of Management Agreement in the form of EXHIBIT 4.2.1.4
annexed hereto and made a part hereof pursuant to which Seller shall assign to
Buyer the Management Agreement and Buyer shall assume the obligations of Seller
thereunder, provided, however, the obligation to deliver the Assignment and
Assumption of Management Agreement shall be irrevocably waived, if prior to the
Close of Escrow, the Management Agreement shall have been terminated and the
Interim Management Agreement shall have become effective in accordance with
SECTION 17.20;
4.2.1.5 Bill of Sale. One or more Bills of Sale in the form
of EXHIBIT 4.2.1.5A AND B annexed hereto and made a part hereof conveying to
Buyer or designees of Buyer all of Seller's right, title and interest in and to
the Tangible Personal Property (the "Bill of Sale");
4.2.1.6 Stock Agreement. The Stock Agreement in the form of
EXHIBIT 4.2.1.6 annexed hereto and made a part hereof (the "Stock Agreement");
4.2.1.7 Liquor License Management Agreement. The Liquor
License Management Agreement in the form of EXHIBIT 4.2.1.7 annexed hereto and
made a part hereof (the "Liquor License Management Agreement").
4.2.1.8 [Intentionally Omitted]
4.2.1.9 [Intentionally Omitted]
4.2.1.10 PUD Cooperation Agreement. A PUD Cooperation
Agreement in the form of EXHIBIT 4.2.1.10 annexed hereto and made a part hereof
pursuant to which Buyer and Seller shall further allocate the respective rights
and obligations of the owners of Lot 1, 3, 5 and 6, including without limitation
the obligation to maintain the Ice Rink on Lot 6 in the Aspen Subdivision (the
"PUD Cooperation Agreement");
4.2.1.11 [Intentionally Omitted]
4.2.1.12 [Intentionally Omitted]
4.2.1.13 Non-Foreign Person Certificate. A Non-Foreign Person
Certificate in the form of EXHIBIT 4.2.1.13 annexed hereto and made a part
hereof (the "Non-Foreign Person Certificate");
4.2.1.14 Transfer Tax Forms. Any statements, such as a
transfer or conveyance tax forms or returns required by applicable state or
local law to be executed by Seller in order to effect the Closing;
4.2.1.15 Certified Rent Roll. A copy of the rent roll for the
Property dated as of the Closing Date and certified by Seller to be (a) a true,
correct and complete copy of the rent roll for the Property provided to Seller
by the Manager; and (b) to Seller's Knowledge, to be
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true, correct and complete;
4.2.1.16 Certified Operating Statement. An operating
statement for the Property dated as of a date no more than thirty (30) days
prior to the Closing Date and certified by Seller to be (a) a true, correct and
complete copy of the operating statement for the Property provided to Seller by
Manager for the period of Manager's employment at the Property; and (b) to
Seller's Knowledge, to be, true, correct and complete;
4.2.1.17 Guest Ledger. A copy of the guest ledger dated as of
the Proration Time showing all Guest Ledger Receivables and certified by Seller
(a) to be a true, correct and complete copy of the guest ledger provided to
Seller by Manager; and (b) to Seller's Knowledge, to be true, correct and
complete;
4.2.1.18 Closing Certificate. A certification by Seller to
Seller's Knowledge that the representations and warranties set forth in SECTION
6.3 are true, correct and complete as of the Closing Date, except to the extent
that any such representation or warranty is expressly made only as of the
Execution Date subject to Seller's right to make revisions pursuant to SECTION
6.7 to such representations and warranties ("Seller's Closing Certificate");
4.2.1.19 Schedule of Bookings. A schedule of all Bookings
relating to periods after the Proration Time, certified by Seller (a) to be a
true, correct and complete copy of the schedule of Bookings provided to Seller
by Manager; and (b) to Seller's Knowledge, to be true, correct and complete;
4.2.1.20 Title Requirements. Any and all certificates,
affidavits and other instruments and documents which the Title Company shall
reasonably require to permit it to issue the Title Policy in the condition
required herein; provided, however, that (a) Seller is given written notice by
Title Company of the requirement of any such certificates, affidavits or other
instruments and documents within a reasonably sufficient time in advance of the
Scheduled Closing Date and (b) such incidental documents do not create any
liability to Seller that is inconsistent with the liability retained by Seller
under the terms of this Agreement;
4.2.1.21 Payoff Letters. A pay-off letter from the holder of
any mortgage or deed of trust presently encumbering the Real Property indicating
all sums required to satisfy the debt secured by and permit the discharge of
record the lien of such mortgage or deed of trust;
4.2.1.22 Notices to Tenants. Notices to Tenants of the
assignment to Buyer of the Tenant Leases in form and substance satisfactory to
Seller and Buyer;
4.2.1.23 Opinion of Seller's Counsel. An opinion of Seller's
Counsel in a form to be agreed upon by the parties; and
4.2.1.24 Other. Any other incidental documents, not otherwise
expressly provided for herein, reasonably required by Escrow Holder to
consummate the purchase and sale of the Property; provided, however, that (a)
Seller is given written notice by Escrow Holder of the requirement of any such
incidental documents within a reasonably sufficient time in advance of the
Scheduled Closing Date (subject to extension in accordance with the provisions
of SECTION 7.1); and (b) such incidental documents do not create any liability
to Seller that is inconsistent with the liability retained by Seller under the
terms of the this Agreement.
4.3 Buyer's Deliveries to Escrow Holder.
4.3.1 Prior to the Scheduled Closing Date (subject to extension in
accordance with the provisions of SECTION 7.1), and subject further to the
provisions of SECTION 4.3.1.4 in the case of the Value Letter, Buyer shall
deliver to Escrow Holder the following items and
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documents, which documents shall be duly executed and, where applicable,
acknowledged by Buyer or its designee, as applicable, and undated, and the
delivery of each of which shall be a condition precedent to the obligation of
Seller to close hereunder:
4.3.1.1 The Cash Purchase Price. The Cash Purchase Price;
4.3.1.2 Stock Certificates. Paired Shares in the amount
required to be delivered at the Closing in accordance with the provisions of
this Agreement and in accordance with and subject to the provisions of the Stock
Agreement;
4.3.1.3 Assignment and Assumption of Management Agreement. A
counterpart of the Assignment and Assumption of Management Agreement, provided,
however, the obligation to deliver the Assignment and Assumption of Management
Agreement shall be irrevocably waived, if prior to the Close of Escrow, the
Management Agreement shall have been terminated and the Interim Management
Agreement shall have become effective in accordance with SECTION 17.20;
4.3.1.4 Value Letter. A letter (the "Value Letter") to be
obtained by Buyer at Buyer's expense with respect to the reasonableness of the
allocation of the purchase price among the transactions being entered into as of
the date hereof between Buyer and Seller and/or Seller's Affiliates issued by
Bear Stearns;
4.3.1.5 Opinion of Buyer's Counsel. An opinion of Buyer's
counsel in a form to be agreed upon by the parties;
4.3.1.6 Stock Agreement. A counterpart of the Stock
Agreement;
4.3.1.7 [Intentionally Omitted]
4.3.1.8 Liquor License Management Agreement. A counterpart of
the Liquor License Management Agreement;
4.3.1.9 PUD Cooperation Agreement. A counterpart of the PUD
Cooperation Agreement;
4.3.1.10 [Intentionally Omitted].
4.3.1.11 [Intentionally Omitted]
4.3.1.12 Closing Certificate. A certification by Buyer that
the representations and warranties set forth in SECTION 6.1 and SECTION 6.2 are
true, correct and complete as of the Closing Date;
4.3.1.13 The Assignment and Assumption of Tenant Leases. A
counterpart of the Assignment and Assumption of Tenant Leases;
4.3.1.14 The General Assignment and Assumption Agreement. A
counterpart of the General Assignment and Assumption Agreement;
4.3.1.15 Transfer Tax Forms. Any statements, such as a
transfer or conveyance tax forms or returns required by applicable state or
local law to be executed by Buyer in order to effect the closing; and
4.3.1.16 Other. Any other incidental documents, not otherwise
expressly provided for herein, required by Escrow Holder to consummate the
purchase and sale of the Property; provided, however, that (a) Buyer is given
written notice by Escrow Holder of the requirement of such incidental documents
within a reasonably sufficient time in advance of the Scheduled Closing Date;
and (b) Buyer shall not be required to incur any liability, in connection with
the delivery of such incidental documents inconsistent with the provisions of
this Agreement.
4.4 Seller's Deliveries to Buyer. At or prior to the Close of Escrow,
Seller shall
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deliver to Buyer or cause to be available to Buyer on-site at the Hotel, the
following documents, to the extent the same have not already been delivered and
to the extent in the possession or control of Seller:
4.4.1 Tenant Leases/Tenant Deposits. The original Tenant Leases (or
if not available, the best available copies), and the originals of Tenant
Security Deposits which are evidenced by letters of credit or escrow agreements,
if any, and if necessary to enable Buyer to realize or draw upon same, consents
of the applicable Tenants and/or financial institutions or replacement letters
of credit or escrow agreements in favor of Buyer;
4.4.2 Service Contracts. The originals, or, if not available, the
best available copies, of the Approved Service Contracts;
4.4.3 Licenses and Permits. The originals, or, if not available,
the best available copies of the Licenses and Permits; and
4.4.4 Records and Plans. The originals, or, if not available, the
best available copies of the Records and Plans.
4.5 Possession. Seller shall deliver the keys and possession of the
Property to Buyer at the Close of Escrow free and clear of all leases, tenancies
and occupancies, except for the Management Agreement, the Bookings, the rights
of guests in guest rooms, banquet facilities, conference rooms and meeting
rooms, the rights of Tenants under the Tenant Leases (including their assignees,
subtenants or licensees), and the other Permitted Encumbrances.
4.6 Evidence of Authorization. At the Close of Escrow, each party shall
deliver to the other party evidence in form and content reasonably satisfactory
to the other party and the Title Company that (a) the party is duly organized
and validly existing under the laws of the state of its organization and has the
power and authority to enter into this Agreement, (b) this Agreement and all
documents delivered pursuant hereto have been duly executed and delivered by the
party, and (c) the performance by the party of its obligations under this
Agreement have been duly authorized by all necessary corporate, partnership or
other action.
4.7 Close of Escrow.
4.7.1 The Escrow shall close on or before the Scheduled Closing
Date.
4.7.2 Provided that Escrow Holder has not received from either
party written notice of the failure of any condition precedent specified in
SECTION 9 to the obligations of such party (or any previous such notice has been
withdrawn), then when the parties have each deposited into the Escrow the
documents and funds required by this Agreement and the Title Company is
unconditionally prepared to issue the Title Policy at the Close of Escrow,
Escrow Holder shall perform the following actions (collectively, "Close of
Escrow" or "Closing"):
4.7.2.1 Prepare a closing statement for the transaction for
approval by Seller and Buyer prior to the Close of Escrow;
4.7.2.2 Insert the Closing Date as the date of any undated
document to be delivered through Escrow;
4.7.2.3 Cause the Deed and the PUD Cooperation Agreement to
be recorded in the land records of the state and county where the Real Property
is located;
4.7.2.4 Deliver to Buyer the documents deposited into the
Escrow for delivery to Buyer at the Close of Escrow;
4.7.2.5 Deliver to Seller (a) all funds and Paired Shares to
be received by Seller from Buyer through the Escrow at the Close of Escrow less
(i) all amounts to be paid by Seller for Escrow Holder's fees and expenses and
(ii) all amounts paid by Escrow
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Holder in satisfaction of liens and encumbrances on the Real Property or other
matters pursuant to the written instruction of Seller, and (b) the documents
deposited into the Escrow for delivery to Seller at the Close of Escrow; and
4.7.2.6 Cause the Title Policy to be issued by the Title
Company and delivered to Buyer.
4.8 Costs of Escrow. Costs of the Escrow shall be allocated as follows:
4.8.1 Buyer and Seller shall each pay one-half (1/2) of the fees
of Escrow Holder;
4.8.2 Buyer and Seller shall each pay one-half (1/2) of the cost
of providing the Survey required to be delivered in accordance with the
provisions of SECTION 7.1; provided, however, Buyer shall be responsible for the
full cost of the Survey in the event the Closing does not occur hereunder other
than on account of default of Seller;
4.8.3 Buyer and Seller shall each pay one-half (1/2) of all
transfer taxes and recording fees payable in connection with the conveyance of
each portion of the Real Property and/or the recording of the Deed and any other
documents or instruments recorded pursuant to this Agreement;
4.8.4 Buyer and Seller shall each pay one-half (1/2) of all sales
or other personal property taxes, levies, fees and charges payable as a result
of the transfer of the Personal Property to Buyer and the consummation of the
transactions contemplated hereby. Buyer shall be the reporting person for such
purposes and shall prepare the necessary sales tax reports based upon the
allocations set forth in SECTION 3.4. The parties acknowledge that additional
sales tax may be assessed as a result of the transfer of the Personal Property
to Buyer and the consummation of the transactions contemplated hereby after the
Closing and that Buyer and Seller shall continue to each be responsible for
one-half of any such additional taxes. The provisions of Section 4.8.3 and
Section 4.8.4 shall survive the Closing;
4.8.5 Buyer and Seller shall each pay one-half (1/2) of the cost
of obtaining the coverage under the Title Policy, except that the cost of any
special endorsements shall be paid exclusively by Buyer;
4.8.6 At Closing or thereafter Buyer shall pay for the cost of the
Value Letter;
4.8.7 [Intentionally Omitted]
4.8.8 If the Close of Escrow fails to occur other than as a result
of a default hereunder by either party, including, without limitation, as a
result of a failure of a condition precedent set forth in SECTION 9, the fees of
the Escrow Holder and Title Company (including, without limitation, cancellation
fees) shall be borne equally between Buyer and Seller; and
4.8.9 If the Close of Escrow fails to occur as a result of a
default hereunder by either party, the fees of the Escrow Holder and Title
Company (including, without limitation, cancellation fees) shall be borne by the
defaulting party.
4.8.10 Pursuant to Section 6045 of the Internal Revenue and
Taxation Code, the Title Company shall be designated the "Closing Agent"
hereunder and shall be solely responsible for complying with the Tax Reform Act
of 1986 with regard to the reporting of all settlement information to the
Internal Revenue Service.
4.9 Other Costs. Except as set forth in SECTION 4.8.6, SECTION
11.1 and SECTION 15.1.6, each party shall pay all of its own legal, accounting
and consulting fees and other costs and expenses incurred in connection with
this Agreement.
4.10 Maintenance of Confidentiality by Escrow Holder. Escrow
Holder shall maintain
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in strict confidence and not disclose to anyone the existence of the Escrow, the
identity of the parties thereto, the amount of the Purchase Price, the existence
or provisions of this Agreement or any other information concerning the Escrow
or the transactions contemplated hereby, without the prior written consent of
Buyer and Seller.
SECTION 5
PRORATIONS AND ASSUMPTION OF OBLIGATIONS
5.1 General. All income, receivables, expenses (whether payable or
prepaid) and payables of the Property shall be apportioned equitably between the
parties as of the Proration Time in accordance with the provisions of this
SECTION 5 (all prorations are to be based upon the number of days in a 365 day
year). The obligation to make apportionments under SECTIONS 5.1 AND 5.2 shall,
unless otherwise expressly provided in this SECTION 5, survive the Close of
Escrow for a period of sixty (60) days at which time such apportionment shall be
final unless disputed during such period.
5.2 General and Specific Prorations. Without limitation, the following
items shall be apportioned:
5.2.1 At the Closing, Buyer shall assume all of the accounts
payable relating to goods and services ordered or obtained in the ordinary
course of operation of the business of the Hotel (including without limitation,
payments under the Service Contracts and Equipment Leases) prior to the
Proration Time. Seller shall be obligated to credit Buyer at the Close of Escrow
with an amount mutually agreed upon by Buyer and Seller at the Closing,
reflecting the parties' good faith estimate of such accounts payable as of the
Proration Time (which estimate shall deduct any discounts then available in the
ordinary course of business for the prompt payment of such accounts payable),
plus a further credit for any late fees then payable with respect to any
identified accounts payable. Buyer shall be responsible for paying when due all
accounts payable arising from the operation of the Property on or after the
Proration Time, and Seller shall have no further liability for such payables or
charges. As of the date which is sixty (60) days following the Closing Date,
Buyer and Seller shall calculate the amount of all accounts payable relating to
goods and services ordered or obtained in the ordinary course of operation of
the business of the Hotel (including without limitation, payments under the
Service Contracts and Equipment Leases) prior to the Proration Time. Seller
shall reimburse Buyer for any payments made on account of any such accounts
payable which were not reflected in the Parties' estimate of such amount
credited to Buyer at Closing and which have been paid by Buyer or for which
Buyer is obligated to pay in accordance with the provisions hereof, and if the
amount of such credit exceeds the amounts so paid or for which Buyer is so
obligated, Buyer shall pay such excess amount to Seller;
5.2.2 At the Closing, Seller shall assign to Buyer all of the
Accounts Receivable, for which Seller shall receive a credit at the Close of
Escrow in an amount equal to (a) the full, aggregate outstanding balance of the
Cash Equivalent Receivables (without discount except for service charges due to
charge card companies) plus (b) the full aggregate outstanding balance of the
Invoiced Receivables and Other Accounts Receivable as of the Proration Time,
provided, Buyer shall at its option accept or reject any Invoiced Receivables
and Other Accounts Receivable over ninety (90) days and Seller shall not receive
a credit for any Invoiced Receivables and Other Accounts Receivable over ninety
(90) days rejected by Buyer; provided, that Buyer shall at its own expense use
reasonable efforts to collect any such rejected Invoiced Receivables and Other
Accounts Receivable on behalf of Seller for a period of sixty (60) days
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after the Closing Date and thereafter Seller shall have the right to collect
same for its own account; provided, further, as of the date which is sixty (60)
days following the Closing Date, Buyer and Seller shall make any adjustments
required to reflect the collectibility of any Invoiced Receivables and Other
Accounts Receivable (it being agreed that (a) any accounts receivable not listed
on the schedule of accounts receivable of the Property as of the date which is
sixty (60) days following the Closing Date shall be deemed paid as of such date
and (b) except as provided in (a), any accounts receivable which are more than
ninety (90) days past due as of the date which is sixty (60) days following the
Closing Date shall be deemed uncollectable as of such date) and Seller and Buyer
shall make a corresponding payment to the other as required to accurately
reflect the collectibility of such Invoiced Receivables and Other Accounts
Receivable and any accounts receivable deemed uncollectable as of such date in
accordance with the terms hereof shall be the property of Seller and Seller
shall be permitted (at its expense and for its own account) to collect the same;
5.2.3 In prorating the Accounts Receivable, Buyer and Seller shall
each receive credit for one-half (1/2) of all Guest Ledger Receivables
attributable to the room night during which the Proration Time occurs. Seller
shall receive the income from all restaurant and bar facilities located at the
Property through the Proration Time and Buyer shall receive such income
thereafter;
5.2.4 At the Closing, Seller shall deliver to Buyer all of the
merchandise owned by Seller and held for retail sale at the Hotel, for which
Seller shall receive a credit at the Close of Escrow in an amount equal to
Seller's cost for such merchandise;
5.2.5 All sales, use and occupancy taxes arising from the
operation of the Property shall be prorated as of the Proration Time;
5.2.6 Fees for transferable annual permits, licenses, and/or
inspection fees, if any, for periods during which the Proration Time occurs
shall be prorated as of the Proration Time;
5.2.7 Utility charges with respect to the Property levied against
Seller or the Property and the value of fuel stored on the Property shall be
prorated at Seller's cost therefor as of the Proration Time. Seller shall notify
all utilities, governmental agencies, suppliers and others providing services to
the Property of the prospective change in ownership and operation of the
Property, and Seller shall use its reasonable efforts to cause all utilities
furnished to the Property, including, but not limited to, electricity, gas,
water and sewer, along with any fuel storage tanks to be read the day prior to
the Proration Time;
5.2.8 Permitted administrative charges, if any, on Tenant Security
Deposits shall be prorated;
5.2.9 Buyer shall receive a credit for advance payments and/or
deposits, if any, under Bookings to the extent the Bookings relate to a period
after the Proration Time;
5.2.10 Vending machine monies will be removed by Seller as of the
Proration Time for the benefit of Seller;
5.2.11 Buyer shall purchase and Seller shall sell to Buyer (or
Seller shall receive a credit therefore) all petty cash funds and cash in the
Property's house banks at 100% of face value at the Proration Time;
5.2.12 Wages, salaries and payroll taxes and other payroll
deductions for all Hotel Employees shall be apportioned as of the Proration Time
(i.e., the night shift shall be prorated 50/50 for the night preceding the
Closing Date). Buyer shall assume all accrued
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vacation benefits and sick leave benefits due to such Hotel Employees which
relate to any period prior to the Proration Time and shall receive a credit for
the full amount of all such accrued benefits reasonably expected to be paid
after the Closing Date; provided, that as of the date which is sixty (60) days
following the Closing, Buyer and Seller shall adjust the amount of the credit if
required to take into account the benefits actually required to be paid by Buyer
or then reasonably expected to be paid following the Closing Date by Buyer.
Buyer shall also assume all obligations of Seller and the Employer Corporation,
under the Employment Agreements and/or the Management Agreement to pay all such
wages, salaries, and compensation set forth above accruing subsequent to
Proration Time; provided, however, that other than as set forth in SECTION 14.1
hereof, no provision contained in this Agreement shall be construed to prevent
the Buyer from terminating or amending in any manner such Employment Agreements
and Management Agreements subsequent to the Proration Time. The obligation to
pay bonuses, if any, following the Closing shall be allocated as of the
Proration Time and adjusted between Buyer and Seller; and
5.2.13 Real and personal property taxes, assessments and special
district levies shall be prorated for the tax fiscal year in which the Closing
Date occurs on the basis of the then most current available tax bills, Seller
being charged through the day prior to the Closing Date and Buyer with the
Closing Date and thereafter.
5.3 Deposits. All rights to utility, assessment, and other cash
deposits (including, without limitation, any Utility Deposits) held by others
for Seller's account, and all certificates of deposit or other forms of cash
collateral held by or otherwise pledged to others for Seller's account to secure
obligations of Seller under Service Contracts, Equipment Leases or other
obligations assumed by Buyer, shall be assigned or transferred to Buyer at the
Close of Escrow; provided, that if any of such deposits are not transferable,
Seller shall retain all rights with respect thereto and there shall be no debit
made to Buyer on account thereof.
5.4 Tenant Leases. At the Close of Escrow, pursuant to the Assignment
and Assumption of Tenant Leases, Buyer shall assume all of the obligations of
Seller under the Tenant Leases as of the Proration Time, including, without
limitation, tenant improvement obligations of landlord thereunder and
obligations with respect to Tenant Security Deposits (to the extent received by
Buyer or credited to Buyer hereunder).
5.5 Service Contracts and Other Intangible Property. At the Close of
Escrow, Seller shall assign to Buyer pursuant to the terms of the General
Assignment and Assumption Agreement, all right, title and interest of Seller in
and to the Approved Service Contracts and other Intangible Property, and Buyer
shall assume all of the obligations of Seller under the Approved Service
Contracts arising from and after the Close of Escrow. Buyer shall protect, hold
harmless, indemnify and defend Seller and its directors, officers, agents,
affiliates, principals, partners, shareholders, representatives and controlling
persons from any Losses attributable to the period beginning on and after the
Closing Date with respect to the Approved Service Contracts. Seller shall be
responsible for all obligations thereunder attributable to the period prior to
the Closing Date with respect to Approved Service Contracts (except to the
extent that Buyer shall have received a credit hereunder with respect to any
such obligations). The provisions of this SECTION 5.5 shall survive the Close of
Escrow.
5.6 Tax Refunds and Proceedings. Buyer shall have the exclusive right
to commence or continue any proceeding to determine the assessed value of the
Property, the real or personal property taxes payable with respect to the
Property or any action to contest water
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charges, sewer charges, sales tax or use tax for the relevant taxable period
during which the Proration Time occurs and to settle or compromise any claim
thereof, and any refunds or proceeds resulting from such proceedings along with
the costs (including reasonable legal and accounting fees) incurred by Buyer in
obtaining the same, shall be prorated as of the Proration Time. In prosecuting
any such action, Buyer shall utilize the services of Marvin Poer & Co. Seller
shall retain the right to continue, commence, prosecute, settle or compromise
any proceedings relating exclusively to any relevant taxable period or periods
prior to the period during which the Proration Time shall occur. Buyer and
Seller agree to cooperate with each other and to execute any and all documents
reasonably requested in furtherance of the foregoing. The provisions of SECTION
5.6 shall survive the Closing.
5.7 Guest Baggage. As of the Close of Escrow, Buyer shall indemnify
and hold harmless Seller against all Losses with respect to all baggage of
departed guests or guests who are still registered at the Hotel on the Closing
Date which has been checked with the Hotel. As of the Close of Escrow, Seller
shall assign to Buyer all claims and causes of action against the Manager with
respect to any Losses with respect to such baggage. Seller agrees to submit to
Seller's Insurance any claims for Losses with respect to such baggage which
arose from acts or omissions prior to the Closing Date to the extent coverage is
available under said insurance and provide Buyer with the proceeds therefrom
provided Buyer is not in default under this SECTION 5.7. The provisions of this
SECTION 5.7 shall survive the Closing.
5.8 Safe Deposit Boxes. As of the Close of Escrow, Buyer shall
indemnify and hold harmless Seller against all Losses with respect to the
contents of any safety deposit boxes in use at the Hotel. As of the Close of
Escrow, Seller shall assign to Buyer all claims and causes of action against the
Manager with respect to any Losses relating to said safety deposit boxes. Seller
agrees to submit to Seller's insurance any claims for Losses which arose from
acts or omissions prior to the Closing Date to the extent coverage is available
under said insurance and provide Buyer with the proceeds therefrom provided
Buyer is not in default under this SECTION 5.8. The provisions of this SECTION
5.8 shall survive the Closing.
5.9 Advance Bookings. Buyer shall assume and honor for its account all
Bookings relating to dates after the Proration Time set forth on the Schedule of
Advance Bookings delivered by Seller to Buyer at the Close of Escrow pursuant to
SECTION 4.2.1.9.
5.10 Special Purchase Price Adjustment. In the event that the Closing
Date is extended beyond January 30, 1998 for any reason other than on account of
a default by Buyer hereunder, Buyer shall receive a credit at Closing against
the Cash Purchase Price in an amount equal to interest on the Purchase Price
calculated at the LIBOR Rate plus 2% per annum for the period from January 30,
1998 through the earlier of (a) the Closing Date and (b) sixty (60) days after
January 30, 1998. Nothing in this SECTION 5.10 shall create a waiver of any
other remedy of Buyer for a Seller default permitted under the provisions of
this Agreement.
5.11 The PCL Litigation. Seller or its designee shall prosecute, in its
own name and at its expense, diligently, and without delay, the lawsuit brought
by it against PCL Construction Services, Inc. et al, in the District Court of,
and for Pitkin County, Colorado as Index #96 CV/6982 (the "PCL Litigation").
Buyer shall have the right to participate, at its sole cost and expense, in the
prosecution and defense of the PCL Litigation. Seller shall have the right to
settle the PCL Litigation provided in Seller's good faith judgment such
settlement is fair and reasonable under the circumstances and Buyer is provided
notice of such settlement prior to the entry into same. Seller shall keep Buyer
informed on a regular basis with respect to the PCL
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Litigation and shall promptly provide Buyer with a copy of all papers filed or
received by Seller in connection therewith, together with a copy of all
correspondence related to the PCL Litigation and/or the proposed settlement
thereof other than any attorney-client privileged documents unless such
privilege has been waived. Any proceeds resulting from a settlement or a
judgment in the PCL Litigation and the return of the escrow account at Citibank
Private Bank #558415, if released to Seller pursuant to such judgment or
settlement, as the case may be, shall be applied as follows: (a) up to
$2,200,000.00 shall be paid to Buyer; and (b) any proceeds in excess of
$2,200,000.00 shall be split equally between Buyer and Seller. Seller shall be
solely liable for any adverse judgment in the PCL Litigation. Any such judgment
may be paid from the PCL escrow account referred to above to the extent of funds
available therein. Buyer shall have no rights with respect to the conduct or
disposition of the PCL Litigation or the claims asserted by Seller therein or
any right to control the disposition of the PCL escrow account, except as
specifically set forth in this Agreement. Subject to the express provisions of
this Agreement, Seller shall retain all rights and responsibilities with respect
to the conduct of the PCL Litigation and the pursuit of all claims against PCL.
Seller may elect in its sole and absolute discretion to seek arbitration or
other dispute resolution with respect to the PCL Litigation. Buyer hereby agrees
and acknowledges that Buyer is purchasing the Hotel with full knowledge of the
claims alleged in the PCL Litigation and after conducting such investigation
thereof as Buyer deems necessary and sufficient. Buyer further agrees and
acknowledges the sums, if any, payable to Buyer in accordance with this Section
5.10 are the sole amounts payable by Seller to Buyer on account of or in
connection with the claims alleged in the PCL Litigation. Without limiting
Seller's rights under SECTION 15, Buyer agrees to provide such cooperation to
Seller, its Affiliates and their representatives as Seller may reasonably
request in connection with the PCL Litigation, including, without limitation,
Seller's efforts to settle the same, and in connection with any discovery
related thereto, provided such cooperation shall be at no material cost or
expense to Buyer.
SECTION 6
REPRESENTATIONS AND WARRANTIES;
CONDITION OF PROPERTY
6.1 Of the Trust. As an inducement to Seller to enter into this
Agreement, the Trust hereby represents, warrants and covenants to Seller as
follows:
6.1.1 Power and Authority. The Trust is a real estate investment
trust duly organized and validly existing under the laws of the State of
Maryland. The Trust has the power and authority to carry on its present
business, to enter into this Agreement and to consummate the transactions herein
contemplated; neither the execution and delivery of this Agreement by the Trust,
nor the performance by the Trust of the Trust's obligations hereunder will
violate or constitute an event of default under any material terms or material
provisions of any agreement, document, instrument, judgment, order or decree to
which the Trust is a party or by which the Trust is bound and/or violate any
applicable law, rule or regulation, the violation of which would have a Material
effect upon the principal benefits intended to be provided by this Agreement.
6.1.2 Authorization; Valid Obligation. All proceedings required to
be taken by or on behalf of the Trust to authorize the Trust to make, deliver
and carry out the terms of this Agreement will be duly taken prior to the
Closing Date. No consent to the execution, delivery and performance of this
Agreement will be required from any partner, board of directors,
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shareholder, creditor, investor, judicial or administrative body, governmental
authority or other person, other than any such consent which already has been
(or prior to the Closing will have been unconditionally given. The individuals
executing this Agreement and the documents referenced herein on behalf of the
Trust have the legal power, right and actual authority to bind the Trust to the
terms and conditions hereof. This Agreement is a valid and binding obligation of
Trust, enforceable in accordance with its terms, except as the same may be
affected by bankruptcy, insolvency, moratorium or similar laws, or by legal or
equitable principles relating to or limiting the rights of contracting parties
generally.
6.1.3 Capital Structure. The authorized and outstanding capital
stock and units of the Trust and its operating partnership are as set forth in
the Starwood Disclosure. All Paired Shares to be issued as the Equity Purchase
Price at the Closing in accordance with this Agreement will, when so issued, be
duly authorized, validly issued, fully paid and nonassessable and free of
preemptive rights and will be paired with each other in the same ratio as all
other shares are paired with each other pursuant to the Pairing Agreement.
6.1.4 SEC Documents and Other Reports. The Trust has filed all
required documents with the SEC since January 1, 1996 (such documents together
with the Starwood Disclosure being referred to herein as the "SEC Documents").
As of their respective dates, the SEC Documents complied in all material
respects with the requirements of applicable law, and, at the respective times
they were filed, none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The consolidated financial statements
(including, in each case, any notes thereto) of the Trust included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto as of their respective dates of filing, were prepared in
accordance with generally accepted accounting principles (except, in the case of
the unaudited statements, as permitted by Regulation S-X of the SEC) applied on
a consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto) and fairly presented the consolidated financial
position of the Trust and its consolidated subsidiaries as of the respective
dates thereof and the consolidated results of their operations and their
consolidated cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein). Except as disclosed in the SEC Documents or as
required by generally accepted accounting principles, the Trust has not, since
December 31, 1996, made any change in the accounting practices or policies
applied in the preparation of their financial statements. Prior to the Closing
Date, the Trust will file all required documents with the SEC, which documents
will comply in all material respects with the requirements of the applicable
law, and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
6.1.5 Absence of Certain Changes or Events. Except as disclosed in
the SEC Documents filed prior to the date of this Agreement, since December 31,
1996, (a) 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 change in or effect on the financial condition,
properties, business, results of operations or prospects of the Trust and its
subsidiaries taken as a whole, or (b) there has not been any split, combination
or reclassification
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of any of the capital stock or units of the Trust or its operating partnership
or any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of, or in substitution for shares of such capital stock.
6.1.6 Actions and Proceedings. Except as set forth in the 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 Trust or any of its subsidiaries, or against or
involving any of the directors, officers or employees of the Trust 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 change in or effect on the financial
condition, properties, business, results of operations or prospects of the Trust
and its subsidiaries taken as a whole. Except as set forth in the SEC Documents,
there are no actions, suits or claims or legal, administrative or arbitrative
proceedings or investigations pending or, to the knowledge of the Trust,
threatened against or involving the Trust 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 change in or effect
on the financial condition, properties, business, results of operations or
prospects of the Trust and its subsidiaries taken as a whole. 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 Trust, threatened against or affecting the Trust or any of
their 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.
6.1.7 REIT Status. The Trust is currently a "real estate investment
trust" ("REIT") for federal income tax purposes and, to its knowledge, the Trust
is and at all times during the testing period described in Code Section
897(h)(4)(D) has been a "domestically controlled REIT" (as defined in Section
897(h)(4)(D) of the Code). From and after January 1, 1995, neither the Internal
Revenue Service nor any other taxing entity or authority has made any assertion
that the Trust does not qualify as a REIT for income tax purposes, nor has there
been any challenge to the REIT status of the Trust. From time to time upon
request by the Seller or its assigns after the Closing Date, the Trust agrees to
inform Seller or such assigns whether to its knowledge it complies with the
representation and warranties set forth in this Section 6.1.7.
6.1.8 Partnership Status. Starwood Realty Partnership is classified
and taxable as a partnership for U.S. federal income tax purposes.
6.1.9 Hart-Scott-Rodino Act. The provisions of the
Hart-Scott-Rodino Act are not applicable to the transactions contemplated hereby
and neither the Trust nor Seller is required to make any filings or submissions
or obtain any approvals thereunder in connection herewith.
6.2 Of the Corporation. As an inducement to Seller to enter into this
Agreement, the Corporation hereby represents, warrants and covenants to Seller
as follows:
6.2.1 Power and Authority. The Corporation is a corporation duly
organized and validly existing under the laws of the State of Maryland. The
Corporation has the power and authority to carry on its present business, to
enter into this Agreement and to consummate the transactions herein
contemplated; neither the execution and delivery of this Agreement by the
Corporation nor the performance by the Corporation of the Corporation's
obligations hereunder will violate or constitute an event of default under any
material terms or material
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provisions of any agreement, document, instrument, judgment, order or decree to
which the Corporation is a party or by which the Corporation is bound and/or
violate any applicable law, rule or regulation, the violation of which would
have a Material effect upon the principal benefits intended to be provided by
this Agreement.
6.2.2 Authorization; Valid Obligation. All proceedings required to
be taken by, or on behalf of the Corporation, to authorize the Corporation to
make, deliver and carry out the terms of this Agreement will be duly taken prior
to the Closing Date. No consent to the execution, delivery and performance of
this Agreement will be required from any partner, board of directors,
shareholder, creditor, investor, judicial or administrative body, governmental
authority or other person, other than any such consent which already has been
(or prior to the Closing will have been) unconditionally given. The individuals
executing this Agreement and the documents referenced herein on behalf of the
Corporation have the legal power, right and actual authority to bind the
Corporation to the terms and conditions hereof. This Agreement is a valid and
binding obligation of Corporation, enforceable in accordance with its terms,
except as the same may be affected by bankruptcy, insolvency, moratorium or
similar laws, or by legal or equitable principles relating to or limiting the
rights of contracting parties generally.
6.2.3 Capital Structure. The authorized and outstanding capital
stock and units of the Corporation and its operating partnership are as set
forth in the Starwood Disclosure. All Paired Shares to be issued as the Equity
Purchase Price at the Closing in accordance with this Agreement will, when so
issued, be duly authorized, validly issued, fully paid and nonassessable and
free of preemptive rights and will be paired with each other in the same ratio
as all other shares are paired with each other pursuant to the Pairing
Agreement.
6.2.4 SEC Documents and Other Reports. The Corporation has filed
all required SEC Documents since January 1, 1996. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of the
applicable law, and, at the respective times they were filed, none of the SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements (including, in each case,
any notes thereto) of the Corporation included in the SEC Documents complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto as of their
respective dates of filing, were prepared in accordance with generally accepted
accounting principles (except, in the case of the unaudited statements, as
permitted by Regulation S-X of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly presented the consolidated financial position of the Corporation and
its consolidated subsidiaries as of the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described therein).
Except as disclosed in the SEC Documents or as required by generally accepted
accounting principles, the Corporation has not, since December 31, 1996, made
any change in the accounting practices or policies applied in the preparation of
their financial statements. Prior to the Closing Date, the Corporation will file
all required documents with the SEC, which documents will comply in all material
respects with the requirements of the applicable law, and will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or
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necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
6.2.5 Absence of Certain Changes or Events. Except as disclosed in
the SEC Documents filed prior to the date of this Agreement, since December 31,
1996, (a) 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 change in or effect on the financial condition,
properties, business, results of operations or prospects of the Corporation and
its subsidiaries taken as a whole, or (b) there has not been any split,
combination or reclassification of any of the capital stock or units of the
Corporation or its respective operating partnerships or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of such capital stock.
6.2.6 Actions and Proceedings. Except as set forth in the 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 Corporation or any of its subsidiaries, or against or
involving any of the directors, officers or employees of the Corporation 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 change in or effect on the financial
condition, properties, business, results of operations or prospects of the
Corporation and its subsidiaries taken as a whole. Except as set forth in the
SEC Documents, there are no actions, suits or claims or legal, administrative or
arbitrative proceedings or investigations pending or, to the knowledge of the
Corporation, threatened against or involving the Corporation 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
change in or effect on the financial condition, properties, business, results of
operations or prospects of the Corporation and its subsidiaries taken as a
whole. 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 Corporation, threatened
against or affecting the Corporation or any of their 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.
6.2.7 Starwood Operating Partnership is classified and taxable as a
partnership for U.S. Federal Income Tax purposes.
6.2.8 Hart-Scott-Rodino. The provisions of the Hart-Scott-Rodino
Act are not applicable to the transactions contemplated hereby and neither the
Corporation nor Seller is required to make any filings or submissions to obtain
any approvals thereunder in connection herewith.
6.3 Of Seller. As an inducement to Buyer to enter into this Agreement,
Seller, represents, warrants and covenants to Buyer as follows:
6.3.1 Regarding Seller's Authority.
6.3.1.1 Seller is a limited partnership in dissolution under
the laws of the District of Columbia. Seller has the power and authority to
enter into this Agreement and the Conveyance Documents and, to sell the Property
on the terms set forth in this Agreement. The execution and delivery hereof and
the performance by Seller of its obligations hereunder, will not violate or
constitute an event of default under any material terms or material provisions
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of any agreement, document, instrument, judgment, order or decree to which
Seller is a party or by which Seller is bound and/or violate any applicable law,
rule or regulation, the violation of which would have a Material effect upon the
principal benefits intended to be provided by this Agreement.
6.3.1.2 The individuals executing this Agreement and the
documents referenced herein on behalf of Seller have the legal power, right and
actual authority to bind Seller to the terms and conditions hereof. This
Agreement is a valid and binding obligation of Seller, enforceable in accordance
with its terms, except as the same may be affected by bankruptcy, insolvency,
moratorium or similar laws, or by legal or equitable principles relating to or
limiting the rights of contracting parties generally.
6.3.2 Tenant Leases. There are no leases, licenses or concessions
for space which will affect the Real Property or any portion thereof following
the Close of Escrow other than as set forth on the Schedule of Tenant Leases.
Seller has delivered to Buyer a true, correct and complete copy of each lease
and agreement listed on the Schedule of Lease. Seller has not received written
notice of any sublease and/or assignment of any Tenant Lease except as set forth
on SCHEDULE 6.3.2. No outstanding written notice of any Material default has
been delivered by Seller or received by Seller with respect to any Tenant Lease,
except as disclosed on the SCHEDULE 6.3.2 annexed hereto and made a part hereof.
To Seller's knowledge, all rent under the leases listed on the Schedule of
Leases is being paid currently. All Material brokerage, leasing and other
commissions due in connection with the Tenant Leases have been paid by Seller
other than those payable with respect to the renewal or extension of such Tenant
Leases or expansion of the leased premises thereunder after the Closing Date,
each of which are payable under agreements described on SCHEDULE 6.3.2.
6.3.3 Service Contracts. There are no Service Contracts which will
affect the Property after the Closing Date except for the Approved Service
Contracts. No outstanding written notice of any Material default has been
delivered by Seller or received by Seller with respect to any Approved Service
Contract, except as disclosed on SCHEDULE 6.3.3 annexed hereto and made a part
hereof.
6.3.4 Claims. There are no pending litigation or condemnation
proceedings with respect to Seller or the Property which would result in an
adverse effect on the ability of Buyer to operate the Property after the
Closing, except as disclosed on SCHEDULE 6.3.4 annexed hereto and made a part
hereof. There is no pending litigation or to Seller's knowledge, other claims of
Seller with respect to the Property attributable to the period prior to the date
hereof which may result in a material judgment in favor of Seller except as
disclosed on SCHEDULE 6.3.4.
6.3.5 Employees. To Seller's Knowledge, SCHEDULE 1.1.6 sets forth a
true and complete list of all Hotel Employees as of the Execution Date together
with their positions, salaries or hourly wages, as applicable, and years of
service. Except for or pursuant to the Employment Agreements, the Collective
Bargaining Agreements, the Management Agreement and the agreements related to
the Ritz-Carlton management of the Hotel described on SCHEDULE 6.3.5 hereto,
neither Seller nor the Employer Corporation has relating to the Property (i) at
any time maintained, contributed to or participated in, (ii) or had at any time
obligation to maintain, contribute to, or participate in, or (iii) any liability
or contingent liability, direct or indirect, with respect to: any employment
agreement, oral or written retirement or deferred compensation plan, incentive
compensation plan, stock plan, unemployment compensation plan, vacation pay
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plan, severance plan, bonus plan, stock compensation plan or any other type or
form of employee-related (or independent contractor-related) arrangement,
program, policy, plan or agreement. Except as set forth on SCHEDULE 6.3.5, to
Seller's knowledge there is no Material default under any of the Employment
Agreements.
6.3.6 Compliance with Laws. During the past twelve (12)
months, Seller has not received any written notice from any party, including,
without limitation, from any municipal, state, federal or other governmental
authority, of a Material violation of any zoning, building, fire, water, use,
health, or other similar statute, ordinance, or code bearing on the
construction, operation or use of the Property or any part thereof (other than
as to matters previously cured), except as disclosed on SCHEDULE 6.3.6 annexed
hereto and made a part hereof and except for violations of Environmental Laws,
which are addressed in SECTION 6.3.7 below.
6.3.7 Hazardous Materials. Seller has not received any written
notice from any municipal, state, federal or other governmental authority or
from any other person during the last three (3) years of (a) any Material
violation of applicable Environmental Laws or (b) any Environmental Condition
requiring Material remediation under applicable Environmental Laws, in either
case only to the extent relating to Environmental Conditions at or on the Real
Property, except as disclosed on SCHEDULE 6.3.7 annexed hereto and made a part
hereof;
6.3.8 Records and Plans. Seller will have delivered to Buyer on
the Closing Date true and correct copies of the Records and Plans.
6.3.9 Licenses and Permits. Seller has delivered to Buyer true and
correct copies of the Liquor License and all other Material Licenses and Permits
and such Licenses and Permits are identified on SCHEDULE 6.3.9 annexed hereto
and made a part hereof.
6.3.10 Management Agreements. There are no hotel management or
property management agreements, which will be binding upon Buyer after the
Closing Date, other than the Management Agreement, a true and complete copy of
which will be delivered to Buyer on the Closing Date. Seller has not sent or
received any notice of default or notice of termination under or with respect to
the Management Agreement.
6.3.11 Personal Property. Seller owns the Tangible Personal
Property (other than the Tangible Personal Property that is subject to the
Equipment Leases) free and clear of any liens and/or encumbrances other than the
Permitted Encumbrances.
6.3.12 Insurance. The Seller in respect of the Real Property is
insured under those policies of casualty and general liability insurance
("Seller's Insurance") described on SCHEDULE 6.3.12 annexed hereto, each of
which is in full force and effect as of the date hereof and will remain in full
force and effect through the Closing Date. Seller has received no notices of any
Material default or demands to cure from any applicable insurer in respect of
Seller's Insurance.
6.3.13 Real Estate Taxes. Except as set forth on SCHEDULE 6.3.13
annexed hereto and made a part hereof, Seller has not commenced any proceedings
which are pending for the reduction of the assessed valuation of the Real
Property or any portion thereof, and other than the Permitted Encumbrances, to
Seller's Knowledge, there are no special assessments affecting the Property.
Nothing in this SECTION 6.3.13 or any other provision of this Agreement shall be
construed to limit Seller's rights to initiate or prosecute after the Close of
Escrow additional proceedings for property tax refunds for taxes relating to any
relevant taxable period or periods prior to the taxable period during which the
Proration Time occurs.
6.3.14 [Intentionally Omitted]
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6.3.15 [Intentionally Omitted]
6.3.16 [Intentionally Omitted]
6.4 Buyer's Review of Records and Plans.
6.4.1 Access to Records and Plans; Specific Disclosures. Buyer
acknowledges that prior to the Closing Date, Buyer has been provided with such
access to the Records and Plans and such other information relating to the Hotel
as Buyer has deemed relevant. Buyer acknowledges that it (a) has been made aware
of and given an opportunity to inquire into the Specific Disclosure Matters
described herein; (b) has been given access to the Property and the opportunity
to conduct such inquiries and analyses as Buyer has deemed necessary or
appropriate in order to evaluate the physical condition of the Property and any
and all other matters concerning the current and future use, feasibility, or
value, or any other matter or circumstance relevant to Buyer concerning the
Property or its marketability; and (c) the Records and Plans and the other books
and records of Seller with respect to the Hotel may not be complete.
6.4.2 Limitation on Access to Records and Plans. Notwithstanding
anything in this Agreement to the contrary, Buyer acknowledges and agrees that
the Records and Plans or other information made available to or delivered to
Buyer prior to, or at the Closing, shall not include any information which is
privileged, confidential or proprietary to Seller or any of its constituent
partners or affiliates, including without limitation, (i) Seller's internal
financial analyses, any appraisals undertaken for Seller or other parties,
income tax returns, financial statements, corporate or partnership governance
records, investment advisory records, and other records concerning Seller's
professional relationships, any Hotel Employee personnel files (prior to the
Closing), or any other internal, proprietary, or confidential information,
files, or records of Seller, (ii) the work papers, memoranda, analysis,
correspondence, and similar materials prepared by or for Seller in connection
with the negotiation and documentation of the transaction contemplated hereby or
any other offer to purchase the Property received by Seller, and (iii) any
documents or communications subject to the attorney/client privilege or attorney
work product privilege. Buyer expressly agrees that its review of the Records
and Plans, and any and all other information of any type or nature, whether oral
or written, provided to Buyer by or on behalf of Seller and relating to the
Property (collectively, the "PROPERTY INFORMATION") is for informational
purposes only, and neither Seller nor any agent, advisor, officer, attorney,
representative or other person acting or purporting to act on behalf of Seller
has verified either the accuracy of the Property Information, or the adequacy of
any method used to compile the Property Information or the qualifications of any
person preparing the Property Information except that, in delivering or making
available a copy of any document or papers to Buyer, Seller has delivered or
made available copies of the originals of such documents or papers in Seller's
possession or included in the Records and Plans. Except as expressly set forth
in this SECTION 6, neither Seller nor any agent, advisor, officer, attorney,
representative or other person acting or purporting to act on behalf of Seller
is making or giving any representation or warranty about, or assuming any
responsibility for, the accuracy or completeness of the Property Information.
Reliance by Buyer upon any Property Information shall not create or give rise to
any liability of or against Seller or any agent, advisor, officer, attorney,
representative or other person acting or purporting to act on behalf of Seller.
Subject to Seller's express representations and warranties set forth herein, the
consummation of the Closing shall constitute Buyer's unconditional approval of
all aspects of the Property and
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Buyer's unconditional acknowledgment that Buyer has had the opportunity to
request from Seller and review such documents and materials relating of the
Property as Buyer deems appropriate. All copies of such documents delivered to
Buyer shall be returned to Seller if the Closing fails to occur for any reason.
6.5 PURCHASE AS IS. BUYER REPRESENTS, WARRANTS AND COVENANTS TO SELLER
THAT BUYER HAS INDEPENDENTLY AND PERSONALLY INSPECTED THE PROPERTY AND THE
PROPERTY INFORMATION AND THAT BUYER HAS ENTERED INTO THIS AGREEMENT BASED UPON
SUCH PERSONAL EXAMINATION AND INSPECTION. BUYER ACCEPTS THE PROPERTY, IN ITS
CONDITION ON THE CLOSE OF ESCROW AS-IS AND WITH ALL ITS FAULTS, INCLUDING
WITHOUT LIMITATION, ANY FAULTS AND CONDITIONS SPECIFICALLY REFERENCED IN THIS
AGREEMENT. NO PERSON ACTING ON BEHALF OF SELLER IS AUTHORIZED TO MAKE, AND BY
EXECUTION HEREOF, BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS SPECIFICALLY
PROVIDED IN THIS AGREEMENT, SELLER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY
NEGATES AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS,
AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR
IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH
RESPECT TO:
(A) THE VALUE OF THE PROPERTY;
(B) THE INCOME TO BE DERIVED FROM THE PROPERTY;
(C) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND
USES WHICH BUYER MAY CONDUCT THEREON;
(D) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OF THE PROPERTY;
(E) THE MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE
PROPERTY;
(F) THE NATURE, QUALITY OR CONDITION OF THE PROPERTY, INCLUDING
WITHOUT LIMITATION, THE WATER, SOIL AND GEOLOGY;
(G) THE COMPLIANCE OF OR BY THE PROPERTY OR ITS OPERATION WITH ANY
LAWS, RULES, ORDINANCES OR REGULATIONS OF ANY APPLICABLE GOVERNMENTAL AUTHORITY
OR BODY;
(H) THE MANNER OR QUALITY OF THE CONSTRUCTION OR MATERIALS, IF ANY,
INCORPORATED INTO THE PROPERTY;
(I) THE COMPLIANCE OF THE PROPERTY WITH ANY ENVIRONMENTAL LAWS OR
THE AMERICANS WITH DISABILITIES ACT;
(J) THE PRESENCE OR ABSENCE OF HAZARDOUS MATERIALS AT, ON, UNDER,
OR ADJACENT TO THE PROPERTY;
(K) THE CONTENT, COMPLETENESS OR ACCURACY OF ANY OF THE RECORDS AND
PLANS OR OTHER INFORMATION PROVIDED BY SELLER TO BUYER WITH RESPECT TO THE
PROPERTY;
(L) THE CONFORMITY OF THE IMPROVEMENTS TO ANY PLANS OR
SPECIFICATIONS FOR THE PROPERTY, INCLUDING ANY PLANS AND SPECIFICATIONS THAT MAY
HAVE BEEN OR MAY BE PROVIDED TO BUYER;
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(M) THE CONFORMITY OF THE PROPERTY TO PAST, CURRENT OR FUTURE
APPLICABLE ZONING OR BUILDING REQUIREMENTS;
(N) DEFICIENCY OF ANY UNDER SHORING;
(O) DEFICIENCY OF ANY DRAINAGE;
(P) THE FACT THAT ALL OR A PORTION OF THE PROPERTY MAY BE LOCATED
ON OR NEAR AN EARTHQUAKE FAULT LINE;
(Q) THE EXISTENCE OF VESTED LAND USE, ZONING OR BUILDING
ENTITLEMENTS AFFECTING THE PROPERTY;
(R) WITH RESPECT TO ANY OTHER MATTER CONCERNING THE PROPERTY
(INCLUDING, WITHOUT LIMITATION, THE TENANT LEASES, THE EQUIPMENT LEASES, ANY
FIXTURES AND EQUIPMENT, THE LICENSES AND PERMITS, THE PERSONAL PROPERTY, THE
SERVICE CONTRACTS, THE EMPLOYMENT CONTRACTS, ANY EMPLOYEE BENEFIT PLANS AND THE
LIQUOR LICENSE) EXCEPT AS MAY BE OTHERWISE EXPRESSLY STATED HEREIN;
(S) [Intentionally Omitted]
(T) ANY OF THE SPECIFIC DISCLOSURE MATTERS; OR
(U) WITHOUT LIMITING THE OTHER DISCLAIMERS SET FORTH HEREIN BUT
SUBJECT TO THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS
AGREEMENT, THE ASSIGNMENTS AND CONVEYANCES OF THE PERSONAL PROPERTY AND THE
MANAGEMENT AGREEMENT ARE WITHOUT ANY EXPRESS OR IMPLIED WARRANTIES OR
REPRESENTATIONS OF ANY KIND WHATSOEVER, INCLUDING, WITHOUT LIMITATION, (1)
WARRANTIES AS TO THE VALIDITY, ENFORCEABILITY OR ASSIGNABILITY OF THE MANAGEMENT
AGREEMENT, (2) WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR
PURPOSE, (3) WARRANTIES RELATING TO THE DESIGN, CONDITION, QUALITY, WORKMANSHIP
OR CAPACITY OF THE TANGIBLE PERSONAL PROPERTY, (4) REPRESENTATIONS OR WARRANTIES
THAT THE TANGIBLE PERSONAL PROPERTY IS IN COMPLIANCE WITH ALL LAWS, STATUTES,
ORDINANCES RULES, REGULATIONS, SPECIFICATIONS OR CONTRACTS PERTAINING THERETO,
(5) WARRANTIES AGAINST PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, AND (F)
WARRANTIES AS TO THE VALIDITY, ENFORCEABILITY, OR COLLECTIBILITY OF ANY ITEM.
6.6 Limitation on Representations and Warranties of Seller. In no event
shall Buyer be entitled to seek recovery against Seller for an alleged breach of
any representation or warranty by Seller if the information, transaction, or
occurrence alleged to give rise to such breach was disclosed to, made available
to or discovered by Buyer, whether in the course of its review of the Records
and Plans or otherwise, prior to the Close of Escrow (the sole adjustment with
respect to same being as set forth in SECTION 6.7 below). Without limiting the
foregoing, each of the representations and warranties by Seller set forth herein
shall be deemed to be qualified in their entirety by the Specific Disclosure
Matters in addition to any other qualifications of such representations and
warranties.
6.7 Right to Supplement Disclosures. At any time prior to the Closing,
Seller may add additional disclosures to the Specific Disclosure Matters and the
Schedules referenced in this SECTION 6, and may make appropriate revisions
thereto, provided, however, that any such revisions do not in the aggregate
disclose any matter or matters which would reasonably be
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expected to have an impact upon the value of the Property in excess of the
amount of the Deposit; and provided, further, that the receipt of any notice of
termination under the Management Agreement shall not be deemed to create any
diminution in value to the Property. In the event that Buyer or Seller discovers
any matter or matters which would be expected to exceed the Threshold Amount,
then, in such event, the provisions of SECTION 7.1.1 shall apply.
6.8 Basket. In no event will Seller be liable to Buyer for any breach
of a representation or warranty hereunder unless and to the extent the Loss
actually and directly incurred by Buyer as results of such breach together with
the Loss actually and directly incurred by Buyer as results of any other
breach(s) in the aggregate exceed the Threshold Amount, provided, that in no
event shall Seller have any liability to Buyer for any consequential damages
arising from a breach by Seller of any representation or warranty unless such
breach results from the intentional concealment by Seller.
6.9 Survival. The Trust, the Corporation and Seller each hereby
covenants and agrees with the other that the representations and warranties of
the Trust, the Corporation and Seller (as the case may be) set forth in SECTIONS
6.1.1 through 6.1.3, inclusive, SECTION 6.2.1 through SECTION 6.2.3, inclusive
and SECTION 6.3.1 and SECTION 6.3.2 shall survive the Close of Escrow without
limitation as to duration. The remaining warranties and representations set
forth in SECTION 6 shall survive the Close of Escrow until the date which is one
(1) year following the Closing Date, at which time such representations and
warranties shall expire unless prior to such time Buyer or Seller, as the case
may be, have duly commenced an action in a court of competent jurisdiction,
alleging a breach of such representation or warranty. Notwithstanding anything
herein to the contrary, in no event shall either Buyer or Seller have any right
to make a claim after the Closing with respect to any representation or
warranty, the breach of which such party shall have discovered prior to the
Closing, unless such party shall have notified the other party of such breach
prior to the Close of Escrow. Nothing contained in this SECTION 6.9 shall limit
the right of Seller to any remedy otherwise available under Federal or other
applicable securities law.
6.10 [Intentionally Omitted]
SECTION 7
TITLE TO THE REAL PROPERTY:
EXTENSION OF THE CLOSING
7.1 Buyer's Review of Title. Seller has caused to be delivered to
Buyer and Buyer's Counsel a current preliminary title commitment for title
insurance issued by the Title Company showing the condition of title to the Real
Property (the "Preliminary Title Report") together with a copy of all documents
evidencing or creating the exceptions to title referenced therein.
7.1.1 Failure to Satisfy Certain Closing Conditions; Monetary
Liens. On or prior to the Close of Escrow, Seller shall be obligated (i) to
cause to be insured over or removed as matters of record all Monetary Liens
affecting the Property as of the date hereof; and (ii) to remove or to bond over
any Monetary Lien arising after the issuance of the Preliminary Title Report
which (a) was created by or with the consent of Seller, or (b) is in an amount
less than or equal to the Deposit. In the event that any Monetary Lien not
reflected on the Preliminary Title Report exceeds the Deposit and was not
created by or with the consent of Seller or any other title defect or other
matters arise which requires Seller to supplement its disclosure pursuant to
SECTION 6.7 and which in the aggregate may create a diminution in value to the
Property in excess of the Deposit: (i) the Deposit shall be refunded by Escrow
Holder to Buyer on February
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28, 1998 if the Closing does not occur by such date in accordance with the
provisions hereof; (ii) the Scheduled Closing Date shall be extended and Seller
shall use all reasonable efforts, to remove or bond over or otherwise cause the
Title Company to omit such Monetary Lien as an exception from coverage under the
Title Policy and/or remove or cure as applicable such other defect or condition;
and (iii) Buyer shall be permitted to record the Memorandum of Contract in the
real property records of the state and county in which the Real Property is
located. In the event that the Scheduled Closing Date is so extended and Seller
is able to remove or cure such Monetary Lien, remove or cure as applicable the
title defect or other condition, the Close of Escrow shall occur as soon as
practicable following such removal or cure with time being of the essence as to
the performance of both Buyer's and Seller's obligations hereunder. THE PARTIES
ACKNOWLEDGE AND AGREE THAT DAMAGES WILL NOT BE AN ADEQUATE REMEDY TO SELLER IF
BUYER SHALL DEFAULT IN ITS OBLIGATION TO CLOSE IN ACCORDANCE WITH THE PROVISIONS
OF THIS SECTION 7.1.1 AND CONSEQUENTLY THAT BUYER'S OBLIGATIONS UNDER THIS
SECTION 7.1.1 SHALL BE SPECIFICALLY ENFORCEABLE AGAINST THE TRUST. IN
CONSIDERATION FOR THE REFUND TO BUYER OF THE DEPOSIT PROVIDED FOR UNDER THIS
SECTION 7.1.1, THE RIGHT OF BUYER TO RECORD THE MEMORANDUM OF CONTRACT PURSUANT
TO THIS SECTION 7.1.1, SELLER'S AGREEMENT TO ENTER INTO THE INTERIM MANAGEMENT
AGREEMENT PURSUANT TO THE PROVISIONS OF THIS SECTION 17.20 (UNDER WHICH
AGREEMENT THE VALUE OF THE HOTEL MAY BE AFFECTED BY THE PERFORMANCE BY THE
MANAGER OF ITS RESPONSIBILITIES THEREUNDER) AND TO ENCUMBER THE PROPERTY WITH
THIS AGREEMENT FOR A PERIOD OF UP TO FIVE (5) YEARS IN ACCORDANCE WITH THE
PROVISIONS OF THIS SECTION 7.1.1 AND IN LIGHT OF THE RISKS WHICH SELLER WILL BE
ASSUMING AS A RESULT IN RELATION TO THE VALUE OF THE EQUITY PURCHASE PRICE TO BE
DELIVERED IF AND WHEN THE CLOSING OCCURS HEREUNDER, THE PARTIES HAVE AGREED THAT
THE PROVISIONS OF THIS SECTION 7.1.1 ARE SPECIFICALLY ENFORCEABLE AGAINST THE
TRUST AS AND TO THE EXTENT PROVIDED IN THE PRECEDING SENTENCE. In the event that
a Monetary Lien cannot be removed or cured or a title defect or other condition
cannot be removed or cured as required hereunder to close within five (5) years
of the date of this Agreement, this Agreement shall terminate and the parties
hereto shall have no further obligations.
7.1.2 [Intentionally Omitted].
7.2. Title Insurance Policy. Buyer's title to the Real Property shall
be insured at Closing by an ALTA extended coverage owner's policy or policies of
title insurance in the amount of the Purchase Price (the "Title Policy") issued
by the Title Company, insuring title to the Real Property vested in Buyer,
subject only to the Permitted Encumbrances, together with such customary
endorsements or affirmative insurance as may be reasonably requested by Buyer
and purchased at Buyer's sole cost and expense.
7.3 Title to Real Property. At the Close of Escrow, title to the Real
Property will be conveyed to Buyer by Seller pursuant to the Deed, subject only
to the matters of title respecting the Property shown on SCHEDULE 7.3 annexed
hereto and, if the Closing is delayed pursuant to SECTION 7.1.1, any additional
easements, covenants, conditions, restrictions or other matters entered into
with the prior written consent of Buyer which consent shall not be unreasonably
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withheld, delayed or conditioned (collectively, the "Permitted Encumbrances");
Buyer agrees to rely exclusively on the Title Policy for protection against any
title defects except as set forth in SECTION 7.1.2. Buyer shall have no claim
following the Closing against Seller on account of the Permitted Encumbrances.
Buyer's agreement under this SECTION 7.1 shall survive the execution, delivery,
and recordation of the Deed.
SECTION 8
INTERIM ACTIVITIES
During the period from the Execution Date through the Close of Escrow,
Seller shall (subject to the provisions of the Interim Management Agreement if
entered into in accordance with the provisions of this Agreement) cause the
Property to be continued to be operated in ordinary course as a hotel consistent
with current operating practices during the period since Manager has been
manager of the Hotel. Buyer shall have the right to enter onto and inspect the
Property, from and after the date hereof, through the Closing Date to inspect
the Property and otherwise perform its due diligence provided such inspections
are performed upon prior notice to Seller and so as not to interfere with the
operation of the Property or to disclose the pendency of the transaction
contemplated hereby. All fees and expenses of any kind relating to the
inspection of the Property by Buyer will be paid for by Buyer. Buyer agrees to
keep the Property free from any liens arising out of or in connection with
Buyer's or its agents entry or the Property. Buyer shall at its sole cost and
expense, clean up and repair the Property as reasonably necessary after Buyer's
or its agents entry thereon. Buyer shall hold harmless, indemnify and defend
Seller from all Losses relating to any action by Buyer, its Affiliates and/or
agents at or on the Property prior to Closing. Any of Buyer's agents shall be
bound by the provisions of SECTION 17.19.
SECTION 9
CONDITIONS PRECEDENT TO CLOSING
9.1 Conditions Precedent to Buyer's Obligations. The Close of Escrow
and the obligation of Buyer to purchase the Property is subject to the
satisfaction, not later than the Scheduled Closing Date, (subject to extensions
as provided in Section 7.1) of the following conditions:
9.1.1 Seller's Deliveries. Seller shall have delivered the items
described in SECTION 4.2 and shall be prepared to deliver the items described in
SECTION 4.4;
9.1.2 Title Policy. The Title Company shall be unconditionally
prepared (subject only to payment of all necessary title insurance premiums and
other charges) to issue to Buyer the Title Policy insuring Buyer's title to the
Real Property subject only to the Permitted Encumbrances;
9.1.3 Performance Under Related Agreement. All conditions precedent
to the closing of the transactions contemplated by that certain Purchase and
Sale Agreement and Joint Escrow Instructions (the "Related Agreement") dated as
of the date hereof by and between Buyer and New Remington Partners shall have
been satisfied or waived and the Seller and Escrow Holder thereunder shall be
ready, willing and able to perform thereunder, and there shall be no default of
Seller under such agreement.
9.1.4 [Intentionally Omitted]
9.1.5 Seller Performance. Seller shall have performed in all
material respects all of the obligations of Seller under this Agreement, to the
extent required to be performed at or prior to the Close of Escrow.
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9.1.6 Representations and Warranties of Seller. The Seller's
representations and warranties set forth in SECTION 6.3 shall be true, correct
and complete, as of the Close of Escrow subject to modification thereof to the
extent permitted under SECTION 6.7 and subject further to the applicable
provisions of SECTION 7.1.1.
The conditions set forth in this SECTION 9.1 are solely for the benefit
of Buyer and may be waived only by Buyer. Buyer shall at all times have the
right to waive any such condition. Any such waiver or waivers shall be in
writing and shall be delivered to Seller and Escrow Holder.
9.2 Conditions Precedent to Seller's Obligations. The Close of Escrow
and Seller's obligation with respect to the transactions contemplated by this
Agreement are subject to the satisfaction, not later than the Scheduled Closing
Date, of the following conditions:
9.2.1 Funds and Documents. Buyer shall have delivered to Escrow
Holder, prior to the Closing Date, for disbursement as directed by Seller, the
Paired Shares and all cash or other immediately available funds due from Buyer
in accordance with SECTION 4 of this Agreement and the documents described in
SECTION 4.3;
9.2.2 Representations and Warranties of Buyer. The Trust's
representations and warranties set forth in SECTION 6.1 and the Corporation's
representations and warranties set forth in SECTION 6.2 shall be true, correct
and complete, as of the Close of Escrow;
9.2.3 No Material Changes. There shall have been no casualty or
condemnation for which Buyer has elected to terminate this Agreement pursuant to
SECTION 12 or SECTION 13 of this Agreement;
9.2.4 [Intentionally Omitted]
9.2.5 Performance Under Related Agreement. All conditions precedent
to the closing of the transactions contemplated by the Related Agreement shall
have been satisfied or waived and the Buyer and Escrow Holder thereunder shall
be ready willing and able to perform thereunder and there shall be no default of
Buyer under such agreement.
The conditions set forth in this SECTION 9.2 are solely for the benefit
of Seller and may be waived only by Seller. Seller shall at all times have the
right to waive any such condition. Any such waiver or waivers shall be in
writing and shall be delivered to Buyer and Escrow Holder.
9.3 Failure of Condition. Except as otherwise provided in this
Agreement, if the Escrow fails to close on the Outside Closing Date for any
reason whatsoever, including, without limitation, a failure of a condition
precedent set forth in this SECTION 9, either Buyer or Seller, if not then in
default under this Agreement, may terminate the Escrow and this Agreement upon
notice to the other; and, thereupon:
9.3.1 This Agreement and the Escrow shall terminate;
9.3.2 The costs of the Escrow through the Scheduled Closing Date
shall be governed by SECTION 4.8.
9.3.3 All monies paid into the Escrow and all documents deposited
in the Escrow shall be returned to the party paying or depositing the same
together with interest earned thereon; and
9.3.4 Each party shall be released from all obligations under this
Agreement except for the obligations that are expressly stated to survive the
termination of this Agreement.
SECTION 10
BROKER
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Buyer and Seller each represent and warrant to the other that it has
not dealt with any broker, finder or other middleman in connection with this
Agreement, or the transactions contemplated hereby and that no broker, finder,
middleman or other person has claimed, or has the right to claim a commission,
finder's fee or other brokerage fee in connection with this Agreement or the
transactions contemplated hereby. Each party shall indemnify, protect, defend
and hold the other party harmless from and against any costs, claims or expenses
(including actual attorneys' fees and expenses), arising out of the breach by
the indemnifying party of any of its representations, warranties or agreements
contained in this SECTION 10. The representations and obligations under this
SECTION 10 shall survive the Close of Escrow, or, if the Close of Escrow does
not occur, the termination of this Agreement.
SECTION 11
REMEDIES FOR SELLER'S DEFAULT
11.1 Buyer's Remedies in General. If Buyer shall discover prior to the
Close of Escrow any default in any of Seller's obligations under this Agreement
(a "Seller Default"), Buyer shall notify Seller thereof, and Seller shall have a
reasonable period of time (not in excess of thirty (30) days) unless extended by
Buyer in its sole discretion in which to cure such default, in which case the
Scheduled Closing Date shall be extended during the continuation of such cure
period. If there shall be any Seller Default discovered by Buyer prior to the
Close of Escrow and not cured by the Scheduled Closing Date, then Buyer's sole
right and remedy other than with respect to a breach of a representation and
warranty which shall be subject to the provisions of SECTION 6.7, shall be to
compel specific performance of this Agreement; provided, however, that Buyer
shall only be entitled to compel specific performance of this Agreement if, as
of the time of Seller's default, Buyer shall (a) not be in default hereunder,
(b) shall be ready, willing and able to perform its obligations hereunder, and
(c) shall have waived all contingencies to closing other than those relating to
Seller's default.
11.2 MATERIAL INDUCEMENT. BUYER SPECIFICALLY ACKNOWLEDGES THAT THE
LIMITATIONS ON DAMAGES AND SURVIVAL AND OTHER REMEDIES WHICH BUYER MAY RECOVER
FROM AND ENFORCE AGAINST SELLER UNDER THIS AGREEMENT ARE A SPECIFIC AND MATERIAL
INDUCEMENT TO SELLER TO ENTER INTO THIS TRANSACTION.
SECTION 12
DAMAGE TO OR DESTRUCTION OF THE PROPERTY
12.1 Insured Casualty.
12.1.1 If, prior to the Close of Escrow, the Property is damaged
or destroyed, whether by fire or other insured casualty, Seller shall promptly
notify Buyer of such damage or destruction and of the good-faith estimate of a
reputable licensed contractor selected by Seller and reasonably approved by
Buyer of the cost to repair the damage and Seller's good-faith belief that such
casualty is insured (the "Insured Casualty Notice"). If the Insured Casualty
Notice indicates that such casualty is a Material Casualty, Buyer may elect to
be released from its obligations hereunder (including its obligation to purchase
the Property) by delivering to Seller written notice of Buyer's intent to do so
within ten (10) days after the date Buyer receives the Insured Casualty Notice.
In such event, the Deposit together with all interest accrued thereon shall be
promptly returned to Buyer.
12.1.2 If the casualty is insured, and (i) it is not a Material
Casualty, or (ii) it is a Material Casualty, but Buyer elects not to terminate
this Agreement in accordance with this
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SECTION 12.1, then the Escrow and this Agreement shall remain in full force and
effect, the Closing shall occur on or before the Outside Closing Date, and
Seller shall assign to Buyer, as a condition precedent to the Close of Escrow,
all of Seller's right, title and interest in and to any of the casualty
insurance proceeds or claims therefor with respect to such damage or
destruction, together with any and all rental loss or business interruption
insurance of Seller, if any, payable with respect to the Property for any period
after the Proration Time and any and all claims against other persons for such
damage or destruction. Additionally, if the Escrow and this Agreement remain in
full force and effect, Seller shall pay to Buyer, by way of a reduction in the
Cash Portion of the Closing Payment, an amount equal to the deductible under the
casualty insurance. Within twelve (12) months following the Close of Escrow,
Buyer shall upon thirty (30) days written notice by Seller, present reasonably
satisfactory evidence to Seller that Buyer applied the proceeds of such
insurance to the Property. If Buyer fails to present such evidence or such
evidence is not reasonably satisfactory to Seller, Buyer shall promptly, but in
any event within thirty (30) days of demand therefor from Seller, pay to Seller
the proceeds of the casualty insurance assigned by Seller to Buyer as provided
herein, together with an amount equal to the deductible under such insurance for
which Buyer received a credit to the Purchase Price.
12.2 Uninsured Casualty.
12.2.1 If, prior to the Close of Escrow, all or any portion of the
property is damaged or destroyed by an uninsured casualty (including, without
limitation, a casualty as to which coverage has been disclaimed by Seller's
insurers), Seller shall promptly notify Buyer of such damage or destruction and
of the Seller's reasonable estimate of the cost to Seller to repair the same of
a reputable licensed contractor selected by Seller and reasonably approved by
Buyer (the "Uninsured Estimate to Repair") and Seller's reasonable belief that
such casualty is uninsured (the "Uninsured Casualty Notice").
12.2.2 If such Uninsured Estimate to Repair indicates the
occurrence of a Material Casualty, either Seller or Buyer may elect to terminate
this Agreement by giving to the other party written notice of its intent to do
so within ten (10) days after the Seller delivers the Uninsured Casualty Notice
to Buyer. If this Agreement is terminated pursuant to this SECTION 12.2.2, the
Deposit together with interest accrued thereon shall be promptly returned to
Buyer.
12.2.3 If the casualty is uninsured, and (i) it is not a Material
Casualty, or (ii) it is a Material Casualty and Buyer and Seller have not
elected to terminate this Agreement in accordance with SECTION 12.2.2, then the
Escrow and this Agreement shall remain in full force and effect, the Closing
shall occur on or before the Outside Closing Date, and Buyer shall be entitled
to a reduction in the Purchase Price in an amount equal to the Uninsured
Estimate to Repair.
12.2.4 If and to the extent that the Purchase Price is adjusted
pursuant to this SECTION 12.2 as a result of a disclaimer of coverage by
Seller's insurers, Buyer shall not be entitled to insurance proceeds due under
Seller's policies, or to be assigned any claim under or with respect to Seller's
policies, and Seller shall retain all rights thereunder or with respect thereto
and to proceeds therefrom, it being the intent of this SECTION 12 that there be
no double recovery by, or double compensation of, Buyer for the casualty.
SECTION 13
CONDEMNATION
If, prior to the Close of Escrow, a Material Taking has occurred or is
pending, Seller shall immediately notify Buyer of such fact. In such event,
Buyer may elect upon written notice
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to Seller given not later than fifteen (15) days after receipt of Seller's
notice to terminate this Agreement. If Buyer does not exercise option which
Buyer may have pursuant to this SECTION 13 to terminate this Agreement, or if
any such taking is not a Material Taking, then neither party shall have the
right to terminate this Agreement, but Seller shall assign and turn over, and
Buyer shall be entitled to receive and keep, all awards for the taking of any of
the Real Property by eminent domain which accrue to Seller (other than those
relating to loss of use prior to the Closing), and the parties shall proceed to
the Close of Escrow pursuant to the terms hereof, without modification of the
terms of this Agreement and without any reduction in the Purchase Price.
SECTION 14
EMPLOYEES
14.1 Hiring of Hotel Employees; WARN Act Compliance. Buyer agrees to
make an offer of employment to all existing Hotel Employees as of the Close of
Escrow, on terms and conditions generally comparable to their existing terms and
conditions of employment (to the extent such terms and conditions have been
disclosed by Seller and/or its agents to Buyer) and to make all reasonable
efforts to retain such employees for a reasonable period of time. Without
limiting the foregoing, Buyer shall offer to maintain without loss of employment
(as defined in the WARN Act) the employment at the Property (other than upon
good cause for termination) of such number of Hotel Employees and on such terms
and conditions as shall not result in, and only to the extent necessary to
prevent, a plant closing or mass layoff as defined in the WARN Act. Buyer (i)
shall also cause each of the health and medical benefit plans maintained for
Hotel Employees to waive any preexisting condition in connection with employment
at the Property that was not excluded under the applicable program as of the
Closing Date, (ii) shall also cause each of such benefit plans to take into
account any deductibles or coinsurance amounts incurred by each Hotel Employee
for the year in which the Closing Date occurs, and (iii) shall also cause each
of the health and medical benefit plans to deem each Hotel Employee to be
eligible for participation in such plan as of the Close of Escrow. In the event
that Buyer fails to comply with any of the foregoing covenants, Buyer agrees
that Buyer shall be solely responsible for the payment of any and all costs,
charges, penalties, compensation, severance pay, benefits and liabilities,
arising under the WARN Act, and any other applicable law, rule or regulation on
account thereof, and Buyer agrees to indemnify, defend and hold Seller and the
Employer Corporation and their directors, officers, agents, affiliates,
principals, partners, shareholders representatives and controlling persons
harmless from and against any and all claims, causes of action, judgments,
damages, penalties and liabilities asserted under the WARN Act or any other
applicable law, rule or regulation, whether against Buyer or Seller, the
Employer Corporation or any other such indemnified party and whether based on
employment of any of the Hotel Employees prior to or following the Closing,
arising from Buyer's failure to comply with the foregoing covenants
(collectively, "Termination Charges"). Following the Closing, if Buyer desires
to terminate the employment of any Hotel Employees other than for cause, Buyer
shall be solely responsible for complying with all applicable provisions of the
WARN Act and all other applicable laws, rules and regulations with respect to
such termination, including without limitation, the payment of all costs and
termination payments owing under the WARN Act and all other applicable laws,
rules and regulations to any of such employees. Buyer shall assume all
obligations under the Employment Agreement for the Director of Finance
attributable to the period from and after the Closing Date (it being agreed that
the
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Directors of Finance may resign thereunder at any time without penalty).
14.2 Collective Bargaining Agreements. Without limiting the provisions
of SECTION 14.1, immediately upon the Close of Escrow, without the necessity of
further action by Buyer, Buyer shall assume each collective bargaining agreement
or other labor union contracts identified on SCHEDULE 14.2 (the "Collective
Bargaining Agreements"). Buyer further agrees to indemnify Seller and the
Employer Corporation and their directors, officers, employees, agents,
affiliates, principals, partners, shareholders, representatives and controlling
persons for any and all liability to the bargaining agents or Hotel Employees,
resulting from the failure of Buyer to comply with the terms and conditions of
any of the Collective Bargaining Agreements with respect to periods beginning
after the Close of Escrow.
14.3 Continuation of Benefits.
14.3.1 (i) Except as provided in SECTION 14.3.2 , on and after the
Closing Date, Seller (or any insurer at Seller's cost) shall continue to process
and pay (or cause applicable insurers and third party administrators, including
ITT Sheraton, to process and pay) in an expeditious manner and with respect to
all covered Hotel Employees (and, to the extent applicable, their covered
spouses, dependents and beneficiaries) all claims under the Employment
Agreements that provide health and medical, or other welfare, benefits submitted
for covered expenses with respect to occurrences commencing on or prior to the
Closing Date, including, but not limited to: (A) covered hospital benefits for
any confinements; (B) covered life and survivor income benefits, if any, for
deaths which occur on or prior to the Closing Date; (C) workers' compensation
benefits for disabilities resulting from a work-related accident which occurred
on or prior to the Closing Date; (D) all covered benefits that are being, or
that may be, paid to, or with respect to, any of such individuals who are on
short or long term disability, or medical, personal or other leaves of absence
as of the Closing Date; (E) covered benefits under any "spending account," or
similar arrangement, under any "cafeteria plan" (as defined under Section 125 of
the Internal Code) with respect to salary reduction elections made prior to the
Closing Date; and (F) covered benefits under all other such Employment
Agreements which accrue on or before the Closing Date; but, only in each
instance, to the extent that Buyer shall not have received a credit against the
Purchase Price on account of such item.
(ii) In order to effectuate the provisions of SECTION 14.3.1(I),
hereof, Seller shall cause to be deposited with Anthem Health and Life Insurance
Company ("Anthem") the full amount required by Anthem to cover the payment of
benefits accrued but unpaid as of the Closing Date with respect to employees
located at the Aspen facility and their dependents. Seller shall cause to be
paid all premiums due to be paid under such Employment Agreements for all
periods ending on or prior to the Closing Date.
14.3.2 Buyer (or any plan maintained by Buyer) will provide
continued health and medical coverage as required under Section 4980B of the
Code, Part 6 of Title I of ERISA or any other applicable federal, state or local
law or ordinance to all current and former Hotel Employees (and their spouses,
dependents and beneficiaries) with respect to whom a "qualifying event" (as such
term is defined under Sections 4980B(f)(3) of the Code or 603 of ERISA) or other
triggering event described under the applicable federal, state or local laws or
ordinances occurred on or before the Closing Date.
14.3.3 Buyer shall maintain supplies of claims forms necessary for
Hotel Employees to make claims under Employment Agreements that provide health,
medical or other welfare benefits with respect to occurrences commencing on or
prior to the Closing Date, and
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shall furnish such forms to the Hotel Employees when needed and otherwise assist
the Hotel Employees in presenting such claims.
14.4 Buyer and Seller intend by this Agreement to comply with Section
4204 of ERISA, so as to prevent Seller from incurring at the Closing Date a
complete or partial withdrawal in respect of any employee benefit plans, if any,
in which the Hotel Employees currently participate that are "multiemployer
plans," as defined in Section 4001(a)(3) of ERISA (and which have been disclosed
to Buyer on the Schedule of Employment Agreements), determined as if Buyer is
the "buyer" referred to in such Section 4204. Accordingly, with respect to such
multiemployer plans, Buyer agrees as follows:
(A) For the first plan year of each such multiemployer plan
commencing after the Close of Escrow, and for each of the succeeding four plan
years for each such plan, Buyer shall assume the obligation to contribute to
each such plan with respect to operations conducted with business assets
acquired from Seller for substantially the same number of contribution base
units (as defined in Section 4001(a)(11) of ERISA) for which Seller had an
obligation to contribute to such plan.
(B) Prior to each such multiemployer plan's first plan year
beginning after the Close of Escrow, Buyer shall apply to such plan for a
variance from the requirement of Section 4204(a)(1)(b) of ERISA, that a bond be
obtained or an amount be held in escrow as provided in said Section. In the
event any such plan determines that the request does not qualify for a variance
on it, Buyer shall obtain any required bond or establish any required escrow
within thirty (30) days after the date on which it receives notice of the plan's
decision, and shall maintain such bond or escrow until the earliest of: (i) the
date a variance is obtained from the plan; (ii) the date a variance or exemption
is obtained from the Pension Benefit Guaranty Corporation; or (iii) the last day
of the fifth (5th) plan year commencing after the Close of Escrow; which bond or
escrow shall be paid to such plan if Buyer withdraws therefrom or fails to make
a contribution to such plan when due, at any time during the first (1st) five
(5) plan years of such plan beginning after the Closing Date. In order to comply
with subsection (a)(1)(C) of such Section 4204, if Buyer withdraws in a complete
withdrawal or a partial withdrawal from any multiemployer plan with respect to
which Buyer has assumed an obligation to contribute pursuant to this Agreement
and such withdrawal or partial withdrawal occurs during the five (5) plan years
commencing with the first (1st) plan year beginning after the date of the Close
of Escrow, Seller shall be secondarily liable for any withdrawal liability it
would have had to such multiemployer plan on the date of the Close of Escrow
under Title IV of ERISA. Buyer agrees to provide Seller with reasonable advance
notice of its anticipated failure to pay any withdrawal liability and to furnish
Seller promptly with a copy of any notice of withdrawal liability it may receive
with respect to such plans.
14.5 Indemnification. Buyer and Seller (as applicable, the
"Indemnitor") agrees to indemnify, defend, protect and hold the other and, the
Employer Corporation in the case of Seller, and their directors, officers,
agents, affiliates, principals, partners, shareholders, representatives and
controlling persons (as applicable, the "Indemnitee") harmless from and against
any and all claims, damages, liabilities, losses, and expenses, (including
attorneys' fees and costs) paid, suffered or incurred by the Indemnitee, arising
out of or related to Indemnitor's failure to comply with any of the covenants,
obligations, or duties contained in SECTION 14.
14.6 Survival. The provisions of this SECTION 14 shall survive the
Close of Escrow.
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SECTION 15
COOPERATION
15.1 Seller has advised Buyer that it may be necessary after the Close
of Escrow for Seller (or its representatives) to audit the Records and Plans
with respect to the period prior to the Closing Date. In addition, Seller may
require access to the such Books and Records in connection with any litigation
by or against Seller and its Affiliates with respect to the Property, any tax
audit, examination or challenge or similar proceeding, or any calculation of
sums payable under SECTION 5. Accordingly, Buyer hereby: (i) agrees to retain
the Records and Plans with respect to the period prior to the Closing Date at
the Property for a period of seven (7) years after the Close of Escrow or such
additional period as may reasonably be requested by Seller; (ii) grants Seller,
its Affiliates and their respective representatives access to the such Records
and Plans and the Property after the Close of Escrow, at reasonable times and
upon reasonable prior notice, for such purposes; (iii) subject to the rights of
guests in guest rooms, tenants under tenant leases, grants Seller, its
Affiliates, and their respective representatives access to the Property after
the Close of Escrow for the purpose of conducting such inspections and/or
testing (including destructive testing) of the Property as may be necessary or
advisable in connection with any litigation and other proceedings to which
Seller is a party (provided that Seller shall give Buyer prior notice of the
scope of such inspections and testing) which shall be scheduled for such periods
as shall be reasonably agreeable to the parties;
15.1.1 All inspections fees, appraisal fees, engineering fees and
other expenses of any kind relating to the inspection of the Property by Seller
or Seller's Affiliate will paid for by Seller and/or Seller's Affiliate.
15.1.2 Prior to Seller or Seller's Affiliate's entry on the
Property for the purpose of conducting inspections and/or tests, Seller or
Seller's Affiliate shall provide Buyer with certificates of insurance from
Seller's agents from an insurance carrier and for such risks and policy limits
as Seller shall reasonably approve.
15.1.3 Seller agrees to keep the Property free from any liens
arising out of or in connection with such testing and inspection.
15.1.4 Seller, shall, at its sole cost and expense, clean up and
repair the Property as reasonably necessary, after Seller's or Seller's agents,
entry thereon.
15.1.5 Seller shall hold harmless, indemnify and defend Buyer for
all losses relating to any action by Seller, its Affiliates and/or agents at or
on the Property after the Closing; [and]
15.1.6 Buyer agrees to cooperate with Seller, its Affiliates and
their respective representatives in connection with any such litigation or
proceedings with respect to the Property, any such tax audit, examination or
challenge or similar proceeding, or any such calculation of sums payable under
SECTION 5, said cooperation to be at no material cost or expense to Buyer; and
15.2 Seller shall cooperate with Buyer in connection with the
assignment of all transferable Licenses and Permits to Buyer and the application
for and procurement of replacements of any non-transferable Licenses and
Permits.
SECTION 16
NOTICES
16.1 Addresses. Whenever any notice, demand or request is required or
permitted hereunder, such notice, demand or request shall be made in writing and
shall be (a) sent via a nationally recognized overnight courier service fully
prepaid, (b) deposited in the United States
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<PAGE> 41
by mail, registered or certified, return receipt requested, postage prepaid, or
(c) sent via telefacsimile, provided that the original of such notice, demand or
request shall also be sent via one of the methods described in (a) and (b)
above, in each case to the addressees (and individuals) set forth below:
As to Seller:
Savanah Limited Partnership
c/o Al Anwa USA Incorporated
1925 Century Park East
Suite 1900
Los Angeles, CA 90067
Attn: General Counsel
Telefacsimile: (310) 229-2939
With a copy to Seller's Additional Addressees:
Gordon Eng, Esq.
19191 S. Vermont Avenue
Suite 420
Torrance, CA 90502
Telefacsimile: (310) 207-1006
Morrison & Foerster LLP
555 West Fifth Street, Suite 3500
Los Angeles, CA 90013-1024
Attn: Thomas R. Fileti, Esq.
Telefacsimile: (213) 892-5454
As to Buyer:
Starwood Lodging Corporation
Starwood Lodging Trust
2231 E. Camelback Road
Suite 400
Phoenix, AZ 85016
Attn: Steven R. Goldman
Telefacsimile: (602) 852-0115
With a copy to Buyer's Additional Addressee:
Greenberg Traurig Hoffman Lipoff Rosen & Quentel
153 East 53rd Street
New York, NY 10022
Attn: Andrew E. Zobler, Esq.
Telefacsimile: (212) 223-7161
As to Escrow Holder:
Chicago Title Insurance Company
700 South Flower Street, Suite 900
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Los Angeles, CA 90017
Attn: Maggie Watson
Telefacsimile: (213) 488-4388
16.2 Receipt of Notices. Any notice, demand or request that shall be
delivered to Buyer and its Additional Addressee in the manner aforesaid shall be
deemed sufficiently given to and received by Buyer for all purposes hereunder,
and any notice, demand or request that shall be delivered to Seller and its
Additional Addresses in the manner aforesaid shall be deemed sufficiently given
to and received by Seller for all purposes hereunder (i) the next business day
following the day such notice, demand or request is delivered by a nationally
recognized overnight courier service fully prepaid, to such party and its
Additional Addressee, (ii) if sent via registered or certified mail, at the time
of receipt by such party and its Additional Addressee, or (iii) if sent via
telefacsimile, as of the date and time stated upon confirmation reports
generated by the sending party's telefacsimile machine confirming the delivery
of such notice, demand or request to such party and its Additional Addressee.
16.3 Refusal of Delivery. The inability to deliver any notice, demand
or request because the individual to whom it is properly addressed in accordance
with this SECTION 16 refused delivery thereof or no longer can be located at
that address shall constitute delivery thereof to such individual.
16.4 Change of Address. Each party shall have the right from time to
time to designate by written notice to the other parties hereto such other
person or persons and such other place or places as said party may desire
written notices to be delivered or sent in accordance herewith.
SECTION 17
GENERAL PROVISIONS
17.1 Amendment. Except as provided in SECTION 4.1, no provision of this
Agreement or of any documents or instrument entered into, given or made pursuant
to this Agreement may be amended, changed, waived, discharged or terminated
except by an instrument in writing, signed by the party against whom enforcement
of the amendment, change, waiver, discharge or termination is sought.
17.2 Time of Essence. All times provided for in this Agreement for the
performance of any act will be strictly construed, time being of the essence.
17.3 Entire Agreement. This Agreement and other documents delivered at
Closing, set forth the entire agreement and understanding of the parties in
respect of the transactions contemplated by this Agreement, and supersede all
prior agreements, arrangements and understandings relating to the subject matter
hereof and thereof. No representation, promise, inducement or statement of
intention has been made by Seller or Buyer which is not embodied in this
Agreement, or in the attached Exhibits or the written certificates, schedules or
instruments of assignment or conveyance delivered pursuant to this Agreement,
and neither Buyer nor Seller shall be bound by or liable for any alleged
representations, promise, inducement or statement of intention not therein so
set forth.
17.4 No Waiver. No failure of any party to exercise any power given
such party hereunder or to insist upon strict compliance by the other party with
its obligations hereunder shall constitute a waiver of any party's right to
demand strict compliance with the terms of this Agreement.
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17.5 Counterparts. This Agreement, any document or instrument entered
into, given or made pursuant to this Agreement or authorized hereby, and any
amendment or supplement thereto may be executed in two or more counterparts,
and, when so executed, will have the same force and effect as though all
signatures appeared on a single document. Any signature page of this Agreement
or of such an amendment, supplement, document or instrument may be detached from
any counterpart without impairing the legal effect of any signatures thereon,
and may be attached to another counterpart identical in form thereto but having
attached to it one or more additional signature pages.
17.6 Costs and Attorneys' Fees. If any legal action or any arbitration
or other proceeding is brought for the enforcement of this Agreement or any
document or instrument entered into, given or made pursuant to this Agreement or
authorized hereby or thereby (including, without limitation, the enforcement of
any obligation to indemnify, defend or hold harmless provided for herein or
therein), or because of an alleged dispute, default, or misrepresentation in
connection with any of the provisions of this Agreement or of such document or
instrument, or if Escrow Holder commences any action with respect to the
Escrow(s), the successful or prevailing party shall be entitled to recover
actual attorneys' fees, charges and other costs incurred in that action or
proceeding, in addition to any other relief to which it may be entitled.
17.7 Payments; Interests. Except as otherwise provided herein, payment
of all amounts required by the terms of this Agreement shall be made in the
United States and in immediately available funds of the United States of America
which, at the time of payment, is accepted for the payment of all public and
private obligations and debts. Unless the parties otherwise agree, payments
shall be made through the Escrow Holder. If any payment due under this Agreement
is not paid when due, it shall thereafter bear interest at a variable rate equal
to the rate announced from time to time by Citibank, N.A. as its prime or
reference rate, plus five percent (5%) per annum, but in no event more than the
maximum rate, if any, allowed by law to be charged by the party receiving the
interest on such type of indebtedness.
17.8 Transfer By Buyer. Buyer shall not have the right to assign this
Agreement, but shall be permitted to designate an Affiliate or Affiliates to
take title to the Property. In the event that Buyer elects to so designate any
Affiliate or Affiliates to take title to the Property hereunder, (i) Buyer shall
upon close of Escrow be released of all obligations hereunder other than
pursuant to SECTION 6, SECTION 7.1, SECTION 10, SECTION 17.18, SECTION 17.19 and
SECTION 17.20 or arising prior to the Close of Escrow, (ii) such Affiliate or
Affiliates shall assume all of Buyer's obligations hereunder; and (iii) such
Affiliate of Affiliates shall represent and warrant to Seller that such entities
are duly organized and validly existing and otherwise as to the matters covered
in SECTION 6.1.1 and SECTION 6.1.2 as applicable.
17.9 Parties in Interest. Subject to SECTION 17.8, the rights and
obligations of the parties hereto shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors, assigns, heirs
and the legal representatives of their respective estates. Nothing in this
Agreement is intended to confer any right or remedy under this Agreement on any
person other than the parties to this Agreement and their respective successors
and permitted assigns, or to relieve or discharge the obligation or liability of
any person to any party to this Agreement or to give any person any right of
subrogation or action over or against any party to this Agreement.
17.10 Applicable Law. This Agreement shall be governed by and construed
and
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enforced in accordance with the laws of the state in which the Real Property is
located without giving effect to the conflict-of-law rules and principles of
that state.
17.11 Incorporation of Recitals and Exhibits. The Recitals and Exhibits
attached to this Agreement are incorporated into and made a part of this
Agreement.
17.12 Construction of Agreement. The language in all parts of this
Agreement shall be in all cases construed simply according to its fair meaning
and not strictly for or against any of the parties hereto. Headings at the
beginning of sections of this Agreement are solely for the convenience of the
parties and are not a part of this Agreement. When required by the context,
whenever the singular number is used in this Agreement, the same shall include
the plural, and the plural shall include the singular, the masculine gender
shall include the feminine and neuter genders, and vice versa. As used in this
Agreement, the term "Seller" shall include the respective permitted successors
and assigns of Seller, and the term "Buyer" shall include the permitted
successors and assigns of Buyer, if any.
17.13 Severability. If any term or provision of this Agreement is
determined to be illegal, unconscionable or unenforceable, all of the other
terms, provisions and sections hereof will nevertheless remain effective and be
in force to the fullest extent permitted by law.
17.14 Announcements. Seller and Buyer shall consult with each other and
provide each other one (1) Business Day prior notice with regard to all press
releases and other announcements issued at or prior to the Close of Escrow and
during the one year period thereafter concerning the existence of this Agreement
or the sale of the Property and, except as permitted under SECTION 17.19,
neither Seller nor Buyer shall issue any such press release or other such
publicity prior to the Close of Escrow without the prior written consent of the
other party, which consent may be withheld in such other party's sole and
absolute discretion. Buyer will not issue any public announcement with respect
to Seller (other than to describe the transaction contemplated hereby to the
extent permitted hereunder) without the prior written consent of Seller which
may be withheld in its sole and absolute discretion. The agreements of the
parties in this SECTION 17.14 shall survive the Close of Escrow or any
termination of this Agreement.
17.15 Submission of Agreement. The submission of this Agreement to
Buyer or its broker, agent or attorney for review or signature does not
constitute an offer to sell the Property to Buyer or the granting of an option
or other rights with respect to the Property to Buyer. No agreement with respect
to the purchase and sale of the Property shall exist, and this writing shall
have no binding force or effect, until this Agreement shall have been executed
and delivered by Buyer and by Seller and Buyer shall have deposited the Deposit
with Escrow Holder.
17.16 Further Assurances. Buyer and Seller agree to execute such
instructions to the Escrow Holder and such other instruments and take such
further actions either before or after the Close of Escrow as may be reasonably
necessary to carry out the provisions of this Agreement provided that no
material additional cost or liability shall be created thereby.
17.17 Cooperation. Buyer and Seller shall cooperate with the other to
carry out the purpose of this Agreement (provided, such cooperation shall not
require either party to expend any sum not otherwise required pursuant to the
other provisions of this Agreement). This SECTION 17.17 shall survive the Close
of Escrow.
17.18 Moratorium on Re-Sale. Buyer covenants and agrees that it will
not sell the Property to any third-party for a period (the "Transfer Restriction
Period") commencing upon the Closing of Escrow and expiring upon the later of
(a) five (5) years following the Close of
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<PAGE> 45
Escrow and (b) settlement of or the final non-appealable judgment is issued in
connection with the existing litigation between Seller and the Ritz Carlton
Hotel Company, LLC and their respective affiliates, provided, however, the
foregoing prohibition shall not apply to a sale of all or substantially all of
the assets of Buyer, the merger of Buyer into another entity or the transfer of
the Property to a subsidiary and/or Affiliate of Buyer but shall be binding upon
the party succeeding to all or substantially all of the assets of Buyer, the
surviving entity in such merger, or such subsidiary or Affiliate. The provisions
of this SECTION 17.18 shall be specifically enforceable. Buyer hereby waives any
requirement for Seller to post a bond in order to seek or obtain any temporary
restraining order or other injunctive relief pursuant to this SECTION 17.18. The
parties acknowledge and agree that the provisions of this Section 17.18 form a
material part of the consideration to Seller for entering into this Agreement.
The parties agree that these provisions are reasonable in light of Seller's
ongoing litigation with Ritz Carlton Hotel Company and its affiliates.
17.19 Confidentiality. Buyer shall hold as confidential all information
concerning the transaction contemplated by this Agreement, Seller and the
Property disclosed in connection with this transaction and Buyer shall not,
prior to the Close of Escrow, release any such information relating to the
transaction, Seller or the Property to any governmental agencies or third
parties without Seller's prior written consent except as may be required by law
and in such case subject to the provisions of SECTION 17.14. Seller hereby gives
its consent to Buyer's disclosure of information relating to the transaction
contemplated hereby to Buyer's Counsel and other consultants, in each instance
to the extent reasonably necessary to verify information given to Buyer by
Seller or otherwise to carry out the purposes of this Agreement and provided in
each instance, such consultants agree in writing to be bound by the
confidentiality provisions of this SECTION 17.19. If the Close of Escrow shall
fail to occur for any reason, neither party shall issue any press release,
publicity or other public announcement of the subject matter of this Agreement,
or to make any other disclosure concerning the subject matter of this Agreement
(except as may be required by law and in such case subject to the provisions of
SECTION 17.14.), without the prior written consent of the other party, which
consent may be withheld in such other party's sole and absolute discretion. The
agreements of the parties in this SECTION 17.19 shall survive any termination of
this Agreement.
17.20 Interim Management Agreement. Seller shall provide Manager with a
notice of termination of the Management Agreement on January 2, 1998 or as soon
thereafter as Seller shall have obtained any required lender consent thereto.
Seller shall, on or prior to January 2, 1998, seek any required lender consent
and use all reasonable commercial efforts to obtain same as promptly as
possible. Buyer and Seller shall enter into a management agreement with respect
to the Property in the form attached as EXHIBIT 17.20 hereto (the "Interim
Management Agreement") which shall be effective (and the Interim Management
Agreement shall be dated as of such effective date) on the earlier of (a) thirty
days from the date of the delivery to Manager of such termination notice and (b)
the effective date of a written waiver of Manager of the notice of termination
required under the Management Agreement. Buyer shall advance any fee payable to
Manager under the Management Agreement on account of the termination thereof up
to $122,481.00. Buyer shall be deemed to have waived delivery of all items under
Sections 4.2.1.15, 4.2.1.16, 4.2.1.17 and 4.2.1.19 in the event the Management
Agreement is terminated in accordance with the provisions of this Section 17.20
prior to the Closing Date.
17.21 Starwood Lodging Trust. The parties hereto understand and agree
that the name
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"Starwood Lodging Trust" is a designation of the Trust and its trustees (as
trustees but not personally) under the Trust's Declaration of Trust, and all
persons dealing with the Trust shall look solely to the Trust's assets for the
enforcement of any claims against the Trust, and that the Trustees, officers,
agents and security holders of the Trust assume no personal liability for
obligations entered into on behalf of the Trust, and their respective individual
assets shall not be subject to the claims of any person relating to such
obligations.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Buyer and Seller have caused this Agreement to be
executed as of the day and year first above written.
"Seller"
SAVANAH LIMITED PARTNERSHIP,
a District of Columbia limited partnership
By: ASPEN ENTERPRISES INTERNATIONAL, INC.,
a Colorado corporation, its General Partner
By: /s/ Mansor Dalaan
------------------------------
Name: Mansor Dalaan
Title: President
"Buyer"
STARWOOD LODGING TRUST,
a Maryland real estate investment trust
By: /s/ Steven R. Goldman
-----------------------------------
Name: Steven R. Goldman
Title: Senior Vice President
STARWOOD LODGING CORPORATION,
a Maryland corporation
By: /s/ Michael C. Mueller
-----------------------------------
Name: Michael C. Mueller
Title: Vice President
"Escrow Agent"
CHICAGO TITLE INSURANCE COMPANY,
a Missouri corporation
By: /s/ Maggie G. Watson*
-----------------------------------
Name: Maggie G. Watson
Title: Authorized Signatory
*Subject to receiving mutual
instructions in the event
paragraph #3.5 becomes
operative.
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TABLE OF CONTENTS
SECTION 1 - DEFINITIONS 1
1.1 Defined Terms 1
1.2 Other Definitional Provisions 11
SECTION 2 - PURCHASE AND SALE OF PROPERTY 11
SECTION 3 - PURCHASE PRICE; PAYMENT; BUYER'S DEFAULT; LIQUIDATED DAMAGES 11
3.1 Purchase Price 11
3.2 Payment 11
3.3 Investment of Escrowed Funds 12
3.4 Allocation of Purchase Price 12
3.5 Default by Buyer Prior to Closing; Liquidated Damages 12
SECTION 4 - ESCROW; CLOSING; COSTS 13
4.1 Escrow 13
4.2 Seller's Deliveries to Escrow Holder 13
4.2.1.1 Deed 14
4.2.1.2 Assignment and Assumption of Tenant Leases 14
4.2.1.3 General Assignment 14
4.2.1.4 Assignment and Assumption of Management Agreement 14
4.2.1.5 Bill of Sale 14
4.2.1.6 Stock Agreement 14
4.2.1.7 Liquor Licenses Management Agreement 14
4.2.1.8 [Intentionally Omitted] 14
4.2.1.9 [Intentionally Omitted] 14
4.2.1.10 PUD Cooperation Agreement 14
4.2.1.11 [Intentionally Omitted] 15
4.2.1.12 [Intentionally Omitted] 15
4.2.1.13 Non-Foreign Person Certificate 15
4.2.1.14 Transfer Tax Forms 15
4.2.1.15 Certified Rent Roll 15
4.2.1.16 Certified Operating Statement 15
4.2.1.17 Guest Ledger 15
4.2.1.18 Closing Certificate 15
4.2.1.19 Schedule of Bookings 15
4.2.1.20 Title Requirements 15
4.2.1.21 Payoff Letters 16
4.2.1.22 Notices to Tenants 16
4.2.1.23 Opinion of Seller's Counsel 16
4.2.1.24 Other 16
4.3 Buyer's Deliveries to Escrow Holder 16
4.3.1.1 The Cash Purchase Price 16
4.3.1.2 Stock Certificates 16
4.3.1.3 Assignment and Assumption of Management Agreement 16
4.3.1.4 Value Letter 17
4.3.1.5 Opinion of Buyer's Counsel 17
4.3.1.6 Stock Agreement 17
<PAGE> 49
4.3.1.7 [Intentionally Omitted] 17
4.3.1.8 Liquor License Management Agreement 17
4.3.1.9 PUD Cooperation Agreement 17
4.3.1.10 [Intentionally Omitted] 17
4.3.1.11 [Intentionally Omitted] 17
4.3.1.12 Closing Certificate 17
4.3.1.13 The Assignment and Assumption of Tenant Leases 17
4.3.1.14 The General Assignment and Assumption Agreement 17
4.3.1.15 Transfer Tax Forms 17
4.3.1.16 Other 17
4.4 Seller's Deliveries to Buyer 17
4.4.1 Tenant Leases/Tenant Deposits 18
4.4.2 Service Contracts 18
4.4.3 Licenses and Permits 18
4.4.4 Records and Plans 18
4.5 Possession 18
4.6 Evidence of Authorization 18
4.7 Close of Escrow 18
4.8 Costs of Escrow 19
4.8.7 [Intentionally Omitted] 20
4.9 Other Costs 20
4.10 Maintenance of Confidentiality by Escrow Holder 20
SECTION 5 - PRORATIONS AND ASSUMPTION OF OBLIGATIONS 20
5.1 General 20
5.2 General and Specific Prorations 21
5.3 Deposits 23
5.4 Tenant Leases 23
5.5 Service Contracts and Other Intangible Property 23
5.6 Tax Refunds and Proceedings 24
5.7 Guest Baggage 24
5.8 Safe Deposit Boxes 24
5.9 Advance Bookings 24
5.10 Special Purchase Price Adjustment 24
5.11 The PCL Litigation 25
SECTION 6 - REPRESENTATIONS AND WARRANTIES; CONDITION OF PROPERTY 25
6.1 Of the Trust 25
6.1.1 Power and Authority 25
6.1.2 Authorization; Valid Obligation 25
6.1.3 Capital Structure 25
6.1.4 SEC Documents and Other Reports 25
6.1.5 Absence of Certain Changes or Events 25
6.1.6 Actions and Proceedings 25
6.1.7 REIT Status 25
6.1.8 Partnership Status 25
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6.1.9 Hart-Scott-Rodino Act 25
6.2 Of the Corporation 25
6.2.1 Power and Authority 25
6.2.2 Authorization; Valid Obligation 25
6.2.3 Capital Structure 25
6.2.4 SEC Documents and Other Reports 25
6.2.5 Absence of Certain Changes or Events 25
6.2.6 Actions and Proceedings 25
6.2.8 Hart-Scott-Rodino 25
6.3 Of Seller 25
6.3.1 Regarding Seller's Authority 25
6.3.2 Tenant Leases 25
6.3.3 Service Contracts 25
6.3.4 Claims 25
6.3.5 Employees 25
6.3.6 Compliance with Laws 25
6.3.7 Hazardous Materials 25
6.3.8 Records and Plans 25
6.3.9 Licenses and Permits 25
6.3.10 Management Agreements 25
6.3.11 Personal Property 25
6.3.12 Insurance 25
6.3.13 Real Estate Taxes 25
6.3.14 [Intentionally Omitted] 25
6.3.15 [Intentionally Omitted] 25
6.3.16 [Intentionally Omitted] 25
6.4 Buyer's Review of Records and Plans 25
6.4.1 Access to Records and Plans; Specific Disclosures 25
6.4.2 Limitation on Access to Records and Plans 25
6.5 PURCHASE AS IS 25
6.6 Limitation on Representations and Warranties of Seller 25
6.7 Right to Supplement Disclosures 25
6.8 Basket 25
6.9 Survival 25
6.10 [Intentionally Omitted] 25
SECTION 7 - TITLE TO THE REAL PROPERTY: EXTENSION OF THE CLOSING 25
7.1 Buyer's Review of Title 25
7.1.1 Failure to Satisfy Certain Closing Conditions; Monetary Liens 25
7.1.2 [Intentionally Omitted] 25
7.2 Title Insurance Policy 25
7.3 Title to Real Property 25
SECTION 8 - INTERIM ACTIVITIES 25
SECTION 9 - CONDITIONS PRECEDENT TO CLOSING 25
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<PAGE> 51
9.1 Conditions Precedent to Buyer's Obligations 25
9.1.1 Seller's Deliveries 25
9.1.2 Title Policy 25
9.1.3 Preference Under Related Agreement 25
9.1.4 [Intentionally Omitted] 25
9.1.5 Seller Performance 25
9.1.6 Representations and Warranties of Seller 25
9.2 Conditions Precedent to Seller's Obligations 25
9.2.1 Funds and Documents 25
9.2.2 Representations and Warranties of Buyer 25
9.2.3 No Material Changes 25
9.2.4 [Intentionally Omitted] 25
9.2.5 Performance Under Related Agreement 25
9.3 Failure of Condition 25
SECTION 10 - BROKER 25
SECTION 11 - REMEDIES FOR SELLER'S DEFAULT 25
11.1 Buyer's Remedies in General 25
11.2 MATERIAL INDUCEMENT 25
SECTION 12 - DAMAGE TO OR DESTRUCTION OF THE PROPERTY 25
12.1 Insured Casualty 25
12.2 Uninsured Casualty 25
SECTION 13 - CONDEMNATION 25
SECTION 14 -EMPLOYEES 25
14.1 Hiring of Hotel Employees; WARN Act Compliance 25
14.2 Collective Bargaining Agreements 25
14.3 Continuation of Benefits 25
14.5 Indemnification 25
14.6 Survival 25
SECTION 15 - COOPERATION 25
SECTION 16 - NOTICES 25
16.1 Addresses 25
16.2 Receipt of Notices 25
16.3 Refusal of Delivery 25
16.4 Change of Address 25
SECTION 17 - GENERAL PROVISIONS 25
17.1 Amendment 25
17.2 Time of Essence 25
17.3 Entire Agreement 25
17.4 No Waiver 25
17.5 Counterparts 25
17.6 Costs and Attorneys' Fees 25
17.7 Payments; Interests 25
17.8 Transfer By Buyer 25
17.9 Parties in Interest 25
17.10 Applicable Law 25
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17.11 Incorporation of Recitals and Exhibits 25
17.12 Construction of Agreement 25
17.13 Severability 25
17.14 Announcements 25
17.15 Submission of Agreement 25
17.16 Further Assurances 25
17.17 Cooperation 25
17.18 Moratorium on Re-Sale 25
17.19 Confidentiality 25
17.20 Interim Management Agreement 25
17.21 Starwood Lodging Trust 25
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EXHIBITS
Exhibit A Legal Description
Exhibit B Memorandum of Contract
Exhibit 4.2.1.1 Deed
Exhibit 4.2.1.2 Assignment and Assumption of Tenant Leases
Exhibit 4.2.1.3 General Assignment and Assumption Agreement
Exhibit 4.2.1.4 Assignment and Assumption of Management Agreement
Exhibit 4.2.1.5A Bill of Sale for Capitalized Tangible Property
Exhibit 4.2.1.5B Bill of Sale for Expensed Tangible Property
Exhibit 4.2.1.6 Stock Agreement
Exhibit 4.2.1.7 Liquor License Management Agreement
Exhibit 4.2.1.10 PUD Cooperation Agreement
Exhibit 4.2.1.13 Non-Foreign Person Certificate
Exhibit 17.20 Interim Management Agreement
SCHEDULES
Schedule 1.1.1 Approved Service Contracts
Schedule 1.1.2 Employment Agreements
Schedule 1.1.3 Equipment Leases
Schedule 1.1.4 Excluded Property
Schedule 1.1.5 [Intentionally Omitted]
Schedule 1.1.6 Hotel Employees
Schedule 1.1.7 Schedule of Tenant Leases
Schedule 1.1.8 Seller's Due Diligence and Seller's Knowledge
Schedule 1.1.9 Specific Disclosure Matters
Schedule 6.3.2 Material Defaults Under Tenant Lease
Schedule 6.3.3 Material Defaults Under Approved Service Contracts
Schedule 6.3.4 Material Claims
Schedule 6.3.5 Material Defaults Under Employment Agreements
Schedule 6.3.6 Material Violations
Schedule 6.3.7 Material Environmental Conditions
Schedule 6.3.9 Licenses and Permits
Schedule 6.3.12 Seller's Insurance
Schedule 6.3.13 Pending Tax Protests
Schedule 7.3 Permitted Encumbrances
Schedule 14.2 Collective Bargaining Agreements
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Exhibit 10.56
STOCK AGREEMENT
by and among
SAVANAH LIMITED PARTNERSHIP
a District of Columbia Limited Partnership
as Stock Purchaser
and
STARWOOD HOTELS & RESORTS TRUST,
a Maryland real estate investment trust
and
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.,
a Maryland corporation,
Dated as of January 15, 1998
<PAGE> 2
STOCK AGREEMENT
THIS STOCK AGREEMENT (this "Agreement") is entered into as of
January 15, 1998 (the "Closing Date") by and between SAVANAH LIMITED
PARTNERSHIP, a District of Columbia limited partnership, ("Stock Purchaser"),
STARWOOD HOTELS & RESORTS TRUST, a Maryland real estate investment trust (the
"Trust"), and STARWOOD HOTELS & RESORTS WORLDWIDE, INC., a Maryland corporation
(the "Corporation", and, with the Trust, "Starwood Lodging").
R E C I T A L S
A. Stock Purchaser has agreed to acquire from Starwood
Lodging, and Starwood Lodging has agreed to issue and deliver to Stock
Purchaser, Paired Shares in partial consideration for certain assets owned by
Stock Purchaser.
B. The parties desire to enter into this Agreement in order to
set forth certain terms and conditions under which the Paired Shares are to be
issued to and held by Stock Purchaser.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements contained in this Agreement and for other good and
valuable consideration, the receipt and adequacy of which are hereby mutually
acknowledged, Starwood Lodging and Stock Purchaser agree as follows:
SECTION 1
DEFINITIONS
1.1 Defined Terms.
"Accredited Investor" shall have the meaning ascribed to that
term in Rule 501 promulgated by the SEC under the Securities Act.
"Affiliate" shall mean, with respect to any Person, any other
Person that controls, is controlled by or is under common control with such
first Person.
"Applicable Percentage" shall mean: (a) if Starwood Lodging
delivers Registered Shares to Stock Purchaser pursuant to Section 2.1 hereof,
100% and (b) if Starwood Lodging delivers Unregistered Shares pursuant to
Section 2.1 hereof, 91.95%.
"Business Day" shall mean any day on which the New York Stock
Exchange is open for business.
"Closing Date" shall mean the date hereof.
"Equity Value" shall mean One Hundred Fifty-Two Million Six
Hundred Thirty-Seven Thousand Dollars ($152,637,000), divided by the Applicable
Percentage, rounded to the nearest whole number.
"ITT Closing" shall have the meaning set forth in the
Registration Rights Agreement.
"Joinder Agreement" means an agreement to be bound by this
Agreement in the form of Attachment A hereto.
"LIBOR" means the average of the interbank offered rates for
three-month dollar
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<PAGE> 3
deposits in the London market based on quotations at five (5) major banks, as
published from time to time in The Wall Street Journal. If The Wall Street
Journal ceases to publish such a compilation of interbank offered rates, or if
The Wall Street Journal ceases to be published, then Starwood Lodging shall
propose a substitute method of determining the interest rate generally known as
the three-month LIBOR rate, which method, absent manifest error, shall be
binding on all holders of the Subject Shares and Starwood.
"Lock Price" shall mean $53.75 per Paired Share if the Closing
Date occurs on or before the 60th day after seven Business Days after January
15, 1998 (or thereafter because of a default by the Trust or the Corporation),
and the Market Price as of the Closing Date if the Closing Date occurs
thereafter for any reason other than a default by the Trust or the Corporation
provided, however, that in the event that, at any time during the period between
December 30, 1997 and the Settlement Date, the Corporation or the Trust effects
any reclassification, stock split or stock dividend with respect to their stock,
any change or conversion of stock into other securities, or any other dividend
or distribution with respect to the Paired Shares, other than (i) dividends
contemplated by the Starwood Lodging Disclosure in effect as of December 30,
1997, or (ii) dividends in the aggregate not to exceed the greater of (a) the
current rate (as of December 30, 1997) of their dividends (together with any
increases in such rate in the ordinary course) and (b) the Trust's "real estate
investment taxable income" (as such term is defined for purposes of the Internal
Revenue Code) without regard to any net capital gains or the deduction for
dividends paid, appropriate and proportionate adjustments shall be made to the
Lock Price.
"Market Price" shall mean, as of any date, the average closing
prices of the Paired Shares on the New York Stock Exchange during the ten
consecutive Business Days immediately preceding such date.
"Open Market Sale" means one or more sales of Stock Agreements
Shares (including "short sales" initiated with the intention of delivering Stock
Agreements Shares) made or proposed to be made by placing one or more sale
orders or offers to sell with one or more securities brokers or dealers with a
view toward the consummation of one or more sale transactions that are required
to be, or that actually are, reported to the New York Stock Exchange or the
National Association of Securities Dealers.
"Orderly Market Disposition" means the sale of Stock
Agreements Shares by placing one or more sell orders with one or more securities
brokers or dealers with a view toward the disposition in the market of such
Stock Agreements Shares.
"Other Stock Agreements" shall mean, collectively, (i) that
certain Stock Agreement, dated as of January 15, 1998, among New Remington
Partners, as stock purchaser, and Starwood Lodging, (ii) that certain Stock
Agreement, dated as of January 15, 1998, among N.Y. Overnight Partners, L.P., as
stock purchaser, and Starwood Lodging, and (iii) that certain Stock Agreement,
dated as of January 15, 1998, among D.C. Overnight Partners, L.P., as stock
purchaser, and Starwood Lodging.
"Paired Shares" shall mean one share of beneficial interest,
par value $.01 per share, of the Trust, and one share of common stock, par value
$.01 per share, of the Corporation that are subject to the Pairing Agreement.
For purposes of calculating the number of Paired Shares to be delivered
hereunder, each pair of the shares of the stock of the Trust and the Corporation
shall be considered one share.
"Pairing Agreement" shall mean the Pairing Agreement dated as
of June 25, 1980, as amended, between the Trust and the Corporation providing,
in relevant part, for the pairing of all outstanding shares of the Corporation
and the Trust.
"Payment Rights" shall have the meaning set forth in Section 5
hereof.
"Person" shall have the meaning set forth in the Registration
Rights Agreement.
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<PAGE> 4
"Proposed Disposition Shares" shall have the meaning set forth
in Section 3 hereof.
"Put Price" and "Put Right" shall have the meaning set forth
in Section 2.4 hereof.
"Registered Shares" means Subject Shares the issuance of which
to Stock Purchaser has been registered under the Securities Act.
"Registration Rights Agreement" means the Registration Rights
Agreement by and among Stock Purchaser, the Trust and the Corporation in the
form of Attachment B hereto.
"Registration Statement" shall have the meaning set forth in
the Registration Rights Agreement.
"Required Effectiveness Date" shall have the meaning set forth
in the Registration Rights Agreement.
"Response Date" shall have the meaning set forth in Section 3
hereof.
"Restricted Group" shall mean two (2) or more Restricted
Holders acting in concert or under common direction.
"Restricted Holder" shall mean Stock Purchaser and any other
Person who shall have acquired any Stock Agreements Shares in a Transfer not
constituting an Open Market Sale. A Restricted Holder shall not include any
Person who shall have acquired any Stock Agreements Shares in a Transfer not
constituting an Open Market Sale if such Transfer occurs after the first Open
Market Sale of such Stock Agreements Shares.
"Sale Notice" shall have the meaning set forth in Section 3
hereof.
"SEC" shall mean the United States Securities and Exchange
Commission.
"SEC Documents" means all documents required to have been
filed by the Trust or the Corporation with the SEC since January 1, 1996 and
through the date hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Settlement Date" shall mean, if Starwood Lodging shall
deliver Unregistered Shares pursuant to Section 2.1 hereof, the date on which
Starwood Lodging or its counsel shall notify Stock Purchaser that (i) the
Registration Statement has been declared effective by the SEC, (ii) that the
Subject Shares have been registered, on the terms and subject to the provisions
of the Registration Rights Agreement, for Transfer by the selling shareholders
named therein in Open Market Sales and in such other manner as is provided in
the Registration Statement, and (iii) that Starwood Lodging has completed all
deliveries and other actions required to enable trading of the Subject Shares on
the New York Stock Exchange; provided, however, that if such notice is given
later than 1:00 PM Eastern Time, the Settlement Date shall be deemed for all
purposes to occur on the Business Day following the date of such notice.
"Starwood Lodging Disclosure" shall mean, collectively, the
Form S-3 filed by the Corporation and the Trust with the SEC on November 12,
1997, and the Form S-4 filed by the Corporation and the Trust with the SEC on
November 20, 1997, as the same has been or may hereafter be amended by any
filing with the SEC made by the Trust or the Corporation.
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<PAGE> 5
"Stock Agreements Shares" shall mean the aggregate of the
Subject Shares and the other Paired Shares delivered pursuant to the Other Stock
Agreements.
"Stock Purchaser Affiliates" shall have the meaning set forth
in Section 6.1 hereof.
"Subject Shares" means the 3,088,372 Paired Shares delivered
by Starwood Lodging pursuant to Section 2.1 hereof.
"Transfer" shall have the meaning set forth in the
Registration Rights Agreement.
"Transfer Agent" shall mean the transfer agent for the Paired
Shares.
"Unregistered Shares" means Subject Shares the issuance of
which to Stock Purchaser has not been registered under the Securities Act.
1.2 Other Definitional Provisions. The terms "hereof,"
"hereto," "hereunder" and similar terms when used in this Agreement shall refer
to this Agreement generally, rather than to the section in which such term is
used, unless otherwise specifically provided. Unless the context otherwise
requires, any defined term used in the plural shall refer to all members of the
relevant class, and any defined term used in the singular shall refer to any one
or more of the members of the relevant class.
SECTION 2
CALCULATION OF SUBJECT SHARES
2.1 Calculation of Subject Shares. Starwood Lodging shall
deliver to Stock Purchaser on the Closing Date Paired Shares in an amount equal
to the Equity Value divided by the Lock Price. Starwood Lodging shall have the
option to deliver Registered Shares or Unregistered Shares on the Closing Date.
2.2 Delivery Requirements for Paired Shares. The Paired
Shares to be delivered hereunder shall be properly endorsed and certificated
Paired Shares in the amount required to be delivered in accordance with the
provisions of this Agreement. If Registered Shares are delivered, such shares
shall be unlegended and fully and freely transferable without any consent of,
registration with or notice to any Person (except as provided for in Sections 3
and 4 hereof and in the Pairing Agreement). If Unregistered Shares are issued,
each certificate evidencing Subject Shares shall be stamped or otherwise
imprinted with a legend in substantially the following form (and no other
restrictive legends):
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT. THE SALE, PLEDGE
OR OTHER TRANSFER OF THIS CERTIFICATE OR THE SHARES EVIDENCED
HEREBY IS SUBJECT TO THE TERMS OF A REGISTRATION RIGHTS
AGREEMENT DATED AS OF JANUARY 15, 1998 BETWEEN THE ISSUER AND
THE HOLDER HEREOF.
There shall be no legend on the Paired Shares reflecting the restrictions in
Sections 3 or 4 hereof.
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<PAGE> 6
2.3 Other Deliveries. Concurrently with the delivery of the
Paired Shares, Starwood Lodging shall deliver to Stock Purchaser any statements,
such as a transfer or conveyance tax forms or returns required by applicable
federal or New York law to be executed by Starwood Lodging, as may reasonably be
requested by Stock Purchaser in order to effect the delivery of the Subject
Shares to Stock Purchaser.
2.4 Registration Rights and Requirements.
(a) If Starwood Lodging delivers Unregistered Shares pursuant
to Section 2.1 hereof, Stock Purchaser and Starwood Lodging shall on the Closing
Date execute and deliver to each other the Registration Rights Agreement and the
parties thereto shall perform their respective obligations thereunder. If
Starwood Lodging delivers Registered Shares pursuant to Section 2.1 hereof, the
Registration Rights Agreement shall not be executed or delivered and none of the
parties shall have any obligations thereunder.
(b) If Starwood Lodging delivers Unregistered Shares pursuant
to Section 2.1 hereof, and if the Settlement Date shall not have occurred on or
before the seventh Business Day after the Required Effectiveness Date, Starwood
Lodging shall pay to each Restricted Holder, on the Settlement Date, an amount
equal to the "Interest Factor." For each Restricted Holder, the "Interest
Factor" shall be an amount equal to the product of (i) LIBOR plus 2% per annum
for each day after the seventh Business Day after the Required Effectiveness
Date to and including the earlier of the Settlement Date or the date that is 60
days after the Required Effectiveness Date, multiplied by (ii) the Market Price
multiplied by the number of Subject Shares held by such Restricted Holder on the
date of such payment.
(c) In the event that the Settlement Date shall not have
occurred by the date that is 60 days after the Required Effectiveness Date, each
Person who is a Restricted Holder as of such date shall have the
non-transferrable right (its "Put Right"), exercisable at any one time for each
such Restricted Holder after such 60th day and through the earlier to occur of
(i) the Settlement Date, and (ii) the day immediately prior to the first
anniversary of the Closing, to "put" some or all of the Subject Shares held by
such Restricted Holder to Starwood Lodging for an amount per share equal to the
Put Price; provided, however, that the Put Right shall not be exercisable by any
Restricted Holder for a number of Subject Shares that is less than the lesser of
(i) 100,000, or (ii) the number of Subject Shares then held by such Restricted
Holder. Such right shall be exercised by such Restricted Holder giving Starwood
Lodging notice of its election to exercise its Put Right and the number of
Subject Shares to be purchased by Starwood, whereupon Starwood Lodging shall
purchase such shares at 9:00 a.m. (Eastern Time) on the second Business Day
following its receipt of such notice, with payment to be delivered (against
delivery to Starwood Lodging of such shares free of all rights of other Persons)
on the third Business Day thereafter in cash or immediately available funds to
such account as such Restricted Holder may designate in such notice. The Put
Price shall be the Market Price determined as of the date such notice is given.
Starwood Lodging shall have the right to satisfy its obligations under the Put
Rights by designating another Person as the purchaser of such shares, and such
obligations shall be deemed satisfied upon such other Person's purchase of such
shares for the Put Price and at the time and in the manner set forth herein.
Such designation shall not affect Starwood's obligation to pay the Interest
Factor as provided herein.
(d) The Interest Factor and the right of each Restricted
Holder to receive the Put Price in the event it elects to exercise its Put Right
shall be each Restricted Holder's sole and exclusive monetary remedies arising
from Starwood's failure to cause the Settlement Date to occur on or before the
seventh Business Day after the Required Effectiveness Date and shall be deemed
liquidated damages in respect of such failure; and each Restricted Holder shall
be
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<PAGE> 7
deemed to have waived its other monetary remedies. However, from and after
the seventh Business Day after the Required Effectiveness Date, each Holder
shall at all times have such equitable remedies as may be available under
applicable law.
SECTION 3
NOTICE PROCEDURES REGARDING OPEN MARKET SALE
OF STOCK AGREEMENTS SHARES
3.1 If, at any time any Restricted Holder or Restricted Group
elects to Transfer, in an Open Market Sale, more than 100,000 Stock Agreements
Shares on any single Business Day (300,000 Stock Agreements Shares from and
after the first Business Day after the ITT Closing), prior to executing such
Transfer the designated representative of such Restricted Holder or Restricted
Group shall provide Starwood's representative, the Chief Financial Officer of
the Trust (or any successor representative identified by a notice given
hereunder), with telephonic notice at (602) 852-3900 along with a confirmation
of such notice by telefacsimile to Starwood Lodging and Starwood's additional
addressees as provided in Section 7.1 hereof. Such notice (the "Sale Notice")
shall indicate the number of Stock Agreements Shares which such Restricted
Holder or Restricted Group has determined to Transfer in an Open Market Sale
(the "Proposed Disposition Shares") on such day or days and shall comply with
Section 3.5 hereof (if applicable). Such notice shall be deemed given on the
Business Day the telephonic notice described above is given so long as such
notice is given by 5:00 P.M., Eastern time, on such day; if given after that
time, it shall be deemed given on the next Business Day. In the event that, at
any time while this Section 3.1 is in effect, the Corporation or the Trust
effects any reclassification, stock split or stock dividend with respect to
their stock, any change or conversion of stock into other securities, or any
other dividend or distribution with respect to the Paired Shares, other than (i)
dividends contemplated by the Starwood Lodging Disclosure as in effect on
December 30, 1997, or (ii) dividends in the aggregate not to exceed the greater
of (a) the current rate (as of December 30, 1997) of their dividends (together
with any increases in such rate in the ordinary course) and (b) the Trust's
"real estate investment taxable income" (as such term is defined for purposes of
the Internal Revenue Code) without regard to any net capital gains or the
deduction for dividends paid, appropriate and proportionate adjustments shall be
made to the numbers of Stock Agreements Shares set forth in the first sentence
of this Section 3.1.
3.2 No later than noon, Eastern time, on the second Business
Day after the Sale Notice is given as described above, Starwood Lodging may
provide the representative(s) of such Restricted Holder or Restricted Group with
telephonic notice, along with a confirmation of such notice to such
representatives by telefacsimile, that Starwood Lodging is irrevocably offering
to purchase or place all of the Proposed Disposition Shares at a price per share
equal to the average of the closing prices on the New York Stock Exchange on the
first and second Business Days following the giving of the Sale Notice. Such
notice shall be given as provided in Section 3.5 hereof. It shall be a condition
to such notice and the consummation of such transaction that such transaction
not constitute a violation of Regulation M promulgated by the SEC. If Starwood
Lodging fails to make such an offer within such period, it shall have no further
rights under this Section 3 with respect to any Orderly Market Disposition by
such Restricted Holder or Restricted Group of Stock Agreements Shares up to the
amount of the Proposed Disposition Shares that is commenced not later than the
seventh Business Day after the Sale Notice is given.
3.3 If Starwood Lodging duly makes such an offer, such
Restricted Holder or Restricted Group shall elect by telephonic notice to
Starwood's representative delivered and confirmed as described above, given by
8:30 a.m. (Eastern Time) on the Business Day following
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<PAGE> 8
receipt of Starwood's offer (such day is referred to herein as the "Response
Date"), in their sole and absolute discretion, to either (i) proceed with such
proposed disposition, in which instance Starwood Lodging shall purchase or place
the Proposed Disposition Shares at 9:00 a.m. (Eastern Time), on the Response
Date, with payment to be delivered (against delivery to Starwood Lodging of the
Proposed Disposition Shares free of all rights of other Persons) on the third
Business Day after the Response Date in cash or immediately available funds to
such account as such Restricted Holder may designate by notice to Starwood, or
(ii) not to proceed with such proposed disposition, in which instance the Sale
Notice shall be withdrawn and such Restricted Holder shall continue to hold the
Proposed Disposition Shares subject to the terms of this Section 3 (to the
extent applicable). If such Restricted Holder shall fail to so elect by 8:30
a.m. (Eastern Time) on the Response Date, it shall irrevocably be deemed to have
elected not to proceed with such proposed disposition.
3.4 On the first anniversary of the Settlement Date, the
provisions of this Section 3 shall automatically lapse and be of no further
force or effect with respect to each Restricted Holder that holds less than
500,000 Stock Agreements Shares (except (i) to the extent that such Restricted
Holder acts on or after such date as a member of a Restricted Group that holds
in the aggregate 500,000 or more Stock Agreements Shares, and (ii) to the extent
such Restricted Holder, either alone or as a member of a Restricted Group, has
given or was required to have given Starwood Lodging a Sale Notice prior to such
date and as to which the procedures in this Section 3 have not been fully
performed).
3.5 Any notice given by Starwood Lodging pursuant to Section
3.2 hereof to Stock Purchaser shall be given telephonically to Mansor Dalaan at
(310) 229-2929 and by telefacsimile to (310) 229-2927, or to such other
telephone and telefacsimile numbers as may be set forth for such purpose in the
Sale Notice. Any notice given by Starwood Lodging pursuant to Section 3.2 hereof
to any other Restricted Holder or Restricted Group shall be given to the
telephone and telefacsimile numbers as may be set forth for such purpose in the
Sale Notice, and no Sale Notice from a Restricted Holder other than Stock
Purchaser or from any Restricted Group shall be deemed properly given in
accordance with Section 3.1 unless such numbers are set forth in such Sale
Notice.
3.6 Time is of the essence in the performance by the parties
of their obligations under this Section 3.
SECTION 4
TRANSFERS NOT CONSTITUTING AN OPEN MARKET SALE; SHORT SALES
4.1 Each Restricted Holder covenants and agrees that, as a
condition to any Transfer by a such Restricted Holder of Subject Shares in a
transaction that does not constitute an Open Market Sale, such Restricted Holder
will obtain and deliver to Starwood Lodging a Joinder Agreement duly
executed by the transferee or the intended transferee; and any purported
Transfer of Subject Shares made in breach of this provision shall be null and
void ab initio.
4.2 Each Restricted Holder covenants and agrees that, prior to
the effectiveness of the Registration Statement, it will not "sell short" (as
such term is commonly understood in the brokerage industry) any Paired Shares,
whether "against the box" or otherwise.
SECTION 5
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<PAGE> 9
PAYMENT RIGHTS
On the Settlement Date, Starwood Lodging shall pay to Stock
Purchaser in cash or other immediately available funds an amount equal to the
amount, if any, by which the Lock Price exceeds the Market Price as of the
Settlement Date, multiplied by the number of Paired Shares delivered by Starwood
Lodging to Stock Purchaser hereunder. Stock Purchaser's right to receive the
payments from Starwood Lodging described in this section are referred to herein
as the "Payment Rights." Pursuant to a written instrument a copy of which is
delivered to Starwood Lodging promptly following its execution by Stock
Purchaser, Stock Purchaser may distribute to its partners or their shareholders
or assign to any other Person all or any portion of the Payment Rights either
together with or separately from the Paired Shares delivered hereunder.
SECTION 6
REPRESENTATIONS AND WARRANTIES
6.1 Stock Purchaser represents and warrants to Starwood
Lodging as follows:
(a) Stock Purchaser has the power and authority to enter into
this Agreement and the Registration Rights Agreement and to perform its
obligations hereunder and thereunder. The execution and delivery hereof and
thereof and the performance by Stock Purchaser of its obligations hereunder and
thereunder will not violate or constitute an event of default under any material
term or material provision of any agreement, document, instrument, judgment,
order or decree to which Stock Purchaser is a party or by which it is bound, or
violate any law, rule or regulation the violation of which would have a material
adverse effect upon the principal benefits intended to be provided under this
Agreement or the Registration Rights Agreement.
(b) The individuals executing this Agreement and the
Registration Rights Agreement on behalf of Stock Purchaser have the legal power,
right and actual authority to bind Stock Purchaser to the terms and conditions
hereof and thereof. Each of this Agreement and the Registration Rights Agreement
is a valid and binding obligation of Stock Purchaser, enforceable in accordance
with its terms, except as the same may be affected by bankruptcy, insolvency,
moratorium or similar laws, or by legal or equitable principles relating to or
limiting the rights of contracting parties generally.
(c) Stock Purchaser is acquiring the Subject Shares to be
issued to it for investment, solely for the account of itself, on behalf of its
partners and Persons who are stockholders of such partners, or on behalf of
certain Persons each of whom is both an Affiliate of a partner of Stock
Purchaser and a creditor of Stock Purchaser (collectively, such partners and
other Persons the "Stock Purchaser Affiliates"). Neither Stock Purchaser nor any
of the Affiliates of Stock Purchaser is acquiring Subject Shares with a view to
or for sale in connection with any distribution of such Subject Shares in
violation of applicable securities laws.
(d) Stock Purchaser and each of the Stock Purchaser Affiliates
is an Accredited Investor.
(e) Stock Purchaser has obtained and reviewed the Starwood
Lodging Disclosure and the SEC Documents that have been filed with the SEC
through the date hereof.
6.2 By its execution of its Joinder Agreement, each Restricted
Holder other than Stock Purchaser shall be deemed to have represented and
warranted to Starwood, as of
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<PAGE> 10
the date of its delivery of such Joinder Agreement, as follows:
(a) Such Restricted Holder has the power and authority to
enter into this Agreement, the Registration Rights Agreement and its Joinder
Agreement and to perform its obligations hereunder and thereunder. The execution
and delivery hereof and thereof and the performance by such Restricted Holder of
its obligations hereunder and thereunder will not violate or constitute an event
of default under any material term or material provision of any agreement,
document, instrument, judgment, order or decree to which such Restricted Holder
is a party or by which it is bound, or violate any law, rule or regulation the
violation of which would have a material adverse effect upon the principal
benefits intended to be provided under this Agreement or the Registration Rights
Agreement.
(b) The individuals executing this Agreement, the Registration
Rights Agreement and its Joinder Agreement on behalf of such Restricted Holder
have the legal power, right and actual authority to bind such Restricted Holder
to the terms and conditions hereof and thereof. Each of this Agreement, the
Registration Rights Agreement and its Joinder Agreement is a valid and binding
obligation of such Restricted Holder, enforceable in accordance with its terms,
except as the same may be affected by bankruptcy, insolvency, moratorium or
similar laws, or by legal or equitable principles relating to or limiting the
rights of contracting parties generally.
(c) Such Restricted Holder is acquiring the Subject Shares
Transferred or to be Transferred to it for investment, solely for the account of
itself and not with a view to or for sale in connection with any distribution of
such Subject Shares in violation of applicable securities laws; provided,
however, that if such Restricted Holder is Stock Purchaser Affiliate, such
Restricted Holder may acquire the Subject Shares on behalf of Persons who are
stockholders of such Restricted Holder if each of such Persons is an Accredited
Investor.
(d) Such Restricted Holder is an Accredited Investor.
(e) Such Restricted Holder has had the opportunity, prior to
making the determination to acquire any Subject Shares, to obtain and review the
Starwood Lodging Disclosure and the SEC Documents that have been filed with the
SEC through the date of the execution of such Restricted Holder's Joinder
Agreement.
6.3 The Trust hereby represents and warrants to Stock
Purchaser as follows:
(a) The Trust has the power and authority to enter into this
Agreement and the Registration Rights Agreement and to consummate the
transactions herein contemplated; neither the execution and delivery of this
Agreement or the Registration Rights Agreement by the Trust, nor the performance
by the Trust of the Trust's obligations hereunder or thereunder will violate or
constitute an event of default under any material terms or material provisions
of any agreement, document, instrument, judgment, order or decree to which the
Trust is a party or by which the Trust is bound, or violate any law,
rule or regulation the violation of which would have a material adverse effect
upon the principal benefits intended to be provided under this Agreement or the
Registration Rights Agreement.
(b) The individuals executing this Agreement and the
Registration Rights Agreement and the documents referenced herein on behalf of
the Trust have the legal power, right and actual authority to bind the Trust to
the terms and conditions hereof. This Agreement and the Registration Rights
Agreement is a valid and binding obligation of Trust, enforceable in accordance
with its terms, except as the same may be affected by bankruptcy, insolvency,
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<PAGE> 11
moratorium or similar laws, or by legal or equitable principles relating to or
limiting the rights of contracting parties generally.
(c) All Paired Shares to be delivered in accordance with
Section 2.1 hereof will, when so issued, be duly authorized, validly issued,
fully paid and nonassessable and free of preemptive rights and will be paired
with each other in the same ratio as all other shares are paired with each other
pursuant to the Pairing Agreement.
(d) The Trust has filed all of the SEC Documents. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of applicable law, and, at the respective times they were filed,
none of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements (including, in each
case, any notes thereto) of the Trust included in the SEC Documents complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto as of their
respective dates of filing, were prepared in accordance with generally accepted
accounting principles (except, in the case of the unaudited statements, as
permitted by Regulation S-X of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly presented the consolidated financial position of the Trust and its
consolidated subsidiaries as of the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described therein).
Except as disclosed in the SEC Documents or as required by generally accepted
accounting principles, the Trust has not, since December 31, 1996, made any
change in the accounting practices or policies applied in the preparation of
their financial statements.
(e) Except as disclosed in the SEC Documents or the Starwood
Lodging Disclosure, since December 31, 1996 and through the date hereof, (i)
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 change in or effect on the financial condition, properties, business,
results of operations or prospects of the Trust and its subsidiaries taken as a
whole, or (ii) there has not been any split, combination or reclassification of
any of the capital stock or units of the Trust or its operating partnership or
any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of, or in substitution for shares of such capital stock.
(f) Except as set forth in the SEC Documents or the Starwood
Lodging Disclosure or in a separate writing provided to Stock Purchaser on or
before the date hereof, as of the date hereof: there are no outstanding orders,
judgments, injunctions, awards or decrees of any governmental entity against or
involving the Trust or any of its subsidiaries, or against or involving any of
the directors, officers or employees of the Trust 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 change in or effect on the financial condition, properties,
business, results of operations or prospects of the Trust and its subsidiaries
taken as a whole; and there are no actions, suits or claims or legal,
administrative or arbitrative proceedings or investigations pending or, to the
knowledge of the Trust, threatened against or involving the Trust 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
change in or effect on the financial condition, properties, business, results of
operations or prospects of the Trust and its subsidiaries taken as a whole. As
of the date hereof, there are
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<PAGE> 12
no actions, suits or other litigation, legal or administrative proceedings or
governmental investigations pending or, to the knowledge of the Trust,
threatened against or affecting the Trust 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
and the Registration Rights Agreement.
6.4 The Corporation hereby represents and warrants to Stock Purchaser
as follows:
(a) The Corporation has the power and authority to enter into
this Agreement and the Registration Rights Agreement and to consummate the
transactions herein contemplated; neither the execution and delivery of this
Agreement or the Registration Rights Agreement by the Corporation, nor the
performance by the Corporation of the Corporation's obligations hereunder or
thereunder will violate or constitute an event of default under any material
terms or material provisions of any agreement, document, instrument, judgment,
order or decree to which the Corporation is a party or by which the Corporation
is bound, or violate any law, rule or regulation the violation of which would
have a material adverse effect upon the principal benefits intended to be
provided under this Agreement or the Registration Rights Agreement.
(b) The individuals executing this Agreement and the
Registration Rights Agreement and the documents referenced herein on behalf of
the Corporation have the legal power, right and actual authority to bind the
Corporation to the terms and conditions hereof. This Agreement and the
Registration Rights Agreement is a valid and binding obligation of Corporation,
enforceable in accordance with its terms, except as the same may be affected by
bankruptcy, insolvency, moratorium or similar laws, or by legal or equitable
principles relating to or limiting the rights of contracting parties generally.
(c) All Paired Shares to be delivered in accordance with
Section 2.1 hereof will, when so issued, be duly authorized, validly issued,
fully paid and nonassessable and free of preemptive rights and will be paired
with each other in the same ratio as all other shares are paired with each other
pursuant to the Pairing Agreement.
(d) The Corporation has filed all of the SEC Documents. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of applicable law, and, at the respective times they were
filed, none of the SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The consolidated financial statements
(including, in each case, any notes thereto) of the Corporation included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto as of their respective dates of filing, were prepared in
accordance with generally accepted accounting principles (except, in the case of
the unaudited statements, as permitted by Regulation S-X of the SEC) applied on
a consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto) and fairly presented the consolidated financial
position of the Corporation and its consolidated subsidiaries as of the
respective dates thereof and the consolidated results of their operations and
their consolidated cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein). Except as disclosed in the SEC Documents or as
required by generally accepted accounting principles, the Corporation has not,
since December 31, 1996, made any change in the accounting practices or policies
applied in the preparation of their financial statements.
(e) Except as disclosed in the SEC Documents or the Starwood
Lodging
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<PAGE> 13
Disclosure, since December 31, 1996 and through the date hereof, (i) 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
change in or effect on the financial condition, properties, business, results of
operations or prospects of the Corporation and its subsidiaries taken as a
whole, or (ii) there has not been any split, combination or reclassification of
any of the capital stock or units of the Corporation or its operating
partnership or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of, or in substitution for shares of such
capital stock.
(f) Except as set forth in the SEC Documents or the Starwood
Lodging Disclosure or in a separate writing provided to Stock Purchaser on or
before the date hereof, as of the date hereof: there are no outstanding orders,
judgments, injunctions, awards or decrees of any governmental entity against or
involving the Corporation or any of its subsidiaries, or against or involving
any of the directors, officers or employees of the Corporation 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 change in or effect on the financial
condition, properties, business, results of operations or prospects of the
Corporation and its subsidiaries taken as a whole; and there are no actions,
suits or claims or legal, administrative or arbitrative proceedings or
investigations pending or, to the knowledge of the Corporation, threatened
against or involving the Corporation 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 change in or effect on the
financial condition, properties, business, results of operations or prospects of
the Corporation and its subsidiaries taken as a whole. As of the date hereof,
there are no actions, suits or other litigation, legal or administrative
proceedings or governmental investigations pending or, to the knowledge of the
Corporation, threatened against or affecting the Corporation 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 and the Registration Rights Agreement (other than
those arising in connection with the Registration Statement or the performance
by the Corporation of its obligations under the Registration Rights Agreement).
SECTION 7
NOTICES
7.1 Addresses. Except for the notices given pursuant to
Section 3, whenever any notice, demand or request is required or permitted
hereunder, such notice, demand or request shall be made in writing and shall be
(a) sent via a nationally recognized overnight courier service fully prepaid,
(b) deposited in the United States by mail, registered or certified, return
receipt requested, postage prepaid, or (c) sent via telefacsimile, provided that
the original of such notice, demand or request shall also be sent via one of the
methods described in (a) and (b) above, in each case to the addressees (and
individuals) set forth below:
As to Stock Purchaser:
c/o Al Anwa USA, Inc.
1925 Century Park East, Suite 1900
Los Angeles, CA 90067
Attn: Mansor Dalaan
Telefacsimile: (310) 229-2927
With a copy to Stock Purchaser's additional addressees:
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<PAGE> 14
Morrison & Foerster LLP
555 West Fifth Street, Suite 3500
Los Angeles, CA 90013-1024
Attn: Thomas R. Fileti, Esq.
Telefacsimile: (213) 892-5454
Gordon K. Eng, Esq.
19191 South Vermont Avenue, Suite 420
Torrance, California 90502
Telefacsimile: (310) 207-1066
As to Starwood Lodging:
Starwood Hotels & Resorts Trust
2231 E. Camelback Rd., Suite 410
Phoenix, AZ 85016
Attn: Ronald C. Brown or Chief Financial Officer
Telefacsimile: (602) 852-0115
Starwood Hotels & Resorts Worldwide, Inc.
2231 E. Camelback Rd., Suite 400
Phoenix, AZ 85016
Attn: Alan M. Schnaid or Vice President
Telefacsimile: (602) 852-0115
With a copy to Starwood Lodging's additional addressees:
Greenberg Traurig Hoffman Lipoff Rosen & Quentel
153 East 53rd Street
New York, NY 10022
Attn: Andrew E. Zobler, Esq.
Telefacsimile: (212) 223-7161
Sidley & Austin
555 West Fifth Street, Suite 4000
Los Angeles, CA 90013
Attn: Sherwin L. Samuels, Esq.
and Kenneth H. Levin, Esq.
Telefacsimile: (213) 896-6600
If to any Restricted Holder other than Stock Purchaser: to the address and
telefacsimile number set forth in such Restricted Holder's Joinder Agreement (or
to any other address or telefacsimile number provided to Starwood Lodging in
writing pursuant to a notice given by such Restricted Holder pursuant to this
Section 7.1).
7.2 Receipt of Notices. Any notice, demand or request that
shall be delivered to Starwood Lodging and its Additional Addressee in the
manner aforesaid shall be deemed sufficiently given to and received by Starwood
Lodging for all purposes hereunder, and any notice, demand or request that shall
be delivered to Stock Purchaser and its Additional Addressee in the manner
aforesaid shall be deemed sufficiently given to and received by Stock Purchaser
for all purposes hereunder (i) the next business day following the day such
notice, demand or request is delivered by a nationally recognized overnight
courier service fully
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<PAGE> 15
prepaid, to such party and its Additional Addressee, (ii) if sent via registered
or certified mail, at the time of receipt by such party and its Additional
Addressee, or (iii) if sent via telefacsimile, as of the date and time stated
upon confirmation reports generated by the sending party's telefacsimile machine
confirming the delivery of such notice, demand or request to such party and its
Additional Addressee.
7.3 Refusal of Delivery. The inability to deliver any notice,
demand or request because the individual to whom it is properly addressed in
accordance with this Section 7 refused delivery thereof or no longer can be
located at that address shall constitute delivery thereof to such individual.
7.4 Change of Address. Each party shall have the right from
time to time to designate by written notice to the other parties hereto such
other Person or Persons and such other place or places as said party may desire
written notices to be delivered or sent in accordance herewith.
SECTION 8
GENERAL PROVISIONS
8.1 Amendment. No provision of this Agreement or of any
documents or instrument entered into, given or made pursuant to this Agreement
may be amended, changed, waived, discharged or terminated except by an
instrument in writing, signed by the party against whom enforcement of the
amendment, change, waiver, discharge or termination is sought.
8.2 Time of Essence. All times provided for in this Agreement
for the performance of any act will be strictly construed, time being of the
essence.
8.3 Entire Agreement. This Agreement and other documents
delivered pursuant to this Agreement set forth the entire agreement and
understanding of the parties in respect of the transactions contemplated by this
Agreement, and supersede all prior agreements, arrangements and understandings
relating to the subject matter hereof and thereof. No representation, promise,
inducement or statement of intention with respect to the subject matter hereof
has been made by Stock Purchaser or Starwood Lodging which is not embodied in
this Agreement, and neither Starwood Lodging nor Stock Purchaser shall be bound
by or liable for any alleged representations, promise, inducement or statement
of intention not therein so set forth.
8.4 No Waiver. No failure of any party to exercise any power
given such party hereunder or to insist upon strict compliance by the other
party with its obligations hereunder shall constitute a waiver of any party's
right to demand strict compliance with the terms of this Agreement.
8.5 Counterparts. This Agreement, any document or instrument
entered into, given or made pursuant to this Agreement or authorized hereby, and
any amendment or supplement thereto may be executed in two or more counterparts,
and, when so executed, will have the same force and effect as though all
signatures appeared on a single document. Any signature page of this Agreement
or of such an amendment, supplement, document or instrument may be detached from
any counterpart without impairing the legal effect of any signatures thereon,
and may be attached to another counterpart identical in form thereto but having
attached to it one or more additional signature pages.
8.6 Costs and Attorneys' Fees. If any legal action or any
arbitration or other
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<PAGE> 16
proceeding is brought for the enforcement of this Agreement or because of an
alleged dispute, default, or misrepresentation in connection with any of the
provisions of this Agreement the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees, charges and other costs incurred
in that action or proceeding, in addition to any other relief to which it may be
entitled.
8.7 Payments; Interests. Except as otherwise provided herein,
payment of all amounts required by the terms of this Agreement shall be made in
the United States and in immediately available funds of the United States of
America which, at the time of payment, is accepted for the payment of all public
and private obligations and debts. If any payment due under this Agreement is
not paid when due, it shall thereafter bear interest at a variable rate equal to
the rate announced from time to time by Citibank, N.A. as its prime or reference
rate, plus five percent (5%) per annum, but in no event more than the maximum
rate, if any, allowed by law to be charged by the party receiving the interest
on such type of indebtedness.
8.8 Parties in Interest. The rights and obligations of the
parties hereto shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors, heirs and the legal
representatives of their respective estates. However, none of Stock Purchaser's
rights under this Agreement shall be assignable except (i) in the case of the
Payment Rights, as provided in Section 5 hereof, and (ii) in the case of all
other rights of Stock Purchaser or another Restricted Holder, to a transferee of
Subject Shares in a transaction not constituting an Open Market Sale if such
transferee delivers a Joinder Agreement in compliance with Section 4 hereof.
Nothing in this Agreement is intended to confer any right or remedy under this
Agreement on any Person other than the parties to this Agreement and their
respective successors and assigns, or to relieve or discharge the obligation or
liability of any Person to any party to this Agreement or to give any Person any
right of subrogation or action over or against any party to this Agreement.
8.9 Applicable Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without giving effect to the conflict-of-law rules and principles of that state.
8.10 Incorporation of Recitals. The recitals of this Agreement
are incorporated into and made a part of this Agreement.
8.11 Construction of Agreement. The language in all parts of
this Agreement shall be in all cases construed simply according to its fair
meaning and not strictly for or against any of the parties hereto. Headings at
the beginning of sections of this Agreement are solely for the convenience of
the parties and are not a part of this Agreement. When required by the context,
whenever the singular number is used in this Agreement, the same shall include
the plural, and the plural shall include the singular, the masculine gender
shall include the feminine and neuter genders, and vice versa. As used in this
Agreement, the term "Stock Purchaser" shall include the respective permitted
successors and assigns of Stock Purchaser, and the term "Starwood Lodging" shall
include the permitted successors and assigns of Starwood Lodging, if any.
8.12 Severability. If any term or provision of this Agreement
is determined to be illegal, unconscionable or unenforceable, all of the other
terms, provisions and sections hereof will nevertheless remain effective and be
in force to the fullest extent permitted by law.
8.13 Further Assurances. Starwood Lodging and Stock Purchaser
agree to execute upon the request of the other party such instruments and take
such actions as may be reasonably necessary to carry out the provisions of this
Agreement provided that no material additional cost or liability shall incurred
thereby by the party of whom such request is made.
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<PAGE> 17
8.14 Starwood Hotels & Resorts Trust. The parties hereto
understand and agree that the name "Starwood Hotels & Resorts Trust" is a
designation of the Trust and its trustees (as trustees but not personally) under
the Trust's Declaration of Trust, and all persons dealing with the Trust shall
look solely to the Trust's assets for the enforcement of any claims against the
Trust, and that the Trustees, officers, agents and security holders of the Trust
assume no personal liability for obligations entered into on behalf of the
Trust, and their respective individual assets shall not be subject to the claims
of any person relating to such obligations.
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<PAGE> 18
IN WITNESS WHEREOF, Starwood Lodging and Stock Purchaser have
caused this Agreement to be executed as of the day and year first above written.
"Stock Purchaser"
SAVANAH LIMITED PARTNERSHIP,
a District of Columbia limited partnership
By: ASPEN ENTERPRISES INTERNATIONAL, INC.,
a Colorado corporation, its General Partner
By: /s/ Mansor Dalaan
-----------------------------
Mansor Dalaan
President
"Starwood Lodging"
STARWOOD HOTELS & RESORTS TRUST,
a Maryland real estate investment trust
By: /s/ Steven R. Goldman
----------------------------------------
Steven R. Goldman
Senior Vice President
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.,
a Maryland corporation
By: /s/ Nir E. Margalit
----------------------------------------
Nir E. Margalit
Secretary
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ATTACHMENT A
to Stock Agreement
AGREEMENT TO BE BOUND
BY THE STOCK AGREEMENT
(JOINDER AGREEMENT)
The undersigned, being the transferee or the intended
transferee of ______________ Paired Shares (the "Subject Shares") of Starwood
Hotels & Resorts Trust, a Maryland real estate investment trust, and Starwood
Hotels & Resorts Worldwide, Inc., a Maryland corporation (together, the
"Company"), as a condition to the transfer to and acquisition by the undersigned
of such Subject Shares, acknowledges that certain sales or other transfers of
such Subject Shares are governed by the Stock Agreement (the "Stock Agreement"),
dated as of January 15, 1998, initially among the Company and Savanah Limited
Partnership, a District of Columbia limited partnership , and the undersigned
hereby (1) acknowledges receipt of a copy of the Stock Agreement, and (2) agrees
to be bound as a "Restricted Holder" by the terms of the Stock Agreement, as the
same has been or may be amended from time to time (including without limitation
the representations and warranties of the undersigned set forth therein that
will be deemed made by virtue hereof).
The undersigned is hereby advised that the Subject Shares have
not been registered under the Securities Act of 1933 and in such event cannot be
resold unless they are registered under said act or unless an exemption from
registration under said act is available.
The following is the undersigned's representative and such
representative's address, telephone number and fax number for all purposes under
the Stock Agreement:
---------------------------------
---------------------------------
---------------------------------
Agreed to this ____ day of __________, ______.
---------------------------------
By:
-------------------------
Its:
-------------------------
18
<PAGE> 20
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as
of January 15, 1998 among STARWOOD HOTELS & RESORTS TRUST, a Maryland real
estate investment trust (the "Trust"), STARWOOD HOTELS & RESORTS WORLDWIDE,
INC., a Maryland corporation (the "Corporation" and, together with the Trust,
the "Company"), and SAVANAH LIMITED PARTNERSHIP, a District of Columbia limited
partnership ("Shareholder").
RECITALS
WHEREAS, pursuant to a Stock Agreement of even date herewith
and by and among the parties hereto (the "Stock Agreement"), the Company is
issuing and delivering to Shareholder certain Paired Shares; and
WHEREAS, the Stock Agreement provides that if such Paired
Shares are Unregistered Shares, the Company shall effect the registration of
such Paired Shares under the Securities Act; and
WHEREAS, the parties desire to set forth their rights and
obligations with respect to such registration and certain other matters;
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions. Each capitalized term used in this Agreement but not defined
herein shall have the meaning ascribed to such term in the Stock Agreement; and
as used in this Agreement the following terms shall have the following meanings:
"Commission" means the Securities and Exchange Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Holder Information" means, with respect to a Selling Holder,
(i) such information regarding such Selling Holder as is required by Section 507
of Regulation S-K promulgated by the Commission under the Securities Act, (ii)
information as to whether (and if so, in what manner) the intended method of
disposition of such Holder's Registrable Shares differs from the Plan of
Distribution, and (iii) any such additional information as may be required to be
included in the Registration Statement by a Selling Holder; in each case as
shall be required to effect the registration of such Registrable Shares pursuant
to the Registration Statement, the disclosures required in the Prospectus with
respect thereto and the offer and Transfer of such Registrable Shares pursuant
to the Prospectus.
"Holders" means (i) Shareholder, and (ii) any other Person who
acquires any of the Registrable Shares from Shareholder or another Holder if
(a) the Transferor and such Person shall have delivered to the Company a written
notice of such Transfer setting forth the name of such Person, and (b) such
Person shall have executed and delivered to the Company a properly completed
Joinder Agreement; in each case at such times as such Persons shall own
Registrable Shares.
"ITT Closing" means the consummation of the acquisition of ITT
Corporation by the Company.
<PAGE> 21
"ITT Termination" means the issuance by the Company of a press
release stating that the Company will not consummate the acquisition of ITT
Corporation.
"Joinder Agreement" means an agreement to be bound by this
Agreement in the form of Annex A hereto.
"Paired Shares" means (i) "paired shares" (as such term is
defined in the Purchase and Sale Agreement), and (ii) shares of capital stock of
the Trust or the Corporation issued by the Trust or the Corporation in respect
of or in exchange for paired shares in connection with any stock dividend or
distribution, stock split-up, recapitalization, recombination or exchange by the
Trust or the Corporation generally of such paired shares.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or other entity, or government or other agency or
political subdivision thereof.
"Proposed Plan of Distribution" means a draft of the portion
of the Registration Statement that describes the intended methods of disposition
of the Registrable Shares by the Selling Holders.
"Prospectus" means, with respect to the Registration Statement
and each amendment thereto, the form of prospectus included therein.
"Registrable Shares" means, as of any date of determination,
(i) the Paired Shares that are Unregistered Shares and that constitute the
Subject Shares; (ii) any shares or other securities issued as (or issuable upon
the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange by
the Trust or the Corporation generally for, or in replacement by the Trust or
the Corporation generally of, such Paired Shares; and (iii) any securities
issued in exchange for such Paired Shares in any merger or reorganization of the
Company; in each case that continue to be owned by a Holder on such date of
determination.
"Registration Statement" means a registration statement on
Form S-3, as amended from time to time, registering the offer and sale by the
Selling Holders of such Selling Holders' Registrable Shares included therein for
offer and Transfer on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act.
"Required Effectiveness Date" means the later of (i) the 30th
day after the Closing Date, or (ii) the earliest of:
(a) The 30th day after the date of the ITT Closing;
(b) The 30th day after the date of the ITT Termination; and
(c) If neither the ITT Closing nor the ITT Termination has
occurred prior to April 1, 1998, the 30th day after a demand for registration is
made by notice given by Shareholder to the Company on or after April 1, 1998;
provided, however, that in the event that, following the initial filing of the
Registration Statement, the Company is advised by the Commission that the
Registration Statement will be reviewed, each of the time periods set forth
above shall be extended for 20 days.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
<PAGE> 22
"Selling Holders" means
(a) each Holder (i) who complies with Sections 3.1.1 hereof,
(ii) who holds not less than 100,000 Subject Shares at the both at the time such
notice is given and the date the Registration Statement is declared effective
(or such lesser number as the Company, in its sole and absolute discretion,
shall determine for such Holder), and (iii) whose Registrable Shares are
included in the Registration Statement; and
(b) each Transferee of such a Holder who (x) provides such
Transferee's Holder Information promptly after its acquisition of Subject
Shares and prior to the Company's request for acceleration of the Registration
Statement, and (y) satisfies the conditions set forth in clauses (ii) and (iii)
above.
"Transfer" means the act of selling, giving, transferring,
creating a trust (voting or otherwise), assigning or otherwise disposing of
(other than pledging, hypothecating or otherwise transferring as security) (and
correlative words shall have correlative meanings).
"Transferee" means a Person to whom Registerable Shares are
Transferred.
"Violation" shall have the meaning set forth in Section 5.1
hereof.
2. Registration Obligations of the Company. The Company shall:
2.1 File the Registration Statement with the Commission not
later than 15 days prior to the Required Effectiveness Date (determined without
reference to the proviso included in the definition of such term) and thereafter
use its best efforts to cause the Registration Statement to be declared
effective on the Required Effectiveness Date.
2.2 Furnish to the Shareholder a copy of the Registration
Statement for its review and comment not later than concurrently with the filing
of the Registration Statement with the Commission.
2.3 The Company shall give notice to the Shareholder of the
expected effectiveness of the Registration Statement no later than the date
acceleration of such effectiveness is requested of the Commission; provided,
however, that in no event shall the Company have any liability for any failure
to give such notice.
2.4 Include in the Registration Statement the number of each
Holder's Registrable Shares for each Holder as shall be specified for such
Holder pursuant to Section 3.1 hereof.
2.5 Use its best efforts to keep the Registration Statement
effective until the earlier of (i) one year after the Closing Date, or (ii) such
date as of which all the Selling Holders have completed the distribution or
other disposition of the Registrable Shares registered under the Registration
Statement. If the Registration Statement is terminated pursuant to clause (i)
above, the Company shall timely file with the Commission all reports and other
information required to enable all holders of Registrable Shares to Transfer
such shares pursuant to Rule 144 promulgated by the Commission under the
Exchange Act, as amended.
2.6 During the effectiveness of the Registration Statement,
upon notice to the Company by a Selling Holder of a Transfer of Registrable
Shares pursuant to the Registration
<PAGE> 23
Statement and receipt (i) by the Company of a certificate from such Selling
Holder in the form of Annex B attached hereto, and (ii) by counsel for the
Company of a certificate from such Selling Holder in the form of Annex C
attached hereto, in each case representing that such Registrable Shares were
offered and have been Transferred by such Selling Holder in a manner consistent
with the description set under the caption "Plan of Distribution" in the
Prospectus, the Company shall use its best efforts to cause such Registrable
Shares to be reissued as soon as practicable (and not later than three Business
Days following receipt by the Company and such counsel of such certificates) in
the name of the transferee free of any restrictive legend under the Securities
Act and to take all such actions as may be reasonably required to cause its
transfer agent to comply with the undertakings set forth in this section.
2.7 Use its best efforts to amend the Registration Statement
or supplement the Prospectus so that they will remain current and in compliance
with the requirements of the Securities Act for the period specified in Section
2.4 hereof, and use its best efforts to give the Selling Holders notice of the
happening of any event or development as a result of which the Registration
Statement or Prospectus may contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements made therein not misleading. In the event that any Registrable
Shares included in the Registration Statement remain unsold at the end of the
period during which the Company is obligated to use its best efforts to maintain
the effectiveness of the Registration Statement, the Company may file a
post-effective amendment to the Registration Statement for the purpose of
de-registering such unsold Registrable Shares.
2.8 Furnish to each Selling Holder, without charge, such
numbers of copies of the Registration Statement, any pre-effective or
post-effective amendment thereto, the final Prospectus, and any amendments or
supplements thereto, in each case in conformity with the requirements of the
Securities Act, and such other related documents, as each Selling Holder may
reasonably request in order to facilitate the Transfer of the Registrable Shares
owned by such Selling Holder.
2.9 Use its best efforts to register and qualify the
Registrable Shares covered by the Registration Statement under such securities
laws of such states or jurisdictions as shall be reasonably requested by the
Selling Holders; provided, however, that neither the Trust nor the Corporation
shall be required in connection therewith or as a condition thereto to qualify
to do business or to file a general consent to service of process in any such
states or jurisdictions.
2.10 Promptly notify each Selling Holder of any stop order
issued or threatened to be issued by the Commission or any of the jurisdictions
referred to in Section 2.9 hereof in connection with the Registration Statement
(and use its best efforts to prevent the entry of such stop order or to remove
it if entered as promptly as practicable).
2.11 Use its best efforts to cause the Registrable Shares
covered by the Registration Statement, if the Paired Shares are then listed on a
securities exchange or included for quotation in a recognized trading market, to
continue to be so listed or included.
3. The Holders' Obligations.
3.1 The obligations of the Company under Section 2 with respect to each
Holder are subject to the satisfaction of each of the following conditions:
3.1.1 Not later than 10 days after the later of (i)
the date hereof, or (ii) the date on which the Company delivers the
Proposed Plan of Distribution to the Shareholder
<PAGE> 24
(or such later date as the Company, in its sole and absolute
discretion, shall determine), such Holder shall furnish all of its
Holder Information to the Company, if such Holder Information discloses
that such Holder holds not less than 100,000 Subject Shares (or such
lesser number as the Company, in its sole and absolute discretion,
shall determine for such Holder).
3.1.2 Prior to the effectiveness of the Registration
Statement, such Holder shall furnish to the Company by a notice such
amendments and supplements to its Holder Information provided pursuant
to Section 3.1.1 hereof as may be necessary in order to assure that the
Holder Information included in the Registration Statement for each
Selling Holder does not include a misstatement of a material fact or
omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
3.1.3 Such Holder shall cooperate with the Company in
the preparation of the Registration Statement in the manner and to the
extent reasonably requested by the Company, including accurately and
fully completing, executing and delivering to the Company such
documents as the Company may reasonably request in order to permit the
Company to obtain the Holder Information or to otherwise comply with
all applicable laws or to obtain acceleration of the effectiveness of
the Registration Statement.
3.1.4 Such Holder shall not have breached any of its
obligations to the Company set forth in this Section 3.1 or in Sections
3 or 4 of the Stock Agreement; provided, however, that if such breach
is one that is capable of being cured and is actually cured by such
Holder in all material respects, the obligations of the Company to such
Holder that arises, or which the Company is obligated to perform in
whole or in part, after such cure shall be reinstated on the terms and
subject to the conditions set forth herein. A Transferee of Subject
Shares who is otherwise entitled to have such shares included in the
Registration Statement shall be deemed not have breached its obligation
to provide its Holder Information to the Company if it provides such
information promptly after its acquisition of such shares and prior to
the Company's request for acceleration of the Registration Statement
3.1.5 Such Holder shall not have made any material
misrepresentation pursuant to Section 6 of the Stock Agreement.
3.2 No action taken or omitted to be taken by or on behalf of
any Holder shall adversely affect the rights of any other Holder hereunder.
3.3 After the effectiveness of the Registration Statement,
each Selling Holder (and each transferee thereof) shall furnish to the Company
by a notice such amendments and supplements to its Holder Information provided
pursuant to Section 3.1 hereof as may be necessary in order to assure that the
Holder Information included in the Registration Statement for such Holder does
not include a misstatement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
4. Expenses of Registration. The Company shall pay all expenses incurred in
connection with the registration, filing and qualification of the Registrable
Shares, including all registration, filing and NASD or securities exchange fees;
all fees and expenses of complying with securities or blue sky laws; all word
processing, duplicating and printing expenses; and the fees and disbursements of
counsel and accountants for the Company; but excluding all discounts,
commissions or fees of selling brokers or similar securities industry
professionals and all fees and expenses of counsel and accountants for the
Selling Holders.
<PAGE> 25
5. Indemnification; Contribution.
5.1 To the extent permitted by applicable law, the Company
shall indemnify and hold harmless each Selling Holder; each Person, if any, who
controls such Selling Holder within the meaning of the Securities Act; and each
officer, director, partner and employee of such Selling Holder and such
controlling Person; against any and all losses, claims, damages, liabilities and
expenses incurred by such party pursuant to any actual or threatened action,
suit, proceeding or investigation, or to which any of the foregoing Persons may
become subject under the Securities Act, to the extent such losses, claims,
damages, liabilities and expenses arise out of or are based upon any of the
following (collectively a "Violation"):
5.1.1 Any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement,
including any final Prospectus, or any amendments or supplements
thereto;
5.1.2 The omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading; or
5.1.3 Any violation or alleged violation by the
Company of the Securities Act, the Exchange Act or any applicable state
securities law;
provided, however, that the indemnification required by this Section 5.1 shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or expense if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld or delayed), nor shall
the Company be liable in any such case for any such loss, claim, damage,
liability or expense incurred by a Selling Holder (or any Person, if any, who
controls such Selling Holder within the meaning of the Securities Act, or any
officer, director, partner and employee of such Selling Holder and such
controlling Person) to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with the Holder
Information or other information furnished to the Company by or on behalf of
such Selling Holder expressly for use in connection with the Registration
Statement.
5.2 To the extent permitted by applicable law, each Selling
Holder shall indemnify and hold harmless the Company; each of its directors,
each of its officers who shall have signed the Registration Statement; each
Person, if any, who controls the Company within the meaning of the Securities
Act; any other Selling Holder, any controlling Person of any such other Selling
Holder and each officer, director, partner, and employee of such other Selling
Holder and such controlling Person; against any and all losses, claims, damages,
liabilities and expenses, incurred by such party pursuant to any actual or
threatened action, suit, proceeding or investigation, or to which any of the
foregoing Persons may otherwise become subject under the Securities Act, to the
extent such losses, claims, damages, liabilities and expenses arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with the
Holder Information or other information furnished to the Company by or on behalf
of that Selling Holder expressly for use in connection with the Registration
Statement.
5.3 Promptly after receipt by an indemnified party under this
Section 5 of notice of the commencement of any action, suit, proceeding,
investigation or threat thereof made in writing for which such indemnified party
may make a claim under this Section 5, such indemnified party shall deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof
<PAGE> 26
with counsel mutually satisfactory to the parties. The failure of an Indemnified
Party to deliver written notice to the indemnifying party within a reasonable
time following the commencement of any such action shall not relieve such
indemnifying party of any liability to the indemnified party under this Section
5 unless such failure is prejudicial to such indemnifying party's ability to
defend such action. Any fees and expenses incurred by the indemnified party
(including any fees and expenses incurred in connection with investigating or
preparing to defend such action or proceeding) shall be paid to the indemnified
party, as incurred, within 30 days of written notice thereof to the indemnifying
party (regardless of whether it is ultimately determined that an indemnified
party is not entitled to indemnification hereunder). Any such indemnified party
shall have the right to employ separate counsel in any such action, claim or
proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be the expenses of such indemnified party unless (i) the
indemnifying party has agreed to pay such fees and expenses, or (ii) the
indemnifying party shall have failed to promptly assume the defense of such
action, claim or proceeding, or (iii) the named parties to any such action,
claim or proceeding (including any impleaded parties) include both such
indemnified party and the indemnifying party, and such indemnified party shall
have been advised by counsel that there may be one or more legal defenses
available to it which are different from or in addition to those available to
the indemnifying party and that the assertion of such defenses would create a
conflict of interest such that counsel employed by the indemnifying party could
not faithfully represent the indemnified party (in which case, if such
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such
action, claim or proceeding on behalf of such indemnified party, it being
understood, however, that the indemnifying party shall not, in connection with
any one such action, claim or proceeding or separate but substantially similar
or related actions, claims or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all such indemnified parties, unless
in the reasonable judgment of such indemnified party a conflict of interest
would exist between such indemnified party and any other of such indemnified
parties with respect to such action, claim or proceeding, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels). No indemnifying party shall be liable to an
indemnified party for any settlement of any action, proceeding or claim without
the written consent of the indemnifying party, which consent shall not be
unreasonably withheld or delayed.
5.4 If the indemnification required by this Section 5 from the
indemnifying party is determined by a court of competent jurisdiction to be
unavailable to an indemnified party hereunder in respect of any losses, claims,
damages, liabilities or expenses referred to in this Section 5:
5.4.1 The indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages,
l abilities or expenses in such proportion as is appropriate to reflect
the relative fault of the indemnifying party and indemnified parties in
connection with the actions which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among
other things, whether any Violation has been committed by, or relates
to information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such Violation. The
amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 5.1 and 5.2,
any legal or other fees or expenses reasonably incurred by such party
in connection with any investigation or proceeding.
<PAGE> 27
5.4.2 The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5.4 were determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in Section 5.4.1. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of a fraudulent misrepresentation.
5.5 If indemnification is available under this Section 5, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in this Section 5 without regard to the relative fault of such
indemnifying party or indemnified party or any other equitable consideration
referred to in Section 5.4.
5.6 The obligations of the Company and the Selling Holders
under this Section 5 shall survive the completion of any offering of Registrable
Shares pursuant to the Registration Statement and any termination of this
Agreement.
6. Amendment, Modification and Waivers; Further Assurances.
6.1 This Agreement may be amended with the consent of the
Company and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it; in each case only if the
Company shall have obtained the written consent of Holders holding more than 50%
of the Registrable Shares. Such amendment, action or omission shall not require
the consent of any other Holder. In addition, the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, that affects the rights hereunder of a specific Holder with the written
consent of such Holder.
6.2 No waiver of any terms or conditions of this Agreement
shall operate as a waiver of any other breach of such terms and conditions or
any other term or condition, nor shall any failure to enforce any provision
hereof operate as a waiver of such provision or of any other provision hereof.
No written waiver hereunder, unless it by its own terms explicitly provides to
the contrary, shall be construed to effect a continuing waiver of the provisions
being waived and no such waiver in any instance shall constitute a waiver in any
other instance or for any other purpose or impair the right of the party against
whom such waiver is claimed in all other instances or for all other purposes to
require full compliance with such provision.
6.3 Each of the parties hereto shall execute all such further
instruments and documents and take all such further action as any other party
hereto may reasonably require in order to effectuate the terms and purposes of
this Agreement.
7. Miscellaneous.
7.1 Business Day. Whenever this Agreement requires that an
action be taken or a notice be given on a date that would otherwise not be a
Business Day, the time period for taking such action or giving such notice shall
be extended to the first day thereafter that is a Business Day.
7.2 Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the state of New York, without giving
regard to the conflict of laws principles thereof.
7.3 Notices. All notices, requests, demands, consents,
approvals, designations and other deliveries and communications called for or
contemplated by this Agreement shall be in
<PAGE> 28
writing and shall be given (i) in the case of Shareholder or the Company, to the
address and in the manner set forth in Section 7 of the Stock Agreement, and
(ii) in the case of any Holder other than Shareholder, in the manner set forth
in Section 7 of the Stock Agreement and to the address provided to the Company
in such Holder's Joinder Agreement.
7.4 Entire Agreement; Integration. This Agreement, together
with the Stock Agreement, supersedes all prior agreements between or among any
of the parties hereto with respect to the subject matter contained herein and
therein, and such agreements embody the entire understanding among the parties
relating to such subject matter.
7.5 Section Headings. Section headings are for convenience of
reference only and shall not affect the meaning of any provision of this
Agreement.
7.6 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, and all of which shall
together constitute one and the same instrument. All signatures need not be on
the same counterpart.
7.7 Severability. If any provision of this Agreement shall be
invalid or unenforceable, such invalidity or unenforceability shall not affect
the validity and enforceability of the remaining provisions of this Agreement,
unless the result thereof would be unreasonable, in which case the parties
hereto shall negotiate in good faith as to appropriate amendments hereto.
7.8 Termination. This Agreement may be terminated at any time
by a written instrument signed by the parties hereto. Unless sooner terminated
in accordance with the preceding sentence, this Agreement (other than Section 5
hereof) shall terminate in its entirety on such date as there shall be no
Registrable Shares.
7.9 Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision hereof is
validly asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees (including any fees incurred in any appeal) in
addition to its costs and expenses and any other available remedy.
7.10 No Third Party Beneficiaries or Assignees. Nothing herein
expressed or implied is intended to confer upon any person, other than the
parties hereto or the Holders (to the extent expressly provided herein) any
rights, remedies, obligations or liabilities under or by reason of this
Agreement. Neither this Agreement not the rights or obligations hereunder may be
assigned or otherwise transferred by any Holder except as permitted herein with
respect to a Transfer of Registrable Shares.
7.11 Starwood Lodging Trust. The parties hereto understand and
agree that the name "Starwood Lodging Trust" is a designation of the Trust and
its trustees (as trustees but not personally) under the Trust's Declaration of
Trust, and all persons dealing with the Trust shall look solely to the Trust's
assets for the enforcement of any claims against the Trust, and that the
Trustees, officers, agents and security holders of the Trust assume no personal
liability for obligations entered into on behalf of the Trust, and their
respective individual assets shall not be subject to the claims of any person
relating to such obligations.
<PAGE> 29
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of the date first written above.
"Shareholder"
SAVANAH LIMITED PARTNERSHIP,
a District of Columbia limited partnership
By: ASPEN ENTERPRISES INTERNATIONAL, INC.,
a Colorado corporation, its General Partner
By: /s/ Mansor Dalaan
____________________________
Mansor Dalaan
President
STARWOOD HOTELS & RESORTS TRUST
a Maryland real estate investment trust
By: /s/ Steven R. Goldman
_____________________________
Steven R. Goldman
Senior Vice President
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
a Maryland corporation
By: /s/ Nir E. Margalit
_____________________________
Nir E. Margalit
Secretary
<PAGE> 30
ANNEX A
to Registration
Rights Agreement
AGREEMENT TO BE BOUND
BY THE REGISTRATION RIGHTS AGREEMENT
The undersigned, being the transferee or the intended
transferee of _________ Paired Shares (the "Registrable Shares") of Starwood
Hotels & Resorts Trust, a Maryland real estate investment trust, and Starwood
Hotels & Resorts Worldwide, Inc., a Maryland corporation (together, the
"Company"), as a condition to the transfer to and acquisition by the undersigned
of such Registrable Shares, acknowledges that matters pertaining to the sale and
registration of such Registrable Shares are governed by the Registration Rights
Agreement (the "Registration Rights Agreement"), dated as of January 15, 1998,
initially among the Company and Savanah Limited Partnership, a District of
Columbia limited partnership, and the undersigned hereby (1) acknowledges
receipt of a copy of such agreement, and (2) agrees to be bound as a "Holder" by
the terms of the Registration Rights Agreement, as the same has been or may be
amended from time to time.
Agreed to this ____ day of __________, ____.
___________________________________
By: __________________________
Its: __________________________
Address, telephone number and
telecopy number for notices:
___________________________________
___________________________________
___________________________________
___________________________________
<PAGE> 31
ANNEX B
to Registration
Rights Agreement
[Letterhead of Selling Holder]
____________, 199__
BY TELECOPIER
Starwood Hotels & Resorts Trust
2231 E. Camelback Road, Suite 410
Phoenix, Arizona 85016
Attention: Ronald C. Brown or Chief Financial Officer
Starwood Hotels & Resorts Worldwide, Inc.
2231 E. Camelback Road, Suite 400
Phoenix, Arizona 85016
Attention: Alan M. Schnaid or Vice President
Re: Starwood Hotels & Resorts
Ladies and Gentlemen:
Reference is made to the prospectus (the "Prospectus")
included in the Registration Statement on Form S-3 (Registration No.
___________) filed by Starwood Hotels & Resorts Trust (the "Trust") and Starwood
Hotels & Resorts Worldwide, Inc. (the "Corporation" and, together with the
Trust, the "Company") with the Securities and Exchange Commission on _________,
1998, under the Securities Act of 1933, as amended (the "Securities Act"),
relating to the registration for resale by the shareholders named therein of
certain shares of beneficial interest, par value $.01 per share, of the Trust,
and shares of common stock, par value $.01 per share, of the Corporation (the
"Paired Shares"), including _______ Paired Shares held by the undersigned.
___________ of the Paired Shares held by the undersigned were
offered for sale and have been sold by the undersigned in a manner consistent
with the description set under the caption "Plan of Distribution" in the
Prospectus. Thus, the undersigned requests that new certificates evidencing such
Paired Shares be issued in the name of _________________________, the
transferee, free of any restrictive legend under the Securities Act.
Very truly yours,
[Name and signature of Selling Holder]
<PAGE> 32
ANNEX C
to Registration
Rights Agreement
[Letterhead of Selling Holder]
____________, 199__
BY TELECOPIER
Sidley & Austin
555 West Fifth Street
Los Angeles, California 90013
Attention: Sherwin L. Samuels, Esq.,
Kenneth H. Levin, Esq. and
James V. Robertson, Esq.
Re: Starwood Hotels & Resorts
Ladies and Gentlemen:
Reference is made to the prospectus (the "Prospectus")
included in the Registration Statement on Form S-3 (Registration No.
___________) filed by Starwood Hotels & Resorts Trust (the "Trust") and Starwood
Hotels & Resorts Worldwide, Inc. (the "Corporation" and, together with the
Trust, the "Company") with the Securities and Exchange Commission on _________,
1998, under the Securities Act of 1933, as amended (the "Securities Act"),
relating to the registration for resale by the shareholders named therein of
certain shares of beneficial interest, par value $.01 per share, of the Trust,
and shares of common stock, par value $.01 per share, of the Corporation (the
"Paired Shares"), including _______ Paired Shares held by the undersigned.
The undersigned understands that you have been requested by
the Company to deliver an opinion to the Company's transfer agent that, upon the
sale by the undersigned of the Paired Shares, certificates evidencing such
shares may be issued to the transferee(s) without any restrictive legend under
the Securities Act. For the purpose of facilitating the delivery by you of such
opinion, the undersigned, hereby represents that _______ of the Paired Shares
held by the undersigned were offered for sale and have been sold in a manner
consistent with the description set under the caption "Plan of Distribution" in
the Prospectus.
The undersigned understands that you will be relying on the
foregoing representations in rendering your opinion, and the undersigned
consents to such reliance.
Very truly yours,
[Name and signature of Selling Holder]
<PAGE> 1
Exhibit 10.57
NY EXECUTION
PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
By
And Between
N.Y. OVERNIGHT PARTNERS, L.P.,
a New York Limited Partnership
As Seller
And
STARWOOD LODGING TRUST,
a Maryland Real Estate Investment Trust
And
STARWOOD LODGING CORPORATION,
a Maryland Corporation,
As Buyer.
Dated As Of: December 30, 1997
Relating to the New York Luxury
Collection Hotel, New York
New York
<PAGE> 2
PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
THIS PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (this
"Agreement") is entered into as of the 30th day of December, 1997, by and
between N.Y. OVERNIGHT PARTNERS, L.P., a New York limited partnership
("Seller"), and STARWOOD LODGING TRUST, a Maryland Real Estate Investment Trust
(the "Trust"), and STARWOOD LODGING CORPORATION, a Maryland corporation (the
"Corporation"; the Trust and the Corporation being referred to herein
collectively as, "Buyer").
A. Seller owns that certain parcel of land described in EXHIBIT A
attached hereto and made a part hereof, which is improved with a hotel building
and certain related improvements, all as more particularly set forth in this
Agreement.
B. Seller desires to sell, and Buyer desires to purchase, the above
described land and hotel together with the related improvements upon the terms
and subject to the conditions set forth in this Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements contained in this Agreement and for other good and
valuable consideration, the receipt and adequacy of which are hereby mutually
acknowledged, Buyer and Seller agree as follows:
SECTION 1
DEFINITIONS
1.1 Defined Terms
"Accounts Receivable" shall mean, collectively, all Cash Equivalent
Receivables, all Invoiced Receivables and all Other Accounts Receivable.
"Affiliate" shall have the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Exchange Act.
"Approved Service Contracts" shall mean the Service Contracts
identified on SCHEDULE 1.1.1 annexed hereto and made a part hereof and any other
Service Contracts cancelable upon thirty (30) or fewer days notice without
penalty, which Service Contracts Buyer shall assume as of the Closing pursuant
to the General Assignment and Assumption Agreement.
"Assignment and Assumption of Ground Lease" shall have the meaning
set forth in SECTION 4.2.1.8.
"Assignment and Assumption of Management Agreement" shall have the
meaning set forth in SECTION 4.2.1.4.
"Assignment and Assumption of Tenant Leases" shall have the meaning
set forth in SECTION 4.2.1.2.
"Assignment of Mortgage" shall have the meaning set forth in
SECTION 4.2.1.9.
<PAGE> 3
"Bill of Sale" shall have the meaning set forth in SECTION 4.2.1.5.
"Business Day" shall mean any day other than Saturday or Sunday on
which the New York Stock Exchange is open for business.
"Booking" shall mean a contract or reservation for the use of guest
rooms, banquet facilities, meeting rooms, and/or conference facilities at the
Hotel.
"Buyer's Counsel" shall mean the law firm of Greenberg Traurig
Hoffman Lipoff Rosen & Quentel acting through Andrew E. Zobler, Esq.
"Buyer Default" shall have the meaning set forth in SECTION 3.5.1.
"Cash Equivalent Receivables" shall mean all Guest Ledger
Receivables which are in the form of drafts or checks written on any bank or
other financial institution, certified checks, money orders, amounts owed to
Seller from credit card, debit card, travel and entertainment card or traveler's
check companies, and are in such other forms which are considered to be cash
equivalents under generally acceptable accounting principles, whether or not
such Guest Ledger Receivables have been presented or billed to any such bank,
financial institution or other company as of the Closing Date.
"Cash Purchase Price" shall mean (a) Seventy-Six Million Eight
Hundred Thousand Dollars ($76,800,000.00) plus (b) an additional Three Million
Two Hundred Thousand Dollars ($3,200,000.00) if the Scheduled Closing Date does
not occur prior to July 15, 1998 plus (c) the Overage Cash Payment, if any, as
adjusted pursuant to SECTION 3.2.2.
"Closing" or "Close of Escrow" shall have the meaning set forth in
SECTION 4.7.2.
"Closing Agent" shall have the meaning set forth in SECTION 4.8.10.
"Closing Date" shall mean the day on which the Closing occurs
hereunder.
"Closing Payment" shall have the meaning set forth in SECTION
3.2.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder.
"Collective Bargaining Agreements" shall have the meaning set forth
in SECTION 14.2.
"Conveyance Documents" shall mean the Deed, the Assignment and
Assumption of Ground Lease, the Assignment and Assumption of Management
Agreement, the Assignment and Assumption of Tenant Leases, the Bill of Sale and
the General Assignment and Assumption Agreement.
"Deed" shall have the meaning set forth in SECTION 4.2.1.1.
"Deposit" shall mean an amount equal to $4,571,428.00 held in
accordance with the provisions of SECTION 3 hereof together with all interest
accrued thereon.
"Employer Corporation" shall mean Luxury Holdings, Inc. (formerly
known as TQM Inc.).
"Employment Agreements" shall mean the Collective Bargaining
Agreements and Employee Benefit Plans (as defined in Section 3(3) of ERISA),
affecting Hotel Employees, including pension, profit sharing, employee benefit
and similar plans, if any, and agreements with regard to any Hotel Employee each
of which are identified on or expressly described in the materials identified on
SCHEDULE 1.1.2 annexed hereto and made a part hereof.
"Environmental Condition" shall mean any condition with respect to
soil, surface waters, groundwater, land, stream sediments, surface or subsurface
strata, ambient air and any environmental medium comprising or surrounding the
Real Property, which results in any damage, loss, cost, expense, claim, demand,
order or liability to or against Seller or Buyer by any third party (including,
without limitation, any government entity) as a result of a violation of any
applicable Environmental Laws.
<PAGE> 4
"Environmental Laws" shall mean all presently applicable statutes,
regulations, rules, ordinances, codes, licenses, permits and orders of any and
all governmental agencies, departments, commissions, boards, bureaus or
instrumentalities of the United States, states and political subdivisions
thereof, and all applicable judicial and administrative and regulatory decrees,
judgments and orders relating to the protection of the environment, including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. 9061 et seq.; the Hazardous
Materials Transportation Act, as amended, 49 U.S.C. 1801, et seq.; the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. 6901, et seq.; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. 1251, et seq.; and analogous
state laws and regulations.
"Equipment Leases" shall mean all leases of equipment, vehicles,
furniture or other personal property leased by, or on behalf of, Seller and
located at, or used in the operation of the Real Property, together with any and
all amendments thereto, which are identified on SCHEDULE 1.1.3 annexed hereto.
"Equity Purchase Price" shall mean the number of Paired Shares with
a value as determined pursuant to the Stock Agreement equal to Two Million Nine
Hundred Forty Two Thousand Four Hundred Dollars ($2,942,400.00) (provided,
however, the Equity Purchase Price shall be reduced to Zero Dollars ($0.00) if
the Scheduled Closing Date does not occur prior to July 15, 1998) to be
delivered in accordance with the applicable provisions of the Stock Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the regulations promulgated thereunder.
"Escrow" shall mean an escrow opened with the Escrow Holder for the
purchase and sale of the Property in accordance with the provisions of this
Agreement.
"Escrow Holder" shall mean the Title Company unless otherwise
agreed in writing by Buyer and Seller.
"Escrow Instructions" shall have the meaning set forth in SECTION
4.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Excluded Property" shall mean all Seller's right, title and
interest in and to: (a) those claims of Seller attributable to the period prior
to the Closing Date and described on SCHEDULE 1.1.4 annexed hereto and made a
part hereof, or which Seller is entitled to assert under the express provisions
of SECTION 5; (b) all insurance proceeds under Seller's Insurance and workers'
compensation policies, including return premiums and dividends thereon and all
claims thereunder in each case to the extent attributable to acts or occurrences
prior to the Closing Date; (c) all accounts owned or maintained by Seller, or
Manager on Seller's behalf, in connection with the Hotel, including all
operating and reserve accounts; and (d) any books, records, files or papers
specifically described in SECTION 6.3.2 as excluded from the Property
Information.
"Excluded Parties" shall have the meaning set forth in SECTION
17.18
"Execution Date" shall mean the date hereof.
"General Assignment and Assumption Agreement" shall have the
meaning set forth in SECTION 4.2.1.3.
"Ground Lease" shall mean the Ground Lease entered into as of
December 30, 1963 by and between the Massachusetts Mutual Life Insurance Company
and Louis Berry & F.B.M. Manufacturing Company, Inc., as amended to date and
described more fully on SCHEDULE 1.1.5 hereto.
"Ground Lease Estoppel" shall have the meaning set forth in SECTION
9.1.4.
<PAGE> 5
"Ground Lease Transfer Requirement" shall have the meaning set
forth in SECTION 7.1.1
"Guest Ledger Receivables" shall mean amounts, including, without
limitation, room charges, accrued to the accounts of guests occupying rooms at
the Hotel or group, conference or banquet customers of Seller at the Hotel.
"Hart-Scott-Rodino Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and the rules and regulations promulgated thereunder,
as the same has been amended from time to time.
"Hotel" shall mean the hotel located on the Land and commonly known
as the New York Luxury Collection Hotel.
"Hotel Employees" shall mean all full-time, part-time or temporary
employees of Seller and/or the Employer Corporation (but not employees of
Manager or any of its affiliates) who are employed by Seller and/or the Employer
Corporation exclusively at or in connection with the Hotel as of the Closing
Date and who are listed on SCHEDULE 1.1.6 annexed hereto and made a part hereof.
"Improvements" shall mean Seller's right, title and interest in and
to the hotel building and other improvements now or hereafter located on the
Land.
"Insured Casualty Notice" shall have the meaning set forth in
SECTION 12.1.1.
"Intangible Property" shall mean all of Seller's right, title and
interest in and to the following, in each case excluding any Excluded Property:
(i) Licenses and Permits; (ii) trademark rights, and other intangible property,
rights, titles, interests, privileges and appurtenances related to or used in
connection with the Hotel or its operations; (iii) warranties and guaranties of
architects, engineers, contractors, subcontractors, suppliers or materialmen
involved in the repair, construction, maintenance, design, reconstruction or
operation of the Hotel, or any equipment or systems constituting a part of the
Hotel; (iv) Approved Service Contracts; (v) Equipment Leases; (vi) Bookings; and
(vii) computer programs, software and documentation thereof (subject to the
limitations of any applicable license agreements pertaining thereto), and
including all electronic data processing systems, program specifications, source
codes, logs, input data and report layouts and forms, record file layouts,
diagrams, functional specifications and variable descriptions, flow charts and
other related materials used in connection therewith; and (viii) any goodwill
associated with the operation of the Hotel.
"Interim Management Agreement" shall have the meaning set forth in
SECTION 17.20 hereto.
"Invoiced Receivables" shall mean all Guest Ledger Receivables
other than Cash Equivalent Receivables whether or not such Guest Ledger
Receivables have been invoiced by Seller as of the Closing Date.
"Land" shall mean Seller's right, title and interest in and to the
land described on EXHIBIT A annexed hereto and made a part hereof.
"Licenses and Permits" shall mean all licenses, permits,
registrations, certificates, authorizations and governmental approvals other
than the Liquor License obtained in connection with the design, construction,
rehabilitation, use and/or operation of the Hotel.
"Liquor License" shall mean all licenses, permits, registrations,
certificates, authorizations and governmental approvals with respect to service
of alcoholic beverages at the Hotel.
"Liquor License Management Agreement" shall have the meaning set
forth in SECTION 4.2.1.8.
"Lock Price" shall have the meaning set forth in the Stock
Agreement.
<PAGE> 6
"Losses" shall mean any and all losses, liabilities, obligations,
damages, claim or expense, including without limitation, reasonable attorneys'
and accountants' fees and disbursements related thereto.
"Manager" means Sheraton Operating Corporation, a wholly-owned
subsidiary of ITT Sheraton Corporation.
"Management Agreement" shall mean that certain Management Agreement
entered into as of August 13, 1997 between Seller and Manager.
"Market Price" shall have the meaning set forth in the Stock
Agreement.
"Material" shall mean $5,000 for any single occurrence and $15,000
in the aggregate for any group of occurrences whether or not related.
"Material Casualty" shall mean a casualty or casualties that, in
the aggregate: (i) causes in excess of $10,000,000.00 worth of damage to the
Hotel; or (ii) will take twelve (12) months or longer from the date of the
casualty to fully remediate.
"Material Taking" shall mean an exercise by an applicable
governmental authority of the power of condemnation or eminent domain that
results in: (a) the taking of more than twenty percent (20%) of the Real
Property; (b) a material reduction or restriction in access to the Property; or
(c) the inability to operate the Hotel in substantially the same manner (without
material additional expense) as it was operated prior to such taking.
"Memorandum of Contract" shall mean a memorandum of this Agreement
in the form attached as EXHIBIT B hereto.
"Monetary Lien" shall mean any monetary lien affecting the Seller's
interest in the Real Property of an ascertainable amount, other than any lien
for taxes or assessments which are not yet due and payable.
"Non-Foreign Person Certificate" shall have the meaning set forth
in SECTION 4.2.1.13.
"Other Accounts Receivable" shall mean any and all rents,
additional rent, deposits, and other sums and charges owing to Seller that are
in any way attributable to the operation of the business at the Hotel,
including, without limitation, all rents and/or license fees due from Tenants
under Tenant Leases, and including any such amounts which are past due, but
excluding Guest Ledger Receivables.
"Overage Cash Payment" shall mean the portion of the Equity
Purchase Price which is payable in cash at Closing as provided in SECTION
3.2.2.1, if any.
"Ownership Limitation" shall mean the limitations contained in the
declaration of trust for the Trust and the Corporation's articles of
incorporation prohibiting actual or constructive ownership by any one person or
group of related persons of more than 8% of the issued and outstanding Paired
Shares taking into account the attribution rules of Section 544(a) of the Code
as modified by Section 856(h) of the Code or Section 318(a) of the Code as
modified by Section 856(d)(5) of the Code.
"Paired Shares" shall mean one share of beneficial interest, par
value $.01 per share of the Trust, and one share of common stock, par value $.01
per share, of the Corporation that are subject to the Pairing Agreement, which
shares shall be transferable as provided in the Stock Agreement and the Pairing
Agreement.
"Pairing Agreement" shall mean the Pairing Agreement dated as of
June 25, 1980, as amended, between the Trust and the Corporation providing, in
relevant part, for the pairing of all outstanding beneficial interests of the
Trust and shares of the Corporation.
"Permitted Encumbrances" shall have the meaning set forth in
SECTION 7.3.
"Person" shall mean any natural person, partnership, corporation,
association,
<PAGE> 7
limited liability company, trust or any other legal entity.
"Personal Property" shall mean collectively the Tangible Personal
Property and the Intangible Property.
"Preliminary Title Report" shall have the meaning set forth in
SECTION 7.1.
"Property" shall mean collectively the Real Property, the Personal
Property, the Tenant Leases, and the Accounts Receivable, but shall exclude the
Excluded Property.
"Property Information" shall have the meaning set forth in SECTION
6.4.2.
"Proration Time" shall mean 12:01 a.m. Eastern Time on the Closing
Date.
"Purchase Price" shall mean the sum of the Cash Purchase Price and
the Equity Purchase Price.
"Real Property" shall mean the Land and the Improvements, together
with Seller's right, title and interest in and to all rights of way, easements,
water or littoral rights, rights to any minerals, oil, gas and other hydrocarbon
substances, or any portion thereof, relating to the Land, and Seller's right,
title and interest in and to all streets, alleys, strips and gores abutting the
Land, if any.
"Records and Plans" shall mean, all financial records showing the
income and expenses of the Hotel for the prior three (3) calendar years and for
the current year to date, certificates of occupancy, records of the Hotel's
operations (including utility bills), building plans, specifications and
drawings, lists of Personal Property, surveys, tax bills for the Real Property
for the last three (3) years and for the current year to date, copies of the
Service Contracts, Licenses and Permits and other documents related to the use,
maintenance, repair, management, construction and/or operation of the Hotel, in
each case, to the extent located on-site at the Hotel, or to Seller's Knowledge,
otherwise under the control of Seller.
"Related Agreement" shall have the meaning set forth in SECTION
9.1.3.
"Schedule of Advance Bookings" means the Schedule of Advance
Bookings delivered pursuant to SECTION 4.2.1.19.
"Schedule of Tenant Leases" means the Schedule of Tenant Leases set
forth in SCHEDULE 1.1.7 annexed hereto and made a part hereof.
"Scheduled Closing Date" shall mean January 15, 1998, as such date
may be extended in accordance with the provisions of SECTION 7.1 time being of
the essence.
"SEC" shall mean the United States Securities and Exchange
Commission.
"SEC Documents" shall have the meaning set forth in SECTION 6.1.4.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller Default" shall have the meaning set forth in SECTION 11.1.
"Seller's Closing Certificate" shall have the meaning set forth in
SECTION 4.2.1.18.
"Seller's Counsel" shall mean Morrison & Foerster LLP acting
through Thomas R. Fileti, Esq.
"Seller's Due Diligence" shall mean the information gathering and
review process described on SCHEDULE 1.1.8.
"Seller's Insurance" shall have the meaning set forth in SECTION
6.3.12.
"Seller's Knowledge" shall mean with respect to any representation
or warranty so qualified, the knowledge of the person(s) identified on SCHEDULE
1.1.8 annexed hereto and made a part hereof, on the date on or as of which such
representation or warranty is made, following the completion by such person(s)
of Seller's Due Diligence, but without any other duty to investigate or inquire
and without attribution to any such identified person(s) of facts and matters
otherwise within the personal knowledge of any other officers, employees, or
agents
<PAGE> 8
of Seller or any third parties (including, but not limited to, the Manager or
any previous manager of the Hotel), but not within the actual current knowledge
of such named person(s). It is understood that none of the individuals
identified on SCHEDULE 1.1.8 shall have any personal liability for any of
Seller's representations, warranties and other obligations under this Agreement.
"Service Contracts" shall mean any and all service contracts,
landscaping contracts, maintenance agreements, open purchase orders and other
contracts for the provision of services, materials or supplies to or for the
benefit of the Property, except for the Management Agreement, together with any
and all amendments thereto.
"Specific Disclosure Matters" shall mean certain disclosures and
information provided or disclosed by Seller to Buyer described on SCHEDULE 1.1.9
annexed hereto and made a part hereof.
"Starwood Disclosure" shall mean collectively, the Form S-3 filed
by the Corporation and the Trust with the SEC on November 12, 1997, and the Form
S-4 filed by the Corporation and the Trust with the SEC on November 20, 1997, as
the same may be amended by any filing with the SEC made by the Trust or the
Corporation as amended to date and from time to time thereafter.
"Starwood Operating Partnership" shall mean SLC Operating Limited
Partnership, a Delaware limited partnership.
"Starwood Realty Partnership" shall mean SLT Realty Limited
Partnership, a Delaware limited partnership.
"State" shall mean the state in which the Hotel is located.
"Stock Agreement" shall have the meaning set forth in SECTION
4.2.1.6.
"Survey" shall mean an as-built customary survey of the Real
Property certified to the Title Company meeting all State land survey
requirements.
"Tangible Personal Property" shall mean, in each case to the extent
owned by Seller and excluding any and all of the Excluded Property: (i) all
Records and Plans; (ii) all "Inventories", as such term is defined in the
Uniform System of Accounts; (iii) all depreciable personal property; and (iv)
all other tools, vehicles, supplies, artwork, furniture, furnishings, machinery,
equipment, licensed software and personal computer based security systems, if
any, specialized hotel equipment and other tangible personal property, used in
connection with the ownership, operation or maintenance of the Property,
including, without limitation, all china, glassware, silverware, linens, towels,
curtains, uniforms, engineering, maintenance, and housekeeping supplies,
draperies, materials and carpeting, used or intended for use, but not for sale,
in connection with the operation of the Hotel, all equipment used in the
operation of the kitchen, dining rooms, lounges, bars, laundry, dry cleaners,
lobby, reservation desk and all merchandise, food and beverages held for sale in
connection with the operation of the Hotel, which are on hand on the Closing
Date; provided, however, that to the extent that any applicable law prohibits
the transfer of alcoholic beverages from Seller to Buyer, such beverages shall
not be considered a part of the Tangible Personal Property.
"Tenant" shall mean a tenant, licensee or concessionaire occupying
space at any portion of the Property pursuant to a Tenant Lease.
"Tenant Lease" shall mean a lease, concession agreement or license
agreement entered into by or on behalf of Seller with a third party for the use
of any part of the Real Property, including those leases, concession agreements
and license agreements shown on the Schedule of Tenant Leases, together with any
amendments thereto but excluding Bookings.
"Tenant Security Deposits" shall mean all security deposits or
other security of
<PAGE> 9
Tenants under the Tenant Leases, plus accrued interest, if any, payable thereon.
"Termination Charges" shall have the meaning set forth in SECTION
14.1.
"Termination Notice" shall have the meaning set forth in SECTION
3.5.1.
"Threshold Amount" shall mean One Million Dollars ($1,000,000).
"Title Company" shall mean Chicago Title Insurance Company.
"Title Policy" shall have the meaning set forth in SECTION 7.2.
"Transfer Restriction Period" shall have the meaning set forth in
SECTION 17.18.
"Uninsured Casualty Notice" shall have the meaning set forth in
SECTION 12.2.1.
"Uninsured Estimate to Repair" shall have the meaning set forth in
SECTION 12.2.1.
"Uniform System of Accounts" shall mean the Uniform System of
Accounts for Hotels, prepared by The Hotel Association of New York City, Inc.,
in effect as of the date hereof.
"Utility Deposits" shall mean Seller's right, title and interest in
and to all deposits delivered by Seller to utilities, governmental agencies,
suppliers or others pursuant to an Approved Service Contract or otherwise in
connection with the Real Property.
"Value Letter" shall have the meaning set forth in SECTION 4.3.1.4.
"WARN Act" shall mean the Workers Adjustment and Retraining
Notification Act and the Regulations promulgated thereunder, as the same has
been amended.
1.2 Other Definitional Provisions. The terms "hereof," "hereto,"
"hereunder" and similar terms when used in this Agreement shall refer to this
Agreement generally, rather than to the section in which such term is used,
unless otherwise specifically provided. Unless the context otherwise requires,
any defined term used in the plural shall refer to all members of the relevant
class, and any defined term used in the singular shall refer to any one or more
of the members of the relevant class.
SECTION 2
PURCHASE AND SALE OF PROPERTY
On the terms and subject to the conditions of this Agreement, Seller
agrees to sell the Property to Buyer, and Buyer agrees to purchase the Property
from Seller all as hereinafter provided. Notwithstanding any other provision of
this Agreement, there shall be excluded from the Property being conveyed
hereunder the Excluded Property.
SECTION 3
PURCHASE PRICE; PAYMENT;
BUYER'S DEFAULT; LIQUIDATED DAMAGES
3.1 Purchase Price. The purchase price for the Property shall be the
Purchase Price.
3.2 Payment. The Purchase Price shall be paid as follows:
3.2.1 Upon the execution hereof, Buyer shall deliver to Escrow
Holder, in cash or other immediately available funds, the Deposit, to be held by
Escrow Holder strictly in accordance with the provisions of this Agreement. If
the Close of Escrow shall occur, Seller shall be entitled to receive the Deposit
as a credit against the Purchase Price.
3.2.2 At least one (1) day prior to the Scheduled Closing Date
(unless extended pursuant to SECTION 7.1), Buyer shall deliver to Escrow Holder
an amount (the "Closing Payment") payable in the form specified in SECTIONS
3.2.2.1 and 3.2.2.2 below, equal to the Purchase Price less the amount of the
Deposit. The Closing Payment shall be paid as follows:
3.2.2.1 The Equity Purchase Price, if any, shall be delivered
in Paired Shares without adjustment for the pro-rations hereunder, which shares
shall be delivered in accordance with and subject to and transferable in
accordance with the provisions of the
<PAGE> 10
Stock Agreement and the Pairing Agreement. If any portion of the Equity Purchase
Price cannot be paid in Paired Shares on account of the Ownership Limitation, a
cash payment in an amount equal to the product of (a) the number of Paired
Shares which are not delivered hereunder or under the Stock Agreement because of
the Ownership Limitation and (b) the Market Price on the Closing Date (the
"Overage Cash Payment") shall be paid in cash or other immediately available
funds.
3.2.2.2 The balance of the Closing Payment shall be paid in
cash or other immediately available funds adjusted for the pro-rations provided
for expressly in this Agreement.
3.3 Investment of Escrowed Funds. Escrow Holder shall invest and
reinvest any funds deposited by Buyer in the Escrow only in bonds, notes,
Treasury bills or other securities having maturities of thirty (30) days or less
and constituting direct obligations of, or fully guaranteed by, the United
States of America (and provided, further, that such direct obligations or
guarantees, as the case may be, are entitled to the full faith and credit of the
United States of America) or such other investments as Buyer may direct and
Seller may approve, until Escrow Holder is required to deliver or use such funds
or any interest earned thereon in accordance with the provisions of this
Agreement. All interest accruing on the Deposit shall be paid to the party
ultimately entitled to the Deposit. All risk of loss on funds held in Escrow
shall be borne by Buyer or Escrow Holder.
3.4 Allocation of Purchase Price. The Purchase Price shall be allocated
among the assets and property that comprise the Property as proposed by Seller
prior to Closing subject to the reasonable approval of Buyer, and such
allocation shall be used by Seller and Buyer in connection with the preparation
of their respective income tax, sales tax, transfer tax, and any other
applicable tax returns. Seller and Buyer shall not, nor shall they permit their
respective Affiliates to, take a federal or state income tax position with any
taxing or other public authorities in any jurisdiction which is materially
inconsistent with the allocation so agreed upon by the parties.
3.5 Default by Buyer Prior to Closing; Liquidated Damages.
3.5.1 EXCEPT AS PROVIDED TO THE CONTRARY IN SECTION 7.1.1., IF
BUYER BREACHES ITS OBLIGATION TO PURCHASE THE PROPERTY UNDER THIS AGREEMENT AND
FAILS TO CURE SUCH BREACH ON OR BEFORE THE SCHEDULED CLOSING DATE (A "BUYER
DEFAULT"), THEN UPON WRITTEN NOTICE OF TERMINATION (A "TERMINATION NOTICE") FROM
SELLER TO BUYER AND ESCROW HOLDER, THE ESCROW AND THIS AGREEMENT SHALL TERMINATE
AND ESCROW HOLDER SHALL DISBURSE FROM THE ESCROW THE DEPOSIT TO SELLER AS
LIQUIDATED DAMAGES, WHICH SHALL BE SELLER'S SOLE REMEDY AT LAW OR IN EQUITY FOR
THE BUYER DEFAULT, AND THEREAFTER NEITHER PURCHASER NOR SELLER SHALL HAVE ANY
FURTHER LIABILITY HEREUNDER, EXCEPT THAT BUYER SHALL REMAIN OBLIGATED FOR
PERFORMANCE OF ITS OBLIGATIONS UNDER SECTIONS 8, 10, 17.14, 17.19 AND ANY OTHER
PROVISION HEREOF WHICH BY ITS EXPRESS TERMS SURVIVES THE TERMINATION OF THIS
AGREEMENT. NOTHING CONTAINED HEREIN SHALL LIMIT SELLER'S RIGHT TO OBTAIN
SPECIFIC PERFORMANCE OF BUYER'S OBLIGATION TO CLOSE PURSUANT TO SECTION 7.1.1.
3.5.2 THE PARTIES ACKNOWLEDGE AND AGREE BY INITIALING THIS SECTION
3.5.2 THAT IF A BUYER DEFAULT OCCURS ON OR PRIOR TO THE SCHEDULED CLOSING DATE
AND IF, AS A RESULT OF SUCH BUYER DEFAULT,
<PAGE> 11
CLOSE OF ESCROW FAILS TO OCCUR, SELLER WILL INCUR CERTAIN COSTS AND OTHER
DAMAGES IN AN AMOUNT THAT WOULD BE EXTREMELY DIFFICULT OR IMPRACTICAL TO
ASCERTAIN; AND THE DEPOSIT BEARS A REASONABLE RELATIONSHIP TO THE DAMAGES WHICH
THE PARTIES ESTIMATE MAY BE SUFFERED BY SELLER BY REASON OF SUCH FAILURE OF THE
CLOSE OF ESCROW TO OCCUR AND THAT SELLER'S RETENTION OF THE DEPOSIT IS FAIR AND
REASONABLE COMPENSATION TO SELLER BY REASON OF SUCH FAILURE OF THE CLOSE OF
ESCROW TO OCCUR.
INITIALS: /s/ T. Ayoubi /s/ SRG /s/ MCM
__________________________ _________________________
Seller Buyer
SECTION 4
ESCROW; CLOSING; COSTS
4.1 Escrow. The purchase and sale of the Property shall be consummated
through the Escrow. Immediately upon the execution of this Agreement, the
parties shall deposit a copy of this Agreement with Escrow Holder. This
Agreement, together with any general provisions agreed to in writing by Buyer
and Seller for the benefit of Escrow Holder, shall constitute the escrow
instructions for the transfer of the Property (the "Escrow Instructions"). In
the event of any conflict between this Agreement and such general provisions,
this Agreement shall control unless otherwise expressly agreed in writing by
Buyer, Seller and Escrow Holder. If any requirements relating to the duties or
obligations of Escrow Holder are not acceptable to Escrow Holder, or if Escrow
Holder requires additional instructions, the parties shall make such deletions,
substitutions and additions to the Escrow Instructions as Buyer's Counsel and
Seller's Counsel shall mutually approve and which do not substantially alter
this Agreement or its intent. Written instructions from Seller's Counsel, in the
case of Seller, or from Buyer's Counsel, in the case of Buyer, shall be accepted
by Escrow Holder and shall be binding upon the party whose counsel gave such
instructions to Escrow Holder.
4.2 Seller's Deliveries to Escrow Holder.
4.2.1 Prior to the Scheduled Closing Date (subject to extension
pursuant to SECTION 7.1), Seller shall deliver to Escrow Holder the following
documents duly executed and, where applicable, acknowledged by Seller, each of
which shall be undated and the delivery of each of which shall be a condition
precedent to the obligation of Buyer to close hereunder.
4.2.1.1 Deed. A deed with respect to the Improvements in the
form of EXHIBIT 4.2.1.1 annexed hereto and made a part hereof, sufficient to
transfer all of Seller's right, title and interest in and to the Improvements,
subject only to matters of record as of the Closing Date, from Seller to Buyer
(the "Deed");
4.2.1.2 Assignment and Assumption of Tenant Leases. An
Assignment and Assumption of Tenant Leases in the form of EXHIBIT 4.2.1.2
annexed hereto and made a part hereof pursuant to which Seller shall assign the
Tenant Leases to Buyer and Buyer shall assume all of Seller's obligations
thereunder (the "Assignment and Assumption of Tenant Leases");
4.2.1.3 General Assignment. A General Assignment and
Assumption Agreement in the form of EXHIBIT 4.2.1.3 annexed hereto and made a
part thereof pursuant to which Seller shall assign to Buyer all of Seller's
right, title and interest in and to all of the Intangible Property and Buyer
shall assume all obligations thereunder (the "General Assignment and Assumption
Agreement");
4.2.1.4 Assignment and Assumption of Management Agreement. An
Assignment and Assumption of Management Agreement in the form of EXHIBIT 4.2.1.4
<PAGE> 12
annexed hereto and made a part hereof pursuant to which Seller shall assign to
Buyer the Management Agreement and Buyer shall assume the obligations of Seller
thereunder, provided, however, the obligation to deliver the Assignment and
Assumption of Management Agreement shall be irrevocably waived, if prior to the
Close of Escrow, the Management Agreement shall have been terminated and the
Interim Management Agreement shall have become effective in accordance with
SECTION 17.20;
4.2.1.5 Bill of Sale. One or more Bills of Sale in the form
of EXHIBITS 4.2.1.5A AND 4.2.1.5B annexed hereto and made a part hereof
conveying to Buyer or designees of Buyer all of Seller's right, title and
interest in and to the Tangible Personal Property (the "Bill of Sale");
4.2.1.6 Stock Agreement. The Stock Agreement in the form of
EXHIBIT 4.2.1.6 annexed hereto and made a part hereof (the "Stock Agreement");
4.2.1.7 Liquor License Management Agreement. The Liquor
License Management Agreement in the form of EXHIBIT 4.2.1.7 annexed hereto and
made a part hereof (the "Liquor License Management Agreement");
4.2.1.8 Assignment and Assumption of Ground Lease. An
Assignment and Assumption of Ground Lease in the form of EXHIBIT 4.2.1.8 annexed
hereto and made a part hereof pursuant to which Seller shall assign the Ground
Lease to Buyer and Buyer shall assume all of Seller's obligations thereunder
(the "Assignment and Assumption of Ground Lease");
4.2.1.9 Assignment of Mortgage. Seller shall use reasonable
efforts to obtain an assignment with covenant of the mortgages presently
encumbering Seller's interest in the Ground Lease and Improvements (the
"Assignment of Mortgage") fully executed and acknowledged by the holders of such
mortgages pursuant to which the holders of such mortgage shall assign the same
to a lender identified by Buyer and a release from the holders of such
mortgages, pursuant to which Seller shall be released from any and all liability
under said mortgages and under any related loan documents; it being understood
that Seller has no obligation to deliver an affidavit pursuant to Section 275 of
the Real Property Law of the State of New York;
4.2.1.10 [Intentionally Omitted]
4.2.1.11 [Intentionally Omitted]
4.2.1.12 [Intentionally Omitted]
4.2.1.13 Non-Foreign Person Certificate. A Non-Foreign Person
Certificate in the form of EXHIBIT 4.2.1.13 annexed hereto and made a part
hereof (the "Non-Foreign Person Certificate");
4.2.1.14 Transfer Tax Forms. Any statements, such as a
transfer or conveyance tax forms or returns required by applicable state or
local law to be executed by Seller in order to effect the Closing;
4.2.1.15 Certified Rent Roll. A copy of the rent roll for the
Property dated as of the Closing Date and certified by Seller to be (a) a true,
correct and complete copy of the rent roll for the Property provided to Seller
by the Manager; and (b) to Seller's Knowledge, to be true, correct and complete;
4.2.1.16 Certified Operating Statement. An operating
statement for the Property dated as of a date no more than thirty (30) days
prior to the Closing Date and certified by Seller to be (a) a true, correct and
complete copy of the operating statement for the Property provided to Seller by
Manager for the period of Manager's employment at the Property; and (b) to
Seller's Knowledge, to be, true, correct and complete;
<PAGE> 13
4.2.1.17 Guest Ledger. A copy of the guest ledger dated as of
the Proration Time showing all Guest Ledger Receivables and certified by Seller
(a) to be a true, correct and complete copy of the guest ledger provided to
Seller by Manager; and (b) to Seller's Knowledge, to be true, correct and
complete;
4.2.1.18 Closing Certificate. A certification by Seller to
Seller's Knowledge that the representations and warranties set forth in SECTION
6.3 are true, correct and complete as of the Closing Date, except to the extent
that any such representation or warranty is expressly made only as of the
Execution Date subject to Seller's right to make revisions pursuant to SECTION
6.7 to such representations and warranties ("Seller's Closing Certificate");
4.2.1.19 Schedule of Bookings. A schedule of all Bookings
relating to periods after the Proration Time, certified by Seller (a) to be a
true, correct and complete copy of the schedule of Bookings provided to Seller
by Manager; and (b) to Seller's Knowledge, to be true, correct and complete;
4.2.1.20 Title Requirements. Any and all certificates,
affidavits and other instruments and documents which the Title Company shall
reasonably require to permit it to issue the Title Policy in the condition
required herein; provided, however, that (a) Seller is given written notice by
Title Company of the requirement of any such certificates, affidavits or other
instruments and documents within a reasonably sufficient time in advance of the
Scheduled Closing Date and (b) such incidental documents do not create any
liability to Seller that is inconsistent with the liability retained by Seller
under the terms of this Agreement;
4.2.1.21 Payoff Letters. A pay-off letter from the holder of
any mortgage or deed of trust presently encumbering the Real Property indicating
all sums required to satisfy the debt secured by and permit the discharge of
record the lien of such mortgage or deed of trust;
4.2.1.22 Notices to Tenants. Notices to Tenants of the
assignment to Buyer of the Tenant Leases in form and substance satisfactory to
Seller and Buyer;
4.2.1.23 Opinion of Seller's Counsel. An opinion of Seller's
Counsel in a form to be agreed upon by the parties; and
4.2.1.24 Other. Any other incidental documents, not otherwise
expressly provided for herein, reasonably required by Escrow Holder to
consummate the purchase and sale of the Property; provided, however, that (a)
Seller is given written notice by Escrow Holder of the requirement of any such
incidental documents within a reasonably sufficient time in advance of the
Scheduled Closing Date (subject to extension in accordance with the provisions
of SECTION 7.1); and (b) such incidental documents do not create any liability
to Seller that is inconsistent with the liability retained by Seller under the
terms of the this Agreement.
4.3 Buyer's Deliveries to Escrow Holder.
4.3.1 Prior to the Scheduled Closing Date (subject to extension in
accordance with the provisions of SECTION 7.1), and subject further to the
provisions of SECTION 4.3.1.4 in the case of the Value Letter, Buyer shall
deliver to Escrow Holder the following items and documents, which documents
shall be duly executed and, where applicable, acknowledged by Buyer or its
designee, as applicable, and undated, and the delivery of each of which shall be
a condition precedent to the obligation of Seller to close hereunder:
4.3.1.1 The Cash Purchase Price. The Cash Purchase Price;
4.3.1.2 Stock Certificates. Paired Shares in the amount
required to be delivered at the Closing in accordance with the provisions of
this Agreement and in accordance with and subject to the provisions of the Stock
Agreement;
<PAGE> 14
4.3.1.3 Assignment and Assumption of Management Agreement. A
counterpart of the Assignment and Assumption of Management Agreement, provided,
however, the obligation to deliver the Assignment and Assumption of Management
Agreement shall be irrevocably waived, if prior to the Close of Escrow, the
Management Agreement shall have been terminated and the Interim Management
Agreement shall have become effective in accordance with SECTION 17.20;
4.3.1.4 Value Letter. A letter (the "Value Letter") to be
obtained by Buyer at Buyer's expense with respect to the reasonableness of the
allocation of the purchase price among the transactions being entered into as of
the date hereof between Buyer and Seller and/or Seller's Affiliates issued by
Bear Stearns;
4.3.1.5 Opinion of Buyer's Counsel. An opinion of Buyer's
counsel in a form to be agreed upon by the parties;
4.3.1.6 Stock Agreement. A counterpart of the Stock
Agreement;
4.3.1.7 Assignment and Assumption of Ground Lease. A
counterpart of the Assignment and Assumption of Ground Lease;
4.3.1.8 Liquor License Management Agreement. A counterpart
of the Liquor License Management Agreement;
4.3.1.9 [Intentionally Omitted]
4.3.1.10 [Intentionally Omitted]
4.3.1.11 [Intentionally Omitted]
4.3.1.12 Closing Certificate. A certification by Buyer that
the representations and warranties set forth in SECTION 6.1 and SECTION 6.2 are
true, correct and complete as of the Closing Date;
4.3.1.13 The Assignment and Assumption of Tenant Leases. A
counterpart of the Assignment and Assumption of Tenant Leases;
4.3.1.14 The General Assignment and Assumption Agreement. A
counterpart of the General Assignment and Assumption Agreement;
4.3.1.15 Transfer Tax Forms. Any statements, such as a
transfer or conveyance tax forms or returns required by applicable state or
local law to be executed by Buyer in order to effect the closing; and
4.3.1.16 Other. Any other incidental documents, not otherwise
expressly provided for herein, required by Escrow Holder to consummate the
purchase and sale of the Property; provided, however, that (a) Buyer is given
written notice by Escrow Holder of the requirement of such incidental documents
within a reasonably sufficient time in advance of the Scheduled Closing Date;
and (b) Buyer shall not be required to incur any liability, in connection with
the delivery of such incidental documents inconsistent with the provisions of
this Agreement.
4.4 Seller's Deliveries to Buyer. At or prior to the Close of Escrow,
Seller shall deliver to Buyer or cause to be available to Buyer on-site at the
Hotel, the following documents, to the extent the same have not already been
delivered and to the extent in the possession or control of Seller:
4.4.1 Tenant Leases/Tenant Deposits. The original Tenant Leases (or
if not available, the best available copies), and the originals of Tenant
Security Deposits which are evidenced by letters of credit or escrow agreements,
if any, and if necessary to enable Buyer to realize or draw upon same, consents
of the applicable Tenants and/or financial institutions or replacement letters
of credit or escrow agreements in favor of Buyer;
4.4.2 Service Contracts. The originals, or, if not available, the
best available
<PAGE> 15
copies, of the Approved Service Contracts;
4.4.3 Licenses and Permits. The originals, or, if not available,
the best available copies of the Licenses and Permits; and
4.4.4 Records and Plans. The originals, or, if not available, the
best available copies of the Records and Plans.
4.5 Possession. Seller shall deliver the keys and possession of the
Property to Buyer at the Close of Escrow free and clear of all leases, tenancies
and occupancies, except for the Management Agreement, the Bookings, the rights
of guests in guest rooms, banquet facilities, conference rooms and meeting
rooms, the rights of Tenants under the Tenant Leases (including their assignees,
subtenants or licensees), and the other Permitted Encumbrances.
4.6 Evidence of Authorization. At the Close of Escrow, each party shall
deliver to the other party evidence in form and content reasonably satisfactory
to the other party and the Title Company that (a) the party is duly organized
and validly existing under the laws of the state of its organization and has the
power and authority to enter into this Agreement, (b) this Agreement and all
documents delivered pursuant hereto have been duly executed and delivered by the
party, and (c) the performance by the party of its obligations under this
Agreement have been duly authorized by all necessary corporate, partnership or
other action.
4.7 Close of Escrow.
4.7.1 The Escrow shall close on or before the Scheduled Closing
Date.
4.7.2 Provided that Escrow Holder has not received from either
party written notice of the failure of any condition precedent specified in
SECTION 9 to the obligations of such party (or any previous such notice has been
withdrawn), then when the parties have each deposited into the Escrow the
documents and funds required by this Agreement and the Title Company is
unconditionally prepared to issue the Title Policy at the Close of Escrow,
Escrow Holder shall perform the following actions (collectively, "Close of
Escrow" or "Closing"):
4.7.2.1 Prepare a closing statement for the transaction for
approval by Seller and Buyer prior to the Close of Escrow;
4.7.2.2 Insert the Closing Date as the date of any undated
document to be delivered through Escrow;
4.7.2.3 Cause the Deed, the Assignment and Assumption of
Ground Lease, and the Assignment of Mortgage to be recorded in the land records
of the state and county where the Real Property is located;
4.7.2.4 Deliver to Buyer the documents deposited into the
Escrow for delivery to Buyer at the Close of Escrow;
4.7.2.5 Deliver to Seller (a) all funds and Paired Shares to
be received by Seller from Buyer through the Escrow at the Close of Escrow less
(i) all amounts to be paid by Seller for Escrow Holder's fees and expenses and
(ii) all amounts paid by Escrow Holder in satisfaction of liens and encumbrances
on the Real Property or other matters pursuant to the written instruction of
Seller, and (b) the documents deposited into the Escrow for delivery to Seller
at the Close of Escrow; and
4.7.2.6 Cause the Title Policy to be issued by the Title
Company and delivered to Buyer.
4.8 Costs of Escrow. Costs of the Escrow shall be allocated as follows:
4.8.1 Buyer and Seller shall each pay one-half (1/2) of the fees of
Escrow Holder;
4.8.2 Buyer and Seller shall each pay one-half (1/2) of the cost of
providing the Survey required to be delivered in accordance with the provisions
of SECTION 7.1; provided,
<PAGE> 16
however, Buyer shall be responsible for the full cost of the Survey in the event
the Closing does not occur hereunder other than on account of default of Seller;
4.8.3 Buyer and Seller shall each pay one-half (1/2) of all
transfer taxes and recording fees payable in connection with the conveyance of
each portion of the Real Property and/or the recording of the Deed and any other
documents or instruments recorded pursuant to this Agreement (other than the
Assignment of Mortgage);
4.8.4 Buyer and Seller shall each pay one-half (1/2) of all sales
or other personal property taxes, levies, fees and charges payable as a result
of the transfer of the Personal Property to Buyer and the consummation of the
transactions contemplated hereby. Buyer shall be the reporting person for such
purposes and shall prepare the necessary sales tax reports based upon the
allocations set forth in SECTION 3.4. The parties acknowledge that additional
sales tax may be assessed as a result of the transfer of the Personal Property
to Buyer and the consummation of the transactions contemplated hereby after the
Closing and that Buyer and Seller shall continue to each be responsible for
one-half of any such additional taxes. The provisions of Section 4.8.3 and
Section 4.8.4 shall survive the Closing;
4.8.5 Buyer and Seller shall each pay one-half (1/2) of the cost
of obtaining the coverage under the Title Policy, except that the cost of any
special endorsements shall be paid exclusively by Buyer;
4.8.6 At Closing or thereafter Buyer shall pay for the cost of the
Value Letter;
4.8.7 Buyer shall pay any legal and other fees to obtain, and any
mortgage recording taxes payable in connection therewith, if any, in connection
with the Assignment of Mortgage;
4.8.8 If the Close of Escrow fails to occur other than as a result
of a default hereunder by either party, including, without limitation, as a
result of a failure of a condition precedent set forth in SECTION 9, the fees of
the Escrow Holder and Title Company (including, without limitation, cancellation
fees) shall be borne equally between Buyer and Seller;
4.8.9 If the Close of Escrow fails to occur as a result of a
default hereunder by either party, the fees of the Escrow Holder and Title
Company (including, without limitation, cancellation fees) shall be borne by the
defaulting party; and
4.8.10 Pursuant to Section 6045 of the Internal Revenue and
Taxation Code, the Title Company shall be designated the "Closing Agent"
hereunder and shall be solely responsible for complying with the Tax Reform Act
of 1986 with regard to the reporting of all settlement information to the
Internal Revenue Service.
4.9 Other Costs. Except as set forth in SECTION 4.8.6, SECTION 11.1
and SECTION 15.1.6, each party shall pay all of its own legal, accounting and
consulting fees and other costs and expenses incurred in connection with this
Agreement.
4.10 Maintenance of Confidentiality by Escrow Holder. Escrow Holder
shall maintain in strict confidence and not disclose to anyone the existence of
the Escrow, the identity of the parties thereto, the amount of the Purchase
Price, the existence or provisions of this Agreement or any other information
concerning the Escrow or the transactions contemplated hereby, without the prior
written consent of Buyer and Seller.
SECTION 5
PRORATIONS AND ASSUMPTION OF OBLIGATIONS
5.1 General. All income, receivables, expenses (whether payable or
prepaid) and payables of the Property shall be apportioned equitably between the
parties as of the Proration Time in accordance with the provisions of this
SECTION 5 (all prorations are to be based upon the number of days in a 365 day
year). The obligation to make apportionments under SECTIONS 5.1
<PAGE> 17
AND 5.2 shall, unless otherwise expressly provided in this SECTION 5, survive
the Close of Escrow for a period of sixty (60) days at which time such
apportionment shall be final unless disputed during such period.
5.2 General and Specific Prorations. Without limitation, the following
items shall be apportioned:
5.2.1 At the Closing, Buyer shall assume all of the accounts
payable relating to goods and services ordered or obtained in the ordinary
course of operation of the business of the Hotel (including without limitation,
payments under the Service Contracts and Equipment Leases) prior to the
Proration Time. Seller shall be obligated to credit Buyer at the Close of Escrow
with an amount mutually agreed upon by Buyer and Seller at the Closing,
reflecting the parties' good faith estimate of such accounts payable as of the
Proration Time (which estimate shall deduct any discounts then available in the
ordinary course of business for the prompt payment of such accounts payable),
plus a further credit for any late fees then payable with respect to any
identified accounts payable. Buyer shall be responsible for paying when due all
accounts payable arising from the operation of the Property on or after the
Proration Time, and Seller shall have no further liability for such payables or
charges. As of the date which is sixty (60) days following the Closing Date,
Buyer and Seller shall calculate the amount of all accounts payable relating to
goods and services ordered or obtained in the ordinary course of operation of
the business of the Hotel (including without limitation, payments under the
Service Contracts and Equipment Leases) prior to the Proration Time. Seller
shall reimburse Buyer for any payments made on account of any such accounts
payable which were not reflected in the Parties' estimate of such amount
credited to Buyer at Closing and which have been paid by Buyer or for which
Buyer is obligated to pay in accordance with the provisions hereof, and if the
amount of such credit exceeds the amounts so paid or for which Buyer is so
obligated, Buyer shall pay such excess amount to Seller;
5.2.2 At the Closing, Seller shall assign to Buyer all of the
Accounts Receivable, for which Seller shall receive a credit at the Close of
Escrow in an amount equal to (a) the full, aggregate outstanding balance of the
Cash Equivalent Receivables (without discount except for service charges due to
charge card companies) plus (b) the full aggregate outstanding balance of the
Invoiced Receivables and Other Accounts Receivable as of the Proration Time,
provided, Buyer shall at its option accept or reject any Invoiced Receivables
and Other Accounts Receivable over ninety (90) days and Seller shall not receive
a credit for any Invoiced Receivables and Other Accounts Receivable over ninety
(90) days rejected by Buyer; provided, that Buyer shall at its own expense use
reasonable efforts to collect any such rejected Invoiced Receivables and Other
Accounts Receivable on behalf of Seller for a period of sixty (60) days after
the Closing Date and thereafter Seller shall have the right to collect same for
its own account; provided, further, as of the date which is sixty (60) days
following the Closing Date, Buyer and Seller shall make any adjustments required
to reflect the collectibility of any Invoiced Receivables and Other Accounts
Receivable (it being agreed that (a) any accounts receivable not listed on the
schedule of accounts receivable of the Property as of the date which is sixty
(60) days following the Closing Date shall be deemed paid as of such date and
(b) except as provided in (a), any accounts receivable which are more than
ninety (90) days past due as of the date which is sixty (60) days following the
Closing Date shall be deemed uncollectable as of such date) and Seller and Buyer
shall make a corresponding payment to the other as required to accurately
reflect the collectibility of such Invoiced Receivables and Other Accounts
Receivable and any accounts receivable deemed uncollectable as of such date in
accordance with the terms hereof shall be the property of Seller and Seller
shall be permitted at
<PAGE> 18
its expense and for its own account to collect the same;
5.2.3 In prorating the Accounts Receivable, Buyer and Seller shall
each receive credit for one-half (1/2) of all Guest Ledger Receivables
attributable to the room night during which the Proration Time occurs. Seller
shall receive the income from all restaurant and bar facilities located at the
Property through the Proration Time and Buyer shall receive such income
thereafter;
5.2.4 [Intentionally Omitted]
5.2.5 All sales, use and occupancy taxes arising from the
operation of the Property shall be prorated as of the Proration Time;
5.2.6 Fees for transferable annual permits, licenses, and/or
inspection fees, if any, for periods during which the Proration Time occurs
shall be prorated as of the Proration Time;
5.2.7 Utility charges with respect to the Property levied against
Seller or the Property and the value of fuel stored on the Property shall be
prorated at Seller's cost therefor as of the Proration Time. Seller shall notify
all utilities, governmental agencies, suppliers and others providing services to
the Property of the prospective change in ownership and operation of the
Property, and Seller shall use its reasonable efforts to cause all utilities
furnished to the Property, including, but not limited to, electricity, gas,
water and sewer, along with any fuel storage tanks to be read the day prior to
the Proration Time;
5.2.8 Permitted administrative charges, if any, on Tenant Security
Deposits shall be prorated;
5.2.9 Buyer shall receive a credit for advance payments and/or
deposits, if any, under Bookings to the extent the Bookings relate to a period
after the Proration Time;
5.2.10 Vending machine monies will be removed by Seller as of the
Proration Time for the benefit of Seller;
5.2.11 Buyer shall purchase and Seller shall sell to Buyer (or
Seller shall receive a credit therefore) all petty cash funds and cash in the
Property's house banks at 100% of face value at the Proration Time;
5.2.12 Wages, salaries and payroll taxes and other payroll
deductions for all Hotel Employees shall be apportioned as of the Proration Time
(i.e., the night shift shall be prorated 50/50 for the night preceding the
Closing Date). Buyer shall assume all accrued vacation benefits and sick leave
benefits due to such Hotel Employees which relate to any period prior to the
Proration Time and shall receive a credit for the full amount of all such
accrued benefits reasonably expected to be paid after the Closing Date;
provided, that as of the date which is sixty (60) days following the Closing,
Buyer and Seller shall adjust the amount of the credit if required to take into
account the benefits actually required to be paid by Buyer or then reasonably
expected to be paid following the Closing Date by Buyer. Buyer shall also assume
all obligations of Seller and the Employer Corporation, under the Employment
Agreements and/or the Management Agreement to pay all such wages, salaries, and
compensation set forth above accruing subsequent to Proration Time; provided,
however, that other than as set forth in SECTION 14.1 hereof, no provision
contained in this Agreement shall be construed to prevent the Buyer from
terminating or amending in any manner such Employment Agreements and Management
Agreements subsequent to the Proration Time. The obligation to pay bonuses, if
any, following the Closing shall be allocated as of the Proration Time and
adjusted between Buyer and Seller; and
5.2.13 Real and personal property taxes, assessments and special
district levies shall be prorated for the tax fiscal year in which the Closing
Date occurs on the basis of the then
<PAGE> 19
most current available tax bills, Seller being charged through the day prior to
the Closing Date and Buyer with the Closing Date and thereafter.
5.3 Deposits. All rights to utility, assessment, and other cash
deposits (including, without limitation, any Utility Deposits) held by others
for Seller's account, and all certificates of deposit or other forms of cash
collateral held by or otherwise pledged to others for Seller's account to secure
obligations of Seller under Service Contracts, Equipment Leases or other
obligations assumed by Buyer, shall be assigned or transferred to Buyer at the
Close of Escrow; provided, that if any of such deposits are not transferable,
Seller shall retain all rights with respect thereto and there shall be no debit
made to Buyer on account thereof.
5.4 Tenant Leases. At the Close of Escrow, pursuant to the Assignment
and Assumption of Tenant Leases, Buyer shall assume all of the obligations of
Seller under the Tenant Leases as of the Proration Time, including, without
limitation, tenant improvement obligations of landlord thereunder and
obligations with respect to Tenant Security Deposits (to the extent received by
Buyer or credited to Buyer hereunder).
5.5 Service Contracts and Other Intangible Property. At the Close of
Escrow, Seller shall assign to Buyer pursuant to the terms of the General
Assignment and Assumption Agreement, all right, title and interest of Seller in
and to the Approved Service Contracts and other Intangible Property, and Buyer
shall assume all of the obligations of Seller under the Approved Service
Contracts arising from and after the Close of Escrow. Buyer shall protect, hold
harmless, indemnify and defend Seller and its directors, officers, agents,
affiliates, principals, partners, shareholders, representatives and controlling
persons from any Losses attributable to the period beginning on and after the
Closing Date with respect to the Approved Service Contracts. Seller shall be
responsible for all obligations thereunder attributable to the period prior to
the Closing Date with respect to Approved Service Contracts (except to the
extent that Buyer shall have received a credit hereunder with respect to any
such obligations). The provisions of this SECTION 5.5 shall survive the Close of
Escrow.
5.6 Tax Refunds and Proceedings. Buyer shall have the exclusive right
to commence or continue any proceeding to determine the assessed value of the
Property, the real or personal property taxes payable with respect to the
Property or any action to contest water charges, sewer charges, sales tax or use
tax for the relevant taxable period during which the Proration Time occurs and
to settle or compromise any claim thereof, and any refunds or proceeds resulting
from such proceedings along with the costs (including reasonable legal and
accounting fees) incurred by Buyer in obtaining the same, shall be prorated as
of the Proration Time. In prosecuting any such action, Buyer shall utilize the
services of Marvin Poer & Co. Seller shall retain the right to continue,
commence, prosecute, settle or compromise any proceedings relating exclusively
to any relevant taxable period or periods prior to the period during which the
Proration Time shall occur. Buyer and Seller agree to cooperate with each other
and to execute any and all documents reasonably requested in furtherance of the
foregoing. The provisions of SECTION 5.6 shall survive the Closing.
5.7 Guest Baggage. As of the Close of Escrow, Buyer shall indemnify and
hold harmless Seller against all Losses with respect to all baggage of departed
guests or guests who are still registered at the Hotel on the Closing Date which
has been checked with the Hotel. As of the Close of Escrow, Seller shall assign
to Buyer all claims and causes of action against the Manager with respect to any
Losses with respect to such baggage. Seller agrees to submit to Seller's
Insurance any claims for Losses with respect to such baggage which arose from
acts or omissions prior to the Closing Date to the extent coverage is available
under said insurance and provide Buyer with the proceeds therefrom provided
Buyer is not in default under this SECTION
<PAGE> 20
5.7. The provisions of this SECTION 5.7 shall survive the Closing.
5.8 Safe Deposit Boxes. As of the Close of Escrow, Buyer shall
indemnify and hold harmless Seller against all Losses with respect to the
contents of any safety deposit boxes in use at the Hotel. As of the Close of
Escrow, Seller shall assign to Buyer all claims and causes of action against the
Manager with respect to any Losses relating to said safety deposit boxes. Seller
agrees to submit to Seller's insurance any claims for Losses which arose from
acts or omissions prior to the Closing Date to the extent coverage is available
under said insurance and provide Buyer with the proceeds therefrom provided
Buyer is not in default under this SECTION 5.8. The provisions of this SECTION
5.8 shall survive the Closing.
5.9 Advance Bookings. Buyer shall assume and honor for its account all
Bookings relating to dates after the Proration Time set forth on the Schedule of
Advance Bookings delivered by Seller to Buyer at the Close of Escrow pursuant to
SECTION 4.2.1.9.
SECTION 6
REPRESENTATIONS AND WARRANTIES;
CONDITION OF PROPERTY
6.1 Of the Trust. As an inducement to Seller to enter into this
Agreement, the Trust hereby represents, warrants and covenants to Seller as
follows:
6.1.1 Power and Authority. The Trust is a real estate investment
trust duly organized and validly existing under the laws of the State of
Maryland. The Trust has the power and authority to carry on its present
business, to enter into this Agreement and to consummate the transactions herein
contemplated; neither the execution and delivery of this Agreement by the Trust,
nor the performance by the Trust of the Trust's obligations hereunder will
violate or constitute an event of default under any material terms or material
provisions of any agreement, document, instrument, judgment, order or decree to
which the Trust is a party or by which the Trust is bound and/or violate any
applicable law, rule or regulation, the violation of which would have a Material
effect upon the principal benefits intended to be provided by this Agreement.
6.1.2 Authorization; Valid Obligation. All proceedings required to
be taken by or on behalf of the Trust to authorize the Trust to make, deliver
and carry out the terms of this Agreement will be duly taken prior to the
Closing Date. No consent to the execution, delivery and performance of this
Agreement will be required from any partner, board of directors, shareholder,
creditor, investor, judicial or administrative body, governmental authority or
other person, other than any such consent which already has been (or prior to
the Closing will have been unconditionally given. The individuals executing this
Agreement and the documents referenced herein on behalf of the Trust have the
legal power, right and actual authority to bind the Trust to the terms and
conditions hereof. This Agreement is a valid and binding obligation of Trust,
enforceable in accordance with its terms, except as the same may be affected by
bankruptcy, insolvency, moratorium or similar laws, or by legal or equitable
principles relating to or limiting the rights of contracting parties generally.
6.1.3 Capital Structure. The authorized and outstanding capital
stock and units of the Trust and its operating partnership are as set forth in
the Starwood Disclosure. All Paired Shares to be issued as the Equity Purchase
Price at the Closing in accordance with this Agreement will, when so issued, be
duly authorized, validly issued, fully paid and nonassessable and free of
preemptive rights and will be paired with each other in the same ratio as all
other shares are paired with each other pursuant to the Pairing Agreement.
6.1.4 SEC Documents and Other Reports. The Trust has filed all
required documents with the SEC since January 1, 1996 (such documents together
with the Starwood
<PAGE> 21
Disclosure being referred to herein as the "SEC Documents"). As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of applicable law, and, at the respective times they were filed,
none of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements (including, in each
case, any notes thereto) of the Trust included in the SEC Documents complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto as of their
respective dates of filing, were prepared in accordance with generally accepted
accounting principles (except, in the case of the unaudited statements, as
permitted by Regulation S-X of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly presented the consolidated financial position of the Trust and its
consolidated subsidiaries as of the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described therein).
Except as disclosed in the SEC Documents or as required by generally accepted
accounting principles, the Trust has not, since December 31, 1996, made any
change in the accounting practices or policies applied in the preparation of
their financial statements. Prior to the Closing Date, the Trust will file all
required documents with the SEC, which documents will comply in all material
respects with the requirements of the applicable law, and will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
6.1.5 Absence of Certain Changes or Events. Except as disclosed in
the SEC Documents filed prior to the date of this Agreement, since December 31,
1996, (a) 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 change in or effect on the financial condition,
properties, business, results of operations or prospects of the Trust and its
subsidiaries taken as a whole, or (b) there has not been any split, combination
or reclassification of any of the capital stock or units of the Trust or its
operating partnership or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of, or in substitution for shares of
such capital stock.
6.1.6 Actions and Proceedings. Except as set forth in the 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 Trust or any of its subsidiaries, or against or
involving any of the directors, officers or employees of the Trust 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 change in or effect on the financial
condition, properties, business, results of operations or prospects of the Trust
and its subsidiaries taken as a whole. Except as set forth in the SEC Documents,
there are no actions, suits or claims or legal, administrative or arbitrative
proceedings or investigations pending or, to the knowledge of the Trust,
threatened against or involving the Trust 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 change in or effect
on the financial condition, properties, business, results of operations or
prospects of the Trust and its subsidiaries taken as a whole. As of the date
hereof, there are no actions, suits, labor disputes or
<PAGE> 22
other litigation, legal or administrative proceedings or governmental
investigations pending or, to the knowledge of the Trust, threatened against or
affecting the Trust or any of their 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.
6.1.7 REIT Status. The Trust is currently a "real estate investment
trust" ("REIT") for federal income tax purposes and, to its knowledge, the Trust
is and at all times during the testing period described in Code Section
897(h)(4)(D) has been a "domestically controlled REIT" (as defined in Section
897(h)(4)(D) of the Code). From and after January 1, 1995, neither the Internal
Revenue Service nor any other taxing entity or authority has made any assertion
that the Trust does not qualify as a REIT for income tax purposes, nor has there
been any challenge to the REIT status of the Trust. From time to time upon
request by the Seller or its assigns after the Closing Date, the Trust agrees to
inform Seller or such assigns whether to its knowledge it complies with the
representation and warranties set forth in this Section 6.1.7.
6.1.8 Partnership Status. Starwood Realty Partnership is classified
and taxable as a partnership for U.S. federal income tax purposes.
6.1.9 Hart-Scott-Rodino Act. The provisions of the
Hart-Scott-Rodino Act are not applicable to the transactions contemplated hereby
and neither the Trust nor Seller is required to make any filings or submissions
or obtain any approvals thereunder in connection herewith.
6.2 Of the Corporation. As an inducement to Seller to enter into this
Agreement, the Corporation hereby represents, warrants and covenants to Seller
as follows:
6.2.1 Power and Authority. The Corporation is a corporation duly
organized and validly existing under the laws of the State of Maryland. The
Corporation has the power and authority to carry on its present business, to
enter into this Agreement and to consummate the transactions herein
contemplated; neither the execution and delivery of this Agreement by the
Corporation nor the performance by the Corporation of the Corporation's
obligations hereunder will violate or constitute an event of default under any
material terms or material provisions of any agreement, document, instrument,
judgment, order or decree to which the Corporation is a party or by which the
Corporation is bound and/or violate any applicable law, rule or regulation, the
violation of which would have a Material effect upon the principal benefits
intended to be provided by this Agreement.
6.2.2 Authorization; Valid Obligation. All proceedings required to
be taken by, or on behalf of the Corporation, to authorize the Corporation to
make, deliver and carry out the terms of this Agreement will be duly taken prior
to the Closing Date. No consent to the execution, delivery and performance of
this Agreement will be required from any partner, board of directors,
shareholder, creditor, investor, judicial or administrative body, governmental
authority or other person, other than any such consent which already has been
(or prior to the Closing will have been) unconditionally given. The individuals
executing this Agreement and the documents referenced herein on behalf of the
Corporation have the legal power, right and actual authority to bind the
Corporation to the terms and conditions hereof. This Agreement is a valid and
binding obligation of Corporation, enforceable in accordance with its terms,
except as the same may be affected by bankruptcy, insolvency, moratorium or
similar laws, or by legal or equitable principles relating to or limiting the
rights of contracting parties generally.
6.2.3 Capital Structure. The authorized and outstanding capital
stock and units of the Corporation and its operating partnership are as set
forth in the Starwood Disclosure. All Paired Shares to be issued as the Equity
Purchase Price at the Closing in accordance with this Agreement will, when so
issued, be duly authorized, validly issued, fully paid and
<PAGE> 23
nonassessable and free of preemptive rights and will be paired with each other
in the same ratio as all other shares are paired with each other pursuant to the
Pairing Agreement.
6.2.4 SEC Documents and Other Reports. The Corporation has filed
all required SEC Documents since January 1, 1996. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of the
applicable law, and, at the respective times they were filed, none of the SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements (including, in each case,
any notes thereto) of the Corporation included in the SEC Documents complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto as of their
respective dates of filing, were prepared in accordance with generally accepted
accounting principles (except, in the case of the unaudited statements, as
permitted by Regulation S-X of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly presented the consolidated financial position of the Corporation and
its consolidated subsidiaries as of the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described therein).
Except as disclosed in the SEC Documents or as required by generally accepted
accounting principles, the Corporation has not, since December 31, 1996, made
any change in the accounting practices or policies applied in the preparation of
their financial statements. Prior to the Closing Date, the Corporation will file
all required documents with the SEC, which documents will comply in all material
respects with the requirements of the applicable law, and will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
6.2.5 Absence of Certain Changes or Events. Except as disclosed in
the SEC Documents filed prior to the date of this Agreement, since December 31,
1996, (a) 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 change in or effect on the financial condition,
properties, business, results of operations or prospects of the Corporation and
its subsidiaries taken as a whole, or (b) there has not been any split,
combination or reclassification of any of the capital stock or units of the
Corporation or its respective operating partnerships or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of such capital stock.
6.2.6 Actions and Proceedings. Except as set forth in the 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 Corporation or any of its subsidiaries, or against or
involving any of the directors, officers or employees of the Corporation 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 change in or effect on the financial
condition, properties, business, results of operations or prospects of the
Corporation and its subsidiaries taken as a whole. Except as set forth in the
SEC Documents, there are no actions, suits or claims or legal, administrative or
arbitrative proceedings or investigations pending or, to the knowledge of the
Corporation, threatened against or involving the Corporation or any of its
subsidiaries or any of their
<PAGE> 24
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 change in or effect on the
financial condition, properties, business, results of operations or prospects of
the Corporation and its subsidiaries taken as a whole. 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 Corporation, threatened against or affecting the Corporation or
any of their 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.
6.2.7 Starwood Operating Partnership is classified and taxable as a
partnership for U.S. Federal Income Tax purposes.
6.2.8 Hart-Scott-Rodino. The provisions of the Hart-Scott-Rodino
Act are not applicable to the transactions contemplated hereby and neither the
Corporation nor Seller is required to make any filings or submissions to obtain
any approvals thereunder in connection herewith.
6.3 Of Seller. As an inducement to Buyer to enter into this Agreement,
Seller, represents, warrants and covenants to Buyer as follows:
6.3.1 Regarding Seller's Authority.
6.3.1.1 Seller is a limited partnership in dissolution under
the laws of the State of New York. Seller has the power and authority to enter
into this Agreement and the Conveyance Documents and, to sell the Property on
the terms set forth in this Agreement. The execution and delivery hereof and the
performance by Seller of its obligations hereunder, will not violate or
constitute an event of default under any material terms or material provisions
of any agreement, document, instrument, judgment, order or decree to which
Seller is a party or by which Seller is bound and/or violate any applicable law,
rule or regulation, the violation of which would have a Material effect upon the
principal benefits intended to be provided by this Agreement.
6.3.1.2 The individuals executing this Agreement and the
documents referenced herein on behalf of Seller have the legal power, right and
actual authority to bind Seller to the terms and conditions hereof. This
Agreement is a valid and binding obligation of Seller, enforceable in accordance
with its terms, except as the same may be affected by bankruptcy, insolvency,
moratorium or similar laws, or by legal or equitable principles relating to or
limiting the rights of contracting parties generally.
6.3.2 Tenant Leases. There are no leases, licenses or concessions
for space which will affect the Real Property or any portion thereof following
the Close of Escrow other than as set forth on the Schedule of Tenant Leases.
Seller has delivered to Buyer a true, correct and complete copy of each lease
and agreement listed on the Schedule of Lease. Seller has not received written
notice of any sublease and/or assignment of any Tenant Lease except as set forth
on SCHEDULE 6.3.2. No outstanding written notice of any Material default has
been delivered by Seller or received by Seller with respect to any Tenant Lease,
except as disclosed on the SCHEDULE 6.3.2 annexed hereto and made a part hereof.
To Seller's knowledge, all rent under the leases listed on the Schedule of
Leases is being paid currently. All Material brokerage, leasing and other
commissions due in connection with the Tenant Leases have been paid by Seller
other than those payable with respect to the renewal or extension of such Tenant
Leases or expansion of the leased premises thereunder after the Closing Date,
each of which are payable under agreements described on SCHEDULE 6.3.2.
6.3.3 Service Contracts. There are no Service Contracts which will
affect the
<PAGE> 25
Property after the Closing Date except for the Approved Service Contracts. No
outstanding written notice of any Material default has been delivered by Seller
or received by Seller with respect to any Approved Service Contract, except as
disclosed on SCHEDULE 6.3.3 annexed hereto and made a part hereof.
6.3.4 Claims. There are no pending litigation or condemnation
proceedings with respect to Seller or the Property which would result in an
adverse effect on the ability of Buyer to operate the Property after the
Closing, except as disclosed on SCHEDULE 6.3.4 annexed hereto and made a part
hereof. There is no pending litigation or to Seller's knowledge, other claims of
Seller with respect to the Property attributable to the period prior to the date
hereof which may result in a material judgment in favor of Seller except as
disclosed on SCHEDULE 6.3.4.
6.3.5 Employees. To Seller's Knowledge, SCHEDULE 1.1.6 sets forth
a true and complete list of all Hotel Employees as of the Execution Date
together with their positions, salaries or hourly wages, as applicable, and
years of service. Except for or pursuant to the Employment Agreements, the
Collective Bargaining Agreements, the Management Agreement and the agreements
related to the Ritz-Carlton management of the Hotel described on SCHEDULE 6.3.5
hereto, neither Seller nor the Employer Corporation has relating to the Property
(i) at any time maintained, contributed to or participated in, (ii) or had at
any time obligation to maintain, contribute to, or participate in, or (iii) any
liability or contingent liability, direct or indirect, with respect to: any
employment agreement, oral or written retirement or deferred compensation plan,
incentive compensation plan, stock plan, unemployment compensation plan,
vacation pay plan, severance plan, bonus plan, stock compensation plan or any
other type or form of employee-related (or independent contractor-related)
arrangement, program, policy, plan or agreement. Except as set forth on SCHEDULE
6.3.5, to Seller's knowledge there is no Material default under any of the
Employment Agreements.
6.3.6 Compliance with Laws. During the past twelve (12) months,
Seller has not received any written notice from any party, including, without
limitation, from any municipal, state, federal or other governmental authority,
of a Material violation of any zoning, building, fire, water, use, health, or
other similar statute, ordinance, or code bearing on the construction, operation
or use of the Property or any part thereof (other than as to matters previously
cured), except as disclosed on SCHEDULE 6.3.6 annexed hereto and made a part
hereof and except for violations of Environmental Laws, which are addressed in
SECTION 6.3.7 below.
6.3.7 Hazardous Materials. Seller has not received any written
notice from any municipal, state, federal or other governmental authority or
from any other person during the last three (3) years of (a) any Material
violation of applicable Environmental Laws or (b) any Environmental Condition
requiring Material remediation under applicable Environmental Laws, in either
case only to the extent relating to Environmental Conditions at or on the Real
Property, except as disclosed on SCHEDULE 6.3.7 annexed hereto and made a part
hereof;
6.3.8 Records and Plans. Seller will have delivered to Buyer on
the Closing Date true and correct copies of the Records and Plans.
6.3.9 Licenses and Permits. Seller has delivered to Buyer true and
correct copies of the Liquor License and all other Material Licenses and Permits
and such Licenses and Permits are identified on SCHEDULE 6.3.9 annexed hereto
and made a part hereof.
6.3.10 Management Agreements. There are no hotel management or
property management agreements, which will be binding upon Buyer after the
Closing Date, other than the Management Agreement, a true and complete copy of
which will be delivered to Buyer on the Closing Date. Seller has not sent or
received any notice of default or notice of termination
<PAGE> 26
under or with respect to the Management Agreement.
6.3.11 Personal Property. Seller owns the Tangible Personal
Property (other than the Tangible Personal Property that is subject to the
Equipment Leases) free and clear of any liens and/or encumbrances other than the
Permitted Encumbrances.
6.3.12 Insurance. The Seller in respect of the Real Property is
insured under those policies of casualty and general liability insurance
("Seller's Insurance") described on SCHEDULE 6.3.12 annexed hereto, each of
which is in full force and effect as of the date hereof and will remain in full
force and effect through the Closing Date. Seller has received no notices of any
Material default or demands to cure from any applicable insurer in respect of
Seller's Insurance.
6.3.13 Real Estate Taxes. Except as set forth on SCHEDULE 6.3.13
annexed hereto and made a part hereof, Seller has not commenced any proceedings
which are pending for the reduction of the assessed valuation of the Real
Property or any portion thereof, and other than the Permitted Encumbrances, to
Seller's Knowledge, there are no special assessments affecting the Property.
Nothing in this SECTION 6.3.13 or any other provision of this Agreement shall be
construed to limit Seller's rights to initiate or prosecute after the Close of
Escrow additional proceedings for property tax refunds for taxes relating to any
relevant taxable period or periods prior to the taxable period during which the
Proration Time occurs.
6.3.14 Residential Apartments; Rent Regulations. Except for
Apartment 1706, which is currently leased to Lenore Morse, there are no rooms at
the Property that are leased to third parties as residential apartments whether
through written or statutory leases. Except for Apartment 1706, there are no
apartments at the Property that are subject to Rent Control, Rent Stabilization
or any similar governmental rent regulation.
6.3.15 Regarding The Ground Lease. There is no outstanding default
of lessee under the Ground Lease. Seller has not received any notice by or on
behalf of lessor thereunder or otherwise claiming a default under the Ground
Lease. The Ground Lease has not been amended or modified whether by agreement of
lessor and lessee, pursuant to the order of any court or otherwise except as set
forth in SCHEDULE 1.1.5 hereto.
6.4 Buyer's Review of Records and Plans.
6.4.1 Access to Records and Plans; Specific Disclosures. Buyer
acknowledges that prior to the Closing Date, Buyer has been provided with such
access to the Records and Plans and such other information relating to the Hotel
as Buyer has deemed relevant. Buyer acknowledges that it (a) has been made aware
of and given an opportunity to inquire into the Specific Disclosure Matters
described herein; (b) has been given access to the Property and the opportunity
to conduct such inquiries and analyses as Buyer has deemed necessary or
appropriate in order to evaluate the physical condition of the Property and any
and all other matters concerning the current and future use, feasibility, or
value, or any other matter or circumstance relevant to Buyer concerning the
Property or its marketability; and (c) the Records and Plans and the other books
and records of Seller with respect to the Hotel may not be complete.
6.4.2 Limitation on Access to Records and Plans. Notwithstanding
anything in this Agreement to the contrary, Buyer acknowledges and agrees that
the Records and Plans or other information made available to or delivered to
Buyer prior to, or at the Closing, shall not include any information which is
privileged, confidential or proprietary to Seller or any of its constituent
partners or affiliates, including without limitation, (i) Seller's internal
financial analyses, any appraisals undertaken for Seller or other parties,
income tax returns, financial statements, corporate or partnership governance
records, investment advisory records, and other
<PAGE> 27
records concerning Seller's professional relationships, any Hotel Employee
personnel files (prior to the Closing), or any other internal, proprietary, or
confidential information, files, or records of Seller, (ii) the work papers,
memoranda, analysis, correspondence, and similar materials prepared by or for
Seller in connection with the negotiation and documentation of the transaction
contemplated hereby or any other offer to purchase the Property received by
Seller, and (iii) any documents or communications subject to the attorney/client
privilege or attorney work product privilege. Buyer expressly agrees that its
review of the Records and Plans, and any and all other information of any type
or nature, whether oral or written, provided to Buyer by or on behalf of Seller
and relating to the Property (collectively, the "PROPERTY INFORMATION") is for
informational purposes only, and neither Seller nor any agent, advisor, officer,
attorney, representative or other person acting or purporting to act on behalf
of Seller has verified either the accuracy of the Property Information, or the
adequacy of any method used to compile the Property Information or the
qualifications of any person preparing the Property Information except that, in
delivering or making available a copy of any document or papers to Buyer, Seller
has delivered or made available copies of the originals of such documents or
papers in Seller's possession or included in the Records and Plans. Except as
expressly set forth in this SECTION 6, neither Seller nor any agent, advisor,
officer, attorney, representative or other person acting or purporting to act on
behalf of Seller is making or giving any representation or warranty about, or
assuming any responsibility for, the accuracy or completeness of the Property
Information. Reliance by Buyer upon any Property Information shall not create or
give rise to any liability of or against Seller or any agent, advisor, officer,
attorney, representative or other person acting or purporting to act on behalf
of Seller. Subject to Seller's express representations and warranties set forth
herein, the consummation of the Closing shall constitute Buyer's unconditional
approval of all aspects of the Property and Buyer's unconditional acknowledgment
that Buyer has had the opportunity to request from Seller and review such
documents and materials relating of the Property as Buyer deems appropriate. All
copies of such documents delivered to Buyer shall be returned to Seller if the
Closing fails to occur for any reason.
6.5 PURCHASE AS IS. BUYER REPRESENTS, WARRANTS AND COVENANTS TO SELLER
THAT BUYER HAS INDEPENDENTLY AND PERSONALLY INSPECTED THE PROPERTY AND THE
PROPERTY INFORMATION AND THAT BUYER HAS ENTERED INTO THIS AGREEMENT BASED UPON
SUCH PERSONAL EXAMINATION AND INSPECTION. BUYER ACCEPTS THE PROPERTY, IN ITS
CONDITION ON THE CLOSE OF ESCROW AS-IS AND WITH ALL ITS FAULTS, INCLUDING
WITHOUT LIMITATION, ANY FAULTS AND CONDITIONS SPECIFICALLY REFERENCED IN THIS
AGREEMENT. NO PERSON ACTING ON BEHALF OF SELLER IS AUTHORIZED TO MAKE, AND BY
EXECUTION HEREOF, BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS SPECIFICALLY
PROVIDED IN THIS AGREEMENT, SELLER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY
NEGATES AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS,
AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR
IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, CONCERNING OR WITH
RESPECT TO:
(A) THE VALUE OF THE PROPERTY;
(B) THE INCOME TO BE DERIVED FROM THE PROPERTY;
(C) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL
<PAGE> 28
ACTIVITIES AND USES WHICH BUYER MAY CONDUCT THEREON;
(D) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OF THE PROPERTY;
(E) THE MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE
PROPERTY;
(F) THE NATURE, QUALITY OR CONDITION OF THE PROPERTY, INCLUDING
WITHOUT LIMITATION, THE WATER, SOIL AND GEOLOGY;
(G) THE COMPLIANCE OF OR BY THE PROPERTY OR ITS OPERATION WITH ANY
LAWS, RULES, ORDINANCES OR REGULATIONS OF ANY APPLICABLE GOVERNMENTAL AUTHORITY
OR BODY;
(H) THE MANNER OR QUALITY OF THE CONSTRUCTION OR MATERIALS, IF ANY,
INCORPORATED INTO THE PROPERTY;
(I) THE COMPLIANCE OF THE PROPERTY WITH ANY ENVIRONMENTAL LAWS OR
THE AMERICANS WITH DISABILITIES ACT;
(J) THE PRESENCE OR ABSENCE OF HAZARDOUS MATERIALS AT, ON, UNDER,
OR ADJACENT TO THE PROPERTY;
(K) THE CONTENT, COMPLETENESS OR ACCURACY OF ANY OF THE RECORDS AND
PLANS OR OTHER INFORMATION PROVIDED BY SELLER TO BUYER WITH RESPECT TO THE
PROPERTY;
(L) THE CONFORMITY OF THE IMPROVEMENTS TO ANY PLANS OR
SPECIFICATIONS FOR THE PROPERTY, INCLUDING ANY PLANS AND SPECIFICATIONS THAT MAY
HAVE BEEN OR MAY BE PROVIDED TO BUYER;
(M) THE CONFORMITY OF THE PROPERTY TO PAST, CURRENT OR FUTURE
APPLICABLE ZONING OR BUILDING REQUIREMENTS;
(N) DEFICIENCY OF ANY UNDER SHORING;
(O) DEFICIENCY OF ANY DRAINAGE;
(P) THE FACT THAT ALL OR A PORTION OF THE PROPERTY MAY BE LOCATED
ON OR NEAR AN EARTHQUAKE FAULT LINE;
(Q) THE EXISTENCE OF VESTED LAND USE, ZONING OR BUILDING
ENTITLEMENTS AFFECTING THE PROPERTY;
(R) WITH RESPECT TO ANY OTHER MATTER CONCERNING THE PROPERTY
(INCLUDING, WITHOUT LIMITATION, THE TENANT LEASES, THE EQUIPMENT LEASES, ANY
FIXTURES AND EQUIPMENT, THE LICENSES AND PERMITS, THE PERSONAL PROPERTY, THE
SERVICE CONTRACTS, THE EMPLOYMENT CONTRACTS, ANY EMPLOYEE BENEFIT PLANS AND THE
LIQUOR LICENSE) EXCEPT AS MAY BE OTHERWISE EXPRESSLY STATED HEREIN;
(S) THE GROUND LEASE;
(T) ANY OF THE SPECIFIC DISCLOSURE MATTERS; OR
(U) WITHOUT LIMITING THE OTHER DISCLAIMERS SET FORTH HEREIN BUT
SUBJECT TO THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS
AGREEMENT, THE ASSIGNMENTS AND CONVEYANCES OF THE PERSONAL PROPERTY, THE
MANAGEMENT AGREEMENT AND THE GROUND LEASE, ARE WITHOUT ANY EXPRESS OR IMPLIED
WARRANTIES OR REPRESENTATIONS OF ANY KIND WHATSOEVER, INCLUDING, WITHOUT
LIMITATION, (1) WARRANTIES AS TO THE VALIDITY, ENFORCEABILITY OR ASSIGNABILITY
OF THE MANAGEMENT AGREEMENT, (2) WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR USE OR PURPOSE, (3)
<PAGE> 29
WARRANTIES RELATING TO THE DESIGN, CONDITION, QUALITY, WORKMANSHIP OR CAPACITY
OF THE TANGIBLE PERSONAL PROPERTY, (4) REPRESENTATIONS OR WARRANTIES THAT THE
TANGIBLE PERSONAL PROPERTY IS IN COMPLIANCE WITH ALL LAWS, STATUTES, ORDINANCES
RULES, REGULATIONS, SPECIFICATIONS OR CONTRACTS PERTAINING THERETO, (5)
WARRANTIES AGAINST PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, AND (F)
WARRANTIES AS TO THE VALIDITY, ENFORCEABILITY, OR COLLECTIBILITY OF ANY ITEM.
6.6 Limitation on Representations and Warranties of Seller. In no event
shall Buyer be entitled to seek recovery against Seller for an alleged breach of
any representation or warranty by Seller if the information, transaction, or
occurrence alleged to give rise to such breach was disclosed to, made available
to or discovered by Buyer, whether in the course of its review of the Records
and Plans or otherwise, prior to the Close of Escrow (the sole adjustment with
respect to same being as set forth in SECTION 6.7 below). Without limiting the
foregoing, each of the representations and warranties by Seller set forth herein
shall be deemed to be qualified in their entirety by the Specific Disclosure
Matters in addition to any other qualifications of such representations and
warranties.
6.7 Right to Supplement Disclosures. At any time prior to the Closing,
Seller may add additional disclosures to the Specific Disclosure Matters and the
Schedules referenced in this SECTION 6, and may make appropriate revisions
thereto, provided, however, that any such revisions do not in the aggregate
disclose any matter or matters which would reasonably be expected to have an
impact upon the value of the Property in excess of the amount of the Deposit;
and provided, further, that the receipt of any notice of termination under the
Management Agreement shall not be deemed to create any diminution in value to
the Property. In the event that Buyer or Seller discovers any matter or matters
which would be expected to exceed the Threshold Amount, then, in such event, the
provisions of SECTION 7.1.1 shall apply.
6.8 Basket. In no event will Seller be liable to Buyer for any breach
of a representation or warranty hereunder unless and to the extent the Loss
actually and directly incurred by Buyer as results of such breach together with
the Loss actually and directly incurred by Buyer as results of any other
breach(s) in the aggregate exceed the Threshold Amount, provided, that in no
event shall Seller have any liability to Buyer for any consequential damages
arising from a breach by Seller of any representation or warranty unless such
breach results from the intentional concealment by Seller.
6.9 Survival. The Trust, the Corporation and Seller each hereby
covenants and agrees with the other that the representations and warranties of
the Trust, the Corporation and Seller (as the case may be) set forth in SECTIONS
6.1.1 through 6.1.3, inclusive, SECTION 6.2.1 through SECTION 6.2.3, inclusive
and SECTION 6.3.1 and SECTION 6.3.2 shall survive the Close of Escrow without
limitation as to duration. The remaining warranties and representations set
forth in SECTION 6 shall survive the Close of Escrow until the date which is one
(1) year following the Closing Date, at which time such representations and
warranties shall expire unless prior to such time Buyer or Seller, as the case
may be, have duly commenced an action in a court of competent jurisdiction,
alleging a breach of such representation or warranty. Notwithstanding anything
herein to the contrary, in no event shall either Buyer or Seller have any right
to make a claim after the Closing with respect to any representation or
warranty, the breach of which such party shall have discovered prior to the
Closing, unless such party shall have notified the other party of such breach
prior to the Close of Escrow. Nothing contained in this SECTION 6.9 shall limit
the right of Seller to any remedy otherwise available under Federal
<PAGE> 30
or other applicable securities law.
SECTION 7
TITLE TO THE REAL PROPERTY:
EXTENSION OF THE CLOSING
7.1 Buyer's Review of Title. Seller has caused to be delivered to Buyer
and Buyer's Counsel a current preliminary title commitment for title insurance
issued by the Title Company showing the condition of title to the Real Property
(the "Preliminary Title Report") together with a copy of all documents
evidencing or creating the exceptions to title referenced therein.
7.1.1 Failure to Satisfy Certain Closing Conditions; Monetary
Liens. On or prior to the Close of Escrow, Seller shall be obligated (i) to
cause to be insured over or removed of record all Monetary Liens affecting the
Seller's interest in the Real Property as of the date hereof; and (ii) to remove
or to bond over any Monetary Lien arising after the issuance of the Preliminary
Title Report which (a) was created by or with the consent of Seller, or (b) is
in an amount less than or equal to the Deposit. In the event that any Monetary
Lien not reflected on the Preliminary Title Report exceeds the Deposit and was
not created by or with the consent of Seller or any other title defect or other
matters arise which requires Seller to supplement its disclosure pursuant to
SECTION 6.7 and which in the aggregate may create a diminution in value to the
Property in excess of the Deposit, and/or the Ground Lease Estoppel has not been
obtained on or prior to the Closing Date in the form required pursuant to
SECTION 9.1.4. (i) the Deposit shall be refunded by Escrow Holder to Buyer on
February 28, 1998 if the Closing does not occur by such date in accordance with
the provisions hereof; (ii) the Scheduled Closing Date shall be extended and
Seller shall use all reasonable efforts, to remove or bond over or otherwise
cause the Title Company to omit such Monetary Lien as an exception from coverage
under the Title Policy and/or remove or cure as applicable such other defect or
condition or obtain the Ground Lease Estoppel as applicable; and (iii) Buyer
shall be permitted to record the Memorandum of Contract in the real property
records of the state and county in which the Real Property is located. In the
event that the Scheduled Closing Date is so extended and Seller is able to
remove or cure such Monetary Lien, remove or cure as applicable the title defect
or other condition and/or the Ground Lease Estoppel is delivered as is required,
a consent to the transfer of the Ground Lease is obtained in form reasonably
acceptable to Buyer and Seller or a judicial determination that no default
exists is obtained as provided below, the Close of Escrow shall occur as soon as
practicable following such removal, cure, or delivery with time being of the
essence as to the performance of both Buyer's and Seller's obligations
hereunder. THE PARTIES ACKNOWLEDGE AND AGREE THAT DAMAGES WILL NOT BE AN
ADEQUATE REMEDY TO SELLER IF BUYER SHALL DEFAULT IN ITS OBLIGATION TO CLOSE IN
ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 7.1.1 AND CONSEQUENTLY THAT
BUYER'S OBLIGATIONS UNDER THIS SECTION 7.1.1 SHALL BE SPECIFICALLY ENFORCEABLE
AGAINST THE TRUST. IN CONSIDERATION FOR THE REFUND TO BUYER OF THE DEPOSIT
PROVIDED FOR UNDER THIS SECTION 7.1.1, THE RIGHT OF BUYER TO RECORD THE
MEMORANDUM OF CONTRACT PURSUANT TO THIS SECTION 7.1.1, SELLER'S AGREEMENT TO
ENTER INTO THE INTERIM MANAGEMENT AGREEMENT PURSUANT TO THE PROVISIONS OF THIS
SECTION 17.20 (UNDER WHICH AGREEMENT THE VALUE OF THE HOTEL MAY BE AFFECTED BY
THE PERFORMANCE BY THE MANAGER OF ITS RESPONSIBILITIES THEREUNDER) AND TO
ENCUMBER THE PROPERTY WITH THIS AGREEMENT FOR A PERIOD OF UP TO FIVE (5) YEARS
IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 7.1.1
<PAGE> 31
AND IN LIGHT OF THE RISKS WHICH SELLER WILL BE ASSUMING AS A RESULT IN RELATION
TO THE VALUE OF THE EQUITY PURCHASE PRICE TO BE DELIVERED IF AND WHEN THE
CLOSING OCCURS HEREUNDER, THE PARTIES HAVE AGREED THAT THE PROVISIONS OF THIS
SECTION 7.1.1 ARE SPECIFICALLY ENFORCEABLE AGAINST THE TRUST AS AND TO THE
EXTENT PROVIDED IN THE PRECEDING SENTENCE. In the event that a Monetary Lien
cannot be removed or cured or a title defect or other condition cannot be
removed or cured as required hereunder to close within five (5) years of the
date of this Agreement, this Agreement shall terminate and the parties hereto
shall have no further obligations. In the event that the Ground Lease Estoppel
is not obtained by April 15, 1998, then, in such event, Seller shall, upon
written request of Buyer at any time thereafter, at its expense and with the
full cooperation and support of Buyer at its expense, commence and prosecute to
completion a lawsuit against lessor under the Ground Lease to obtain the
delivery of the Ground Lease Estoppel or, in the alternative, a consent to the
transfer of the Ground Lease in form reasonably acceptable to Buyer or a
judicial determination that no default then exists under the Ground Lease and
the Scheduled Closing Date shall be extended until such time as such Ground
Lease Estoppel is obtained, a consent is given or a judicial determination is so
made. (The satisfaction of one or more of the foregoing conditions being
referred to herein as the "Ground Lease Transfer Requirement").
7.1.2 [Intentionally omitted]
7.2 Title Insurance Policy. Buyer's title to the Real Property shall be
insured at Closing by an ALTA extended coverage owner's policy or policies of
title insurance in the amount of the Purchase Price (the "Title Policy") issued
by the Title Company, insuring title to the Improvements and the lessee's
interest under the Ground Lease vested in Buyer, subject only to the Permitted
Encumbrances, together with such customary endorsements or affirmative insurance
as may be reasonably requested by Buyer and purchased at Buyer's sole cost and
expense.
7.3 Title to Real Property. At the Close of Escrow, title to the
Improvements and the lessee's interest under the Ground Lease will be conveyed
to Buyer by Seller pursuant to the Deed and the Assignment of Ground Lease,
subject only to the matters of title respecting the Property shown on SCHEDULE
7.3 annexed hereto and, if the Closing is delayed pursuant to SECTION 7.1.1, any
additional easements, covenants, conditions, restrictions or other matters
entered into with the prior written consent of Buyer which consent shall not be
unreasonably withheld, delayed or conditioned (collectively, the "Permitted
Encumbrances"); Buyer agrees to rely exclusively on the Title Policy for
protection against any title defects except as set forth in SECTION 7.1.2. Buyer
shall have no claim following the Closing against Seller on account of the
Permitted Encumbrances. Buyer's agreement under this SECTION 7.1 shall survive
the execution, delivery, and recordation of the Deed and the Assignment of
Ground Lease.
SECTION 8
INTERIM ACTIVITIES
During the period from the Execution Date through the Close of Escrow,
Seller shall (subject to the provisions of the Interim Management Agreement if
entered into in accordance with the provisions of this Agreement) cause the
Property to be continued to be operated in ordinary course as a hotel consistent
with current operating practices during the period since Manager has been
manager of the Hotel. Buyer shall have the right to enter onto and inspect the
Property, from and after the date hereof, through the Closing Date to inspect
the Property and otherwise perform its due diligence provided such inspections
are performed upon prior notice to Seller and so as not to interfere with the
operation of the Property or to disclose the pendency
<PAGE> 32
of the transaction contemplated hereby. All fees and expenses of any kind
relating to the inspection of the Property by Buyer will be paid for by Buyer.
Buyer agrees to keep the Property free from any liens arising out of or in
connection with Buyer's or its agents entry or the Property. Buyer shall at its
sole cost and expense, clean up and repair the Property as reasonably necessary
after Buyer's or its agents entry thereon. Buyer shall hold harmless, indemnify
and defend Seller from all Losses relating to any action by Buyer, its
Affiliates and/or agents at or on the Property prior to Closing. Any of Buyer's
agents shall be bound by the provisions of SECTION 17.19.
SECTION 9
CONDITIONS PRECEDENT TO CLOSING
9.1 Conditions Precedent to Buyer's Obligations. The Close of Escrow
and the obligation of Buyer to purchase the Property is subject to the
satisfaction, not later than the Scheduled Closing Date, (subject to extensions
as provided in Section 7.1) of the following conditions:
9.1.1 Seller's Deliveries. Seller shall have delivered the items
described in SECTION 4.2 and shall be prepared to deliver the items described in
SECTION 4.4;
9.1.2 Title Policy. The Title Company shall be unconditionally
prepared (subject only to payment of all necessary title insurance premiums and
other charges) to issue to Buyer the Title Policy insuring Buyer's title to the
Real Property subject only to the Permitted Encumbrances;
9.1.3 Performance Under Related Agreement. All conditions precedent
to the closing of the transactions contemplated by that certain Purchase and
Sale Agreement and Joint Escrow Instructions (the "Related Agreement") dated as
of the date hereof by and between D.C. Overnight Partners, L.P. and Buyer shall
have been satisfied or waived and the Seller and Escrow Holder thereunder shall
be ready, willing and able to perform thereunder, and there shall be no default
of Seller under such agreement;
9.1.4 Ground Lessor Estoppel. The lessor (or its agent) under the
Ground Lease shall have delivered a certificate in form and substance
satisfactory to the Title Company, confirming that there are no defaults
thereunder as of the Closing Date and otherwise sufficient to allow the Title
Company to issue the Title Policy in the form required pursuant to this
Agreement (the "Ground Lease Estoppel") and/or the Ground Lease Transfer
Requirement shall have otherwise been satisfied; and
9.1.5 Seller Performance. Seller shall have performed in all
material respects all of the obligations of Seller under this Agreement, to the
extent required to be performed at or prior to the Close of Escrow.
9.1.6 Representations and Warranties of Seller. The Seller's
representations and warranties set forth in SECTION 6.3 shall be true, correct
and complete, as of the Close of Escrow subject to modification thereof to the
extent permitted under SECTION 6.7 and subject further to the applicable
provisions of SECTION 7.1.1.
The conditions set forth in this SECTION 9.1 are solely for the benefit
of Buyer and may be waived only by Buyer. Buyer shall at all times have the
right to waive any such condition. Any such waiver or waivers shall be in
writing and shall be delivered to Seller and Escrow Holder.
9.2 Conditions Precedent to Seller's Obligations. The Close of Escrow
and Seller's obligation with respect to the transactions contemplated by this
Agreement are subject to the satisfaction, not later than the Scheduled Closing
Date, of the following conditions:
9.2.1 Funds and Documents. Buyer shall have delivered to Escrow
Holder,
<PAGE> 33
prior to the Closing Date, for disbursement as directed by Seller, the Paired
Shares and all cash or other immediately available funds due from Buyer in
accordance with SECTION 4 of this Agreement and the documents described in
SECTION 4.3;
9.2.2 Representations and Warranties of Buyer. The Trust's
representations and warranties set forth in SECTION 6.1 and the Corporation's
representations and warranties set forth in SECTION 6.2 shall be true, correct
and complete, as of the Close of Escrow;
9.2.3 No Material Changes. There shall have been no casualty or
condemnation for which Buyer has elected to terminate this Agreement pursuant to
SECTION 12 or SECTION 13 of this Agreement;
9.2.4 Ground Lessor Estoppel. The lessor (or its agent) under the
Ground Lease shall have delivered the Ground Lease Estoppel or the Ground Lease
Transfer Requirement shall have otherwise been satisfied; and
9.2.5 Performance Under Related Agreement. All conditions precedent
to the closing of the transactions contemplated by the Related Agreement shall
have been satisfied or waived and the Buyer and Escrow Holder thereunder shall
be ready, willing and able to perform thereunder and there shall be no default
of Buyer under such agreement.
The conditions set forth in this SECTION 9.2 are solely for the benefit
of Seller and may be waived only by Seller. Seller shall at all times have the
right to waive any such condition. Any such waiver or waivers shall be in
writing and shall be delivered to Buyer and Escrow Holder.
9.3 Failure of Condition. Except as otherwise provided in this
Agreement, if the Escrow fails to close on the Outside Closing Date for any
reason whatsoever, including, without limitation, a failure of a condition
precedent set forth in this SECTION 9, either Buyer or Seller, if not then in
default under this Agreement, may terminate the Escrow and this Agreement upon
notice to the other; and, thereupon:
9.3.1 This Agreement and the Escrow shall terminate;
9.3.2 The costs of the Escrow through the Scheduled Closing Date
shall be governed by SECTION 4.8;
9.3.3 All monies paid into the Escrow and all documents deposited
in the Escrow shall be returned to the party paying or depositing the same
together with interest earned thereon; and
9.3.4 Each party shall be released from all obligations under this
Agreement except for the obligations that are expressly stated to survive the
termination of this Agreement.
SECTION 10
BROKER
Buyer and Seller each represent and warrant to the other that it has
not dealt with any broker, finder or other middleman in connection with this
Agreement, or the transactions contemplated hereby and that no broker, finder,
middleman or other person has claimed, or has the right to claim a commission,
finder's fee or other brokerage fee in connection with this Agreement or the
transactions contemplated hereby. Each party shall indemnify, protect, defend
and hold the other party harmless from and against any costs, claims or expenses
(including actual attorneys' fees and expenses), arising out of the breach by
the indemnifying party of any of its representations, warranties or agreements
contained in this SECTION 10. The representations and obligations under this
SECTION 10 shall survive the Close of Escrow, or, if the Close of Escrow does
not occur, the termination of this Agreement.
<PAGE> 34
SECTION 11
REMEDIES FOR SELLER'S DEFAULT
11.1 Buyer's Remedies in General. If Buyer shall discover prior to the
Close of Escrow any default in any of Seller's obligations under this Agreement
(a "Seller Default"), Buyer shall notify Seller thereof, and Seller shall have a
reasonable period of time (not in excess of thirty (30) days) unless extended by
Buyer in its sole discretion in which to cure such default, in which case the
Scheduled Closing Date shall be extended during the continuation of such cure
period. If there shall be any Seller Default discovered by Buyer prior to the
Close of Escrow and not cured by the Scheduled Closing Date, then Buyer's sole
right and remedy other than with respect to a breach of a representation and
warranty which shall be subject to the provisions of SECTION 6.7, shall be to
compel specific performance of this Agreement; provided, however, that Buyer
shall only be entitled to compel specific performance of this Agreement if, as
of the time of Seller's default, Buyer shall (a) not be in default hereunder,
(b) shall be ready, willing and able to perform its obligations hereunder, and
(c) shall have waived all contingencies to closing other than those relating to
Seller's default.
11.2 MATERIAL INDUCEMENT. BUYER SPECIFICALLY ACKNOWLEDGES THAT THE
LIMITATIONS ON DAMAGES AND SURVIVAL AND OTHER REMEDIES WHICH BUYER MAY RECOVER
FROM AND ENFORCE AGAINST SELLER UNDER THIS AGREEMENT ARE A SPECIFIC AND MATERIAL
INDUCEMENT TO SELLER TO ENTER INTO THIS TRANSACTION.
SECTION 12
DAMAGE TO OR DESTRUCTION OF THE PROPERTY
12.1 Insured Casualty.
12.1.1 If, prior to the Close of Escrow, the Property is damaged
or destroyed, whether by fire or other insured casualty, Seller shall promptly
notify Buyer of such damage or destruction and of the good-faith estimate of a
reputable licensed contractor selected by Seller and reasonably approved by
Buyer of the cost to repair the damage and Seller's good-faith belief that such
casualty is insured (the "Insured Casualty Notice"). If the Insured Casualty
Notice indicates that such casualty is a Material Casualty, Buyer may elect to
be released from its obligations hereunder (including its obligation to purchase
the Property) by delivering to Seller written notice of Buyer's intent to do so
within ten (10) days after the date Buyer receives the Insured Casualty Notice.
In such event, the Deposit together with all interest accrued thereon shall be
promptly returned to Buyer.
12.1.2 If the casualty is insured, and (i) it is not a Material
Casualty, or (ii) it is a Material Casualty, but Buyer elects not to terminate
this Agreement in accordance with this SECTION 12.1, then the Escrow and this
Agreement shall remain in full force and effect, the Closing shall occur on or
before the Outside Closing Date, and Seller shall assign to Buyer, as a
condition precedent to the Close of Escrow, all of Seller's right, title and
interest in and to any of the casualty insurance proceeds or claims therefor
with respect to such damage or destruction, together with any and all rental
loss or business interruption insurance of Seller, if any, payable with respect
to the Property for any period after the Proration Time and any and all claims
against other persons for such damage or destruction. Additionally, if the
Escrow and this Agreement remain in full force and effect, Seller shall pay to
Buyer, by way of a reduction in the Cash Portion of the Closing Payment, an
amount equal to the deductible under the casualty insurance. Within twelve (12)
months following the Close of Escrow, Buyer shall upon thirty (30) days written
notice by Seller, present reasonably satisfactory evidence to Seller that Buyer
applied the proceeds of such insurance to the Property. If Buyer fails to
present such evidence or such evidence is not reasonably satisfactory to Seller,
Buyer shall promptly, but in any event within thirty (30) days of demand
therefor from Seller, pay to Seller the proceeds of the casualty
<PAGE> 35
insurance assigned by Seller to Buyer as provided herein, together with an
amount equal to the deductible under such insurance for which Buyer received a
credit to the Purchase Price.
12.2 Uninsured Casualty.
12.2.1 If, prior to the Close of Escrow, all or any portion of the
property is damaged or destroyed by an uninsured casualty (including, without
limitation, a casualty as to which coverage has been disclaimed by Seller's
insurers), Seller shall promptly notify Buyer of such damage or destruction and
of the Seller's reasonable estimate of the cost to Seller to repair the same of
a reputable licensed contractor selected by Seller and reasonably approved by
Buyer (the "Uninsured Estimate to Repair") and Seller's reasonable belief that
such casualty is uninsured (the "Uninsured Casualty Notice").
12.2.2 If such Uninsured Estimate to Repair indicates the
occurrence of a Material Casualty, either Seller or Buyer may elect to terminate
this Agreement by giving to the other party written notice of its intent to do
so within ten (10) days after the Seller delivers the Uninsured Casualty Notice
to Buyer. If this Agreement is terminated pursuant to this SECTION 12.2.2, the
Deposit together with interest accrued thereon shall be promptly returned to
Buyer.
12.2.3 If the casualty is uninsured, and (i) it is not a Material
Casualty, or (ii) it is a Material Casualty and Buyer and Seller have not
elected to terminate this Agreement in accordance with SECTION 12.2.2, then the
Escrow and this Agreement shall remain in full force and effect, the Closing
shall occur on or before the Outside Closing Date, and Buyer shall be entitled
to a reduction in the Purchase Price in an amount equal to the Uninsured
Estimate to Repair.
12.2.4 If and to the extent that the Purchase Price is adjusted
pursuant to this SECTION 12.2 as a result of a disclaimer of coverage by
Seller's insurers, Buyer shall not be entitled to insurance proceeds due under
Seller's policies, or to be assigned any claim under or with respect to Seller's
policies, and Seller shall retain all rights thereunder or with respect thereto
and to proceeds therefrom, it being the intent of this SECTION 12 that there be
no double recovery by, or double compensation of, Buyer for the casualty.
SECTION 13
CONDEMNATION
If, prior to the Close of Escrow, a Material Taking has occurred or is
pending, Seller shall immediately notify Buyer of such fact. In such event,
Buyer may elect upon written notice to Seller given not later than fifteen (15)
days after receipt of Seller's notice to terminate this Agreement. If Buyer does
not exercise option which Buyer may have pursuant to this SECTION 13 to
terminate this Agreement, or if any such taking is not a Material Taking, then
neither party shall have the right to terminate this Agreement, but Seller shall
assign and turn over, and Buyer shall be entitled to receive and keep, all
awards for the taking of any of the Real Property by eminent domain which accrue
to Seller (other than those relating to loss of use prior to the Closing), and
the parties shall proceed to the Close of Escrow pursuant to the terms hereof,
without modification of the terms of this Agreement and without any reduction in
the Purchase Price.
SECTION 14
EMPLOYEES
14.1 Hiring of Hotel Employees; WARN Act Compliance. Buyer agrees to
make an offer of employment to all existing Hotel Employees as of the Close of
Escrow, on terms and conditions generally comparable to their existing terms and
conditions of employment (to the extent such terms and conditions have been
disclosed by Seller and/or its agents to Buyer) and to make all reasonable
efforts to retain such employees for a reasonable period of time. Without
<PAGE> 36
limiting the foregoing, Buyer shall offer to maintain without loss of employment
(as defined in the WARN Act) the employment at the Property (other than upon
good cause for termination) of such number of Hotel Employees and on such terms
and conditions as shall not result in, and only to the extent necessary to
prevent, a plant closing or mass layoff as defined in the WARN Act. Buyer (i)
shall also cause each of the health and medical benefit plans maintained for
Hotel Employees to waive any preexisting condition in connection with employment
at the Property that was not excluded under the applicable program as of the
Closing Date, (ii) shall also cause each of such benefit plans to take into
account any deductibles or coinsurance amounts incurred by each Hotel Employee
for the year in which the Closing Date occurs, and (iii) shall also cause each
of the health and medical benefit plans to deem each Hotel Employee to be
eligible for participation in such Plan as of the Close of Escrow. In the event
that Buyer fails to comply with any of the foregoing covenants, Buyer agrees
that Buyer shall be solely responsible for the payment of any and all costs,
charges, penalties, compensation, severance pay, benefits and liabilities,
arising under the WARN Act, and any other applicable law, rule or regulation on
account thereof, and Buyer agrees to indemnify, defend and hold Seller and the
Employer Corporation and their directors, officers, agents, affiliates,
principals, partners, shareholders representatives and controlling persons
harmless from and against any and all claims, causes of action, judgments,
damages, penalties and liabilities asserted under the WARN Act or any other
applicable law, rule or regulation, whether against Buyer or Seller, the
Employer Corporation or any other such indemnified party and whether based on
employment of any of the Hotel Employees prior to or following the Closing,
arising from Buyer's failure to comply with the foregoing covenants
(collectively, "Termination Charges"). Following the Closing, if Buyer desires
to terminate the employment of any Hotel Employees other than for cause, Buyer
shall be solely responsible for complying with all applicable provisions of the
WARN Act and all other applicable laws, rules and regulations with respect to
such termination, including without limitation, the payment of all costs and
termination payments owing under the WARN Act and all other applicable laws,
rules and regulations to any of such employees. Buyer shall assume all
obligations under the Employment Agreement for the Director of Finance
attributable to the period from and after the Closing Date (it being agreed that
the Director of Finance may resign thereunder at any time without penalty).
14.2 Collective Bargaining Agreements. Without limiting the provisions
of SECTION 14.1, immediately upon the Close of Escrow, without the necessity of
further action by Buyer, Buyer shall assume each collective bargaining agreement
or other labor union contracts identified on SCHEDULE 14.2 (the "Collective
Bargaining Agreements"). Buyer further agrees to indemnify Seller and the
Employer Corporation and their directors, officers, employees, agents,
affiliates, principals, partners, shareholders, representatives and controlling
persons for any and all liability to the bargaining agents or Hotel Employees,
resulting from the failure of Buyer to comply with the terms and conditions of
any of the Collective Bargaining Agreements with respect to periods beginning
after the Close of Escrow.
14.3 Continuation of Benefits.
14.3.1 Except as provided in SECTION 14.3.2 , on and after the
Closing Date, Seller (or any insurer at Seller's cost) shall continue to process
and pay (or cause applicable insurers and third party administrators, including
ITT Sheraton, to process and pay) in an expeditious manner and with respect to
all covered Hotel Employees (and, to the extent applicable, their covered
spouses, dependents and beneficiaries) all claims under the Employment
Agreements that provide health and medical, or other welfare, benefits submitted
for covered expenses with respect to occurrences commencing on or prior to the
Closing Date,
<PAGE> 37
including, but not limited to: (A) covered hospital benefits for any
confinements; (B) covered life and survivor income benefits, if any, for deaths
which occur on or prior to the Closing Date; (C) workers' compensation benefits
for disabilities resulting from a work-related accident which occurred on or
prior to the Closing Date; (D) all covered benefits that are being, or that may
be, paid to, or with respect to, any of such individuals who are on short or
long term disability, or medical, personal or other leaves of absence as of the
Closing Date; (E) covered benefits under any "spending account," or similar
arrangement, under any "cafeteria plan" (as defined under Section 125 of the
Internal Code) with respect to salary reduction elections made prior to the
Closing Date; and (F) covered benefits under all other such Employment
Agreements which accrue on or before the Closing Date; but, only in each
instance, to the extent that Buyer shall not have received a credit against the
Purchase Price on account of such item.
14.3.2 Buyer (or any plan maintained by Buyer) will provide
continued health and medical coverage as required under Section 4980B of the
Code, Part 6 of Title I of ERISA or any other applicable federal, state or local
law or ordinance to all current and former Hotel Employees (and their spouses,
dependents and beneficiaries) with respect to whom a "qualifying event" (as such
term is defined under Sections 4980B(f)(3) of the Code or 603 of ERISA) or other
triggering event described under the applicable federal, state or local laws or
ordinances occurred on or before the Closing Date.
14.3.3 Buyer shall maintain supplies of claims forms necessary for
Hotel Employees to make claims under Employment Agreements that provide health,
medical or other welfare benefits with respect to occurrences commencing on or
prior to the Closing Date, and shall furnish such forms to the Hotel Employees
when needed and otherwise assist the Hotel Employees in presenting such claims.
14.4 Buyer and Seller intend by this Agreement to comply with Section
4204 of ERISA, so as to prevent Seller from incurring at the Closing Date a
complete or partial withdrawal in respect of any employee benefit plans, if any,
in which the Hotel Employees currently participate that are "multiemployer
plans," as defined in Section 4001(a)(3) of ERISA (and which have been disclosed
to Buyer on the Schedule of Employment Agreements), determined as if Buyer is
the "buyer" referred to in such Section 4204. Accordingly, with respect to such
multiemployer plans, Buyer agrees as follows:
(A) For the first plan year of each such multiemployer plan
commencing after the Close of Escrow, and for each of the succeeding four plan
years for each such plan, Buyer shall assume the obligation to contribute to
each such plan with respect to operations conducted with business assets
acquired from Seller for substantially the same number of contribution base
units (as defined in Section 4001(a)(11) of ERISA) for which Seller had an
obligation to contribute to such plan.
(B) Prior to each such multiemployer plan's first plan year
beginning after the Close of Escrow, Buyer shall apply to such plan for a
variance from the requirement of Section 4204(a)(1)(b) of ERISA, that a bond be
obtained or an amount be held in escrow as provided in said Section. In the
event any such plan determines that the request does not qualify for a variance
on it, Buyer shall obtain any required bond or establish any required escrow
within thirty (30) days after the date on which it receives notice of the plan's
decision, and shall maintain such bond or escrow until the earliest of: (i) the
date a variance is obtained from the plan; (ii) the date a variance or exemption
is obtained from the Pension Benefit Guaranty Corporation; or (iii) the last day
of the fifth (5th) plan year commencing after the Close of Escrow; which bond or
escrow shall be paid to such plan if Buyer withdraws therefrom or fails to make
a contribution to such plan when due, at any time during the first (1st) five
(5) plan
<PAGE> 38
years of such plan beginning after the Closing Date. In order to comply with
subsection (a)(1)(C) of such Section 4204, if Buyer withdraws in a complete
withdrawal or a partial withdrawal from any multiemployer plan with respect to
which Buyer has assumed an obligation to contribute pursuant to this Agreement
and such withdrawal or partial withdrawal occurs during the five (5) plan years
commencing with the first (1st) plan year beginning after the date of the Close
of Escrow, Seller shall be secondarily liable for any withdrawal liability it
would have had to such multiemployer plan on the date of the Close of Escrow
under Title IV of ERISA. Buyer agrees to provide Seller with reasonable advance
notice of its anticipated failure to pay any withdrawal liability and to furnish
Seller promptly with a copy of any notice of withdrawal liability it may receive
with respect to such plans.
14.5 Indemnification. Buyer and Seller (as applicable, the
"Indemnitor") agrees to indemnify, defend, protect and hold the other and, the
Employer Corporation in the case of Seller, and their directors, officers,
agents, affiliates, principals, partners, shareholders, representatives and
controlling persons (as applicable, the "Indemnitee") harmless from and against
any and all claims, damages, liabilities, losses, and expenses, (including
attorneys' fees and costs) paid, suffered or incurred by the Indemnitee, arising
out of or related to Indemnitor's failure to comply with any of the covenants,
obligations, or duties contained in SECTION 14.
14.6 Survival. The provisions of this SECTION 14 shall survive the
Close of Escrow.
SECTION 15
COOPERATION
15.1 Seller has advised Buyer that it may be necessary after the Close
of Escrow for Seller (or its representatives) to audit the Records and Plans
with respect to the period prior to the Closing Date. In addition, Seller may
require access to the such Books and Records in connection with any litigation
by or against Seller and its Affiliates with respect to the Property, any tax
audit, examination or challenge or similar proceeding, or any calculation of
sums payable under SECTION 5. Accordingly, Buyer hereby: (i) agrees to retain
the Records and Plans with respect to the period prior to the Closing Date at
the Property for a period of seven (7) years after the Close of Escrow or such
additional period as may reasonably be requested by Seller; (ii) grants Seller,
its Affiliates and their respective representatives access to the such Records
and Plans and the Property after the Close of Escrow, at reasonable times and
upon reasonable prior notice, for such purposes; (iii) subject to the rights of
guests in guest rooms, tenants under tenant leases, grants Seller, its
Affiliates, and their respective representatives access to the Property after
the Close of Escrow for the purpose of conducting such inspections and/or
testing (including destructive testing) of the Property as may be necessary or
advisable in connection with any litigation and other proceedings to which
Seller is a party (provided that Seller shall give Buyer prior notice of the
scope of such inspections and testing) which shall be scheduled for such periods
as shall be reasonably agreeable to the parties.
15.1.1 All inspections fees, appraisal fees, engineering fees and
other expenses of any kind relating to the inspection of the Property by Seller
or Seller's Affiliate will paid for by Seller and/or Seller's Affiliate.
15.1.2 Prior to Seller or Seller's Affiliate's entry on the
Property for the purpose of conducting inspections and/or tests, Seller or
Seller's Affiliate shall provide Buyer with certificates of insurance from
Seller's agents from an insurance carrier and for such risks and policy limits
as Seller shall reasonably approve.
15.1.3 Seller agrees to keep the Property free from any liens
arising out of or in connection with such testing and inspection.
15.1.4 Seller, shall, at its sole cost and expense, clean up and
repair the Property
<PAGE> 39
as reasonably necessary, after Seller's or Seller's agents, entry thereon.
15.1.5 Seller shall hold harmless, indemnify and defend Buyer for
all losses relating to any action by Seller, its Affiliates and/or agents at or
on the Property after the Closing.
15.1.6 Buyer agrees to cooperate with Seller, its Affiliates and
their respective representatives in connection with any such litigation or
proceedings with respect to the Property, any such tax audit, examination or
challenge or similar proceeding, or any such calculation of sums payable under
SECTION 5, said cooperation to be at no material cost or expense to Buyer.
15.2 Seller shall cooperate with Buyer in connection with the
assignment of all transferable Licenses and Permits to Buyer and the application
for and procurement of replacements of any non-transferable Licenses and
Permits.
SECTION 16
NOTICES
16.1 Addresses. Whenever any notice, demand or request is required or
permitted hereunder, such notice, demand or request shall be made in writing and
shall be (a) sent via a nationally recognized overnight courier service fully
prepaid, (b) deposited in the United States by mail, registered or certified,
return receipt requested, postage prepaid, or (c) sent via telefacsimile,
provided that the original of such notice, demand or request shall also be sent
via one of the methods described in (a) and (b) above, in each case to the
addressees (and individuals) set forth below:
As to Seller:
N.Y. Overnight Partners, L.P.
c/o Al Anwa USA Incorporated
1925 Century Park East
Suite 1900
Los Angeles, CA 90067
Attn: General Counsel
Telefacsimile: (310) 229-2939
With a copy to Seller's Additional Addressees:
Gordon Eng, Esq.
19191 S. Vermont Avenue
Suite 420
Torrance, CA 90502
Telefacsimile: (310) 207-1006
Morrison & Foerster LLP
555 West Fifth Street, Suite 3500
Los Angeles, CA 90013-1024
Attn: Thomas R. Fileti, Esq.
Telefacsimile: (213) 892-5454
As to Buyer:
Starwood Lodging Corporation
Starwood Lodging Trust
2231 E. Camelback Road
<PAGE> 40
Suite 400
Phoenix, AZ 85016
Attn: Steven R. Goldman
Telefacsimile: (602) 852-0115
With a copy to Buyer's Additional Addressee:
Greenberg Traurig Hoffman Lipoff Rosen & Quentel
153 East 53rd Street
New York, NY 10022
Attn: Andrew E. Zobler, Esq.
Telefacsimile: (212) 223-7161
As to Escrow Holder:
Chicago Title Insurance Company
700 South Flower Street, Suite 900
Los Angeles, CA 90017
Attn: Maggie Watson
Telefacsimile: (213) 488-4388
16.2 Receipt of Notices. Any notice, demand or request that shall be
delivered to Buyer and its Additional Addressee in the manner aforesaid shall be
deemed sufficiently given to and received by Buyer for all purposes hereunder,
and any notice, demand or request that shall be delivered to Seller and its
Additional Addresses in the manner aforesaid shall be deemed sufficiently given
to and received by Seller for all purposes hereunder (i) the next business day
following the day such notice, demand or request is delivered by a nationally
recognized overnight courier service fully prepaid, to such party and its
Additional Addressee, (ii) if sent via registered or certified mail, at the time
of receipt by such party and its Additional Addressee, or (iii) if sent via
telefacsimile, as of the date and time stated upon confirmation reports
generated by the sending party's telefacsimile machine confirming the delivery
of such notice, demand or request to such party and its Additional Addressee.
16.3 Refusal of Delivery. The inability to deliver any notice, demand
or request because the individual to whom it is properly addressed in accordance
with this SECTION 16 refused delivery thereof or no longer can be located at
that address shall constitute delivery thereof to such individual.
16.4 Change of Address. Each party shall have the right from time to
time to designate by written notice to the other parties hereto such other
person or persons and such other place or places as said party may desire
written notices to be delivered or sent in accordance herewith.
SECTION 17
GENERAL PROVISIONS
17.1 Amendment. Except as provided in SECTION 4.1, no provision of this
Agreement or of any documents or instrument entered into, given or made pursuant
to this Agreement may be amended, changed, waived, discharged or terminated
except by an instrument in writing, signed by the party against whom enforcement
of the amendment, change, waiver, discharge or termination is sought.
17.2 Time of Essence. All times provided for in this Agreement for the
performance of any act will be strictly construed, time being of the essence.
<PAGE> 41
17.3 Entire Agreement. This Agreement and other documents delivered at
Closing, set forth the entire agreement and understanding of the parties in
respect of the transactions contemplated by this Agreement, and supersede all
prior agreements, arrangements and understandings relating to the subject matter
hereof and thereof. No representation, promise, inducement or statement of
intention has been made by Seller or Buyer which is not embodied in this
Agreement, or in the attached Exhibits or the written certificates, schedules or
instruments of assignment or conveyance delivered pursuant to this Agreement,
and neither Buyer nor Seller shall be bound by or liable for any alleged
representations, promise, inducement or statement of intention not therein so
set forth.
17.4 No Waiver. No failure of any party to exercise any power given
such party hereunder or to insist upon strict compliance by the other party with
its obligations hereunder shall constitute a waiver of any party's right to
demand strict compliance with the terms of this Agreement.
17.5 Counterparts. This Agreement, any document or instrument entered
into, given or made pursuant to this Agreement or authorized hereby, and any
amendment or supplement thereto may be executed in two or more counterparts,
and, when so executed, will have the same force and effect as though all
signatures appeared on a single document. Any signature page of this Agreement
or of such an amendment, supplement, document or instrument may be detached from
any counterpart without impairing the legal effect of any signatures thereon,
and may be attached to another counterpart identical in form thereto but having
attached to it one or more additional signature pages.
17.6 Costs and Attorneys' Fees. If any legal action or any arbitration
or other proceeding is brought for the enforcement of this Agreement or any
document or instrument entered into, given or made pursuant to this Agreement or
authorized hereby or thereby (including, without limitation, the enforcement of
any obligation to indemnify, defend or hold harmless provided for herein or
therein), or because of an alleged dispute, default, or misrepresentation in
connection with any of the provisions of this Agreement or of such document or
instrument, or if Escrow Holder commences any action with respect to the
Escrow(s), the successful or prevailing party shall be entitled to recover
actual attorneys' fees, charges and other costs incurred in that action or
proceeding, in addition to any other relief to which it may be entitled.
17.7 Payments; Interests. Except as otherwise provided herein, payment
of all amounts required by the terms of this Agreement shall be made in the
United States and in immediately available funds of the United States of America
which, at the time of payment, is accepted for the payment of all public and
private obligations and debts. Unless the parties otherwise agree, payments
shall be made through the Escrow Holder. If any payment due under this Agreement
is not paid when due, it shall thereafter bear interest at a variable rate equal
to the rate announced from time to time by Citibank, N.A. as its prime or
reference rate, plus five percent (5%) per annum, but in no event more than the
maximum rate, if any, allowed by law to be charged by the party receiving the
interest on such type of indebtedness.
17.8 Transfer By Buyer. Buyer shall not have the right to assign this
Agreement, but shall be permitted to designate an Affiliate or Affiliates to
take title to the Property. In the event that Buyer elects to so designate any
Affiliate or Affiliates to take title to the Property hereunder, (i) Buyer shall
upon close of Escrow be released of all obligations hereunder other than
pursuant to SECTION 6, SECTION 7.1, SECTION 10, SECTION 17.18, SECTION 17.19 and
SECTION 17.20 or arising prior to the Close of Escrow, (ii) such Affiliate or
Affiliates shall assume all of Buyer's obligations hereunder; and (iii) such
Affiliate of Affiliates shall represent and warrant
<PAGE> 42
to Seller that such entities are duly organized and validly existing and
otherwise as to the matters covered in SECTION 6.1.1 and SECTION 6.1.2 as
applicable.
17.9 Parties in Interest. Subject to SECTION 17.8, the rights and
obligations of the parties hereto shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors, assigns, heirs
and the legal representatives of their respective estates. Nothing in this
Agreement is intended to confer any right or remedy under this Agreement on any
person other than the parties to this Agreement and their respective successors
and permitted assigns, or to relieve or discharge the obligation or liability of
any person to any party to this Agreement or to give any person any right of
subrogation or action over or against any party to this Agreement.
17.10 Applicable Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the state in which the Real Property
is located without giving effect to the conflict-of-law rules and principles of
that state.
17.11 Incorporation of Recitals and Exhibits. The Recitals and Exhibits
attached to this Agreement are incorporated into and made a part of this
Agreement.
17.12 Construction of Agreement. The language in all parts of this
Agreement shall be in all cases construed simply according to its fair meaning
and not strictly for or against any of the parties hereto. Headings at the
beginning of sections of this Agreement are solely for the convenience of the
parties and are not a part of this Agreement. When required by the context,
whenever the singular number is used in this Agreement, the same shall include
the plural, and the plural shall include the singular, the masculine gender
shall include the feminine and neuter genders, and vice versa. As used in this
Agreement, the term "Seller" shall include the respective permitted successors
and assigns of Seller, and the term "Buyer" shall include the permitted
successors and assigns of Buyer, if any.
17.13 Severability. If any term or provision of this Agreement is
determined to be illegal, unconscionable or unenforceable, all of the other
terms, provisions and sections hereof will nevertheless remain effective and be
in force to the fullest extent permitted by law.
17.14 Announcements. Seller and Buyer shall consult with each other and
provide each other one (1) Business Day prior notice with regard to all press
releases and other announcements issued at or prior to the Close of Escrow and
during the one year period thereafter concerning the existence of this Agreement
or the sale of the Property and, except as permitted under SECTION 17.19,
neither Seller nor Buyer shall issue any such press release or other such
publicity prior to the Close of Escrow without the prior written consent of the
other party, which consent may be withheld in such other party's sole and
absolute discretion. Buyer will not issue any public announcement with respect
to Seller (other than to describe the transaction contemplated hereby to the
extent permitted hereunder) without the prior written consent of Seller which
may be withheld in its sole and absolute discretion. The agreements of the
parties in this SECTION 17.14 shall survive the Close of Escrow or any
termination of this Agreement.
17.15 Submission of Agreement. The submission of this Agreement to
Buyer or its broker, agent or attorney for review or signature does not
constitute an offer to sell the Property to Buyer or the granting of an option
or other rights with respect to the Property to Buyer. No agreement with respect
to the purchase and sale of the Property shall exist, and this writing shall
have no binding force or effect, until this Agreement shall have been executed
and delivered by Buyer and by Seller and Buyer shall have deposited the Deposit
with Escrow Holder.
17.16 Further Assurances. Buyer and Seller agree to execute such
instructions to the Escrow Holder and such other instruments and take such
further actions either before or after
<PAGE> 43
the Close of Escrow as may be reasonably necessary to carry out the provisions
of this Agreement provided that no material additional cost or liability shall
be created thereby.
17.17 Cooperation. Buyer and Seller shall cooperate with the other to
carry out the purpose of this Agreement (provided, such cooperation shall not
require either party to expend any sum not otherwise required pursuant to the
other provisions of this Agreement). This SECTION 17.17 shall survive the Close
of Escrow.
17.18 Moratorium on Re-Sale. Buyer covenants and agrees that it will
not sell the Property to any third-party for a period (the "Transfer Restriction
Period") commencing upon the Close of Escrow and expiring upon the later of (a)
five (5) years following the Close of Escrow and (b) settlement of or the final
non-appealable judgment is issued in connection with the existing litigation
between Seller and the Ritz Carlton Hotel Company, LLC and their respective
affiliates, provided, however, the foregoing prohibition shall not apply to a
sale of all or substantially all of the assets of Buyer, the merger of Buyer
into another entity or the transfer of the Property to a subsidiary and/or
Affiliate of Buyer but shall be binding upon the party succeeding to all or
substantially all of the assets of Buyer, the surviving entity in such merger,
or such subsidiary or Affiliate. The provisions of this SECTION 17.18 shall be
specifically enforceable. Buyer hereby waives any requirement for Seller to post
a bond in order to seek or obtain any temporary restraining order or other
injunctive relief pursuant to this SECTION 17.18. The parties acknowledge and
agree that the provisions of this SECTION 17.18 form a material part of the
consideration to Seller for entering into this Agreement. The parties agree that
these provisions are reasonable in light of Seller's ongoing litigation with
Ritz Carlton Hotel Company, LLC and its affiliates.
17.19 Confidentiality. Buyer shall hold as confidential all information
concerning the transaction contemplated by this Agreement, Seller and the
Property disclosed in connection with this transaction and Buyer shall not,
prior to the Close of Escrow, release any such information relating to the
transaction, Seller or the Property to any governmental agencies or third
parties without Seller's prior written consent except as may be required by law
and in such case subject to the provisions of SECTION 17.14. Seller hereby gives
its consent to Buyer's disclosure of information relating to the transaction
contemplated hereby to Buyer's Counsel and other consultants, in each instance
to the extent reasonably necessary to verify information given to Buyer by
Seller or otherwise to carry out the purposes of this Agreement and provided in
each instance, such consultants agree in writing to be bound by the
confidentiality provisions of this SECTION 17.19. If the Close of Escrow shall
fail to occur for any reason, neither party shall issue any press release,
publicity or other public announcement of the subject matter of this Agreement,
or to make any other disclosure concerning the subject matter of this Agreement
(except as may be required by law and in such case subject to the provisions of
SECTION 17.14.), without the prior written consent of the other party, which
consent may be withheld in such other party's sole and absolute discretion. The
agreements of the parties in this SECTION 17.19 shall survive any termination of
this Agreement.
17.20 Interim Management Agreement. Seller shall provide Manager with a
notice of termination of the Management Agreement on January 2, 1998 or as soon
thereafter as Seller shall have obtained any required lender consent thereto.
Seller shall, on or prior to January 2,1998, seek any required lender contents
and use all reasonable commercial efforts to obtain the same as promptly as
possible. Buyer and Seller shall enter into a management agreement with respect
to the Property in the form attached as EXHIBIT 17.20 hereto (the "Interim
Management Agreement") which shall be effective (and the Interim Management
Agreement shall be dated as of such effective date) on the earlier of (a) thirty
days from the date of that at
<PAGE> 44
delivery to Manager of such Termination Notice, and (b) the effective date of a
written waiver of Manager of the notice of termination required under the
Management Agreement. Buyer shall advance any fee payable to Manager under the
Management Agreement on account of the termination thereof up to $69,767.00.
Buyer shall be deemed to have waived delivery of all items under SECTIONS
4.2.1.15, 4.2.1.16, 4.2.1.17 and 4.2.1.19 in the event the Management Agreement
is terminated in accordance with the provisions of this SECTION 17.20 prior to
the Closing Date.
17.21 Starwood Lodging Trust. The parties hereto understand and agree
that the name "Starwood Lodging Trust" is a designation of the Trust and its
trustees (as trustees but not personally) under the Trust's Declaration of
Trust, and all persons dealing with the Trust shall look solely to the Trust's
assets for the enforcement of any claims against the Trust, and that the
Trustees, officers, agents and security holders of the Trust assume no personal
liability for obligations entered into on behalf of the Trust, and their
respective individual assets shall not be subject to the claims of any person
relating to such obligations.
[BALANCE OF PAGE INTENTIONALLY BLANK]
<PAGE> 45
IN WITNESS WHEREOF, Buyer and Seller have caused this Agreement to be
executed as of the day and year first above written.
"Seller"
N.Y. OVERNIGHT PARTNERS, L.P.,
a New York limited partnership
By: N.Y. OVERNIGHT, INC. a New York
corporation, its sole General Partner
By: /s/ T. Ayoubi
-------------------------------------
Name: Tarek Ayoubi
Its: President
"Buyer"
STARWOOD LODGING TRUST,
a Maryland real estate investment trust
By: /s/ Steven R. Goldman
__________________________
Name:
Title:
STARWOOD LODGING CORPORATION,
a Maryland corporation
By: /s/ Michael C. Mueller
__________________________
Name: Michael C. Mueller
Title: Vice President
"Escrow Agent"
CHICAGO TITLE INSURANCE COMPANY,
a Missouri corporation
By: /s/ Maggie G. Watson*
__________________________
Name: Maggie G. Watson
Title: Authorized Signatory
* subject to receiving mutual instructions in
the event paragraph #3.5 becomes operative
<PAGE> 46
TABLE OF CONTENTS
SECTION 1 - DEFINITIONS 1
1.1 Defined Terms 1
1.2 Other Definitional Provisions 10
SECTION 2 - PURCHASE AND SALE OF PROPERTY 11
SECTION 3 - PURCHASE PRICE; PAYMENT; BUYER'S DEFAULT; LIQUIDATED DAMAGES 11
3.1 Purchase Price 11
3.2 Payment 11
3.3 Investment of Escrowed Funds 12
3.4 Allocation of Purchase Price 12
3.5 Default by Buyer Prior to Closing; Liquidated Damages 12
SECTION 4 - ESCROW; CLOSING; COSTS 13
4.1 Escrow 13
4.2 Seller's Deliveries to Escrow Holder 13
4.2.1.1 Deed 13
4.2.1.2 Assignment and Assumption of Tenant Leases 14
4.2.1.3 General Assignment 14
4.2.1.4 Assignment and Assumption of Management Agreement 14
4.2.1.5 Bill of Sale 14
4.2.1.6 Stock Agreement 14
4.2.1.7 Liquor Licenses Management Agreement 14
4.2.1.8 Assignment and Assumption of Ground Lease 14
4.2.1.9 Assignment of Mortgage 14
4.2.1.10 [Intentionally Omitted] 15
4.2.1.11 [Intentionally Omitted] 15
4.2.1.12 [Intentionally Omitted] 15
4.2.1.13 Non-Foreign Person Certificate 15
4.2.1.14 Transfer Tax Forms 15
4.2.1.15 Certified Rent Roll 15
4.2.1.16 Certified Operating Statement 15
4.2.1.17 Guest Ledger 15
4.2.1.18 Closing Certificate 15
4.2.1.19 Schedule of Bookings 16
4.2.1.20 Title Requirements 16
4.2.1.21 Payoff Letters 16
4.2.1.22 Notices to Tenants 16
4.2.1.23 Opinion of Seller's Counsel 16
4.2.1.24 Other 16
4.3 Buyer's Deliveries to Escrow Holder 16
4.3.1.1 The Cash Purchase Price 17
4.3.1.2 Stock Certificates 17
4.3.1.3 Assignment and Assumption of Management Agreement 17
4.3.1.4 Value Letter 17
46
<PAGE> 47
4.3.1.5 Opinion of Buyer's Counsel 17
4.3.1.6 Stock Agreement 17
4.3.1.7 Assignment and Assumption of Ground Lease 17
4.3.1.8 Liquor License Management Agreement 17
4.3.1.9 [Intentionally Omitted] 17
4.3.1.10 [Intentionally Omitted] 17
4.3.1.11 [Intentionally Omitted] 17
4.3.1.12 Closing Certificate 18
4.3.1.13 The Assignment and Assumption of Tenant Leases 18
4.3.1.14 The General Assignment and Assumption Agreement 18
4.3.1.15 Transfer Tax Forms 18
4.3.1.16 Other 18
4.4 Seller's Deliveries to Buyer 18
4.4.1 Tenant Leases/Tenant Deposits 18
4.4.2 Service Contracts 18
4.4.3 Licenses and Permits 18
4.4.4 Records and Plans 18
4.5 Possession 19
4.6 Evidence of Authorization 19
4.7 Close of Escrow 19
4.8 Costs of Escrow 20
4.9 Other Costs 21
4.10 Maintenance of Confidentiality by Escrow Holder 21
SECTION 5 - PRORATIONS AND ASSUMPTION OF OBLIGATIONS 21
5.1 General 21
5.2 General and Specific Prorations 21
5.3 Deposits 24
5.4 Tenant Leases 24
5.5 Service Contracts and Other Intangible Property 24
5.6 Tax Refunds and Proceedings 24
5.7 Guest Baggage 25
5.8 Safe Deposit Boxes 25
5.9 Advance Bookings 25
SECTION 6 - REPRESENTATIONS AND WARRANTIES; CONDITION OF PROPERTY 25
6.1 Of the Trust 25
6.1.1 Power and Authority 25
6.1.2 Authorization; Valid Obligation 26
6.1.3 Capital Structure 26
6.1.4 SEC Documents and Other Reports 26
6.1.5 Absence of Certain Changes or Events 27
6.1.6 Actions and Proceedings 27
6.1.7 REIT Status 28
6.1.8 Partnership Status 28
6.1.9 Hart-Scott-Rodino Act 28
6.2 Of the Corporation 28
6.2.1 Power and Authority 28
47
<PAGE> 48
6.2.2 Authorization; Valid Obligation 28
6.2.3 Capital Structure 29
6.2.4 SEC Documents and Other Reports 29
6.2.5 Absence of Certain Changes or Events 29
6.2.6 Actions and Proceedings 30
6.2.8 Hart-Scott-Rodino 30
6.3 Of Seller 30
6.3.1 Regarding Seller's Authority 30
6.3.2 Tenant Leases 31
6.3.3 Service Contracts 31
6.3.4 Claims 31
6.3.5 Employees 31
6.3.6 Compliance with Laws 32
6.3.7 Hazardous Materials 32
6.3.8 Records and Plans 32
6.3.9 Licenses and Permits 32
6.3.10 Management Agreements 32
6.3.11 Personal Property 32
6.3.12 Insurance 33
6.3.13 Real Estate Taxes 33
6.3.14 Residential Apartments; Rent Regulations 33
6.3.15 Regarding The Ground Lease 33
6.4 Buyer's Review of Records and Plans 33
6.4.1 Access to Records and Plans; Specific Disclosures 33
6.4.2 Limitation on Access to Records and Plans 34
6.5 PURCHASE AS IS 34
6.6 Limitation on Representations and Warranties of Seller 36
6.7 Right to Supplement Disclosures 37
6.8 Basket 37
6.9 Survival 37
SECTION 7 - TITLE TO THE REAL PROPERTY: EXTENSION OF THE CLOSING 37
7.1 Buyer's Review of Title 38
7.1.1 Failure to Satisfy Certain Closing Conditions; Monetary Liens 38
7.1.2 [Intentionally omitted] 39
7.2 Title Insurance Policy 39
7.3 Title to Real Property 39
SECTION 8 - INTERIM ACTIVITIES 40
SECTION 9 - CONDITIONS PRECEDENT TO CLOSING 40
9.1 Conditions Precedent to Buyer's Obligations 40
9.1.1 Seller's Deliveries 40
9.1.2 Title Policy 40
9.1.3 Performance Under Related Agreement 40
9.1.4 Ground Lessor Estoppel 41
9.1.5 Seller Performance 41
9.1.6 Representations and Warranties of Seller 41
48
<PAGE> 49
9.2 Conditions Precedent to Seller's Obligations 41
9.2.1 Funds and Documents 41
9.2.2 Representations and Warranties of Buyer 41
9.2.3 No Material Changes 41
9.2.4 Ground Lessor Estoppel 42
9.2.5 Performance Under Related Agreement 42
9.3 Failure of Condition 42
SECTION 10 - BROKER 42
SECTION 11 - REMEDIES FOR SELLER'S DEFAULT 43
11.1 Buyer's Remedies in General 43
11.2 MATERIAL INDUCEMENT 43
SECTION 12 - DAMAGE TO OR DESTRUCTION OF THE PROPERTY 43
12.1 Insured Casualty 43
12.2 Uninsured Casualty 44
SECTION 13 - CONDEMNATION 45
SECTION 14 -EMPLOYEES 45
14.1 Hiring of Hotel Employees; WARN Act Compliance 45
14.2 Collective Bargaining Agreements; ERISA Compliance 46
14.3 Continuation of Benefits 46
14.5 Indemnification 48
14.6 Survival 48
SECTION 15 - COOPERATION 48
SECTION 16 - NOTICES 49
16.1 Addresses 49
16.2 Receipt of Notices 51
16.3 Refusal of Delivery 51
16.4 Change of Address 51
SECTION 17 - GENERAL PROVISIONS 51
17.1 Amendment 51
17.2 Time of Essence 51
17.3 Entire Agreement 52
17.4 No Waiver 52
17.5 Counterparts 52
17.6 Costs and Attorneys' Fees 52
17.7 Payments; Interests 52
17.8 Transfer By Buyer 53
17.9 Parties in Interest 53
17.10 Applicable Law 53
17.11 Incorporation of Recitals and Exhibits 53
17.12 Construction of Agreement 53
17.13 Severability 53
17.14 Announcements 53
17.15 Submission of Agreement 54
17.16 Further Assurances 54
17.17 Cooperation 54
17.18 Moratorium on Re-Sale 54
17.19 Confidentiality 55
17.20 Interim Management Agreement 55
49
<PAGE> 50
EXHIBITS
Exhibit A Legal Description
Exhibit B Memorandum of Contract
Exhibit 4.2.1.1 Deed
Exhibit 4.2.1.2 Assignment and Assumption of Tenant Leases
Exhibit 4.2.1.3 General Assignment and Assumption Agreement
Exhibit 4.2.1.4 Assignment and Assumption of Management Agreement
Exhibit 4.2.1.5(a) Bill of Sale for Capitalized Tangible Property
Exhibit 4.2.1.5(b) Bill of Sale for Expensed Tangible Property
Exhibit 4.2.1.6 Stock Agreement
Exhibit 4.2.1.7 Liquor License Management Agreement
Exhibit 4.2.1.8 Assignment and Assumption of Ground Lease
Exhibit 4.2.1.13 Non-Foreign Person Certificate
Exhibit 17.20 Interim Management Agreement
SCHEDULES
Schedule 1.1.1 Approved Service Contracts
Schedule 1.1.2 Employment Agreements
Schedule 1.1.3 Equipment Leases
Schedule 1.1.4 Excluded Property
Schedule 1.1.5 Ground Lease
Schedule 1.1.6 Hotel Employees
Schedule 1.1.7 Schedule of Tenant Leases
Schedule 1.1.8 Seller's Due Diligence and Seller's Knowledge
Schedule 1.1.9 Specific Disclosure Matters
Schedule 3.4 Allocation of Purchase Price
Schedule 6.3.2 Material Defaults Under Tenant Lease
Schedule 6.3.3 Material Defaults Under Approved Service Contracts
Schedule 6.3.4 Material Claims
Schedule 6.3.5 Material Defaults Under Employment Agreements
Schedule 6.3.6 Material Violations
Schedule 6.3.7 Material Environmental Conditions
Schedule 6.3.9 Licenses and Permits
Schedule 6.3.12 Seller's Insurance
Schedule 6.3.13 Pending Tax Protests
Schedule 7.3 Permitted Encumbrances
Schedule 14.2 Collective Bargaining Agreements
50
<PAGE> 1
Exhibit 10.58
STOCK AGREEMENT
by and among
N.Y. OVERNIGHT PARTNERS, L.P.
a New York limited partnership
as Stock Purchaser
and
STARWOOD HOTELS & RESORTS TRUST,
a Maryland Real Estate Investment Trust
and
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.,
a Maryland Corporation,
Dated as of January 15, 1998
<PAGE> 2
STOCK AGREEMENT
THIS STOCK AGREEMENT (this "Agreement") is entered into as of
January 15, 1998 (the "Closing Date") by and between N.Y. OVERNIGHT PARTNERS,
L.P., a New York limited partnership, ("Stock Purchaser"), STARWOOD HOTELS &
RESORTS TRUST, a Maryland real estate investment trust (the "Trust"), and
STARWOOD HOTELS & RESORTS WORLDWIDE, INC., a Maryland corporation (the
"Corporation", and, with the Trust, "Starwood Lodging").
R E C I T A L S
A. Stock Purchaser has agreed to acquire from Starwood
Lodging, and Starwood Lodging has agreed to issue and deliver to Stock
Purchaser, Paired Shares in partial consideration for certain assets owned by
Stock Purchaser.
B. The parties desire to enter into this Agreement in order to
set forth certain terms and conditions under which the Paired Shares are to be
issued to and held by Stock Purchaser.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements contained in this Agreement and for other good and
valuable consideration, the receipt and adequacy of which are hereby mutually
acknowledged, Starwood Lodging and Stock Purchaser agree as follows:
SECTION 1
DEFINITIONS
1.1 Defined Terms.
"Accredited Investor" shall have the meaning ascribed to that
term in Rule 501 promulgated by the SEC under the Securities Act.
"Affiliate" shall mean, with respect to any Person, any other
Person that controls, is controlled by or is under common control with such
first Person.
"Applicable Percentage" shall mean: (a) if Starwood Lodging
delivers Registered Shares to Stock Purchaser pursuant to Section 2.1 hereof,
100% and (b) if Starwood Lodging delivers Unregistered Shares pursuant to
Section 2.1 hereof, 91.95%.
"Business Day" shall mean any day on which the New York Stock
Exchange is open for business.
"Closing Date" shall mean the date hereof.
"Equity Value" shall mean Two Million Nine Hundred Forty-Two
Thousand Four Hundred Dollars ($2,942,400), divided by the Applicable
Percentage, rounded to the nearest whole number.
"ITT Closing" shall have the meaning set forth in the
Registration Rights Agreement.
"Joinder Agreement" means an agreement to be bound by this
Agreement in the form of Attachment A hereto.
<PAGE> 3
"LIBOR" means the average of the interbank offered rates for
three-month dollar deposits in the London market based on quotations at five (5)
major banks, as published from time to time in The Wall Street Journal. If The
Wall Street Journal ceases to publish such a compilation of interbank offered
rates, or if The Wall Street Journal ceases to be published, then Starwood
Lodging shall propose a substitute method of determining the interest rate
generally known as the three-month LIBOR rate, which method, absent manifest
error, shall be binding on all holders of the Subject Shares and Starwood
Lodging.
"Lock Price" shall mean the Market Price as of the Closing
Date, provided, however, that in the event that, at any time during the period
between December 30, 1997 and the Settlement Date, the Corporation or the Trust
effects any reclassification, stock split or stock dividend with respect to
their stock, any change or conversion of stock into other securities, or any
other dividend or distribution with respect to the Paired Shares, other than (i)
dividends contemplated by the Starwood Lodging Disclosure in effect as of
December 30, 1997, or (ii) dividends in the aggregate not to exceed the greater
of (a) the current rate (as of December 30, 1997) of their dividends (together
with any increases in such rate in the ordinary course) and (b) the Trust's
"real estate investment taxable income" (as such term is defined for purposes of
the Internal Revenue Code) without regard to any net capital gains or the
deduction for dividends paid, appropriate and proportionate adjustments shall be
made to the Lock Price.
"Market Price" shall mean, as of any date, the average closing
prices of the Paired Shares on the New York Stock Exchange during the ten
consecutive Business Days immediately preceding such date.
"Open Market Sale" means one or more sales of Stock Agreements
Shares (including "short sales" initiated with the intention of delivering Stock
Agreements Shares) made or proposed to be made by placing one or more sale
orders or offers to sell with one or more securities brokers or dealers with a
view toward the consummation of one or more sale transactions that are required
to be, or that actually are, reported to the New York Stock Exchange or the
National Association of Securities Dealers.
"Orderly Market Disposition" means the sale of Stock
Agreements Shares by placing one or more sell orders with one or more securities
brokers or dealers with a view toward the disposition in the market of such
Stock Agreements Shares.
"Other Stock Agreements" shall mean, collectively, (i) that
certain Stock Agreement, dated as of January 15, 1998, among Savanah Limited
Partnership, as stock purchaser, and Starwood Lodging, (ii) that certain Stock
Agreement, dated as of January 15, 1998, among New Remington Partners, as stock
purchaser, and Starwood Lodging, and (iii) that certain Stock Agreement, dated
as of January 15, 1998, among D.C. Overnight Partners, L.P., as stock purchaser,
and Starwood Lodging.
"Paired Shares" shall mean one share of beneficial interest,
par value $.01 per share, of the Trust, and one share of common stock, par value
$.01 per share, of the Corporation that are subject to the Pairing Agreement.
For purposes of calculating the number of Paired Shares to be delivered
hereunder, each pair of the shares of the stock of the Trust and the Corporation
shall be considered one share.
"Pairing Agreement" shall mean the Pairing Agreement dated as
of June 25, 1980, as amended, between the Trust and the Corporation providing,
in relevant part, for the pairing of all outstanding shares of the Corporation
and the Trust.
<PAGE> 4
"Payment Rights" shall have the meaning set forth in Section 5
hereof.
"Person" shall have the meaning set forth in the Registration
Rights Agreement.
"Proposed Disposition Shares" shall have the meaning set forth
in Section 3 hereof.
"Put Price" and "Put Right" shall have the meaning set forth
in Section 2.4 hereof.
"Registered Shares" means Subject Shares the issuance of which
to Stock Purchaser has been registered under the Securities Act.
"Registration Rights Agreement" means the Registration Rights
Agreement by and among Stock Purchaser, the Trust and the Corporation in the
form of Attachment B hereto.
"Registration Statement" shall have the meaning set forth in
the Registration Rights Agreement.
"Required Effectiveness Date" shall have the meaning set forth
in the Registration Rights Agreement.
"Response Date" shall have the meaning set forth in Section 3
hereof.
"Restricted Group" shall mean two (2) or more Restricted
Holders acting in concert or under common direction.
"Restricted Holder" shall mean Stock Purchaser and any other
Person who shall have acquired any Stock Agreements Shares in a Transfer not
constituting an Open Market Sale. A Restricted Holder shall not include any
Person who shall have acquired any Stock Agreements Shares in a Transfer not
constituting an Open Market Sale if such Transfer occurs after the first Open
Market Sale of such Stock Agreements Shares.
"Sale Notice" shall have the meaning set forth in Section 3
hereof.
"SEC" shall mean the United States Securities and Exchange
Commission.
"SEC Documents" means all documents required to have been
filed by the Trust or the Corporation with the SEC since January 1, 1996 and
through the date hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Settlement Date" shall mean, if Starwood Lodging shall
deliver Unregistered Shares pursuant to Section 2.1 hereof, the date on which
Starwood Lodging or its counsel shall notify Stock Purchaser that (i) the
Registration Statement has been declared effective by the SEC, (ii) that the
Subject Shares have been registered, on the terms and subject to the provisions
of the Registration Rights Agreement, for Transfer by the selling shareholders
named therein in Open Market Sales and in such other manner as is provided in
the Registration Statement, and (iii) that Starwood Lodging has completed all
deliveries and other actions required to enable trading of the Subject Shares on
the New York Stock Exchange; provided, however, that if such notice is given
later than 1:00 PM Eastern Time, the Settlement Date shall be deemed for all
purposes to occur on the Business Day following the date of such notice.
<PAGE> 5
"Starwood Lodging Disclosure" shall mean, collectively, the
Form S-3 filed by the Corporation and the Trust with the SEC on November 12,
1997, and the Form S-4 filed by the Corporation and the Trust with the SEC on
November 20, 1997, as the same has been or may hereafter be amended by any
filing with the SEC made by the Trust or the Corporation.
"Stock Agreements Shares" shall mean the aggregate of the
Subject Shares and the other Paired Shares delivered pursuant to the Other Stock
Agreements.
.
"Stock Purchaser Affiliates" shall have the meaning set forth
in Section 6.1 hereof.
"Subject Shares" means the 57,405 Paired Shares delivered by
Starwood Lodging pursuant to Section 2.1 hereof.
"Transfer" shall have the meaning set forth in the
Registration Rights Agreement.
"Transfer Agent" shall mean the transfer agent for the Paired
Shares.
"Unregistered Shares" means Subject Shares the issuance of
which to Stock Purchaser has not been registered under the Securities Act.
1.2 Other Definitional Provisions. The terms "hereof,"
"hereto," "hereunder" and similar terms when used in this Agreement shall refer
to this Agreement generally, rather than to the section in which such term is
used, unless otherwise specifically provided. Unless the context otherwise
requires, any defined term used in the plural shall refer to all members of the
relevant class, and any defined term used in the singular shall refer to any one
or more of the members of the relevant class.
SECTION 2
CALCULATION OF SUBJECT SHARES
2.1 Calculation of Subject Shares. Starwood Lodging shall
deliver to Stock Purchaser on the Closing Date Paired Shares in an amount equal
to the Equity Value divided by the Lock Price. Starwood Lodging shall have the
option to deliver Registered Shares or Unregistered Shares on the Closing Date.
2.2 Delivery Requirements for Paired Shares. The Paired Shares
to be delivered hereunder shall be properly endorsed and certificated Paired
Shares in the amount required to be delivered in accordance with the provisions
of this Agreement. If Registered Shares are delivered, such shares shall be
unlegended and fully and freely transferable without any consent of,
registration with or notice to any Person (except as provided for in Sections 3
and 4 hereof and in the Pairing Agreement). If Unregistered Shares are issued,
each certificate evidencing Subject Shares shall be stamped or otherwise
imprinted with a legend in substantially the following form (and no other
restrictive legends):
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT. THE SALE, PLEDGE
OR OTHER TRANSFER OF THIS
<PAGE> 6
CERTIFICATE OR THE SHARES EVIDENCED HEREBY IS SUBJECT TO THE
TERMS OF A REGISTRATION RIGHTS AGREEMENT DATED AS OF JANUARY
15, 1998 BETWEEN THE ISSUER AND THE HOLDER HEREOF.
There shall be no legend on the Paired Shares reflecting the restrictions in
Sections 3 or 4 hereof.
2.3 Other Deliveries. Concurrently with the delivery of the
Paired Shares, Starwood Lodging shall deliver to Stock Purchaser any statements,
such as a transfer or conveyance tax forms or returns required by applicable
federal or New York law to be executed by Starwood Lodging, as may reasonably be
requested by Stock Purchaser in order to effect the delivery of the Subject
Shares to Stock Purchaser.
2.4 Registration Rights and Requirements.
(a) If Starwood Lodging delivers Unregistered Shares pursuant
to Section 2.1 hereof, Stock Purchaser and Starwood Lodging shall on the Closing
Date execute and deliver to each other the Registration Rights Agreement and the
parties thereto shall perform their respective obligations thereunder. If
Starwood Lodging delivers Registered Shares pursuant to Section 2.1 hereof, the
Registration Rights Agreement shall not be executed or delivered and none of the
parties shall have any obligations thereunder.
(b) If Starwood Lodging delivers Unregistered Shares pursuant
to Section 2.1 hereof, and if the Settlement Date shall not have occurred on or
before the seventh Business Day after the Required Effectiveness Date, Starwood
Lodging shall pay to each Restricted Holder, on the Settlement Date, an amount
equal to the "Interest Factor." For each Restricted Holder, the "Interest
Factor" shall be an amount equal to the product of (i) LIBOR plus 2% per annum
for each day after the seventh Business Day after the Required Effectiveness
Date to and including the earlier of the Settlement Date or the date that is 60
days after the Required Effectiveness Date, multiplied by (ii) the Market Price
multiplied by the number of Subject Shares held by such Restricted Holder on the
date of such payment.
(c) In the event that the Settlement Date shall not have
occurred by the date that is 60 days after the Required Effectiveness Date, each
Person who is a Restricted Holder as of such date shall have the
non-transferrable right (its "Put Right"), exercisable at any one time for each
such Restricted Holder after such 60th day and through the earlier to occur of
(i) the Settlement Date, and (ii) the day immediately prior to the first
anniversary of the Closing, to "put" some or all of the Subject Shares held by
such Restricted Holder to Starwood Lodging for an amount per share equal to the
Put Price; provided, however, that the Put Right shall not be exercisable by any
Restricted Holder for a number of Subject Shares that is less than the lesser of
(i) 100,000, or (ii) the number of Subject Shares then held by such Restricted
Holder. Such right shall be exercised by such Restricted Holder giving Starwood
Lodging notice of its election to exercise its Put Right and the number of
Subject Shares to be purchased by Starwood Lodging, whereupon Starwood Lodging
shall purchase such shares at 9:00 a.m. (Eastern Time) on the second Business
Day following its receipt of such notice, with payment to be delivered (against
delivery to Starwood Lodging of such shares free of all rights of other Persons)
on the third Business Day thereafter in cash or immediately available funds to
such account as such Restricted Holder may designate in such notice. The Put
Price shall be the Market Price determined as of the date such notice is given.
Starwood Lodging shall have the right to satisfy
<PAGE> 7
its obligations under the Put Rights by designating another Person as the
purchaser of such shares, and such obligations shall be deemed satisfied upon
such other Person's purchase of such shares for the Put Price and at the time
and in the manner set forth herein. Such designation shall not affect Starwood
Lodging's obligation to pay the Interest Factor as provided herein.
(d) The Interest Factor and the right of each Restricted
Holder to receive the Put Price in the event it elects to exercise its Put Right
shall be each Restricted Holder's sole and exclusive monetary remedies arising
from Starwood Lodging's failure to cause the Settlement Date to occur on or
before the seventh Business Day after the Required Effectiveness Date and shall
be deemed liquidated damages in respect of such failure; and each Restricted
Holder shall be deemed to have waived its other monetary remedies. However, from
and after the seventh Business Day after the Required Effectiveness Date, each
Holder shall at all times have such equitable remedies as may be available under
applicable law.
SECTION 3
NOTICE PROCEDURES REGARDING OPEN MARKET SALE
OF STOCK AGREEMENTS SHARES
3.1 If, at any time any Restricted Holder or Restricted Group
elects to Transfer, in an Open Market Sale, more than 100,000 Stock Agreements
Shares on any single Business Day (300,000 Stock Agreements Shares from and
after the first Business Day after the ITT Closing), prior to executing such
Transfer the designated representative of such Restricted Holder or Restricted
Group shall provide Starwood Lodging's representative, the Chief Financial
Officer of the Trust (or any successor representative identified by a notice
given hereunder), with telephonic notice at (602) 852-3900 along with a
confirmation of such notice by telefacsimile to Starwood Lodging and Starwood
Lodging's additional addressees as provided in Section 7.1 hereof. Such notice
(the "Sale Notice") shall indicate the number of Stock Agreements Shares which
such Restricted Holder or Restricted Group has determined to Transfer in an Open
Market Sale (the "Proposed Disposition Shares") on such day or days and shall
comply with Section 3.5 hereof (if applicable). Such notice shall be deemed
given on the Business Day the telephonic notice described above is given so long
as such notice is given by 5:00 P.M., Eastern time, on such day; if given after
that time, it shall be deemed given on the next Business Day. In the event that,
at any time while this Section 3.1 is in effect, the Corporation or the Trust
effects any reclassification, stock split or stock dividend with respect to
their stock, any change or conversion of stock into other securities, or any
other dividend or distribution with respect to the Paired Shares, other than (i)
dividends contemplated by the Starwood Lodging Disclosure as in effect on
December 30, 1997, or (ii) dividends in the aggregate not to exceed the greater
of (a) the current rate (as of December 30, 1997) of their dividends (together
with any increases in such rate in the ordinary course) and (b) the Trust's
"real estate investment taxable income" (as such term is defined for purposes of
the Internal Revenue Code) without regard to any net capital gains or the
deduction for dividends paid, appropriate and proportionate adjustments shall be
made to the numbers of Stock Agreements Shares set forth in the first sentence
of this Section 3.1.
3.2 No later than noon, Eastern time, on the second Business
Day after the Sale Notice is given as described above, Starwood Lodging may
provide the representative(s) of such Restricted Holder or Restricted Group with
telephonic notice, along with a confirmation of such notice to such
representatives by telefacsimile, that Starwood Lodging is irrevocably offering
to purchase or place all of the Proposed Disposition Shares at a price per share
equal to the average of the closing prices on the New York Stock Exchange on the
first and second
<PAGE> 8
Business Days following the giving of the Sale Notice. Such notice shall be
given as provided in Section 3.5 hereof. It shall be a condition to such notice
and the consummation of such transaction that such transaction not constitute a
violation of Regulation M promulgated by the SEC. If Starwood Lodging fails to
make such an offer within such period, it shall have no further rights under
this Section 3 with respect to any Orderly Market Disposition by such Restricted
Holder or Restricted Group of Stock Agreements Shares up to the amount of the
Proposed Disposition Shares that is commenced not later than the seventh
Business Day after the Sale Notice is given.
3.3 If Starwood Lodging duly makes such an offer, such
Restricted Holder or Restricted Group shall elect by telephonic notice to
Starwood Lodging's representative delivered and confirmed as described above,
given by 8:30 a.m. (Eastern Time) on the Business Day following receipt of
Starwood Lodging's offer (such day is referred to herein as the "Response
Date"), in their sole and absolute discretion, to either (i) proceed with such
proposed disposition, in which instance Starwood Lodging shall purchase or place
the Proposed Disposition Shares at 9:00 a.m. (Eastern Time), on the Response
Date, with payment to be delivered (against delivery to Starwood Lodging of the
Proposed Disposition Shares free of all rights of other Persons) on the third
Business Day after the Response Date in cash or immediately available funds to
such account as such Restricted Holder may designate by notice to Starwood
Lodging, or (ii) not to proceed with such proposed disposition, in which
instance the Sale Notice shall be withdrawn and such Restricted Holder shall
continue to hold the Proposed Disposition Shares subject to the terms of this
Section 3 (to the extent applicable). If such Restricted Holder shall fail to so
elect by 8:30 a.m. (Eastern Time) on the Response Date, it shall irrevocably be
deemed to have elected not to proceed with such proposed disposition.
3.4 On the first anniversary of the Settlement Date, the
provisions of this Section 3 shall automatically lapse and be of no further
force or effect with respect to each Restricted Holder that holds less than
500,000 Stock Agreements Shares (except (i) to the extent that such Restricted
Holder acts on or after such date as a member of a Restricted Group that holds
in the aggregate 500,000 or more Stock Agreements Shares, and (ii) to the extent
such Restricted Holder, either alone or as a member of a Restricted Group, has
given or was required to have given Starwood Lodging a Sale Notice prior to such
date and as to which the procedures in this Section 3 have not been fully
performed).
3.5 Any notice given by Starwood Lodging pursuant to Section
3.2 hereof to Stock Purchaser shall be given telephonically to Tarek Ayoubi at
(310) 229-2929 and by telefacsimile at (310) 229-2927, or to such other
telephone and telefacsimile numbers as may be set forth for such purpose in the
Sale Notice. Any notice given by Starwood Lodging pursuant to Section 3.2 hereof
to any other Restricted Holder or Restricted Group shall be given to the
telephone and telefacsimile numbers as may be set forth for such purpose in the
Sale Notice, and no Sale Notice from a Restricted Holder other than Stock
Purchaser or from any Restricted Group shall be deemed properly given in
accordance with Section 3.1 unless such numbers are set forth in such Sale
Notice.
3.6 Time is of the essence in the performance by the parties
of their obligations under this Section 3.
SECTION 4
TRANSFERS NOT CONSTITUTING AN OPEN MARKET SALE; SHORT SALES
4.1 Each Restricted Holder covenants and agrees that, as a
condition to any
<PAGE> 9
Transfer by a such Restricted Holder of Subject Shares in a transaction that
does not constitute an Open Market Sale, such Restricted Holder will obtain and
deliver to Starwood Lodging a Joinder Agreement duly executed by the transferee
or the intended transferee; and any purported Transfer of Subject Shares made in
breach of this provision shall be null and void ab initio.
4.2 Each Restricted Holder covenants and agrees that, prior to
the effectiveness of the Registration Statement, it will not "sell short" (as
such term is commonly understood in the brokerage industry) any Paired Shares,
whether "against the box" or otherwise.
SECTION 5
PAYMENT RIGHTS
On the Settlement Date, Starwood Lodging shall pay to Stock
Purchaser in cash or other immediately available funds an amount equal to the
amount, if any, by which the Lock Price exceeds the Market Price as of the
Settlement Date, multiplied by the number of Paired Shares delivered by Starwood
Lodging to Stock Purchaser hereunder. Stock Purchaser's right to receive the
payments from Starwood Lodging described in this section are referred to herein
as the "Payment Rights." Pursuant to a written instrument a copy of which is
delivered to Starwood Lodging promptly following its execution by Stock
Purchaser, Stock Purchaser may distribute to its partners or their shareholders
or assign to any other Person all or any portion of the Payment Rights either
together with or separately from the Paired Shares delivered hereunder.
SECTION 6
REPRESENTATIONS AND WARRANTIES
6.1 Stock Purchaser represents and warrants to Starwood
Lodging as follows:
(a) Stock Purchaser has the power and authority to enter into
this Agreement and the Registration Rights Agreement and to perform its
obligations hereunder and thereunder. The execution and delivery hereof and
thereof and the performance by Stock Purchaser of its obligations hereunder and
thereunder will not violate or constitute an event of default under any material
term or material provision of any agreement, document, instrument, judgment,
order or decree to which Stock Purchaser is a party or by which it is bound, or
violate any law, rule or regulation the violation of which would have a material
adverse effect upon the principal benefits intended to be provided under this
Agreement or the Registration Rights Agreement.
(b) The individuals executing this Agreement and the
Registration Rights Agreement on behalf of Stock Purchaser have the legal power,
right and actual authority to bind Stock Purchaser to the terms and conditions
hereof and thereof. Each of this Agreement and the Registration Rights Agreement
is a valid and binding obligation of Stock Purchaser, enforceable in accordance
with its terms, except as the same may be affected by bankruptcy, insolvency,
moratorium or similar laws, or by legal or equitable principles relating to or
limiting the rights of contracting parties generally.
(c) Stock Purchaser is acquiring the Subject Shares to be
issued to it for
<PAGE> 10
investment, solely for the account of itself, on behalf of its
partners and Persons who are stockholders of such partners, or on behalf of
certain Persons each of whom is both an Affiliate of a partner of Stock
Purchaser and a creditor of Stock Purchaser (collectively, such partners and
other Persons the "Stock Purchaser Affiliates"). Neither Stock Purchaser nor any
of the Affiliates of Stock Purchaser is acquiring Subject Shares with a view to
or for sale in connection with any distribution of such Subject Shares in
violation of applicable securities laws.
(d) Stock Purchaser and each of the Stock Purchaser Affiliates
is an Accredited Investor.
(e) Stock Purchaser has obtained and reviewed the Starwood
Lodging Disclosure and the SEC Documents that have been filed with the SEC
through the date hereof.
6.2 By its execution of its Joinder Agreement, each Restricted
Holder other than Stock Purchaser shall be deemed to have represented and
warranted to Starwood Lodging, as of the date of its delivery of such Joinder
Agreement, as follows:
(a) Such Restricted Holder has the power and authority to
enter into this Agreement, the Registration Rights Agreement and its Joinder
Agreement and to perform its obligations hereunder and thereunder. The execution
and delivery hereof and thereof and the performance by such Restricted Holder of
its obligations hereunder and thereunder will not violate or constitute an event
of default under any material term or material provision of any agreement,
document, instrument, judgment, order or decree to which such Restricted Holder
is a party or by which it is bound, or violate any law, rule or regulation the
violation of which would have a material adverse effect upon the principal
benefits intended to be provided under this Agreement or the Registration Rights
Agreement.
(b) The individuals executing this Agreement, the Registration
Rights Agreement and its Joinder Agreement on behalf of such Restricted Holder
have the legal power, right and actual authority to bind such Restricted Holder
to the terms and conditions hereof and thereof. Each of this Agreement, the
Registration Rights Agreement and its Joinder Agreement is a valid and binding
obligation of such Restricted Holder, enforceable in accordance with its terms,
except as the same may be affected by bankruptcy, insolvency, moratorium or
similar laws, or by legal or equitable principles relating to or limiting the
rights of contracting parties generally.
(c) Such Restricted Holder is acquiring the Subject Shares
Transferred or to be Transferred to it for investment, solely for the account of
itself and not with a view to or for sale in connection with any distribution of
such Subject Shares in violation of applicable securities laws; provided,
however, that if such Restricted Holder is Stock Purchaser Affiliate, such
Restricted Holder may acquire the Subject Shares on behalf of Persons who are
stockholders of such Restricted Holder if each of such Persons is an Accredited
Investor.
(d) Such Restricted Holder is an Accredited Investor.
(e) Such Restricted Holder has had the opportunity, prior to
making the determination to acquire any Subject Shares, to obtain and review the
Starwood Lodging Disclosure and the SEC Documents that have been filed with the
SEC through the date of the execution of such Restricted Holder's Joinder
Agreement.
6.3
<PAGE> 11
The Trust hereby represents and warrants to Stock Purchaser as follows:
(a) The Trust has the power and authority to enter into this
Agreement and the Registration Rights Agreement and to consummate the
transactions herein contemplated; neither the execution and delivery of this
Agreement or the Registration Rights Agreement by the Trust, nor the performance
by the Trust of the Trust's obligations hereunder or thereunder will violate or
constitute an event of default under any material terms or material provisions
of any agreement, document, instrument, judgment, order or decree to which the
Trust is a party or by which the Trust is bound, or violate any law, rule or
regulation the violation of which would have a material adverse effect upon the
principal benefits intended to be provided under this Agreement or the
Registration Rights Agreement.
(b) The individuals executing this Agreement and the
Registration Rights Agreement and the documents referenced herein on behalf of
the Trust have the legal power, right and actual authority to bind the Trust to
the terms and conditions hereof. This Agreement and the Registration Rights
Agreement is a valid and binding obligation of Trust, enforceable in accordance
with its terms, except as the same may be affected by bankruptcy, insolvency,
moratorium or similar laws, or by legal or equitable principles relating to or
limiting the rights of contracting parties generally.
(c) All Paired Shares to be delivered in accordance with
Section 2.1 hereof will, when so issued, be duly authorized, validly issued,
fully paid and nonassessable and free of preemptive rights and will be paired
with each other in the same ratio as all other shares are paired with each other
pursuant to the Pairing Agreement.
(d) The Trust has filed all of the SEC Documents. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of applicable law, and, at the respective times they were filed,
none of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements (including, in each
case, any notes thereto) of the Trust included in the SEC Documents complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto as of their
respective dates of filing, were prepared in accordance with generally accepted
accounting principles (except, in the case of the unaudited statements, as
permitted by Regulation S-X of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly presented the consolidated financial position of the Trust and its
consolidated subsidiaries as of the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described therein).
Except as disclosed in the SEC Documents or as required by generally accepted
accounting principles, the Trust has not, since December 31, 1996, made any
change in the accounting practices or policies applied in the preparation of
their financial statements.
(e) Except as disclosed in the SEC Documents or the Starwood
Lodging Disclosure, since December 31, 1996 and through the date hereof, (i)
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 change in or effect on the financial condition, properties, business,
results of operations or prospects of the Trust and its subsidiaries taken as a
whole, or (ii) there has not been any split, combination or reclassification of
any of the capital stock or units of the Trust or its operating partnership or
any issuance or the
<PAGE> 12
authorization of any issuance of any other securities in respect of, in lieu of,
or in substitution for shares of such capital stock.
(f) Except as set forth in the SEC Documents or the Starwood
Lodging Disclosure or in a separate writing provided to Stock Purchaser on or
before the date hereof, as of the date hereof: there are no outstanding orders,
judgments, injunctions, awards or decrees of any governmental entity against or
involving the Trust or any of its subsidiaries, or against or involving any of
the directors, officers or employees of the Trust 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 change in or effect on the financial condition, properties,
business, results of operations or prospects of the Trust and its subsidiaries
taken as a whole; and there are no actions, suits or claims or legal,
administrative or arbitrative proceedings or investigations pending or, to the
knowledge of the Trust, threatened against or involving the Trust 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
change in or effect on the financial condition, properties, business, results of
operations or prospects of the Trust and its subsidiaries taken as a whole. As
of the date hereof, there are no actions, suits or other litigation, legal or
administrative proceedings or governmental investigations pending or, to the
knowledge of the Trust, threatened against or affecting the Trust 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 and the Registration Rights Agreement.
6.4 The Corporation hereby represents and warrants to Stock
Purchaser as follows:
(a) The Corporation has the power and authority to enter into
this Agreement and the Registration Rights Agreement and to consummate the
transactions herein contemplated; neither the execution and delivery of this
Agreement or the Registration Rights Agreement by the Corporation, nor the
performance by the Corporation of the Corporation's obligations hereunder or
thereunder will violate or constitute an event of default under any material
terms or material provisions of any agreement, document, instrument, judgment,
order or decree to which the Corporation is a party or by which the Corporation
is bound, or violate any law, rule or regulation the violation of which would
have a material adverse effect upon the principal benefits intended to be
provided under this Agreement or the Registration Rights Agreement.
(b) The individuals executing this Agreement and the
Registration Rights Agreement and the documents referenced herein on behalf of
the Corporation have the legal power, right and actual authority to bind the
Corporation to the terms and conditions hereof. This Agreement and the
Registration Rights Agreement is a valid and binding obligation of Corporation,
enforceable in accordance with its terms, except as the same may be affected by
bankruptcy, insolvency, moratorium or similar laws, or by legal or equitable
principles relating to or limiting the rights of contracting parties generally.
(c) All Paired Shares to be delivered in accordance with
Section 2.1 hereof will, when so issued, be duly authorized, validly issued,
fully paid and nonassessable and free of preemptive rights and will be paired
with each other in the same ratio as all other shares are paired with each other
pursuant to the Pairing Agreement.
(d) The Corporation has filed all of the SEC Documents. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of
<PAGE> 13
applicable law, and, at the respective times they were filed, none of the SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements (including, in each case,
any notes thereto) of the Corporation included in the SEC Documents complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto as of their
respective dates of filing, were prepared in accordance with generally accepted
accounting principles (except, in the case of the unaudited statements, as
permitted by Regulation S-X of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly presented the consolidated financial position of the Corporation and
its consolidated subsidiaries as of the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described therein).
Except as disclosed in the SEC Documents or as required by generally accepted
accounting principles, the Corporation has not, since December 31, 1996, made
any change in the accounting practices or policies applied in the preparation of
their financial statements.
(e) Except as disclosed in the SEC Documents or the Starwood
Lodging Disclosure, since December 31, 1996 and through the date hereof, (i)
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 change in or effect on the financial condition, properties, business,
results of operations or prospects of the Corporation and its subsidiaries taken
as a whole, or (ii) there has not been any split, combination or
reclassification of any of the capital stock or units of the Corporation or its
operating partnership or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of, or in substitution for shares of
such capital stock.
(f) Except as set forth in the SEC Documents or the Starwood
Lodging Disclosure or in a separate writing provided to Stock Purchaser on or
before the date hereof, as of the date hereof: there are no outstanding orders,
judgments, injunctions, awards or decrees of any governmental entity against or
involving the Corporation or any of its subsidiaries, or against or involving
any of the directors, officers or employees of the Corporation 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 change in or effect on the financial
condition, properties, business, results of operations or prospects of the
Corporation and its subsidiaries taken as a whole; and there are no actions,
suits or claims or legal, administrative or arbitrative proceedings or
investigations pending or, to the knowledge of the Corporation, threatened
against or involving the Corporation 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 change in or effect on the
financial condition, properties, business, results of operations or prospects of
the Corporation and its subsidiaries taken as a whole. As of the date hereof,
there are no actions, suits or other litigation, legal or administrative
proceedings or governmental investigations pending or, to the knowledge of the
Corporation, threatened against or affecting the Corporation 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 and the Registration Rights Agreement (other than
those arising in connection with the Registration Statement or the performance
by the Corporation of its obligations under the Registration Rights Agreement).
<PAGE> 14
SECTION 7
NOTICES
7.1 Addresses. Except for the notices given pursuant to
Section 3, whenever any notice, demand or request is required or permitted
hereunder, such notice, demand or request shall be made in writing and shall be
(a) sent via a nationally recognized overnight courier service fully prepaid,
(b) deposited in the United States by mail, registered or certified, return
receipt requested, postage prepaid, or (c) sent via telefacsimile, provided that
the original of such notice, demand or request shall also be sent via one of the
methods described in (a) and (b) above, in each case to the addressees (and
individuals) set forth below:
As to Stock Purchaser:
c/o Al Anwa USA, Inc.
1925 Century Park East, Suite 1900
Los Angeles, CA 90067
Attn: Tarek Ayoubi
Telefacsimile: (310) 229-2927
With a copy to Stock Purchaser's additional addressees:
Morrison & Foerster LLP
555 West Fifth Street, Suite 3500
Los Angeles, CA 90013-1024
Attn: Thomas R. Fileti, Esq.
Telefacsimile: (213) 892-5454
Gordon K. Eng, Esq.
19191 South Vermont Avenue, Suite 420
Torrance, California 90502
Telefacsimile: (310) 207-1066
As to Starwood Lodging:
Starwood Hotels & Resorts Trust
2231 E. Camelback Rd., Suite 410
Phoenix, AZ 85016
Attn: Ronald C. Brown or Chief Financial Officer
Telefacsimile: (602) 852-0115
Starwood Hotels & Resorts Worldwide, Inc.
2231 E. Camelback Rd., Suite 400
Phoenix, AZ 85016
Attn: Alan M. Schnaid or Vice President
Telefacsimile: (602) 852-0115
With a copy to Starwood Lodging's additional addressees:
Greenberg Traurig Hoffman Lipoff Rosen & Quentel
153 East 53rd Street
New York, NY 10022
Attn: Andrew E. Zobler, Esq.
<PAGE> 15
Telefacsimile: (212) 223-7161
Sidley & Austin
555 West Fifth Street, Suite 4000
Los Angeles, CA 90013
Attn: Sherwin L. Samuels, Esq.
and Kenneth H. Levin, Esq.
Telefacsimile: (213) 896-6600
If to any Restricted Holder other than Stock Purchaser: to the address and
telefacsimile number set forth in such Restricted Holder's Joinder Agreement (or
to any other address or telefacsimile number provided to Starwood Lodging in
writing pursuant to a notice given by such Restricted Holder pursuant to this
Section 7.1).
7.2 Receipt of Notices. Any notice, demand or request that
shall be delivered to Starwood Lodging and its Additional Addressee in the
manner aforesaid shall be deemed sufficiently given to and received by Starwood
Lodging for all purposes hereunder, and any notice, demand or request that shall
be delivered to Stock Purchaser and its Additional Addressee in the manner
aforesaid shall be deemed sufficiently given to and received by Stock Purchaser
for all purposes hereunder (i) the next business day following the day such
notice, demand or request is delivered by a nationally recognized overnight
courier service fully prepaid, to such party and its Additional Addressee, (ii)
if sent via registered or certified mail, at the time of receipt by such party
and its Additional Addressee, or (iii) if sent via telefacsimile, as of the date
and time stated upon confirmation reports generated by the sending party's
telefacsimile machine confirming the delivery of such notice, demand or request
to such party and its Additional Addressee.
7.3 Refusal of Delivery. The inability to deliver any notice,
demand or request because the individual to whom it is properly addressed in
accordance with this Section 7 refused delivery thereof or no longer can be
located at that address shall constitute delivery thereof to such individual.
7.4 Change of Address. Each party shall have the right from
time to time to designate by written notice to the other parties hereto such
other Person or Persons and such other place or places as said party may desire
written notices to be delivered or sent in accordance herewith.
SECTION 8
GENERAL PROVISIONS
8.1 Amendment. No provision of this Agreement or of any
documents or instrument entered into, given or made pursuant to this Agreement
may be amended, changed, waived, discharged or terminated except by an
instrument in writing, signed by the party against whom enforcement of the
amendment, change, waiver, discharge or termination is sought.
8.2 Time of Essence. All times provided for in this Agreement
for the performance of any act will be strictly construed, time being of the
essence.
8.3
<PAGE> 16
Entire Agreement. This Agreement and other documents delivered pursuant to
this Agreement set forth the entire agreement and understanding of the parties
in respect of the transactions contemplated by this Agreement, and supersede all
prior agreements, arrangements and understandings relating to the subject matter
hereof and thereof. No representation, promise, inducement or statement of
intention with respect to the subject matter hereof has been made by Stock
Purchaser or Starwood Lodging which is not embodied in this Agreement, and
neither Starwood Lodging nor Stock Purchaser shall be bound by or liable for any
alleged representations, promise, inducement or statement of intention not
therein so set forth.
8.4 No Waiver. No failure of any party to exercise any power
given such party hereunder or to insist upon strict compliance by the other
party with its obligations hereunder shall constitute a waiver of any party's
right to demand strict compliance with the terms of this Agreement.
8.5 Counterparts. This Agreement, any document or instrument
entered into, given or made pursuant to this Agreement or authorized hereby, and
any amendment or supplement thereto may be executed in two or more counterparts,
and, when so executed, will have the same force and effect as though all
signatures appeared on a single document. Any signature page of this Agreement
or of such an amendment, supplement, document or instrument may be detached from
any counterpart without impairing the legal effect of any signatures thereon,
and may be attached to another counterpart identical in form thereto but having
attached to it one or more additional signature pages.
8.6 Costs and Attorneys' Fees. If any legal action or any
arbitration or other proceeding is brought for the enforcement of this Agreement
or because of an alleged dispute, default, or misrepresentation in connection
with any of the provisions of this Agreement the successful or prevailing party
shall be entitled to recover reasonable attorneys' fees, charges and other costs
incurred in that action or proceeding, in addition to any other relief to which
it may be entitled.
8.7 Payments; Interests. Except as otherwise provided herein,
payment of all amounts required by the terms of this Agreement shall be made in
the United States and in immediately available funds of the United States of
America which, at the time of payment, is accepted for the payment of all public
and private obligations and debts. If any payment due under this Agreement is
not paid when due, it shall thereafter bear interest at a variable rate equal to
the rate announced from time to time by Citibank, N.A. as its prime or reference
rate, plus five percent (5%) per annum, but in no event more than the maximum
rate, if any, allowed by law to be charged by the party receiving the interest
on such type of indebtedness.
8.8 Parties in Interest. The rights and obligations of the
parties hereto shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors, heirs and the legal
representatives of their respective estates. However, none of Stock Purchaser's
rights under this Agreement shall be assignable except (i) in the case of the
Payment Rights, as provided in Section 5 hereof, and (ii) in the case of all
other rights of Stock Purchaser or another Restricted Holder, to a transferee of
Subject Shares in a transaction not constituting an Open Market Sale if such
transferee delivers a Joinder Agreement in compliance with Section 4 hereof.
Nothing in this Agreement is intended to confer any right or remedy under this
Agreement on any Person other than the parties to this Agreement and their
respective successors and assigns, or to relieve or discharge the obligation or
liability of any Person to any party to this Agreement or to give any Person any
right of subrogation or action over or against any party to this Agreement.
<PAGE> 17
8.9 Applicable Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without giving effect to the conflict-of-law rules and principles of that state.
8.10 Incorporation of Recitals. The recitals of this Agreement
are incorporated into and made a part of this Agreement.
8.11 Construction of Agreement. The language in all parts of
this Agreement shall be in all cases construed simply according to its fair
meaning and not strictly for or against any of the parties hereto. Headings at
the beginning of sections of this Agreement are solely for the convenience of
the parties and are not a part of this Agreement. When required by the context,
whenever the singular number is used in this Agreement, the same shall include
the plural, and the plural shall include the singular, the masculine gender
shall include the feminine and neuter genders, and vice versa. As used in this
Agreement, the term "Stock Purchaser" shall include the respective permitted
successors and assigns of Stock Purchaser, and the term "Starwood Lodging" shall
include the permitted successors and assigns of Starwood Lodging, if any.
8.12 Severability. If any term or provision of this Agreement
is determined to be illegal, unconscionable or unenforceable, all of the other
terms, provisions and sections hereof will nevertheless remain effective and be
in force to the fullest extent permitted by law.
8.13 Further Assurances. Starwood Lodging and Stock Purchaser
agree to execute upon the request of the other party such instruments and take
such actions as may be reasonably necessary to carry out the provisions of this
Agreement provided that no material additional cost or liability shall incurred
thereby by the party of whom such request is made.
8.14 Starwood Hotels & Resorts Trust. The parties hereto
understand and agree that the name "Starwood Hotels & Resorts Trust" is a
designation of the Trust and its trustees (as trustees but not personally) under
the Trust's Declaration of Trust, and all persons dealing with the Trust shall
look solely to the Trust's assets for the enforcement of any claims against the
Trust, and that the Trustees, officers, agents and security holders of the Trust
assume no personal liability for obligations entered into on behalf of the
Trust, and their respective individual assets shall not be subject to the claims
of any person relating to such obligations.
<PAGE> 18
IN WITNESS WHEREOF, Starwood Lodging and Stock Purchaser have
caused this Agreement to be executed as of the day and year first above written.
"Stock Purchaser"
N.Y. OVERNIGHT PARTNERS, L.P.,
a New York limited partnership
By: N.Y. OVERNIGHT, INC., a New York corporation,
its sole General Partner
By: /s/ Tarek Ayoubi
______________________________
Tarek Ayoubi
President
"Starwood Lodging"
STARWOOD HOTELS & RESORTS TRUST,
a Maryland Real Estate Investment Trust
By: /s/ Steven R. Goldman
____________________________
Steven R. Goldman
Senior Vice President
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.,
a Maryland Corporation
By: /s/ Nir E. Margalit
____________________________
Nir E. Margalit
Secretary
<PAGE> 19
ATTACHMENT A
to Stock Agreement
AGREEMENT TO BE BOUND
BY THE STOCK AGREEMENT
(JOINDER AGREEMENT)
The undersigned, being the transferee or the intended
transferee of _________ Paired Shares (the "Subject Shares") of Starwood Hotels
& Resorts Trust, a Maryland real estate investment trust, and Starwood Hotels &
Resorts Worldwide, Inc., a Maryland corporation (together, the "Company"), as a
condition to the transfer to and acquisition by the undersigned of such Subject
Shares, acknowledges that certain sales or other transfers of such Subject
Shares are governed by the Stock Agreement (the "Stock Agreement"), dated as of
January 15, 1998, initially among the Company and N.Y. Overnight Partners, L.P.,
a New York limited partnership, and the undersigned hereby (1) acknowledges
receipt of a copy of the Stock Agreement, and (2) agrees to be bound as a
"Restricted Holder" by the terms of the Stock Agreement, as the same has been or
may be amended from time to time (including without limitation the
representations and warranties of the undersigned set forth therein that will be
deemed made by virtue hereof).
The undersigned is hereby advised that the Subject Shares have
not been registered under the Securities Act of 1933 and in such event cannot be
resold unless they are registered under said act or unless an exemption from
registration under said act is available.
The following is the undersigned's representative and such
representative's address, telephone number and fax number for all purposes under
the Stock Agreement:
_________________________________
_________________________________
_________________________________
Agreed to this ____ day of __________, ____.
_________________________________
By: __________________________
Its: __________________________
<PAGE> 20
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as
of January 15, 1998 among STARWOOD HOTELS & RESORTS TRUST, a Maryland real
estate investment trust (the "Trust"), STARWOOD HOTELS & RESORTS WORLDWIDE,
INC., a Maryland corporation (the "Corporation" and, together with the Trust,
the "Company"), and N.Y. OVERNIGHT PARTNERS, L.P., a New York limited
partnership ("Shareholder").
RECITALS
WHEREAS, pursuant to a Stock Agreement of even date herewith
and by and among the parties hereto (the "Stock Agreement"), the Company is
issuing and delivering to Shareholder certain Paired Shares; and
WHEREAS, the Stock Agreement provides that if such Paired
Shares are Unregistered Shares, the Company shall effect the registration of
such Paired Shares under the Securities Act; and
WHEREAS, the parties desire to set forth their rights and
obligations with respect to such registration and certain other matters;
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions. Each capitalized term used in this Agreement but not defined
herein shall have the meaning ascribed to such term in the Stock Agreement; and
as used in this Agreement the following terms shall have the following meanings:
"Commission" means the Securities and Exchange Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Holder Information" means, with respect to a Selling Holder,
(i) such information regarding such Selling Holder as is required by Section 507
of Regulation S-K promulgated by the Commission under the Securities Act, (ii)
information as to whether (and if so, in what manner) the intended method of
disposition of such Holder's Registrable Shares differs from the Plan of
Distribution, and (iii) any such additional information as may be required to be
included in the Registration Statement by a Selling Holder; in each case as
shall be required to effect the registration of such Registrable Shares pursuant
to the Registration Statement, the disclosures required in the Prospectus with
respect thereto and the offer and Transfer of such Registrable Shares pursuant
to the Prospectus.
"Holders" means (i) Shareholder, and (ii) any other Person who
acquires any of the Registrable Shares from Shareholder or another Holder if
(a) the Transferor and such Person shall have delivered to the Company a written
notice of such Transfer setting forth the name of such Person, and (b) such
Person shall have executed and delivered to the Company a properly completed
Joinder Agreement; in each case at such times as such Persons shall own
Registrable Shares.
"ITT Closing" means the consummation of the acquisition of ITT
Corporation by the Company.
<PAGE> 21
"ITT Termination" means the issuance by the Company of a press
release stating that the Company will not consummate the acquisition of ITT
Corporation.
"Joinder Agreement" means an agreement to be bound by this
Agreement in the form of Annex A hereto.
"Paired Shares" means (i) "paired shares" (as such term is
defined in the Purchase and Sale Agreement), and (ii) shares of capital stock of
the Trust or the Corporation issued by the Trust or the Corporation in respect
of or in exchange for paired shares in connection with any stock dividend or
distribution, stock split-up, recapitalization, recombination or exchange by the
Trust or the Corporation generally of such paired shares.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or other entity, or government or other agency or
political subdivision thereof.
"Proposed Plan of Distribution" means a draft of the portion
of the Registration Statement that describes the intended methods of disposition
of the Registrable Shares by the Selling Holders.
"Prospectus" means, with respect to the Registration Statement
and each amendment thereto, the form of prospectus included therein.
"Registrable Shares" means, as of any date of determination,
(i) the Paired Shares that are Unregistered Shares and that constitute the
Subject Shares; (ii) any shares or other securities issued as (or issuable upon
the conversion or exercise of any warrant, right or other security which is
issued as) a dividend or other distribution with respect to, or in exchange by
the Trust or the Corporation generally for, or in replacement by the Trust or
the Corporation generally of, such Paired Shares; and (iii) any securities
issued in exchange for such Paired Shares in any merger or reorganization of the
Company; in each case that continue to be owned by a Holder on such date of
determination.
"Registration Statement" means a registration statement on
Form S-3, as amended from time to time, registering the offer and sale by the
Selling Holders of such Selling Holders' Registrable Shares included therein for
offer and Transfer on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act.
"Required Effectiveness Date" means the later of (i) the 30th
day after the Closing Date, or (ii) the earliest of:
(a) The 30th day after the date of the ITT Closing;
(b) The 30th day after the date of the ITT Termination; and
<PAGE> 22
(c) If neither the ITT Closing nor the ITT Termination has
occurred prior to April 1, 1998, the 30th day after a demand for registration is
made by notice given by Shareholder to the Company on or after April 1, 1998;
provided, however, that in the event that, following the initial filing of the
Registration Statement, the Company is advised by the Commission that the
Registration Statement will be reviewed, each of the time periods set forth
above shall be extended for 20 days.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Selling Holders" means
(a) each Holder (i) who complies with Sections 3.1.1 hereof,
(ii) who holds not less than 100,000 Subject Shares at the both at the time such
notice is given and the date the Registration Statement is declared effective
(or such lesser number as the Company, in its sole and absolute discretion,
shall determine for such Holder), and (iii) whose Registrable Shares are
included in the Registration Statement; and
(b) each Transferee of such a Holder who (x) provides such
Transferee's Holder Information promptly after its acquisition of Subject
Shares and prior to the Company's request for acceleration of the Registration
Statement, and (y) satisfies the conditions set forth in clauses (ii) and (iii)
above.
"Transfer" means the act of selling, giving, transferring,
creating a trust (voting or otherwise), assigning or otherwise disposing of
(other than pledging, hypothecating or otherwise transferring as security) (and
correlative words shall have correlative meanings).
"Transferee" means a Person to whom Registerable Shares are
Transferred.
"Violation" shall have the meaning set forth in Section 5.1
hereof.
2. Registration Obligations of the Company. The Company shall:
2.1 File the Registration statement with the Commission not
later than 15 days prior to the Required Effectiveness Date (determined without
reference to the proviso included in the definition of such term) and thereafter
use its best efforts to cause the Registration Statement to be declared
effective on the Required Effectiveness Date.
2.2 Furnish to the Shareholder a copy of the Registration
Statement for its review and comment not later than concurrently with the filing
of the Registration Statement with the Commission.
2.3 The Company shall give notice to the Shareholder of the
expected
<PAGE> 23
effectiveness of the Registration Statement no later than the date acceleration
of such effectiveness is requested of the Commission; provided, however, that in
no event shall the Company have any liability for any failure to give such
notice.
2.4 Include in the Registration Statement the number of each
Holder's Registrable Shares for each Holder as shall be specified for such
Holder pursuant to Section 3.1 hereof.
2.5 Use its best efforts to keep the Registration Statement
effective until the earlier of (i) one year after the Closing Date, or (ii) such
date as of which all the Selling Holders have completed the distribution or
other disposition of the Registrable Shares registered under the Registration
Statement. If the Registration Statement is terminated pursuant to clause (i)
above, the Company shall timely file with the Commission all reports and other
information required to enable all holders of Registrable Shares to Transfer
such shares pursuant to Rule 144 promulgated by the Commission under the
Exchange Act, as amended.
2.6 During the effectiveness of the Registration Statement,
upon notice to the Company by a Selling Holder of a Transfer of Registrable
Shares pursuant to the Registration Statement and receipt (i) by the Company of
a certificate from such Selling Holder in the form of Annex B attached hereto,
and (ii) by counsel for the Company of a certificate from such Selling Holder in
the form of Annex C attached hereto, in each case representing that such
Registrable Shares were offered and have been Transferred by such Selling Holder
in a manner consistent with the description set under the caption "Plan of
Distribution" in the Prospectus, the Company shall use its best efforts to cause
such Registrable Shares to be reissued as soon as practicable (and not later
than three Business Days following receipt by the Company and such counsel of
such certificates) in the name of the transferee free of any restrictive legend
under the Securities Act and to take all such actions as may be reasonably
required to cause its transfer agent to comply with the undertakings set forth
in this section.
2.7 Use its best efforts to amend the Registration Statement
or supplement the Prospectus so that they will remain current and in compliance
with the requirements of the Securities Act for the period specified in Section
2.4 hereof, and use its best efforts to give the Selling Holders notice of the
happening of any event or development as a result of which the Registration
Statement or Prospectus may contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements made therein not misleading. In the event that any Registrable
Shares included in the Registration Statement remain unsold at the end of the
period during which the Company is obligated to use its best efforts to maintain
the effectiveness of the Registration Statement, the Company may file a
post-effective amendment to the Registration Statement for the purpose of
de-registering such unsold Registrable Shares.
2.8 Furnish to each Selling Holder, without charge, such
numbers of copies of the Registration Statement, any pre-effective or
post-effective amendment thereto, the final Prospectus, and any amendments or
supplements thereto, in each case in conformity with the requirements of the
Securities Act, and such other related documents, as each Selling Holder may
<PAGE> 24
reasonably request in order to facilitate the Transfer of the Registrable Shares
owned by such Selling Holder.
2.9 Use its best efforts to register and qualify the
Registrable Shares covered by the Registration Statement under such securities
laws of such states or jurisdictions as shall be reasonably requested by the
Selling Holders; provided, however, that neither the Trust nor the Corporation
shall be required in connection therewith or as a condition thereto to qualify
to do business or to file a general consent to service of process in any such
states or jurisdictions.
2.10 Promptly notify each Selling Holder of any stop order
issued or threatened to be issued by the Commission or any of the jurisdictions
referred to in Section 2.9 hereof in connection with the Registration Statement
(and use its best efforts to prevent the entry of such stop order or to remove
it if entered as promptly as practicable).
2.11 Use its best efforts to cause the Registrable Shares
covered by the Registration Statement, if the Paired Shares are then listed on a
securities exchange or included for quotation in a recognized trading market, to
continue to be so listed or included.
3. The Holders' Obligations.
3.1 The obligations of the Company under Section 2 with respect to each
Holder are subject to the satisfaction of each of the following conditions:
3.1.1 Not later than 10 days after the later of (i)
the date hereof, or (ii) the date on which the Company delivers the
Proposed Plan of Distribution to the Shareholder (or such later date as
the Company, in its sole and absolute discretion, shall determine),
such Holder shall furnish all of its Holder Information to the Company,
if such Holder Information discloses that such Holder holds not less
than 100,000 Subject Shares (or such lesser number as the Company, in
its sole and absolute discretion, shall determine for such Holder).
3.1.2 Prior to the effectiveness of the Registration
Statement, such Holder shall furnish to the Company by a notice such
amendments and supplements to its Holder Information provided pursuant
to Section 3.1.1 hereof as may be necessary in order to assure that the
Holder Information included in the Registration Statement for each
Selling Holder does not include a misstatement of a material fact or
omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
3.1.3 Such Holder shall cooperate with the Company in
the preparation of the Registration Statement in the manner and to the
extent reasonably requested by the Company, including accurately and
fully completing, executing and delivering to the Company such
documents as the Company may reasonably request in order to permit the
Company to obtain the Holder Information or to otherwise comply with
all applicable laws or to obtain acceleration of the effectiveness of
the Registration Statement.
<PAGE> 25
3.1.4 Such Holder shall not have breached any of its
obligations to the Company set forth in this Section 3.1 or in Sections
3 or 4 of the Stock Agreement; provided, however, that if such breach
is one that is capable of being cured and is actually cured by such
Holder in all material respects, the obligations of the Company to such
Holder that arises, or which the Company is obligated to perform in
whole or in part, after such cure shall be reinstated on the terms and
subject to the conditions set forth herein. A Transferee of Subject
Shares who is otherwise entitled to have such shares included in the
Registration Statement shall be deemed not have breached its obligation
to provide its Holder Information to the Company if it provides such
information promptly after its acquisition of such shares and prior to
the Company's request for acceleration of the Registration Statement
3.1.5 Such Holder shall not have made any material
misrepresentation pursuant to Section 6 of the Stock Agreement.
3.2 No action taken or omitted to be taken by or on behalf of
any Holder shall adversely affect the rights of any other Holder hereunder.
3.3 After the effectiveness of the Registration Statement,
each Selling Holder (and each transferee thereof) shall furnish to the Company
by a notice such amendments and supplements to its Holder Information provided
pursuant to Section 3.1 hereof as may be necessary in order to assure that the
Holder Information included in the Registration Statement for such Holder does
not include a misstatement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
4. Expenses of Registration. The Company shall pay all expenses incurred in
connection with the registration, filing and qualification of the Registrable
Shares, including all registration, filing and NASD or securities exchange fees;
all fees and expenses of complying with securities or blue sky laws; all word
processing, duplicating and printing expenses; and the fees and disbursements of
counsel and accountants for the Company; but excluding all discounts,
commissions or fees of selling brokers or similar securities industry
professionals and all fees and expenses of counsel and accountants for the
Selling Holders.
5. Indemnification; Contribution.
5.1 To the extent permitted by applicable law, the Company
shall indemnify and hold harmless each Selling Holder; each Person, if any, who
controls such Selling Holder within the meaning of the Securities Act; and each
officer, director, partner and employee of such Selling Holder and such
controlling Person; against any and all losses, claims, damages, liabilities and
expenses incurred by such party pursuant to any actual or threatened action,
suit, proceeding or investigation, or to which any of the foregoing Persons may
become subject under the Securities Act, to the extent such losses, claims,
damages, liabilities and expenses arise out of or are based upon any of the
following (collectively a "Violation"):
5.1.1 Any untrue statement or alleged untrue
statement of a material fact
<PAGE> 26
contained in the Registration Statement, including any final
Prospectus, or any amendments or supplements thereto;
5.1.2 The omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading; or
5.1.3 Any violation or alleged violation by the
Company of the Securities Act, the Exchange Act or any applicable state
securities law;
provided, however, that the indemnification required by this Section 5.1 shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or expense if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld or delayed), nor shall
the Company be liable in any such case for any such loss, claim, damage,
liability or expense incurred by a Selling Holder (or any Person, if any, who
controls such Selling Holder within the meaning of the Securities Act, or any
officer, director, partner and employee of such Selling Holder and such
controlling Person) to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with the Holder
Information or other information furnished to the Company by or on behalf of
such Selling Holder expressly for use in connection with the Registration
Statement.
5.2 To the extent permitted by applicable law, each Selling
Holder shall indemnify and hold harmless the Company; each of its directors,
each of its officers who shall have signed the Registration Statement; each
Person, if any, who controls the Company within the meaning of the Securities
Act; any other Selling Holder, any controlling Person of any such other Selling
Holder and each officer, director, partner, and employee of such other Selling
Holder and such controlling Person; against any and all losses, claims, damages,
liabilities and expenses, incurred by such party pursuant to any actual or
threatened action, suit, proceeding or investigation, or to which any of the
foregoing Persons may otherwise become subject under the Securities Act, to the
extent such losses, claims, damages, liabilities and expenses arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with the
Holder Information or other information furnished to the Company by or on behalf
of that Selling Holder expressly for use in connection with the Registration
Statement.
5.3 Promptly after receipt by an indemnified party under this
Section 5 of notice of the commencement of any action, suit, proceeding,
investigation or threat thereof made in writing for which such indemnified party
may make a claim under this Section 5, such indemnified party shall deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties. The failure of an Indemnified Party to deliver
written notice to the indemnifying party within a reasonable time following the
commencement of any such action shall not relieve such indemnifying party of any
liability to the indemnified party under this Section 5 unless such failure is
prejudicial to such indemnifying party's ability to defend such action. Any fees
and expenses incurred by the indemnified party (including any fees and expenses
<PAGE> 27
incurred in connection with investigating or preparing to defend such action or
proceeding) shall be paid to the indemnified party, as incurred, within 30 days
of written notice thereof to the indemnifying party (regardless of whether it is
ultimately determined that an indemnified party is not entitled to
indemnification hereunder). Any such indemnified party shall have the right to
employ separate counsel in any such action, claim or proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be the expenses of such indemnified party unless (i) the indemnifying
party has agreed to pay such fees and expenses, or (ii) the indemnifying party
shall have failed to promptly assume the defense of such action, claim or
proceeding, or (iii) the named parties to any such action, claim or proceeding
(including any impleaded parties) include both such indemnified party and the
indemnifying party, and such indemnified party shall have been advised by
counsel that there may be one or more legal defenses available to it which are
different from or in addition to those available to the indemnifying party and
that the assertion of such defenses would create a conflict of interest such
that counsel employed by the indemnifying party could not faithfully represent
the indemnified party (in which case, if such indemnified party notifies the
indemnifying party in writing that it elects to employ separate counsel at the
expense of the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action, claim or proceeding on behalf of
such indemnified party, it being understood, however, that the indemnifying
party shall not, in connection with any one such action, claim or proceeding or
separate but substantially similar or related actions, claims or proceedings in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (together with appropriate local counsel) at any time
for all such indemnified parties, unless in the reasonable judgment of such
indemnified party a conflict of interest would exist between such indemnified
party and any other of such indemnified parties with respect to such action,
claim or proceeding, in which event the indemnifying party shall be obligated to
pay the fees and expenses of such additional counsel or counsels). No
indemnifying party shall be liable to an indemnified party for any settlement of
any action, proceeding or claim without the written consent of the indemnifying
party, which consent shall not be unreasonably withheld or delayed.
5.4 If the indemnification required by this Section 5 from the
indemnifying party is determined by a court of competent jurisdiction to be
unavailable to an indemnified party hereunder in respect of any losses, claims,
damages, liabilities or expenses referred to in this Section 5:
5.4.1 The indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect
the relative fault of the indemnifying party and indemnified parties in
connection with the actions which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among
other things, whether any Violation has been committed by, or relates
to information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such Violation. The
amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses
<PAGE> 28
referred to above shall be deemed to include, subject to the
limitations set forth in Section 5.1 and 5.2, any legal or other fees
or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
5.4.2 The parties hereto agree that it would not be
just and equitable if contribution pursuant to this Section 5.4 were
determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred
to in Section 5.4.1. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any Person who was not guilty of a
fraudulent misrepresentation.
5.5 If indemnification is available under this Section 5, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in this Section 5 without regard to the relative fault of such
indemnifying party or indemnified party or any other equitable consideration
referred to in Section 5.4.
5.6 The obligations of the Company and the Selling Holders
under this Section 5 shall survive the completion of any offering of Registrable
Shares pursuant to the Registration Statement and any termination of this
Agreement.
6. Amendment, Modification and Waivers; Further Assurances.
6.1 This Agreement may be amended with the consent of the
Company and the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it; in each case only if the
Company shall have obtained the written consent of Holders holding more than 50%
of the Registrable Shares. Such amendment, action or omission shall not require
the consent of any other Holder. In addition, the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, that affects the rights hereunder of a specific Holder with the written
consent of such Holder.
6.2 No waiver of any terms or conditions of this Agreement
shall operate as a waiver of any other breach of such terms and conditions or
any other term or condition, nor shall any failure to enforce any provision
hereof operate as a waiver of such provision or of any other provision hereof.
No written waiver hereunder, unless it by its own terms explicitly provides to
the contrary, shall be construed to effect a continuing waiver of the provisions
being waived and no such waiver in any instance shall constitute a waiver in any
other instance or for any other purpose or impair the right of the party against
whom such waiver is claimed in all other instances or for all other purposes to
require full compliance with such provision.
6.3 Each of the parties hereto shall execute all such further
instruments and documents and take all such further action as any other party
hereto may reasonably require in order to effectuate the terms and purposes of
this Agreement.
7. Miscellaneous.
<PAGE> 29
7.1 Business Day. Whenever this Agreement requires that an
action be taken or a notice be given on a date that would otherwise not be a
Business Day, the time period for taking such action or giving such notice shall
be extended to the first day thereafter that is a Business Day.
7.2 Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the state of New York, without giving
regard to the conflict of laws principles thereof.
7.3 Notices. All notices, requests, demands, consents,
approvals, designations and other deliveries and communications called for or
contemplated by this Agreement shall be in writing and shall be given (i) in the
case of Shareholder or the Company, to the address and in the manner set forth
in Section 7 of the Stock Agreement, and (ii) in the case of any Holder other
than Shareholder, in the manner set forth in Section 7 of the Stock Agreement
and to the address provided to the Company in such Holder's Joinder Agreement.
7.4 Entire Agreement; Integration. This Agreement, together
with the Stock Agreement, supersedes all prior agreements between or among any
of the parties hereto with respect to the subject matter contained herein and
therein, and such agreements embody the entire understanding among the parties
relating to such subject matter.
7.5 Section Headings. Section headings are for convenience of
reference only and shall not affect the meaning of any provision of this
Agreement.
7.6 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, and all of which shall
together constitute one and the same instrument. All signatures need not be on
the same counterpart.
7.7 Severability. If any provision of this Agreement shall be
invalid or unenforceable, such invalidity or unenforceability shall not affect
the validity and enforceability of the remaining provisions of this Agreement,
unless the result thereof would be unreasonable, in which case the parties
hereto shall negotiate in good faith as to appropriate amendments hereto.
7.8 Termination. This Agreement may be terminated at any time
by a written instrument signed by the parties hereto. Unless sooner terminated
in accordance with the preceding sentence, this Agreement (other than Section 5
hereof) shall terminate in its entirety on such date as there shall be no
Registrable Shares.
7.9 Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision hereof is
validly asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees (including any fees incurred in any appeal) in
addition to its costs and expenses and any other available remedy.
7.10 No Third Party Beneficiaries or Assignees. Nothing herein
expressed or
<PAGE> 30
implied is intended to confer upon any person, other than the parties hereto or
the Holders (to the extent expressly provided herein) any rights, remedies,
obligations or liabilities under or by reason of this Agreement. Neither this
Agreement not the rights or obligations hereunder may be assigned or otherwise
transferred by any Holder except as permitted herein with respect to a Transfer
of Registrable Shares.
7.11 Starwood Hotels & Resorts Trust. The parties hereto
understand and agree that the name "Starwood Hotels & Resorts Trust" is a
designation of the Trust and its trustees (as trustees but not personally) under
the Trust's Declaration of Trust, and all persons dealing with the Trust shall
look solely to the Trust's assets for the enforcement of any claims against the
Trust, and that the Trustees, officers, agents and security holders of the Trust
assume no personal liability for obligations entered into on behalf of the
Trust, and their respective individual assets shall not be subject to the claims
of any person relating to such obligations.
<PAGE> 31
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of the date first written above.
"Shareholder"
N.Y. OVERNIGHT PARTNERS, L.P.,
a New York limited partnership
By: N.Y. OVERNIGHT, INC. a New York corporation,
its sole General Partner
By: /s/ Tarek Ayoubi
------------------------------
Tarek Ayoubi
President
STARWOOD HOTELS & RESORTS TRUST
a Maryland real estate investment trust
By: /s/ Steven R. Goldman
-----------------------------
Steven R. Goldman
Senior Vice President
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
a Maryland corporation
By: /s/ Nir E. Margalit
-------------------------------
Nir E. Margalit
Secretary
<PAGE> 32
ANNEX A
to Registration
Rights Agreement
AGREEMENT TO BE BOUND
BY THE REGISTRATION RIGHTS AGREEMENT
The undersigned, being the transferee or the intended
transferee of _________ Paired Shares (the "Registrable Shares") of Starwood
Hotels & Resorts Trust, a Maryland real estate investment trust, and Starwood
Hotels & Resorts Worldwide, Inc., a Maryland corporation (together, the
"Company"), as a condition to the transfer to and acquisition by the undersigned
of such Registrable Shares, acknowledges that matters pertaining to the sale and
registration of such Registrable Shares are governed by the Registration Rights
Agreement (the "Registration Rights Agreement"), dated as of January 15, 1998
initially among the Company and N.Y. Overnight Partners, L.P., and the
undersigned hereby (1) acknowledges receipt of a copy of such agreement, and (2)
agrees to be bound as a "Holder" by the terms of the Registration Rights
Agreement, as the same has been or may be amended from time to time.
Agreed to this ____ day of __________, ____.
---------------------------------
By: __________________________
Its: __________________________
Address, telephone number and
telecopy number for notices:
---------------------------------
---------------------------------
---------------------------------
---------------------------------
<PAGE> 33
ANNEX B
to Registration
Rights Agreement
[Letterhead of Selling Holder]
____________, 199__
BY TELECOPIER
Starwood Hotels & Resorts Trust
2231 E. Camelback Road, Suite 410
Phoenix, Arizona 85016
Attention: Ronald C. Brown or Chief Financial Officer
Starwood Hotels & Resorts Worldwide, Inc.
2231 E. Camelback Road, Suite 400
Phoenix, Arizona 85016
Attention: Alan M. Schnaid or Vice President
Re: Starwood Hotels & Resorts
Ladies and Gentlemen:
Reference is made to the prospectus (the "Prospectus")
included in the Registration Statement on Form S-3 (Registration No.
___________) filed by Starwood Hotels & Resorts Trust (the "Trust") and Starwood
Hotels & Resorts Worldwide, Inc. (the "Corporation" and, together with the
Trust, the "Company") with the Securities and Exchange Commission on _________,
1998, under the Securities Act of 1933, as amended (the "Securities Act"),
relating to the registration for resale by the shareholders named therein of
certain shares of beneficial interest, par value $.01 per share, of the Trust,
and shares of common stock, par value $.01 per share, of the Corporation (the
"Paired Shares"), including _______ Paired Shares held by the undersigned.
___________ of the Paired Shares held by the undersigned were
offered for sale and have been sold by the undersigned in a manner consistent
with the description set under the caption "Plan of Distribution" in the
Prospectus. Thus, the undersigned requests that new certificates evidencing such
Paired Shares be issued in the name of _________________________, the
transferee, free of any restrictive legend under the Securities Act.
Very truly yours,
<PAGE> 34
[Name and signature of Selling Holder]
<PAGE> 35
ANNEX C
to Registration
Rights Agreement
[Letterhead of Selling Holder]
____________, 199__
BY TELECOPIER
Sidley & Austin
555 West Fifth Street
Los Angeles, California 90013
Attention: Sherwin L. Samuels, Esq.,
Kenneth H. Levin, Esq. and
James V. Robertson, Esq.
Re: Starwood Hotels & Resorts
Ladies and Gentlemen:
Reference is made to the prospectus (the "Prospectus")
included in the Registration Statement on Form S-3 (Registration No.
___________) filed by Starwood Hotels & Resorts Trust (the "Trust") and Starwood
Hotels & Resorts Worldwide, Inc. (the "Corporation" and, together with the
Trust, the "Company") with the Securities and Exchange Commission on _________,
1998, under the Securities Act of 1933, as amended (the "Securities Act"),
relating to the registration for resale by the shareholders named therein of
certain shares of beneficial interest, par value $.01 per share, of the Trust,
and shares of common stock, par value $.01 per share, of the Corporation (the
"Paired Shares"), including _______ Paired Shares held by the undersigned.
The undersigned understands that you have been requested by
the Company to deliver an opinion to the Company's transfer agent that, upon the
sale by the undersigned of the Paired Shares, certificates evidencing such
shares may be issued to the transferee(s) without any restrictive legend under
the Securities Act. For the purpose of facilitating the delivery by you of such
opinion, the undersigned, hereby represents that _______ of the Paired Shares
held by the undersigned were offered for sale and have been sold in a manner
consistent with the description set under the caption "Plan of Distribution" in
the Prospectus.
The undersigned understands that you will be relying on the
foregoing representations in rendering your opinion, and the undersigned
consents to such reliance.
<PAGE> 36
Very truly yours,
[Name and signature of Selling Holder]
<PAGE> 1
Exhibit 10.59
D.C. EXECUTION
PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
By
And Between
D.C. OVERNIGHT PARTNERS, L.P.,
a District of Columbia Limited Partnership,
As Seller
And
STARWOOD LODGING TRUST,
a Maryland Real Estate Investment Trust
And
STARWOOD LODGING CORPORATION,
a Maryland Corporation,
As Buyer.
Dated As Of: December 30, 1997
Relating to the D.C. Luxury Collection Hotel
Washington, D.C.
<PAGE> 2
PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
THIS PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (this
"Agreement") is entered into as of the 30th day of December, 1997, by and
between D.C. OVERNIGHT PARTNERS, L.P., a District of Columbia limited
partnership ("Seller"), and STARWOOD LODGING TRUST, a Maryland Real Estate
Investment Trust (the "Trust"), and STARWOOD LODGING CORPORATION, a Maryland
corporation (the "Corporation"; the Trust and the Corporation being referred to
herein collectively as, "Buyer").
A. Seller owns that certain parcel of land described in EXHIBIT A
attached hereto and made a part hereof, which is improved with a hotel building
and certain related improvements, all as more particularly set forth in this
Agreement.
B. Seller desires to sell, and Buyer desires to purchase, the above
described land and hotel together with the related improvements upon the terms
and subject to the conditions set forth in this Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements contained in this Agreement and for other good and
valuable consideration, the receipt and adequacy of which are hereby mutually
acknowledged, Buyer and Seller agree as follows:
SECTION 1
DEFINITIONS
1.1 Defined Terms
"Accounts Receivable" shall mean, collectively, all Cash Equivalent
Receivables, all Invoiced Receivables and all Other Accounts Receivable.
"Affiliate" shall have the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Exchange Act.
"Approved Service Contracts" shall mean the Service Contracts
identified on SCHEDULE 1.1.1 annexed hereto and made a part hereof and any other
Service Contracts cancelable upon thirty (30) or fewer days notice without
penalty, which Service Contracts Buyer shall assume as of the Closing pursuant
to the General Assignment and Assumption Agreement.
"Assignment and Assumption of Management Agreement" shall have the
meaning set forth in SECTION 4.2.1.4.
"Assignment and Assumption of Tenant Leases" shall have the meaning
set forth in SECTION 4.2.1.2.
"Bill of Sale" shall have the meaning set forth in SECTION 4.2.1.5.
"Business Day" shall mean any day other than Saturday or Sunday on
which the New York Stock Exchange is open for business.
"Booking" shall mean a contract or reservation for the use of guest
rooms, banquet facilities, meeting rooms, and/or conference facilities at the
Hotel.
"Buyer's Counsel" shall mean the law firm of Greenberg Traurig
Hoffman Lipoff Rosen & Quentel acting through Andrew E. Zobler, Esq.
"Buyer Default" shall have the meaning set forth in SECTION 3.5.1.
"Cash Equivalent Receivables" shall mean all Guest Ledger
Receivables which are in the form of drafts or checks written on any bank or
other financial institution, certified checks, money orders, amounts owed to
Seller from credit card, debit card, travel and
<PAGE> 3
entertainment card or traveler's check companies, and are in such other forms
which are considered to be cash equivalents under generally acceptable
accounting principles, whether or not such Guest Ledger Receivables have been
presented or billed to any such bank, financial institution or other company as
of the Closing Date.
"Cash Purchase Price" shall mean (a) Forty Three Million Two
Hundred Thousand Dollars ($43,200,000) plus (b) an additional One Million Eight
Hundred Thousand Dollars ($1,800,000) if the Scheduled Closing Date does not
occur prior to July 15, 1998 plus (c) the Overage Cash Payment, if any, as
adjusted pursuant to SECTION 3.2.2.
"Closing" or "Close of Escrow" shall have the meaning set forth in
SECTION 4.7.2.
"Closing Agent" shall have the meaning set forth in SECTION 4.8.10.
"Closing Date" shall mean the day on which the Closing occurs
hereunder.
"Closing Payment" shall have the meaning set forth in SECTION
3.2.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder.
"Collective Bargaining Agreements" shall have the meaning set forth
in SECTION 14.2.
"Conveyance Documents" shall mean the Deed, the Assignment and
Assumption of Management Agreement, the Assignment and Assumption of Tenant
Leases, the Bill of Sale and the General Assignment and Assumption Agreement.
"Deed" shall have the meaning set forth in SECTION 4.2.1.1.
"Deposit" shall mean an amount equal to $2,571,429.00, held in
accordance with the provisions of SECTION 3 hereof together with all interest
accrued thereon.
"Employer Corporation" shall mean Luxury Holdings, Inc. (formerly
known as TQM Inc.).
"Employment Agreements" shall mean the Collective Bargaining
Agreements and Employee Benefit Plans (as defined in Section 3(3) of ERISA),
affecting Hotel Employees, including pension, profit sharing, employee benefit
and similar plans, if any, and agreements with regard to any Hotel Employee each
of which are identified on or expressly described in the materials identified on
SCHEDULE 1.1.2 annexed hereto and made a part hereof.
"Environmental Condition" shall mean any condition with respect to
soil, surface waters, groundwater, land, stream sediments, surface or subsurface
strata, ambient air and any environmental medium comprising or surrounding the
Real Property, which results in any damage, loss, cost, expense, claim, demand,
order or liability to or against Seller or Buyer by any third party (including,
without limitation, any government entity) as a result of a violation of any
applicable Environmental Laws.
"Environmental Laws" shall mean all presently applicable statutes,
regulations, rules, ordinances, codes, licenses, permits and orders of any and
all governmental agencies, departments, commissions, boards, bureaus or
instrumentalities of the United States, states and political subdivisions
thereof, and all applicable judicial and administrative and regulatory decrees,
judgments and orders relating to the protection of the environment, including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. 9061 et seq.; the Hazardous
Materials Transportation Act, as amended, 49 U.S.C. 1801, et seq.; the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. 6901, et seq.; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. 1251, et seq.; and analogous
state laws and regulations.
3
<PAGE> 4
"Equipment Leases" shall mean all leases of equipment, vehicles,
furniture or other personal property leased by, or on behalf of, Seller and
located at, or used in the operation of the Real Property, together with any and
all amendments thereto, which are identified on SCHEDULE 1.1.3 annexed hereto.
"Equity Purchase Price" shall mean the number of Paired Shares with
a value as determined pursuant to the Stock Agreement equal to One Million Six
Hundred Fifty Five Thousand One Hundred Dollars ($1,655,100.00) provided,
however, the Equity Purchase Price shall be reduced to Zero Dollars ($0.00) if
the Scheduled Closing Date does not occur prior to July 15, 1998 to be delivered
in accordance with the applicable provisions of the Stock Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the regulations promulgated thereunder.
"Escrow" shall mean an escrow opened with the Escrow Holder for the
purchase and sale of the Property in accordance with the provisions of this
Agreement.
"Escrow Holder" shall mean the Title Company unless otherwise
agreed in writing by Buyer and Seller.
"Escrow Instructions" shall have the meaning set forth in SECTION
4.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Excluded Property" shall mean all Seller's right, title and
interest in and to: (a) those claims of Seller attributable to the period prior
to the Closing Date and described on SCHEDULE 1.1.4 annexed hereto and made a
part hereof, or which Seller is entitled to assert under the express provisions
of SECTION 5; (b) all insurance proceeds under Seller's Insurance and workers'
compensation policies, including return premiums and dividends thereon and all
claims thereunder in each case to the extent attributable to acts or occurrences
prior to the Closing Date; (c) all accounts owned or maintained by Seller, or
Manager on Seller's behalf, in connection with the Hotel, including all
operating and reserve accounts; and (d) any books, records, files or papers
specifically described in SECTION 6.3.2 as excluded from the Property
Information.
"Excluded Parties" shall have the meaning set forth in SECTION
17.18
"Execution Date" shall mean the date hereof.
"General Assignment and Assumption Agreement" shall have the
meaning set forth in SECTION 4.2.1.3.
"Guest Ledger Receivables" shall mean amounts, including, without
limitation, room charges, accrued to the accounts of guests occupying rooms at
the Hotel or group, conference or banquet customers of Seller at the Hotel.
"Hart-Scott-Rodino Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and the rules and regulations promulgated thereunder,
as the same has been amended from time to time.
"Hotel" shall mean the hotel located on the Land and commonly known
as the D.C. Luxury Collection Hotel.
"Hotel Employees" shall mean all full-time, part-time or temporary
employees of Seller and/or the Employer Corporation (but not employees of
Manager or any of its affiliates) who are employed by Seller and/or the Employer
Corporation exclusively at or in connection with the Hotel as of the Closing
Date and who are listed on SCHEDULE 1.1.6 annexed hereto and made a part hereof.
4
<PAGE> 5
"Improvements" shall mean Seller's right, title and interest in and
to the hotel building and other improvements now or hereafter located on the
Land.
"Insured Casualty Notice" shall have the meaning set forth in
SECTION 12.1.1.
"Intangible Property" shall mean all of Seller's right, title and
interest in and to the following, in each case excluding any Excluded Property:
(i) Licenses and Permits; (ii) trademark rights, and other intangible property,
rights, titles, interests, privileges and appurtenances related to or used in
connection with the Hotel or its operations; (iii) warranties and guaranties of
architects, engineers, contractors, subcontractors, suppliers or materialmen
involved in the repair, construction, maintenance, design, reconstruction or
operation of the Hotel, or any equipment or systems constituting a part of the
Hotel; (iv) Approved Service Contracts; (v) Equipment Leases; (vi) Bookings; and
(vii) computer programs, software and documentation thereof (subject to the
limitations of any applicable license agreements pertaining thereto), and
including all electronic data processing systems, program specifications, source
codes, logs, input data and report layouts and forms, record file layouts,
diagrams, functional specifications and variable descriptions, flow charts and
other related materials used in connection therewith; and (viii) any goodwill
associated with the operation of the Hotel.
"Interim Management Agreement" shall have the meaning set forth in
SECTION 17.20 hereto.
"Invoiced Receivables" shall mean all Guest Ledger Receivables
other than Cash Equivalent Receivables whether or not such Guest Ledger
Receivables have been invoiced by Seller as of the Closing Date.
"Land" shall mean Seller's right, title and interest in and to the
land described on EXHIBIT A annexed hereto and made a part hereof.
"Licenses and Permits" shall mean all licenses, permits,
registrations, certificates, authorizations and governmental approvals other
than the Liquor License obtained in connection with the design, construction,
rehabilitation, use and/or operation of the Hotel.
"Liquor License" shall mean all licenses, permits, registrations,
certificates, authorizations and governmental approvals with respect to service
of alcoholic beverages at the Hotel.
"Liquor License Management Agreement" shall have the meaning set
forth in SECTION 4.2.1.8.
"Lock Price" shall have the meaning set forth in the Stock
Agreement.
"Losses" shall mean any and all losses, liabilities, obligations,
damages, claim or expense, including without limitation, reasonable attorneys'
and accountants' fees and disbursements related thereto.
"Manager" means Sheraton Operating Corporation, a wholly-owned
subsidiary of ITT Sheraton Corporation.
"Management Agreement" shall mean that certain Management Agreement
entered into as of August 13, 1997 between Seller and Manager.
"Market Price" shall have the meaning set forth in the Stock
Agreement.
"Material" shall mean $5,000 for any single occurrence and $15,000
in the aggregate for any group of occurrences whether or not related.
"Material Casualty" shall mean a casualty or casualties that, in
the aggregate: (i) causes in excess of $10,000,000.00 worth of damage to the
Hotel; or (ii) will take twelve (12) months or longer from the date of the
casualty to fully remediate.
5
<PAGE> 6
"Material Taking" shall mean an exercise by an applicable
governmental authority of the power of condemnation or eminent domain that
results in: (a) the taking of more than twenty percent (20%) of the Real
Property; (b) a material reduction or restriction in access to the Property; or
(c) the inability to operate the Hotel in substantially the same manner (without
material additional expense) as it was operated prior to such taking.
"Memorandum of Contract" shall mean a memorandum of this Agreement
in the form attached as EXHIBIT B hereto.
"Monetary Lien" shall mean any monetary lien affecting the Real
Property of an ascertainable amount, other than any lien for taxes or
assessments which are not yet due and payable.
"Non-Foreign Person Certificate" shall have the meaning set forth
in SECTION 4.2.1.13.
"Other Accounts Receivable" shall mean any and all rents,
additional rent, deposits, and other sums and charges owing to Seller that are
in any way attributable to the operation of the business at the Hotel,
including, without limitation, all rents and/or license fees due from Tenants
under Tenant Leases, and including any such amounts which are past due, but
excluding Guest Ledger Receivables.
"Overage Cash Payment" shall mean the portion of the Equity
Purchase Price which is payable in cash at Closing as provided in SECTION
3.2.2.1, if any.
"Ownership Limitation" shall mean the limitations contained in the
declaration of trust for the Trust and the Corporation's articles of
incorporation prohibiting actual or constructive ownership by any one person or
group of related persons of more than 8% of the issued and outstanding Paired
Shares taking into account the attribution rules of Section 544(a) of the Code
as modified by Section 856(h) of the Code or Section 318(a) of the Code as
modified by Section 856(d)(5) of the Code.
"Paired Shares" shall mean one share of beneficial interest, par
value $.01 per share of the Trust, and one share of common stock, par value $.01
per share, of the Corporation that are subject to the Pairing Agreement, which
shares shall be transferable as provided in the Stock Agreement and the Pairing
Agreement.
"Pairing Agreement" shall mean the Pairing Agreement dated as of
June 25, 1980, as amended, between the Trust and the Corporation providing, in
relevant part, for the pairing of all outstanding beneficial interests of the
Trust and shares of the Corporation.
"Permitted Encumbrances" shall have the meaning set forth in
SECTION 7.3.
"Person" shall mean any natural person, partnership, corporation,
association, limited liability company, trust or any other legal entity.
"Personal Property" shall mean collectively the Tangible Personal
Property and the Intangible Property.
"Preliminary Title Report" shall have the meaning set forth in
SECTION 7.1.
"Property" shall mean collectively the Real Property, the Personal
Property, the Tenant Leases, and the Accounts Receivable, but shall exclude the
Excluded Property.
"Property Information" shall have the meaning set forth in SECTION
6.4.2.
"Proration Time" shall mean 12:01 a.m. Eastern Time on the Closing
Date.
"Purchase Price" shall mean the sum of the Cash Purchase Price and
the Equity Purchase Price.
"Real Property" shall mean the Land and the Improvements, together
with
6
<PAGE> 7
Seller's right, title and interest in and to all rights of way, easements, water
or littoral rights, rights to any minerals, oil, gas and other hydrocarbon
substances, or any portion thereof, relating to the Land, and Seller's right,
title and interest in and to all streets, alleys, strips and gores abutting the
Land, if any.
"Records and Plans" shall mean, all financial records showing the
income and expenses of the Hotel for the prior three (3) calendar years and for
the current year to date, certificates of occupancy, records of the Hotel's
operations (including utility bills), building plans, specifications and
drawings, lists of Personal Property, surveys, tax bills for the Real Property
for the last three (3) years and for the current year to date, copies of the
Service Contracts, Licenses and Permits and other documents related to the use,
maintenance, repair, management, construction and/or operation of the Hotel, in
each case, to the extent located on-site at the Hotel, or to Seller's Knowledge,
otherwise under the control of Seller.
"Related Agreement" shall have the meaning set forth in SECTION
9.1.3.
"Schedule of Advance Bookings" means the Schedule of Advance
Bookings delivered pursuant to SECTION 4.2.1.19.
"Schedule of Tenant Leases" means the Schedule of Tenant Leases set
forth in SCHEDULE 1.1.7 annexed hereto and made a part hereof.
"Scheduled Closing Date" shall mean January 15, 1998, as such date
may be extended in accordance with the provisions of SECTION 7.1 time being of
the essence.
"SEC" shall mean the United States Securities and Exchange
Commission.
"SEC Documents" shall have the meaning set forth in SECTION 6.1.4.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller Default" shall have the meaning set forth in SECTION 11.1.
"Seller's Closing Certificate" shall have the meaning set forth in
SECTION 4.2.1.18.
"Seller's Counsel" shall mean Morrison & Foerster LLP acting
through Thomas R. Fileti, Esq.
"Seller's Due Diligence" shall mean the information gathering and
review process described on SCHEDULE 1.1.8. "Seller's Insurance" shall have the
meaning set forth in SECTION 6.3.12.
"Seller's Knowledge" shall mean with respect to any representation
or warranty so qualified, the knowledge of the person(s) identified on SCHEDULE
1.1.8 annexed hereto and made a part hereof, on the date on or as of which such
representation or warranty is made, following the completion by such person(s)
of Seller's Due Diligence, but without any other duty to investigate or inquire
and without attribution to any such identified person(s) of facts and matters
otherwise within the personal knowledge of any other officers, employees, or
agents of Seller or any third parties (including, but not limited to, the
Manager or any previous manager of the Hotel), but not within the actual current
knowledge of such named person(s). It is understood that none of the individuals
identified on SCHEDULE 1.1.8 shall have any personal liability for any of
Seller's representations, warranties and other obligations under this Agreement.
"Service Contracts" shall mean any and all service contracts,
landscaping contracts, maintenance agreements, open purchase orders and other
contracts for the provision of services, materials or supplies to or for the
benefit of the Property, except for the Management Agreement, together with any
and all amendments thereto.
7
<PAGE> 8
"Specific Disclosure Matters" shall mean certain disclosures and
information provided or disclosed by Seller to Buyer described on SCHEDULE 1.1.9
annexed hereto and made a part hereof.
"Starwood Disclosure" shall mean collectively, the Form S-3 filed
by the Corporation and the Trust with the SEC on November 12, 1997, and the Form
S-4 filed by the Corporation and the Trust with the SEC on November 20, 1997, as
the same may be amended by any filing with the SEC made by the Trust or the
Corporation, as amended to date and from time to time thereafter .
"Starwood Operating Partnership" shall mean SLC Operating Limited
Partnership, a Delaware limited partnership.
"Starwood Realty Partnership" shall mean SLT Realty Limited
Partnership, a Delaware limited partnership.
"State" shall mean the state in which the Hotel is located.
"Stock Agreement" shall have the meaning set forth in SECTION
4.2.1.6.
"Survey" shall mean an as-built ALTA survey of the Real Property
certified to the Title Company meeting all State land survey requirements.
"Tangible Personal Property" shall mean, in each case to the extent
owned by Seller and excluding any and all of the Excluded Property: (i) all
Records and Plans; (ii) all "Inventories", as such term is defined in the
Uniform System of Accounts; (iii) all depreciable personal property; and (iv)
all other tools, vehicles, supplies, artwork, furniture, furnishings, machinery,
equipment, licensed software and personal computer based security systems, if
any, specialized hotel equipment and other tangible personal property, used in
connection with the ownership, operation or maintenance of the Property,
including, without limitation, all china, glassware, silverware, linens, towels,
curtains, uniforms, engineering, maintenance, and housekeeping supplies,
draperies, materials and carpeting, used or intended for use, but not for sale,
in connection with the operation of the Hotel, all equipment used in the
operation of the kitchen, dining rooms, lounges, bars, laundry, dry cleaners,
lobby, reservation desk and all merchandise, food and beverages held for sale in
connection with the operation of the Hotel, which are on hand on the Closing
Date; provided, however, that to the extent that any applicable law prohibits
the transfer of alcoholic beverages from Seller to Buyer, such beverages shall
not be considered a part of the Tangible Personal Property.
"Tenant" shall mean a tenant, licensee or concessionaire occupying
space at any portion of the Property pursuant to a Tenant Lease.
"Tenant Lease" shall mean a lease, concession agreement or license
agreement entered into by or on behalf of Seller with a third party for the use
of any part of the Real Property, including those leases, concession agreements
and license agreements shown on the Schedule of Tenant Leases, together with any
amendments thereto but excluding Bookings.
"Tenant Security Deposits" shall mean all security deposits or
other security of Tenants under the Tenant Leases, plus accrued interest, if
any, payable thereon.
"Termination Charges" shall have the meaning set forth in SECTION
14.1.
"Termination Notice" shall have the meaning set forth in SECTION
3.5.1.
"Threshold Amount" shall mean One Million Dollars ($1,000,000).
"Title Company" shall mean Chicago Title Insurance Company.
"Title Policy" shall have the meaning set forth in SECTION 7.2.
"Transfer Restriction Period" shall have the meaning set forth in
SECTION 17.18.
8
<PAGE> 9
"Uninsured Casualty Notice" shall have the meaning set forth in
SECTION 12.2.1.
"Uninsured Estimate to Repair" shall have the meaning set forth in
SECTION 12.2.1.
"Uniform System of Accounts" shall mean the Uniform System of
Accounts for Hotels, prepared by The Hotel Association of New York City, Inc.,
in effect as of the date hereof.
"Utility Deposits" shall mean Seller's right, title and interest in
and to all deposits delivered by Seller to utilities, governmental agencies,
suppliers or others pursuant to an Approved Service Contract or otherwise in
connection with the Real Property.
"Value Letter" shall have the meaning set forth in SECTION 4.3.1.4.
"WARN Act" shall mean the Workers Adjustment and Retraining
Notification Act and the Regulations promulgated thereunder, as the same has
been amended.
1.2 Other Definitional Provisions. The terms "hereof," "hereto,"
"hereunder" and similar terms when used in this Agreement shall refer to this
Agreement generally, rather than to the section in which such term is used,
unless otherwise specifically provided. Unless the context otherwise requires,
any defined term used in the plural shall refer to all members of the relevant
class, and any defined term used in the singular shall refer to any one or more
of the members of the relevant class.
SECTION 2
PURCHASE AND SALE OF PROPERTY
On the terms and subject to the conditions of this Agreement, Seller
agrees to sell the Property to Buyer, and Buyer agrees to purchase the Property
from Seller all as hereinafter provided. Notwithstanding any other provision of
this Agreement, there shall be excluded from the Property being conveyed
hereunder the Excluded Property.
SECTION 3
PURCHASE PRICE; PAYMENT;
BUYER'S DEFAULT; LIQUIDATED DAMAGES
3.1 Purchase Price. The purchase price for the Property shall be the
Purchase Price.
3.2 Payment. The Purchase Price shall be paid as follows:
3.2.1 Upon the execution hereof, Buyer shall deliver to Escrow
Holder, in cash or other immediately available funds, the Deposit, to be held by
Escrow Holder strictly in accordance with the provisions of this Agreement. If
the Close of Escrow shall occur, Seller shall be entitled to receive the Deposit
as a credit against the Purchase Price.
3.2.2 At least one (1) day prior to the Scheduled Closing Date
(unless extended pursuant to SECTION 7.1), Buyer shall deliver to Escrow Holder
an amount (the "Closing Payment") payable in the form specified in SECTIONS
3.2.2.1 and 3.2.2.2 below, equal to the Purchase Price less the amount of the
Deposit. The Closing Payment shall be paid as follows:
3.2.2.1 The Equity Purchase Price, if any, shall be delivered
in Paired Shares without adjustment for the pro-rations hereunder, which shares
shall be delivered in accordance with and subject to and transferable in
accordance with the provisions of the Stock Agreement and the Pairing Agreement.
If any portion of the Equity Purchase Price cannot be paid in Paired Shares on
account of the Ownership Limitation, a cash payment in an amount equal to the
product of (a) the number of Paired Shares which are not delivered hereunder or
under the Stock Agreement because of the Ownership Limitation and (b) the Market
Price on the Closing Date (the "Overage Cash Payment") shall be paid in cash or
other
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immediately available funds.
3.2.2.2 The balance of the Closing Payment shall be paid in
cash or other immediately available funds adjusted for the pro-rations provided
for expressly in this Agreement.
3.3 Investment of Escrowed Funds. Escrow Holder shall invest and
reinvest any funds deposited by Buyer in the Escrow only in bonds, notes,
Treasury bills or other securities having maturities of thirty (30) days or less
and constituting direct obligations of, or fully guaranteed by, the United
States of America (and provided, further, that such direct obligations or
guarantees, as the case may be, are entitled to the full faith and credit of the
United States of America) or such other investments as Buyer may direct and
Seller may approve, until Escrow Holder is required to deliver or use such funds
or any interest earned thereon in accordance with the provisions of this
Agreement. All interest accruing on the Deposit shall be paid to the party
ultimately entitled to the Deposit. All risk of loss on funds held in Escrow
shall be borne by Buyer or Escrow Holder.
3.4 Allocation of Purchase Price. The Purchase Price shall be allocated
among the assets and property that comprise the Property as proposed by Seller
prior to Closing subject to the reasonable approval of Buyer, and such
allocation shall be used by Seller and Buyer in connection with the preparation
of their respective income tax, sales tax, transfer tax, and any other
applicable tax returns. Seller and Buyer shall not, nor shall they permit their
respective Affiliates to, take a federal or state income tax position with any
taxing or other public authorities in any jurisdiction which is materially
inconsistent with the allocation so agreed upon by the parties.
3.5 Default by Buyer Prior to Closing; Liquidated Damages.
3.5.1 EXCEPT AS PROVIDED TO THE CONTRARY IN SECTION 7.1.1., IF
BUYER BREACHES ITS OBLIGATION TO PURCHASE THE PROPERTY UNDER THIS AGREEMENT AND
FAILS TO CURE SUCH BREACH ON OR BEFORE THE SCHEDULED CLOSING DATE (A "BUYER
DEFAULT"), THEN UPON WRITTEN NOTICE OF TERMINATION (A "TERMINATION NOTICE") FROM
SELLER TO BUYER AND ESCROW HOLDER, THE ESCROW AND THIS AGREEMENT SHALL TERMINATE
AND ESCROW HOLDER SHALL DISBURSE FROM THE ESCROW THE DEPOSIT TO SELLER AS
LIQUIDATED DAMAGES, WHICH SHALL BE SELLER'S SOLE REMEDY AT LAW OR IN EQUITY FOR
THE BUYER DEFAULT, AND THEREAFTER NEITHER PURCHASER NOR SELLER SHALL HAVE ANY
FURTHER LIABILITY HEREUNDER, EXCEPT THAT BUYER SHALL REMAIN OBLIGATED FOR
PERFORMANCE OF ITS OBLIGATIONS UNDER SECTIONS 8, 10, 17.14, 17.19 AND ANY OTHER
PROVISION HEREOF WHICH BY ITS EXPRESS TERMS SURVIVES THE TERMINATION OF THIS
AGREEMENT. NOTHING CONTAINED HEREIN SHALL LIMIT SELLER'S RIGHT TO OBTAIN
SPECIFIC PERFORMANCE OF BUYER'S OBLIGATION TO CLOSE PURSUANT TO SECTION 7.1.1.
3.5.2 THE PARTIES ACKNOWLEDGE AND AGREE BY INITIALING THIS SECTION
3.5.2 THAT IF A BUYER DEFAULT OCCURS ON OR PRIOR TO THE SCHEDULED CLOSING DATE
AND IF, AS A RESULT OF SUCH BUYER DEFAULT, CLOSE OF ESCROW FAILS TO OCCUR,
SELLER WILL INCUR CERTAIN COSTS AND OTHER DAMAGES IN AN AMOUNT THAT WOULD BE
EXTREMELY DIFFICULT OR IMPRACTICAL TO ASCERTAIN; AND THE DEPOSIT BEARS A
REASONABLE
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RELATIONSHIP TO THE DAMAGES WHICH THE PARTIES ESTIMATE MAY BE SUFFERED BY SELLER
BY REASON OF SUCH FAILURE OF THE CLOSE OF ESCROW TO OCCUR AND THAT SELLER'S
RETENTION OF THE DEPOSIT IS FAIR AND REASONABLE COMPENSATION TO SELLER BY REASON
OF SUCH FAILURE OF THE CLOSE OF ESCROW TO OCCUR.
INITIALS: /s/ T. Ayoubi /s/ SRG /s/ MCM
------------------------ -----------------------
Seller Buyer
SECTION 4
ESCROW; CLOSING; COSTS
4.1 Escrow. The purchase and sale of the Property shall be consummated
through the Escrow. Immediately upon the execution of this Agreement, the
parties shall deposit a copy of this Agreement with Escrow Holder. This
Agreement, together with any general provisions agreed to in writing by Buyer
and Seller for the benefit of Escrow Holder, shall constitute the escrow
instructions for the transfer of the Property (the "Escrow Instructions"). In
the event of any conflict between this Agreement and such general provisions,
this Agreement shall control unless otherwise expressly agreed in writing by
Buyer, Seller and Escrow Holder. If any requirements relating to the duties or
obligations of Escrow Holder are not acceptable to Escrow Holder, or if Escrow
Holder requires additional instructions, the parties shall make such deletions,
substitutions and additions to the Escrow Instructions as Buyer's Counsel and
Seller's Counsel shall mutually approve and which do not substantially alter
this Agreement or its intent. Written instructions from Seller's Counsel, in the
case of Seller, or from Buyer's Counsel, in the case of Buyer, shall be accepted
by Escrow Holder and shall be binding upon the party whose counsel gave such
instructions to Escrow Holder.
4.2 Seller's Deliveries to Escrow Holder.
4.2.1 Prior to the Scheduled Closing Date (subject to extension
pursuant to SECTION 7.1), Seller shall deliver to Escrow Holder the following
documents duly executed and, where applicable, acknowledged by Seller, each of
which shall be undated and the delivery of each of which shall be a condition
precedent to the obligation of Buyer to close hereunder.
4.2.1.1 Deed. A deed with respect to the Real Property in the
form of EXHIBIT 4.2.1.1 annexed hereto and made a part hereof, sufficient to
transfer all of Seller's right, title and interest in and to the Real Property,
subject only to matters of record as of the Closing Date, from Seller to Buyer
(the "Deed");
4.2.1.2 Assignment and Assumption of Tenant Leases. An
Assignment and Assumption of Tenant Leases in the form of EXHIBIT 4.2.1.2
annexed hereto and made a part hereof pursuant to which Seller shall assign the
Tenant Leases to Buyer and Buyer shall assume all of Seller's obligations
thereunder (the "Assignment and Assumption of Tenant Leases");
4.2.1.3 General Assignment. A General Assignment and
Assumption Agreement in the form of EXHIBIT 4.2.1.3 annexed hereto and made a
part thereof pursuant to which Seller shall assign to Buyer all of Seller's
right, title and interest in and to all of the Intangible Property and Buyer
shall assume all obligations thereunder (the "General Assignment and Assumption
Agreement");
4.2.1.4 Assignment and Assumption of Management Agreement. An
Assignment and Assumption of Management Agreement in the form of EXHIBIT 4.2.1.4
annexed hereto and made a part hereof pursuant to which Seller shall assign to
Buyer the
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Management Agreement and Buyer shall assume the obligations of Seller
thereunder, provided, however, the obligation to deliver the Assignment and
Assumption of Management Agreement shall be irrevocably waived, if prior to the
Close of Escrow, the Management Agreement shall have been terminated and the
Interim Management Agreement shall have become effective in accordance with
SECTION 17.20;
4.2.1.5 Bill of Sale. One or more Bills of Sale in the form
of EXHIBIT 4.2.1.5A AND 4.2.1.5B annexed hereto and made a part hereof conveying
to Buyer or designees of Buyer all of Seller's right, title and interest in and
to the Tangible Personal Property (the "Bill of Sale");
4.2.1.6 Stock Agreement. The Stock Agreement in the form of
EXHIBIT 4.2.1.6 annexed hereto and made a part hereof (the "Stock Agreement");
4.2.1.7 Liquor License Management Agreement. The Liquor
License Management Agreement in the form of EXHIBIT 4.2.1.7 annexed hereto and
made a part hereof (the "Liquor License Management Agreement");
4.2.1.8 [Intentionally Omitted]
4.2.1.9 [Intentionally Omitted]
4.2.1.10 [Intentionally Omitted]
4.2.1.11 [Intentionally Omitted]
4.2.1.12 [Intentionally Omitted]
4.2.1.13 Non-Foreign Person Certificate. A Non-Foreign Person
Certificate in the form of EXHIBIT 4.2.1.13 annexed hereto and made a part
hereof (the "Non-Foreign Person Certificate");
4.2.1.14 Transfer Tax Forms. Any statements, such as a
transfer or conveyance tax forms or returns required by applicable state or
local law to be executed by Seller in order to effect the Closing;
4.2.1.15 Certified Rent Roll. A copy of the rent roll for the
Property dated as of the Closing Date and certified by Seller to be (a) a true,
correct and complete copy of the rent roll for the Property provided to Seller
by the Manager; and (b) to Seller's Knowledge, to be true, correct and complete;
4.2.1.16 Certified Operating Statement. An operating
statement for the Property dated as of a date no more than thirty (30) days
prior to the Closing Date and certified by Seller to be (a) a true, correct and
complete copy of the operating statement for the Property provided to Seller by
Manager for the period of Manager's employment at the Property; and (b) to
Seller's Knowledge, to be, true, correct and complete;
4.2.1.17 Guest Ledger. A copy of the guest ledger dated as of
the Proration Time showing all Guest Ledger Receivables and certified by Seller
(a) to be a true, correct and complete copy of the guest ledger provided to
Seller by Manager; and (b) to Seller's Knowledge, to be true, correct and
complete;
4.2.1.18 Closing Certificate. A certification by Seller to
Seller's Knowledge that the representations and warranties set forth in SECTION
6.3 are true, correct and complete as of the Closing Date, except to the extent
that any such representation or warranty is expressly made only as of the
Execution Date subject to Seller's right to make revisions pursuant to SECTION
6.7 to such representations and warranties ("Seller's Closing Certificate");
4.2.1.19 Schedule of Bookings. A schedule of all Bookings
relating to periods after the Proration Time, certified by Seller (a) to be a
true, correct and
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complete copy of the schedule of Bookings provided to Seller by Manager; and (b)
to Seller's Knowledge, to be true, correct and complete;
4.2.1.20 Title Requirements. Any and all certificates,
affidavits and other instruments and documents which the Title Company shall
reasonably require, to permit it to issue the Title Policy in the condition
required herein; provided, however, that (a) Seller is given written notice by
Title Company of the requirement of any such certificates, affidavits or other
instruments and documents within a reasonably sufficient time in advance of the
Scheduled Closing Date and (b) such incidental documents do not create any
liability to Seller that is inconsistent with the liability retained by Seller
under the terms of this Agreement;
4.2.1.21 Payoff Letters. A pay-off letter from the holder of
any mortgage or deed of trust presently encumbering the Real Property indicating
all sums required to satisfy the debt secured by and permit the discharge of
record the lien of such mortgage or deed of trust;
4.2.1.22 Notices to Tenants. Notices to Tenants of the
assignment to Buyer of the Tenant Leases in form and substance satisfactory to
Seller and Buyer;
4.2.1.23 Opinion of Seller's Counsel. An opinion of Seller's
Counsel in a form to be agreed upon by the parties; and
4.2.1.24 Other. Any other incidental documents, not otherwise
expressly provided for herein, reasonably required by Escrow Holder to
consummate the purchase and sale of the Property; provided, however, that (a)
Seller is given written notice by Escrow Holder of the requirement of any such
incidental documents within a reasonably sufficient time in advance of the
Scheduled Closing Date (subject to extension in accordance with the provisions
of SECTION 7.1); and (b) such incidental documents do not create any liability
to Seller that is inconsistent with the liability retained by Seller under the
terms of the this Agreement.
4.3 Buyer's Deliveries to Escrow Holder.
4.3.1 Prior to the Scheduled Closing Date (subject to extension in
accordance with the provisions of SECTION 7.1), and subject further to the
provisions of SECTION 4.3.1.4 in the case of the Value Letter, Buyer shall
deliver to Escrow Holder the following items and documents, which documents
shall be duly executed and, where applicable, acknowledged by Buyer or its
designee, as applicable, and undated, and the delivery of each of which shall be
a condition precedent to the obligation of Seller to close hereunder:
4.3.1.1 The Cash Purchase Price. The Cash Purchase Price;
4.3.1.2 Stock Certificates. Paired Shares in the amount
required to be delivered at the Closing in accordance with the provisions of
this Agreement and in accordance with and subject to the provisions of the Stock
Agreement;
4.3.1.3 Assignment and Assumption of Management Agreement. A
counterpart of the Assignment and Assumption of Management Agreement, provided,
however, the obligation to deliver the Assignment and Assumption of Management
Agreement shall be irrevocably waived, if prior to the Close of Escrow, the
Management Agreement shall have been terminated and the Interim Management
Agreement shall have become effective in accordance with SECTION 17.20;
4.3.1.4 Value Letter. A letter (the "Value Letter") to be
obtained by Buyer at Buyer's expense with respect to the reasonableness of the
allocation of the purchase price among the transactions being entered into as of
the date hereof between Buyer and Seller
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and/or Seller's Affiliates issued by Bear Stearns;
4.3.1.5 Opinion of Buyer's Counsel. An opinion of Buyer's
counsel in a form to be agreed upon by the parties;
4.3.1.6 Stock Agreement. A counterpart of the Stock
Agreement;
4.3.1.7 [Intentionally Omitted]
4.3.1.8 Liquor License Management Agreement. A counterpart
of the Liquor License Management Agreement;
4.3.1.9 [Intentionally Omitted]
4.3.1.10 [Intentionally Omitted]
4.3.1.11 [Intentionally Omitted]
4.3.1.12 Closing Certificate. A certification by Buyer that
the representations and warranties set forth in SECTION 6.1 and SECTION 6.2 are
true, correct and complete as of the Closing Date;
4.3.1.13 The Assignment and Assumption of Tenant Leases. A
counterpart of the Assignment and Assumption of Tenant Leases;
4.3.1.14 The General Assignment and Assumption Agreement. A
counterpart of the General Assignment and Assumption Agreement;
4.3.1.15 Transfer Tax Forms. Any statements, such as a
transfer or conveyance tax forms or returns required by applicable state or
local law to be executed by Buyer in order to effect the closing; and
4.3.1.16 Other. Any other incidental documents, not otherwise
expressly provided for herein, required by Escrow Holder to consummate the
purchase and sale of the Property; provided, however, that (a) Buyer is given
written notice by Escrow Holder of the requirement of such incidental documents
within a reasonably sufficient time in advance of the Scheduled Closing Date;
and (b) Buyer shall not be required to incur any liability, in connection with
the delivery of such incidental documents inconsistent with the provisions of
this Agreement.
4.4 Seller's Deliveries to Buyer. At or prior to the Close of Escrow,
Seller shall deliver to Buyer or cause to be available to Buyer on-site at the
Hotel, the following documents, to the extent the same have not already been
delivered and to the extent in the possession or control of Seller:
4.4.1 Tenant Leases/Tenant Deposits. The original Tenant Leases (or
if not available, the best available copies), and the originals of Tenant
Security Deposits which are evidenced by letters of credit or escrow agreements,
if any, and if necessary to enable Buyer to realize or draw upon same, consents
of the applicable Tenants and/or financial institutions or replacement letters
of credit or escrow agreements in favor of Buyer;
4.4.2 Service Contracts. The originals, or, if not available, the
best available copies, of the Approved Service Contracts;
4.4.3 Licenses and Permits. The originals, or, if not available,
the best available copies of the Licenses and Permits; and
4.4.4 Records and Plans. The originals, or, if not available, the
best available copies of the Records and Plans.
4.5 Possession. Seller shall deliver the keys and possession of the
Property to Buyer at the Close of Escrow free and clear of all leases, tenancies
and occupancies, except for the Management Agreement, the Bookings, the rights
of guests in guest rooms, banquet facilities,
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conference rooms and meeting rooms, the rights of Tenants under the Tenant
Leases (including their assignees, subtenants or licensees), and the other
Permitted Encumbrances.
4.6 Evidence of Authorization. At the Close of Escrow, each party shall
deliver to the other party evidence in form and content reasonably satisfactory
to the other party and the Title Company that (a) the party is duly organized
and validly existing under the laws of the state of its organization and has the
power and authority to enter into this Agreement, (b) this Agreement and all
documents delivered pursuant hereto have been duly executed and delivered by the
party, and (c) the performance by the party of its obligations under this
Agreement have been duly authorized by all necessary corporate, partnership or
other action.
4.7 Close of Escrow.
4.7.1 The Escrow shall close on or before the Scheduled Closing
Date.
4.7.2 Provided that Escrow Holder has not received from either
party written notice of the failure of any condition precedent specified in
SECTION 9 to the obligations of such party (or any previous such notice has been
withdrawn), then when the parties have each deposited into the Escrow the
documents and funds required by this Agreement and the Title Company is
unconditionally prepared to issue the Title Policy at the Close of Escrow,
Escrow Holder shall perform the following actions (collectively, "Close of
Escrow" or "Closing"):
4.7.2.1 Prepare a closing statement for the transaction for
approval by Seller and Buyer prior to the Close of Escrow;
4.7.2.2 Insert the Closing Date as the date of any undated
document to be delivered through Escrow;
4.7.2.3 Cause the Deed to be recorded in the land records of
the state and county where the Real Property is located;
4.7.2.4 Deliver to Buyer the documents deposited into the
Escrow for delivery to Buyer at the Close of Escrow;
4.7.2.5 Deliver to Seller (a) all funds and Paired Shares to
be received by Seller from Buyer through the Escrow at the Close of Escrow less
(i) all amounts to be paid by Seller for Escrow Holder's fees and expenses and
(ii) all amounts paid by Escrow Holder in satisfaction of liens and encumbrances
on the Real Property or other matters pursuant to the written instruction of
Seller, and (b) the documents deposited into the Escrow for delivery to Seller
at the Close of Escrow; and
4.7.2.6 Cause the Title Policy to be issued by the Title
Company and delivered to Buyer.
4.8 Costs of Escrow. Costs of the Escrow shall be allocated as follows:
4.8.1 Buyer and Seller shall each pay one-half (1/2) of the fees of
Escrow Holder;
4.8.2 Buyer and Seller shall each pay one-half (1/2) of the cost of
providing the Survey required to be delivered in accordance with the provisions
of SECTION 7.1; provided, however, Buyer shall be responsible for the full cost
of the Survey in the event the Closing does not occur hereunder other than on
account of default of Seller;
4.8.3 Buyer and Seller shall each pay one-half (1/2) of all
transfer taxes and recording fees payable in connection with the conveyance of
each portion of the Real Property and/or the recording of the Deed and any other
documents or instruments recorded pursuant to this Agreement (other than the
Assignment of Mortgage);
4.8.4 Buyer and Seller shall each pay one-half (1/2) of all sales
or other
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personal property taxes, levies, fees and charges payable as a result of the
transfer of the Personal Property to Buyer and the consummation of the
transactions contemplated hereby. Buyer shall be the reporting person for such
purposes and shall prepare the necessary sales tax reports based upon the
allocations set forth in SECTION 3.4. The parties acknowledge that additional
sales tax may be assessed as a result of the transfer of the Personal Property
to Buyer and the consummation of the transactions contemplated hereby after the
Closing and that Buyer and Seller shall continue to each be responsible for
one-half of any such additional taxes. The provisions of Section 4.8.3 and
Section 4.8.4 shall survive the Closing;
4.8.5 Buyer and Seller shall each pay one-half (1/2) of the cost
of obtaining the coverage under the Title Policy, except that the cost of any
special endorsements shall be paid exclusively by Buyer;
4.8.6 At Closing or thereafter Buyer shall pay for the cost of the
Value Letter;
4.8.7 [Intentionally Omitted]
4.8.8 If the Close of Escrow fails to occur other than as a result
of a default hereunder by either party, including, without limitation, as a
result of a failure of a condition precedent set forth in SECTION 9, the fees of
the Escrow Holder and Title Company (including, without limitation, cancellation
fees) shall be borne equally between Buyer and Seller;
4.8.9 If the Close of Escrow fails to occur as a result of a
default hereunder by either party, the fees of the Escrow Holder and Title
Company (including, without limitation, cancellation fees) shall be borne by the
defaulting party; and
4.8.10 Pursuant to Section 6045 of the Internal Revenue and
Taxation Code, the Title Company shall be designated the "Closing Agent"
hereunder and shall be solely responsible for complying with the Tax Reform Act
of 1986 with regard to the reporting of all settlement information to the
Internal Revenue Service.
4.9 Other Costs. Except as set forth in SECTION 4.8.6, SECTION 11.1 and
SECTION 15.1.6, each party shall pay all of its own legal, accounting and
consulting fees and other costs and expenses incurred in connection with this
Agreement.
4.10 Maintenance of Confidentiality by Escrow Holder. Escrow Holder
shall maintain in strict confidence and not disclose to anyone the existence of
the Escrow, the identity of the parties thereto, the amount of the Purchase
Price, the existence or provisions of this Agreement or any other information
concerning the Escrow or the transactions contemplated hereby, without the prior
written consent of Buyer and Seller.
SECTION 5
PRORATIONS AND ASSUMPTION OF OBLIGATIONS
5.1 General. All income, receivables, expenses (whether payable or
prepaid) and payables of the Property shall be apportioned equitably between the
parties as of the Proration Time in accordance with the provisions of this
SECTION 5 (all prorations are to be based upon the number of days in a 365 day
year). The obligation to make apportionments under SECTIONS 5.1 AND 5.2 shall,
unless otherwise expressly provided in this SECTION 5, survive the Close of
Escrow for a period of sixty (60) days at which time such apportionment shall be
final unless disputed during such period.
5.2 General and Specific Prorations. Without limitation, the following
items shall be apportioned:
5.2.1 At the Closing, Buyer shall assume all of the accounts
payable relating to goods and services ordered or obtained in the ordinary
course of operation of the business of the
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Hotel (including without limitation, payments under the Service Contracts and
Equipment Leases) prior to the Proration Time. Seller shall be obligated to
credit Buyer at the Close of Escrow with an amount mutually agreed upon by Buyer
and Seller at the Closing, reflecting the parties' good faith estimate of such
accounts payable as of the Proration Time (which estimate shall deduct any
discounts then available in the ordinary course of business for the prompt
payment of such accounts payable), plus a further credit for any late fees then
payable with respect to any identified accounts payable. Buyer shall be
responsible for paying when due all accounts payable arising from the operation
of the Property on or after the Proration Time, and Seller shall have no further
liability for such payables or charges. As of the date which is sixty (60) days
following the Closing Date, Buyer and Seller shall calculate the amount of all
accounts payable relating to goods and services ordered or obtained in the
ordinary course of operation of the business of the Hotel (including without
limitation, payments under the Service Contracts and Equipment Leases) prior to
the Proration Time. Seller shall reimburse Buyer for any payments made on
account of any such accounts payable which were not reflected in the Parties'
estimate of such amount credited to Buyer at Closing and which have been paid by
Buyer or for which Buyer is obligated to pay in accordance with the provisions
hereof, and if the amount of such credit exceeds the amounts so paid or for
which Buyer is so obligated, Buyer shall pay such excess amount to Seller.
5.2.2 At the Closing, Seller shall assign to Buyer all of the
Accounts Receivable, for which Seller shall receive a credit at the Close of
Escrow in an amount equal to (a) the full, aggregate outstanding balance of the
Cash Equivalent Receivables (without discount except for service charges due to
charge card companies) plus (b) the full aggregate outstanding balance of the
Invoiced Receivables and Other Accounts Receivable as of the Proration Time,
provided, Buyer shall at its option accept or reject any Invoiced Receivables
and Other Accounts Receivable over ninety (90) days and Seller shall not receive
a credit for any Invoiced Receivables and Other Accounts Receivable over ninety
(90) days rejected by Buyer; provided, that Buyer shall at its own expense use
reasonable efforts to collect any such rejected Invoiced Receivables and Other
Accounts Receivable on behalf of Seller for a period of sixty (60) days after
the Closing Date and thereafter Seller shall have the right to collect same for
its own account; provided, further, as of the date which is sixty (60) days
following the Closing Date, Buyer and Seller shall make any adjustments required
to reflect the collectibility of any Invoiced Receivables and Other Accounts
Receivable (it being agreed that (a) any accounts receivable not listed on the
schedule of accounts receivable of the Property as of the date which is sixty
(60) days following the Closing Date shall be deemed paid as of such date and
(b) except as provided in (a), any accounts receivable which are more than
ninety (90) days past due as of the date which is sixty (60) days following the
Closing Date shall be deemed uncollectable as of such date) and Seller and Buyer
shall make a corresponding payment to the other as required to accurately
reflect the collectibility of such Invoiced Receivables and Other Accounts
Receivable and any accounts receivable deemed uncollectable as of such date in
accordance with the terms hereof shall be the property of Seller and Seller
shall be permitted (at its expense and for its own account) to collect the same;
5.2.3 In prorating the Accounts Receivable, Buyer and Seller shall
each receive credit for one-half (1/2) of all Guest Ledger Receivables
attributable to the room night during which the Proration Time occurs. Seller
shall receive the income from all restaurant and bar facilities located at the
Property through the Proration Time and Buyer shall receive such
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income thereafter;
5.2.4 [Intentionally Omitted]
5.2.5 All sales, use and occupancy taxes arising from the
operation of the Property shall be prorated as of the Proration Time;
5.2.6 Fees for transferable annual permits, licenses, and/or
inspection fees, if any, for periods during which the Proration Time occurs
shall be prorated as of the Proration Time;
5.2.7 Utility charges with respect to the Property levied against
Seller or the Property and the value of fuel stored on the Property shall be
prorated at Seller's cost therefor as of the Proration Time. Seller shall notify
all utilities, governmental agencies, suppliers and others providing services to
the Property of the prospective change in ownership and operation of the
Property, and Seller shall use its reasonable efforts to cause all utilities
furnished to the Property, including, but not limited to, electricity, gas,
water and sewer, along with any fuel storage tanks to be read the day prior to
the Proration Time;
5.2.8 Permitted administrative charges, if any, on Tenant Security
Deposits shall be prorated;
5.2.9 Buyer shall receive a credit for advance payments and/or
deposits, if any, under Bookings to the extent the Bookings relate to a period
after the Proration Time;
5.2.10 Vending machine monies will be removed by Seller as of the
Proration Time for the benefit of Seller;
5.2.11 Buyer shall purchase and Seller shall sell to Buyer (or
Seller shall receive a credit therefore) all petty cash funds and cash in the
Property's house banks at 100% of face value at the Proration Time;
5.2.12 Wages, salaries and payroll taxes and other payroll
deductions for all Hotel Employees shall be apportioned as of the Proration Time
(i.e., the night shift shall be prorated 50/50 for the night preceding the
Closing Date). Buyer shall assume all accrued vacation benefits and sick leave
benefits due to such Hotel Employees which relate to any period prior to the
Proration Time and shall receive a credit for the full amount of all such
accrued benefits reasonably expected to be paid after the Closing Date;
provided, that as of the date which is sixty (60) days following the Closing,
Buyer and Seller shall adjust the amount of the credit if required to take into
account the benefits actually required to be paid by Buyer or then reasonably
expected to be paid following the Closing Date by Buyer. Buyer shall also assume
all obligations of Seller and the Employer Corporation, under the Employment
Agreements and/or the Management Agreement to pay all such wages, salaries, and
compensation set forth above accruing subsequent to Proration Time; provided,
however, that other than as set forth in SECTION 14.1 hereof, no provision
contained in this Agreement shall be construed to prevent the Buyer from
terminating or amending in any manner such Employment Agreements and Management
Agreements subsequent to the Proration Time. The obligation to pay bonuses, if
any, following the Closing shall be allocated as of the Proration Time and
adjusted between Buyer and Seller; and
5.2.13 Real and personal property taxes, assessments and special
district levies shall be prorated for the tax fiscal year in which the Closing
Date occurs on the basis of the then most current available tax bills, Seller
being charged through the day prior to the Closing Date and Buyer with the
Closing Date and thereafter.
5.3 Deposits. All rights to utility, assessment, and other cash
deposits (including,
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without limitation, any Utility Deposits) held by others for Seller's account,
and all certificates of deposit or other forms of cash collateral held by or
otherwise pledged to others for Seller's account to secure obligations of Seller
under Service Contracts, Equipment Leases or other obligations assumed by Buyer,
shall be assigned or transferred to Buyer at the Close of Escrow; provided, that
if any of such deposits are not transferable, Seller shall retain all rights
with respect thereto and there shall be no debit made to Buyer on account
thereof.
5.4 Tenant Leases. At the Close of Escrow, pursuant to the Assignment
and Assumption of Tenant Leases, Buyer shall assume all of the obligations of
Seller under the Tenant Leases as of the Proration Time, including, without
limitation, tenant improvement obligations of landlord thereunder and
obligations with respect to Tenant Security Deposits (to the extent received by
Buyer or credited to Buyer hereunder).
5.5 Service Contracts and Other Intangible Property. At the Close of
Escrow, Seller shall assign to Buyer pursuant to the terms of the General
Assignment and Assumption Agreement, all right, title and interest of Seller in
and to the Approved Service Contracts and other Intangible Property, and Buyer
shall assume all of the obligations of Seller under the Approved Service
Contracts arising from and after the Close of Escrow. Buyer shall protect, hold
harmless, indemnify and defend Seller and its directors, officers, agents,
affiliates, principals, partners, shareholders, representatives and controlling
persons from any Losses attributable to the period beginning on and after the
Closing Date with respect to the Approved Service Contracts. Seller shall be
responsible for all obligations thereunder attributable to the period prior to
the Closing Date with respect to Approved Service Contracts (except to the
extent that Buyer shall have received a credit hereunder with respect to any
such obligations). The provisions of this SECTION 5.5 shall survive the Close of
Escrow.
5.6 Tax Refunds and Proceedings. Buyer shall have the exclusive right
to commence or continue any proceeding to determine the assessed value of the
Property, the real or personal property taxes payable with respect to the
Property or any action to contest water charges, sewer charges, sales tax or use
tax for the relevant taxable period during which the Proration Time occurs and
to settle or compromise any claim thereof, and any refunds or proceeds resulting
from such proceedings along with the costs (including reasonable legal and
accounting fees) incurred by Buyer in obtaining the same, shall be prorated as
of the Proration Time. In prosecuting any such action, Buyer shall utilize the
services of Marvin Poer & Co. Seller shall retain the right to continue,
commence, prosecute, settle or compromise any proceedings relating exclusively
to any relevant taxable period or periods prior to the period during which the
Proration Time shall occur. Buyer and Seller agree to cooperate with each other
and to execute any and all documents reasonably requested in furtherance of the
foregoing. The provisions of SECTION 5.6 shall survive the Closing.
5.7 Guest Baggage. As of the Close of Escrow, Buyer shall indemnify and
hold harmless Seller against all Losses with respect to all baggage of departed
guests or guests who are still registered at the Hotel on the Closing Date which
has been checked with the Hotel. As of the Close of Escrow, Seller shall assign
to Buyer all claims and causes of action against the Manager with respect to any
Losses with respect to such baggage. Seller agrees to submit to Seller's
Insurance any claims for Losses with respect to such baggage which arose from
acts or omissions prior to the Closing Date to the extent coverage is available
under said insurance and provide Buyer with the proceeds therefrom provided
Buyer is not in default under this SECTION 5.7. The provisions of this SECTION
5.7 shall survive the Closing.
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5.8 Safe Deposit Boxes. As of the Close of Escrow, Buyer shall
indemnify and hold harmless Seller against all Losses with respect to the
contents of any safety deposit boxes in use at the Hotel. As of the Close of
Escrow, Seller shall assign to Buyer all claims and causes of action against the
Manager with respect to any Losses relating to said safety deposit boxes. Seller
agrees to submit to Seller's insurance any claims for Losses which arose from
acts or omissions prior to the Closing Date to the extent coverage is available
under said insurance and provide Buyer with the proceeds therefrom provided
Buyer is not in default under this SECTION 5.8. The provisions of this SECTION
5.8 shall survive the Closing.
5.9 Advance Bookings. Buyer shall assume and honor for its account all
Bookings relating to dates after the Proration Time set forth on the Schedule of
Advance Bookings delivered by Seller to Buyer at the Close of Escrow pursuant to
SECTION 4.2.1.9.
5.10 [Intentionally Omitted]
SECTION 6
REPRESENTATIONS AND WARRANTIES;
CONDITION OF PROPERTY
6.1 Of the Trust. As an inducement to Seller to enter into this
Agreement, the Trust hereby represents, warrants and covenants to Seller as
follows:
6.1.1 Power and Authority. The Trust is a real estate investment
trust duly organized and validly existing under the laws of the State of
Maryland. The Trust has the power and authority to carry on its present
business, to enter into this Agreement and to consummate the transactions herein
contemplated; neither the execution and delivery of this Agreement by the Trust,
nor the performance by the Trust of the Trust's obligations hereunder will
violate or constitute an event of default under any material terms or material
provisions of any agreement, document, instrument, judgment, order or decree to
which the Trust is a party or by which the Trust is bound and/or violate any
applicable law, rule or regulation the violation of which would have a Material
effect upon the principal benefits intended to be provided by this Agreement.
6.1.2 Authorization; Valid Obligation. All proceedings required to
be taken by or on behalf of the Trust to authorize the Trust to make, deliver
and carry out the terms of this Agreement will be duly taken prior to the
Closing Date. No consent to the execution, delivery and performance of this
Agreement will be required from any partner, board of directors, shareholder,
creditor, investor, judicial or administrative body, governmental authority or
other person, other than any such consent which already has been (or prior to
the Closing will have been unconditionally given. The individuals executing this
Agreement and the documents referenced herein on behalf of the Trust have the
legal power, right and actual authority to bind the Trust to the terms and
conditions hereof. This Agreement is a valid and binding obligation of Trust,
enforceable in accordance with its terms, except as the same may be affected by
bankruptcy, insolvency, moratorium or similar laws, or by legal or equitable
principles relating to or limiting the rights of contracting parties generally.
6.1.3 Capital Structure. The authorized and outstanding capital
stock and units of the Trust and its operating partnership are as set forth in
the Starwood Disclosure. All Paired Shares to be issued as the Equity Purchase
Price at the Closing in accordance with this Agreement will, when so issued, be
duly authorized, validly issued, fully paid and nonassessable and free of
preemptive rights and will be paired with each other in the same ratio as all
other shares are paired with each other pursuant to the Pairing Agreement.
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6.1.4 SEC Documents and Other Reports. The Trust has filed all
required documents with the SEC since January 1, 1996 (such documents together
with the Starwood Disclosure being referred to herein as the "SEC Documents").
As of their respective dates, the SEC Documents complied in all material
respects with the requirements of applicable law, and, at the respective times
they were filed, none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The consolidated financial statements
(including, in each case, any notes thereto) of the Trust included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto as of their respective dates of filing, were prepared in
accordance with generally accepted accounting principles (except, in the case of
the unaudited statements, as permitted by Regulation S-X of the SEC) applied on
a consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto) and fairly presented the consolidated financial
position of the Trust and its consolidated subsidiaries as of the respective
dates thereof and the consolidated results of their operations and their
consolidated cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein). Except as disclosed in the SEC Documents or as
required by generally accepted accounting principles, the Trust has not, since
December 31, 1996, made any change in the accounting practices or policies
applied in the preparation of their financial statements. Prior to the Closing
Date, the Trust will file all required documents with the SEC, which documents
will comply in all material respects with the requirements of the applicable
law, and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
6.1.5 Absence of Certain Changes or Events. Except as disclosed in
the SEC Documents filed prior to the date of this Agreement, since December 31,
1996, (a) 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 change in or effect on the financial condition,
properties, business, results of operations or prospects of the Trust and its
subsidiaries taken as a whole, or (b) there has not been any split, combination
or reclassification of any of the capital stock or units of the Trust or its
operating partnership or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of, or in substitution for shares of
such capital stock.
6.1.6 Actions and Proceedings. Except as set forth in the 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 Trust or any of its subsidiaries, or against or
involving any of the directors, officers or employees of the Trust 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 change in or effect on the financial
condition, properties, business, results of operations or prospects of the Trust
and its subsidiaries taken as a whole. Except as set forth in the SEC Documents,
there are no actions, suits or claims or legal, administrative or arbitrative
proceedings or investigations pending or, to the knowledge of the Trust,
threatened against or involving the Trust or any of its subsidiaries or any of
their directors, officers or employees, as
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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 change in or effect on the financial condition, properties,
business, results of operations or prospects of the Trust and its subsidiaries
taken as a whole. 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 Trust,
threatened against or affecting the Trust or any of their 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.
6.1.7 REIT Status. The Trust is currently a "real estate investment
trust" ("REIT") for federal income tax purposes and, to its knowledge, the Trust
is and at all times during the testing period described in Code Section
897(h)(4)(D) has been a "domestically controlled REIT" (as defined in Section
897(h)(4)(D) of the Code). From and after January 1, 1995, neither the Internal
Revenue Service nor any other taxing entity or authority has made any assertion
that the Trust does not qualify as a REIT for income tax purposes, nor has there
been any challenge to the REIT status of the Trust. From time to time upon
request by the Seller or its assigns after the Closing Date, the Trust agrees to
inform Seller or such assigns whether to its knowledge it complies with the
representation and warranties set forth in this Section 6.1.7.
6.1.8 Partnership Status. Starwood Realty Partnership is classified
and taxable as a partnership for U.S. federal income tax purposes.
6.1.9 Hart-Scott-Rodino Act. The provisions of the
Hart-Scott-Rodino Act are not applicable to the transactions contemplated hereby
and neither the Trust nor Seller is required to make any filings or submissions
or obtain any approvals thereunder in connection herewith.
6.2 Of the Corporation. As an inducement to Seller to enter into this
Agreement, the Corporation hereby represents, warrants and covenants to Seller
as follows:
6.2.1 Power and Authority. The Corporation is a corporation duly
organized and validly existing under the laws of the State of Maryland. The
Corporation has the power and authority to carry on its present business, to
enter into this Agreement and to consummate the transactions herein
contemplated; neither the execution and delivery of this Agreement by the
Corporation nor the performance by the Corporation of the Corporation's
obligations hereunder will violate or constitute an event of default under any
material terms or material provisions of any agreement, document, instrument,
judgment, order or decree to which the Corporation is a party or by which the
Corporation is bound and/or violate any applicable law, rule or regulation the
violation of which would have a Material effect upon the principal benefits
intended to be provided by this Agreement.
6.2.2 Authorization; Valid Obligation. All proceedings required to
be taken by, or on behalf of the Corporation, to authorize the Corporation to
make, deliver and carry out the terms of this Agreement will be duly taken prior
to the Closing Date. No consent to the execution, delivery and performance of
this Agreement will be required from any partner, board of directors,
shareholder, creditor, investor, judicial or administrative body, governmental
authority or other person, other than any such consent which already has been
(or prior to the Closing will have been) unconditionally given. The individuals
executing this Agreement and the documents referenced herein on behalf of the
Corporation have the legal power, right and actual authority to bind the
Corporation to the terms and conditions hereof. This Agreement is a valid and
binding obligation of Corporation, enforceable in accordance with its terms,
except as
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the same may be affected by bankruptcy, insolvency, moratorium or similar laws,
or by legal or equitable principles relating to or limiting the rights of
contracting parties generally.
6.2.3 Capital Structure. The authorized and outstanding capital
stock and units of the Corporation and its operating partnership are as set
forth in the Starwood Disclosure. All Paired Shares to be issued as the Equity
Purchase Price at the Closing in accordance with this Agreement will, when so
issued, be duly authorized, validly issued, fully paid and nonassessable and
free of preemptive rights and will be paired with each other in the same ratio
as all other shares are paired with each other pursuant to the Pairing
Agreement.
6.2.4 SEC Documents and Other Reports. The Corporation has filed
all required SEC Documents since January 1, 1996. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of the
applicable law, and, at the respective times they were filed, none of the SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements (including, in each case,
any notes thereto) of the Corporation included in the SEC Documents complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto as of their
respective dates of filing, were prepared in accordance with generally accepted
accounting principles (except, in the case of the unaudited statements, as
permitted by Regulation S-X of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly presented the consolidated financial position of the Corporation and
its consolidated subsidiaries as of the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described therein).
Except as disclosed in the SEC Documents or as required by generally accepted
accounting principles, the Corporation has not, since December 31, 1996, made
any change in the accounting practices or policies applied in the preparation of
their financial statements. Prior to the Closing Date, the Corporation will file
all required documents with the SEC, which documents will comply in all material
respects with the requirements of the applicable law, and will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
6.2.5 Absence of Certain Changes or Events. Except as disclosed in
the SEC Documents filed prior to the date of this Agreement, since December 31,
1996, (a) 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 change in or effect on the financial condition,
properties, business, results of operations or prospects of the Corporation and
its subsidiaries taken as a whole, or (b) there has not been any split,
combination or reclassification of any of the capital stock or units of the
Corporation or its respective operating partnerships or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for shares of such capital stock.
6.2.6 Actions and Proceedings. Except as set forth in the 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 Corporation or any of its
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subsidiaries, or against or involving any of the directors, officers or
employees of the Corporation 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 change in
or effect on the financial condition, properties, business, results of
operations or prospects of the Corporation and its subsidiaries taken as a
whole. Except as set forth in the SEC Documents, there are no actions, suits or
claims or legal, administrative or arbitrative proceedings or investigations
pending or, to the knowledge of the Corporation, threatened against or involving
the Corporation 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 change in or effect on the financial
condition, properties, business, results of operations or prospects of the
Corporation and its subsidiaries taken as a whole. 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 Corporation, threatened against or affecting the Corporation or
any of their 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.
6.2.7 Starwood Operating Partnership is classified and taxable as a
partnership for U.S. Federal Income Tax purposes.
6.2.8 Hart-Scott-Rodino. The provisions of the Hart-Scott-Rodino
Act are not applicable to the transactions contemplated hereby and neither the
Corporation nor Seller is required to make any filings or submissions to obtain
any approvals thereunder in connection herewith.
6.3 Of Seller. As an inducement to Buyer to enter into this Agreement,
Seller, represents, warrants and covenants to Buyer as follows:
6.3.1 Regarding Seller's Authority.
6.3.1.1 Seller is a limited partnership in dissolution under
the laws of the District of Columbia. Seller has the power and authority to
enter into this Agreement and the Conveyance Documents and, to sell the Property
on the terms set forth in this Agreement. The execution and delivery hereof and
the performance by Seller of its obligations hereunder, will not violate or
constitute an event of default under any material terms or material provisions
of any agreement, document, instrument, judgment, order or decree to which
Seller is a party or by which Seller is bound and/or violate any applicable law,
rule or regulation the violation of which would have a Material effect upon the
principal benefits intended to be provided by this Agreement.
6.3.1.2 The individuals executing this Agreement and the
documents referenced herein on behalf of Seller have the legal power, right and
actual authority to bind Seller to the terms and conditions hereof. This
Agreement is a valid and binding obligation of Seller, enforceable in accordance
with its terms, except as the same may be affected by bankruptcy, insolvency,
moratorium or similar laws, or by legal or equitable principles relating to or
limiting the rights of contracting parties generally.
6.3.2 Tenant Leases. There are no leases, licenses or concessions
for space which will affect the Real Property or any portion thereof following
the Close of Escrow other than as set forth on the Schedule of Tenant Leases.
Seller has delivered to Buyer a true, correct and complete copy of each lease
and agreement listed on the Schedule of Lease. Seller
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has not received written notice of any sublease and/or assignment of any Tenant
Lease except as set forth on SCHEDULE 6.3.2. No outstanding written notice of
any Material default has been delivered by Seller or received by Seller with
respect to any Tenant Lease, except as disclosed on the SCHEDULE 6.3.2 annexed
hereto and made a part hereof. To Seller's knowledge, all rent under the leases
listed on the Schedule of Leases is being paid currently. All Material
brokerage, leasing and other commissions due in connection with the Tenant
Leases have been paid by Seller other than those payable with respect to the
renewal or extension of such Tenant Leases or expansion of the leased premises
thereunder after the Closing Date, each of which are payable under agreements
described on SCHEDULE 6.3.2.
6.3.3 Service Contracts. There are no Service Contracts which will
affect the Property after the Closing Date except for the Approved Service
Contracts. No outstanding written notice of any Material default has been
delivered by Seller or received by Seller with respect to any Approved Service
Contract, except as disclosed on SCHEDULE 6.3.3 annexed hereto and made a part
hereof.
6.3.4 Claims. There are no pending litigation or condemnation
proceedings with respect to Seller or the Property which would result in an
adverse effect on the ability of Buyer to operate the Property after the
Closing, except as disclosed on SCHEDULE 6.3.4 annexed hereto and made a part
hereof. There is no pending litigation or to Seller's knowledge, other claims of
Seller with respect to the Property attributable to the period prior to the date
hereof which may result in a material judgment in favor of Seller except as
disclosed on SCHEDULE 6.3.4.
6.3.5 Employees. To Seller's Knowledge, SCHEDULE 1.1.6 sets forth a
true and complete list of all Hotel Employees as of the Execution Date together
with their positions, salaries or hourly wages, as applicable, and years of
service. Except for or pursuant to the Employment Agreements, the Collective
Bargaining Agreements, the Management Agreement and the agreements related to
the Ritz-Carlton management of the Hotel described on SCHEDULE 6.3.5 hereto,
neither Seller nor the Employer Corporation has relating to the Property (i) at
any time maintained, contributed to or participated in, (ii) or had at any time
obligation to maintain, contribute to, or participate in, or (iii) any liability
or contingent liability, direct or indirect, with respect to: any employment
agreement, oral or written retirement or deferred compensation plan, incentive
compensation plan, stock plan, unemployment compensation plan, vacation pay
plan, severance plan, bonus plan, stock compensation plan or any other type or
form of employee-related (or independent contractor-related) arrangement,
program, policy, plan or agreement. Except as set forth on SCHEDULE 6.3.5, to
Seller's knowledge there is no Material default under any of the Employment
Agreements.
6.3.6 Compliance with Laws. During the past twelve (12) months,
Seller has not received any written notice from any party, including, without
limitation, from any municipal, state, federal or other governmental authority,
of a Material violation of any zoning, building, fire, water, use, health, or
other similar statute, ordinance, or code bearing on the construction, operation
or use of the Property or any part thereof (other than as to matters previously
cured), except as disclosed on SCHEDULE 6.3.6 annexed hereto and made a part
hereof and except for violations of Environmental Laws, which are addressed in
SECTION 6.3.7 below.
6.3.7 Hazardous Materials. Seller has not received any written
notice from any municipal, state, federal or other governmental authority or
from any other person during the last three (3) years of (a) any Material
violation of applicable Environmental Laws or (b) any
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Environmental Condition requiring Material remediation under applicable
Environmental Laws, in either case only to the extent relating to Environmental
Conditions at or on the Real Property, except as disclosed on SCHEDULE 6.3.7
annexed hereto and made a part hereof;
6.3.8 Records and Plans. Seller will have delivered to Buyer on
the Closing Date true and correct copies of the Records and Plans.
6.3.9 Licenses and Permits. Seller has delivered to Buyer true and
correct copies of the Liquor License and all other Material Licenses and Permits
and such Licenses and Permits are identified on SCHEDULE 6.3.9 annexed hereto
and made a part hereof.
6.3.10 Management Agreements. There are no hotel management or
property management agreements, which will be binding upon Buyer after the
Closing Date, other than the Management Agreement, a true and complete copy of
which will be delivered to Buyer on the Closing Date. Seller has not sent or
received any notice of default or notice of termination under or with respect to
the Management Agreement.
6.3.11 Personal Property. Seller owns the Tangible Personal
Property (other than the Tangible Personal Property that is subject to the
Equipment Leases) free and clear of any liens and/or encumbrances other than the
Permitted Encumbrances.
6.3.12 Insurance. The Seller in respect of the Real Property is
insured under those policies of casualty and general liability insurance
("Seller's Insurance") described on SCHEDULE 6.3.12 annexed hereto, each of
which is in full force and effect as of the date hereof and will remain in full
force and effect through the Closing Date. Seller has received no notices of any
Material default or demands to cure from any applicable insurer in respect of
Seller's Insurance.
6.3.13 Real Estate Taxes. Except as set forth on SCHEDULE 6.3.13
annexed hereto and made a part hereof, Seller has not commenced any proceedings
which are pending for the reduction of the assessed valuation of the Real
Property or any portion thereof, and other than the Permitted Encumbrances, to
Seller's Knowledge, there are no special assessments affecting the Property.
Nothing in this SECTION 6.3.13 or any other provision of this Agreement shall be
construed to limit Seller's rights to initiate or prosecute after the Close of
Escrow additional proceedings for property tax refunds for taxes relating to any
relevant taxable period or periods prior to the taxable period during which the
Proration Time occurs.
6.3.14 [Intentionally Omitted]
6.3.15 [Intentionally Omitted]
6.3.16 District of Columbia Underground Storage Tank Disclosure
Notice. In accordance with the requirements of the D.C. Underground Storage Tank
Management Act of 1990 as amended by the District of Columbia Underground
Storage Tank Management Act of 1990 Amendment Act of 1992 (D.C. Code 6-995.1 et
seq.) (the "Act") and the D.C. Underground Storage Tank Regulations, 20 DCMR
Chapters 55-68 (the "Regulations"), Seller hereby informs Buyer that Seller has
knowledge of the past existence of one or more "underground storage tanks" in,
under, or upon the Property as that term is defined in the Act and the
Regulations. In accordance with the Regulations, Seller has executed the
disclosure form attached as EXHIBIT 6.3.16. This disclosure notice was provided
to Buyer prior to entering into this Agreement.
6.4 Buyer's Review of Records and Plans.
6.4.1 Access to Records and Plans; Specific Disclosures. Buyer
acknowledges that prior to the Closing Date, Buyer has been provided with such
access to the Records and
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Plans and such other information relating to the Hotel as Buyer has deemed
relevant. Buyer acknowledges that it (a) has been made aware of and given an
opportunity to inquire into the Specific Disclosure Matters described herein;
(b) has been given access to the Property and the opportunity to conduct such
inquiries and analyses as Buyer has deemed necessary or appropriate in order to
evaluate the physical condition of the Property and any and all other matters
concerning the current and future use, feasibility, or value, or any other
matter or circumstance relevant to Buyer concerning the Property or its
marketability; and (c) the Records and Plans and the other books and records of
Seller with respect to the Hotel may not be complete.
6.4.2 Limitation on Access to Records and Plans. Notwithstanding
anything in this Agreement to the contrary, Buyer acknowledges and agrees that
the Records and Plans or other information made available to or delivered to
Buyer prior to, or at the Closing, shall not include any information which is
privileged, confidential or proprietary to Seller or any of its constituent
partners or affiliates, including without limitation, (i) Seller's internal
financial analyses, any appraisals undertaken for Seller or other parties,
income tax returns, financial statements, corporate or partnership governance
records, investment advisory records, and other records concerning Seller's
professional relationships, any Hotel Employee personnel files (prior to the
Closing), or any other internal, proprietary, or confidential information,
files, or records of Seller, (ii) the work papers, memoranda, analysis,
correspondence, and similar materials prepared by or for Seller in connection
with the negotiation and documentation of the transaction contemplated hereby or
any other offer to purchase the Property received by Seller, and (iii) any
documents or communications subject to the attorney/client privilege or attorney
work product privilege. Buyer expressly agrees that its review of the Records
and Plans, and any and all other information of any type or nature, whether oral
or written, provided to Buyer by or on behalf of Seller and relating to the
Property (collectively, the "PROPERTY INFORMATION") is for informational
purposes only, and neither Seller nor any agent, advisor, officer, attorney,
representative or other person acting or purporting to act on behalf of Seller
has verified either the accuracy of the Property Information, or the adequacy of
any method used to compile the Property Information or the qualifications of any
person preparing the Property Information except that, in delivering or making
available a copy of any document or papers to Buyer, Seller has delivered or
made available copies of the originals of such documents or papers in Seller's
possession or included in the Records and Files. Except as expressly set forth
in this SECTION 6, neither Seller nor any agent, advisor, officer, attorney,
representative or other person acting or purporting to act on behalf of Seller
is making or giving any representation or warranty about, or assuming any
responsibility for, the accuracy or completeness of the Property Information.
Reliance by Buyer upon any Property Information shall not create or give rise to
any liability of or against Seller or any agent, advisor, officer, attorney,
representative or other person acting or purporting to act on behalf of Seller.
Subject to Seller's express representations and warranties set forth herein, the
consummation of the Closing shall constitute Buyer's unconditional approval of
all aspects of the Property and Buyer's unconditional acknowledgment that Buyer
has had the opportunity to request from Seller and review such documents and
materials relating of the Property as Buyer deems appropriate. All copies of
such documents delivered to Buyer shall be returned to Seller if the Closing
fails to occur for any reason.
6.5 PURCHASE AS IS. BUYER REPRESENTS, WARRANTS AND
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COVENANTS TO SELLER THAT BUYER HAS INDEPENDENTLY AND PERSONALLY INSPECTED THE
PROPERTY AND THE PROPERTY INFORMATION AND THAT BUYER HAS ENTERED INTO THIS
AGREEMENT BASED UPON SUCH PERSONAL EXAMINATION AND INSPECTION. BUYER ACCEPTS THE
PROPERTY, IN ITS CONDITION ON THE CLOSE OF ESCROW AS-IS AND WITH ALL ITS FAULTS,
INCLUDING WITHOUT LIMITATION, ANY FAULTS AND CONDITIONS SPECIFICALLY REFERENCED
IN THIS AGREEMENT. NO PERSON ACTING ON BEHALF OF SELLER IS AUTHORIZED TO MAKE,
AND BY EXECUTION HEREOF, BUYER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS
SPECIFICALLY PROVIDED IN THIS AGREEMENT, SELLER HAS NOT MADE, DOES NOT MAKE AND
SPECIFICALLY NEGATES AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES, PROMISES,
COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER
EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO,
CONCERNING OR WITH RESPECT TO:
(A) THE VALUE OF THE PROPERTY;
(B) THE INCOME TO BE DERIVED FROM THE PROPERTY;
(C) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND
USES WHICH BUYER MAY CONDUCT THEREON;
(D) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OF THE PROPERTY;
(E) THE MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE
PROPERTY;
(F) THE NATURE, QUALITY OR CONDITION OF THE PROPERTY, INCLUDING
WITHOUT LIMITATION, THE WATER, SOIL AND GEOLOGY;
(G) THE COMPLIANCE OF OR BY THE PROPERTY OR ITS OPERATION WITH ANY
LAWS, RULES, ORDINANCES OR REGULATIONS OF ANY APPLICABLE GOVERNMENTAL AUTHORITY
OR BODY;
(H) THE MANNER OR QUALITY OF THE CONSTRUCTION OR MATERIALS, IF ANY,
INCORPORATED INTO THE PROPERTY;
(I) THE COMPLIANCE OF THE PROPERTY WITH ANY ENVIRONMENTAL LAWS OR
THE AMERICANS WITH DISABILITIES ACT;
(J) THE PRESENCE OR ABSENCE OF HAZARDOUS MATERIALS AT, ON, UNDER,
OR ADJACENT TO THE PROPERTY;
(K) THE CONTENT, COMPLETENESS OR ACCURACY OF ANY OF THE RECORDS AND
PLANS OR OTHER INFORMATION PROVIDED BY SELLER TO BUYER WITH RESPECT TO THE
PROPERTY;
(L) THE CONFORMITY OF THE IMPROVEMENTS TO ANY PLANS OR
SPECIFICATIONS FOR THE PROPERTY, INCLUDING ANY PLANS AND SPECIFICATIONS THAT MAY
HAVE BEEN OR MAY BE PROVIDED TO BUYER;
(M) THE CONFORMITY OF THE PROPERTY TO PAST, CURRENT OR FUTURE
APPLICABLE ZONING OR BUILDING REQUIREMENTS;
(N) DEFICIENCY OF ANY UNDER SHORING;
(O) DEFICIENCY OF ANY DRAINAGE;
(P) THE FACT THAT ALL OR A PORTION OF THE PROPERTY MAY
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BE LOCATED ON OR NEAR AN EARTHQUAKE FAULT LINE;
(Q) THE EXISTENCE OF VESTED LAND USE, ZONING OR BUILDING
ENTITLEMENTS AFFECTING THE PROPERTY;
(R) WITH RESPECT TO ANY OTHER MATTER CONCERNING THE PROPERTY
(INCLUDING, WITHOUT LIMITATION, THE TENANT LEASES, THE EQUIPMENT LEASES, ANY
FIXTURES AND EQUIPMENT, THE LICENSES AND PERMITS, THE PERSONAL PROPERTY, THE
SERVICE CONTRACTS, THE EMPLOYMENT CONTRACTS, ANY EMPLOYEE BENEFIT PLANS AND THE
LIQUOR LICENSE) EXCEPT AS MAY BE OTHERWISE EXPRESSLY STATED HEREIN;
(S) [INTENTIONALLY OMITTED]
(T) ANY OF THE SPECIFIC DISCLOSURE MATTERS; OR
(U) WITHOUT LIMITING THE OTHER DISCLAIMERS SET FORTH HEREIN BUT
SUBJECT TO THE EXPRESS REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS
AGREEMENT, THE ASSIGNMENTS AND CONVEYANCES OF THE PERSONAL PROPERTY AND THE
MANAGEMENT AGREEMENT ARE WITHOUT ANY EXPRESS OR IMPLIED WARRANTIES OR
REPRESENTATIONS OF ANY KIND WHATSOEVER, INCLUDING, WITHOUT LIMITATION, (1)
WARRANTIES AS TO THE VALIDITY, ENFORCEABILITY OR ASSIGNABILITY OF THE MANAGEMENT
AGREEMENT, (2) WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR
PURPOSE, (3) WARRANTIES RELATING TO THE DESIGN, CONDITION, QUALITY, WORKMANSHIP
OR CAPACITY OF THE TANGIBLE PERSONAL PROPERTY, (4) REPRESENTATIONS OR WARRANTIES
THAT THE TANGIBLE PERSONAL PROPERTY IS IN COMPLIANCE WITH ALL LAWS, STATUTES,
ORDINANCES RULES, REGULATIONS, SPECIFICATIONS OR CONTRACTS PERTAINING THERETO,
(5) WARRANTIES AGAINST PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, AND (F)
WARRANTIES AS TO THE VALIDITY, ENFORCEABILITY, OR COLLECTIBILITY OF ANY ITEM.
6.6 Limitation on Representations and Warranties of Seller. In no event
shall Buyer be entitled to seek recovery against Seller for an alleged breach of
any representation or warranty by Seller if the information, transaction, or
occurrence alleged to give rise to such breach was disclosed to, made available
to or discovered by Buyer, whether in the course of its review of the Records
and Plans or otherwise, prior to the Close of Escrow (the sole adjustment with
respect to same being as set forth in SECTION 6.7 below). Without limiting the
foregoing, each of the representations and warranties by Seller set forth herein
shall be deemed to be qualified in their entirety by the Specific Disclosure
Matters in addition to any other qualifications of such representations and
warranties.
6.7 Right to Supplement Disclosures. At any time prior to the Closing,
Seller may add additional disclosures to the Specific Disclosure Matters and the
Schedules referenced in this SECTION 6, and may make appropriate revisions
thereto, provided, however, that any such revisions do not in the aggregate
disclose any matter or matters which would reasonably be expected to have an
impact upon the value of the Property in excess of the amount of the Deposit;
and provided, further, that the receipt of any notice of termination under the
Management Agreement shall not be deemed to create any diminution in value to
the Property. In the event that Buyer or Seller discovers any matter or matters
which would be expected to exceed the Threshold Amount, then, in such event, the
provisions of SECTION 7.1.1 shall apply.
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6.8 Basket. In no event will Seller be liable to Buyer for any breach
of a representation or warranty hereunder unless and to the extent the Loss
actually and directly incurred by Buyer as results of such breach together with
the Loss actually and directly incurred by Buyer as results of any other
breach(s) in the aggregate exceed the Threshold Amount, provided, that in no
event shall Seller have any liability to Buyer for any consequential damages
arising from a breach by Seller of any representation or warranty unless such
breach results from the intentional concealment by Seller.
6.9 Survival. The Trust, the Corporation and Seller each hereby
covenants and agrees with the other that the representations and warranties of
the Trust, the Corporation and Seller (as the case may be) set forth in SECTIONS
6.1.1 through 6.1.3, inclusive, SECTION 6.2.1 through SECTION 6.2.3, inclusive
and SECTION 6.3.1 and SECTION 6.3.2 shall survive the Close of Escrow without
limitation as to duration. The remaining warranties and representations set
forth in SECTION 6 shall survive the Close of Escrow until the date which is one
(1) year following the Closing Date, at which time such representations and
warranties shall expire unless prior to such time Buyer or Seller, as the case
may be, have duly commenced an action in a court of competent jurisdiction,
alleging a breach of such representation or warranty. Notwithstanding anything
herein to the contrary, in no event shall either Buyer or Seller have any right
to make a claim after the Closing with respect to any representation or
warranty, the breach of which such party shall have discovered prior to the
Closing, unless such party shall have notified the other party of such breach
prior to the Close of Escrow. Nothing contained in this SECTION 6.9 shall limit
the right of Seller to any remedy otherwise available under Federal or other
applicable securities law.
6.10 Soil Disclosure. In accordance with D.C. CodeSection45-508(b),
Seller advises Buyer that the characteristics of the soil on the Property is
Urban Land. For further information, Buyer can contact a soil testing
laboratory, the D.C. Department of Consumer and Regulatory Affairs or the Soil
Conservation Service (U.S.D.A.). The foregoing is given pursuant to District of
Columbia statutory requirements and does not constitute a representation or
warranty by Seller as to soil characteristics or conditions.
SECTION 7
TITLE TO THE REAL PROPERTY:
EXTENSION OF THE CLOSING
7.1 Buyer's Review of Title. Seller has caused to be delivered to Buyer
and Buyer's Counsel a current preliminary title commitment for title insurance
issued by the Title Company showing the condition of title to the Real Property
(the "Preliminary Title Report") together with a copy of all documents
evidencing or creating the exceptions to title referenced therein.
7.1.1 Failure to Satisfy Certain Closing Conditions; Monetary
Liens. On or prior to the Close of Escrow, Seller shall be obligated (i) to
cause to be insured over or removed of record all Monetary Liens affecting the
Property as of the date hereof; and (ii) to remove or to bond over any Monetary
Lien arising after the issuance of the Preliminary Title Report which (a) was
created by or with the consent of Seller, or (b) is in an amount less than the
Deposit. In the event that any Monetary Lien not reflected on the Preliminary
Title Report exceeds the Deposit and was not created by or with the consent of
Seller or any other title defect or other matters arise which requires Seller to
supplement its disclosure pursuant to SECTION 6.7 and which in the aggregate may
create a diminution in value to the Property in excess of the Deposit, (i) the
Deposit shall be refunded by Escrow Holder to Buyer on February 28, 1998 if
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the Closing does not occur by such date in accordance with the provisions
hereof; (ii) the Scheduled Closing Date shall be extended and Seller shall use
all reasonable efforts, to remove or bond over or otherwise cause the Title
Company to omit such Monetary Lien as an exception from coverage under the Title
Policy and/or remove or cure as applicable such other defect or condition as
applicable; and (iii) Buyer shall be permitted to record the Memorandum of
Contract in the real property records of the state and county in which the Real
Property is located. In the event that the Scheduled Closing Date is so extended
and Seller is able to remove or cure such Monetary Lien, remove or cure as
applicable the title defect or other condition, the Close of Escrow shall occur
as soon as practicable following such removal or cure with time being of the
essence as to the performance of both Buyer's and Seller's obligations
hereunder. THE PARTIES ACKNOWLEDGE AND AGREE THAT DAMAGES WILL NOT BE AN
ADEQUATE REMEDY TO SELLER IF BUYER SHALL DEFAULT IN ITS OBLIGATION TO CLOSE IN
ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 7.1.1 AND CONSEQUENTLY THAT
BUYER'S OBLIGATIONS UNDER THIS SECTION 7.1.1 SHALL BE SPECIFICALLY ENFORCEABLE
AGAINST THE TRUST. IN CONSIDERATION FOR THE REFUND TO BUYER OF THE DEPOSIT
PROVIDED FOR UNDER THIS SECTION 7.1.1, THE RIGHT OF BUYER TO RECORD THE
MEMORANDUM OF CONTRACT PURSUANT TO THIS SECTION 7.1.1, SELLER'S AGREEMENT TO
ENTER INTO THE INTERIM MANAGEMENT AGREEMENT PURSUANT TO THE PROVISIONS OF THIS
SECTION 17.20 (UNDER WHICH AGREEMENT THE VALUE OF THE HOTEL MAY BE AFFECTED BY
THE PERFORMANCE BY THE MANAGER OF ITS RESPONSIBILITIES THEREUNDER) AND TO
ENCUMBER THE PROPERTY WITH THIS AGREEMENT FOR A PERIOD OF UP TO FIVE (5) YEARS
IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 7.1.1 AND IN LIGHT OF THE
RISKS WHICH SELLER WILL BE ASSUMING AS A RESULT IN RELATION TO THE VALUE OF THE
EQUITY PURCHASE PRICE TO BE DELIVERED IF AND WHEN THE CLOSING OCCURS HEREUNDER,
THE PARTIES HAVE AGREED THAT THE PROVISIONS OF THIS SECTION 7.1.1 ARE
SPECIFICALLY ENFORCEABLE AGAINST THE TRUST AS AND TO THE EXTENT PROVIDED IN THE
PRECEDING SENTENCE. In the event that a Monetary Lien cannot be removed or cured
or a title defect or other condition cannot be removed or cured as required
hereunder to close within five (5) years of the date of this Agreement, this
Agreement shall terminate and the parties hereto shall have no further
obligations.
7.1.2 [Intentionally Omitted]
7.2 Title Insurance Policy. Buyer's title to the Real Property shall be
insured at Closing by an ALTA extended coverage owner's policy or policies of
title insurance in the amount of the Purchase Price (the "Title Policy") issued
by the Title Company, insuring title to the Real Property vested in Buyer,
subject only to the Permitted Encumbrances, together with such customary
endorsements or affirmative insurance as may be reasonably requested by Buyer
and purchased at Buyer's sole cost and expense.
7.3 Title to Real Property. At the Close of Escrow, title to the Real
Property will be conveyed to Buyer by Seller pursuant to the Deed, subject only
to the matters of title respecting the Property shown on SCHEDULE 7.3 annexed
hereto and, if the Closing is delayed pursuant to SECTION 7.1.1, any additional
easements, covenants, conditions, restrictions or other matters entered into
with the prior written consent of Buyer which consent shall not be unreasonably
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withheld, delayed or conditioned (collectively, the "Permitted Encumbrances");
Buyer agrees to rely exclusively on the Title Policy for protection against any
title defects except as set forth in SECTION 7.1.2. Buyer shall have no claim
following the Closing against Seller on account of the Permitted Encumbrances.
Buyer's agreement under this SECTION 7.1 shall survive the execution, delivery,
and recordation of the Deed.
SECTION 8
INTERIM ACTIVITIES
During the period from the Execution Date through the Close of Escrow,
Seller shall (subject to the provisions of the Interim Management Agreement if
entered into in accordance with the provisions of this Agreement) cause the
Property to be continued to be operated in ordinary course as a hotel consistent
with current operating practices during the period since Manager has been
manager of the Hotel. Buyer shall have the right to enter onto and inspect the
Property, from and after the date hereof, through the Closing Date to inspect
the Property and otherwise perform its due diligence provided such inspections
are performed upon prior notice to Seller and so as not to interfere with the
operation of the Property or to disclose the pendency of the transaction
contemplated hereby. All fees and expenses of any kind relating to the
inspection of the Property by Buyer will be paid for by Buyer. Buyer agrees to
keep the Property free from any liens arising out of or in connection with
Buyer's or its agents entry or the Property. Buyer shall at its sole cost and
expense, clean up and repair the Property as reasonably necessary after Buyer's
or its agents entry thereon. Buyer shall hold harmless, indemnify and defend
Seller from all Losses relating to any action by Buyer, its Affiliates and/or
agents at or on the Property prior to Closing. Any of Buyer's agents shall be
bound by the provisions of SECTION 17.19.
SECTION 9
CONDITIONS PRECEDENT TO CLOSING
9.1 Conditions Precedent to Buyer's Obligations. The Close of Escrow
and the obligation of Buyer to purchase the Property is subject to the
satisfaction, not later than the Scheduled Closing Date, (subject to extensions
as provided in Section 7.1) of the following conditions:
9.1.1 Seller's Deliveries. Seller shall have delivered the items
described in SECTION 4.2 and shall be prepared to deliver the items described in
SECTION 4.4;
9.1.2 Title Policy. The Title Company shall be unconditionally
prepared (subject only to payment of all necessary title insurance premiums and
other charges) to issue to Buyer the Title Policy insuring Buyer's title to the
Real Property subject only to the Permitted Encumbrances;
9.1.3 Performance Under Related Agreements. All conditions
precedent to the closing of the transactions contemplated by that certain
Purchase and Sale Agreements with Joint Escrow Instructions (the "Related
Agreement"), dated as of the date hereof, by and between N.Y. Overnight
Partners, L.P. and Buyer, shall have been satisfied or waived and the Seller and
Escrow Holder thereunder shall be ready, willing and able to perform thereunder,
and there shall be no default of Seller under such agreement.
9.1.4 [Intentionally Omitted]
9.1.5 Seller Performance. Seller shall have performed in all
material respects all of the obligations of Seller under this Agreement, to the
extent required to be performed at or prior to the Close of Escrow.
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9.1.6 Representations and Warranties of Seller. The Seller's
representations and warranties set forth in SECTION 6.3 shall be true, correct
and complete, as of the Close of Escrow subject to modification thereof to the
extent permitted under SECTION 6.7 and subject further to the applicable
provisions of SECTION 7.1.1.
The conditions set forth in this SECTION 9.1 are solely for the benefit
of Buyer and may be waived only by Buyer. Buyer shall at all times have the
right to waive any such condition. Any such waiver or waivers shall be in
writing and shall be delivered to Seller and Escrow Holder.
9.2 Conditions Precedent to Seller's Obligations. The Close of Escrow
and Seller's obligation with respect to the transactions contemplated by this
Agreement are subject to the satisfaction, not later than the Scheduled Closing
Date, of the following conditions:
9.2.1 Funds and Documents. Buyer shall have delivered to Escrow
Holder, prior to the Closing Date, for disbursement as directed by Seller, the
Paired Shares and all cash or other immediately available funds due from Buyer
in accordance with SECTION 4 of this Agreement and the documents described in
SECTION 4.3;
9.2.2 Representations and Warranties of Buyer. The Trust's
representations and warranties set forth in SECTION 6.1 and the Corporation's
representations and warranties set forth in SECTION 6.2 shall be true, correct
and complete, as of the Close of Escrow;
9.2.3 No Material Changes. There shall have been no casualty or
condemnation for which Buyer has elected to terminate this Agreement pursuant to
SECTION 12 or SECTION 13 of this Agreement;
9.2.4 [Intentionally Omitted]
9.2.5 Performance Under Related Agreements. All conditions
precedent to the closing of the transactions contemplated by the Related
Agreement shall have been satisfied or waived and the Buyer and Escrow Holder
thereunder shall be ready, willing and able to perform thereunder and there
shall be no default of Buyer under such agreement.
The conditions set forth in this SECTION 9.2 are solely for the benefit
of Seller and may be waived only by Seller. Seller shall at all times have the
right to waive any such condition. Any such waiver or waivers shall be in
writing and shall be delivered to Buyer and Escrow Holder.
9.3 Failure of Condition. Except as otherwise provided in this
Agreement, if the Escrow fails to close on the Outside Closing Date for any
reason whatsoever, including, without limitation, a failure of a condition
precedent set forth in this SECTION 9, either Buyer or Seller, if not then in
default under this Agreement, may terminate the Escrow and this Agreement upon
notice to the other; and, thereupon:
9.3.1 This Agreement and the Escrow shall terminate;
9.3.2 The costs of the Escrow through the Scheduled Closing Date
shall be governed by SECTION 4.8;
9.3.3 All monies paid into the Escrow and all documents deposited
in the Escrow shall be returned to the party paying or depositing the same
together with interest earned thereon; and
9.3.4 Each party shall be released from all obligations under this
Agreement except for the obligations that are expressly stated to survive the
termination of this Agreement.
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SECTION 10
BROKER
Buyer and Seller each represent and warrant to the other that it has
not dealt with any broker, finder or other middleman in connection with this
Agreement, or the transactions contemplated hereby and that no broker, finder,
middleman or other person has claimed, or has the right to claim a commission,
finder's fee or other brokerage fee in connection with this Agreement or the
transactions contemplated hereby. Each party shall indemnify, protect, defend
and hold the other party harmless from and against any costs, claims or expenses
(including actual attorneys' fees and expenses), arising out of the breach by
the indemnifying party of any of its representations, warranties or agreements
contained in this SECTION 10. The representations and obligations under this
SECTION 10 shall survive the Close of Escrow, or, if the Close of Escrow does
not occur, the termination of this Agreement.
SECTION 11
REMEDIES FOR SELLER'S DEFAULT
11.1 Buyer's Remedies in General. If Buyer shall discover prior to the
Close of Escrow any default in any of Seller's obligations under this Agreement
(a "Seller Default"), Buyer shall notify Seller thereof, and Seller shall have a
reasonable period of time (not in excess of thirty (30) days) unless extended by
Buyer in its sole discretion in which to cure such default, in which case the
Scheduled Closing Date shall be extended during the continuation of such cure
period. If there shall be any Seller Default discovered by Buyer prior to the
Close of Escrow and not cured by the Scheduled Closing Date, then Buyer's sole
right and remedy other than with respect to a breach of a representation and
warranty which shall be subject to the provisions of SECTION 6.7, shall be to
compel specific performance of this Agreement; provided, however, that Buyer
shall only be entitled to compel specific performance of this Agreement if, as
of the time of Seller's default, Buyer shall (a) not be in default hereunder,
(b) shall be ready, willing and able to perform its obligations hereunder, and
(c) shall have waived all contingencies to closing other than those relating to
Seller's default.
11.2 MATERIAL INDUCEMENT. BUYER SPECIFICALLY ACKNOWLEDGES THAT THE
LIMITATIONS ON DAMAGES AND SURVIVAL AND OTHER REMEDIES WHICH BUYER MAY RECOVER
FROM AND ENFORCE AGAINST SELLER UNDER THIS AGREEMENT ARE A SPECIFIC AND MATERIAL
INDUCEMENT TO SELLER TO ENTER INTO THIS TRANSACTION.
SECTION 12
DAMAGE TO OR DESTRUCTION OF THE PROPERTY
12.1 Insured Casualty.
12.1.1 If, prior to the Close of Escrow, the Property is damaged
or destroyed, whether by fire or other insured casualty, Seller shall promptly
notify Buyer of such damage or destruction and of the good-faith estimate of a
reputable licensed contractor selected by Seller and reasonably approved by
Buyer of the cost to repair the damage and Seller's good-faith belief that such
casualty is insured (the "Insured Casualty Notice"). If the Insured Casualty
Notice indicates that such casualty is a Material Casualty, Buyer may elect to
be released from its obligations hereunder (including its obligation to purchase
the Property) by delivering to Seller written notice of Buyer's intent to do so
within ten (10) days after the date Buyer receives the Insured Casualty Notice.
In such event, the Deposit together with all interest accrued thereon shall be
promptly returned to Buyer.
12.1.2 If the casualty is insured, and (i) it is not a Material
Casualty, or (ii) it is a Material Casualty, but Buyer elects not to terminate
this Agreement in accordance with this
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SECTION 12.1, then the Escrow and this Agreement shall remain in full force and
effect, the Closing shall occur on or before the Outside Closing Date, and
Seller shall assign to Buyer, as a condition precedent to the Close of Escrow,
all of Seller's right, title and interest in and to any of the casualty
insurance proceeds or claims therefor with respect to such damage or
destruction, together with any and all rental loss or business interruption
insurance of Seller, if any, payable with respect to the Property for any period
after the Proration Time and any and all claims against other persons for such
damage or destruction. Additionally, if the Escrow and this Agreement remain in
full force and effect, Seller shall pay to Buyer, by way of a reduction in the
Cash Portion of the Closing Payment, an amount equal to the deductible under the
casualty insurance. Within twelve (12) months following the Close of Escrow,
Buyer shall upon thirty (30) days written notice by Seller, present reasonably
satisfactory evidence to Seller that Buyer applied the proceeds of such
insurance to the Property. If Buyer fails to present such evidence or such
evidence is not reasonably satisfactory to Seller, Buyer shall promptly, but in
any event within thirty (30) days of demand therefor from Seller, pay to Seller
the proceeds of the casualty insurance assigned by Seller to Buyer as provided
herein, together with an amount equal to the deductible under such insurance for
which Buyer received a credit to the Purchase Price.
12.2 Uninsured Casualty.
12.2.1 If, prior to the Close of Escrow, all or any portion of the
property is damaged or destroyed by an uninsured casualty (including, without
limitation, a casualty as to which coverage has been disclaimed by Seller's
insurers), Seller shall promptly notify Buyer of such damage or destruction and
of the Seller's reasonable estimate of the cost to Seller to repair the same of
a reputable licensed contractor selected by Seller and reasonably approved by
Buyer (the "Uninsured Estimate to Repair") and Seller's reasonable belief that
such casualty is uninsured (the "Uninsured Casualty Notice").
12.2.2 If such Uninsured Estimate to Repair indicates the
occurrence of a Material Casualty, either Seller or Buyer may elect to terminate
this Agreement by giving to the other party written notice of its intent to do
so within ten (10) days after the Seller delivers the Uninsured Casualty Notice
to Buyer. If this Agreement is terminated pursuant to this SECTION 12.2.2, the
Deposit together with interest accrued thereon shall be promptly returned to
Buyer.
12.2.3 If the casualty is uninsured, and (i) it is not a Material
Casualty, or (ii) it is a Material Casualty and Buyer and Seller have not
elected to terminate this Agreement in accordance with SECTION 12.2.2, then the
Escrow and this Agreement shall remain in full force and effect, the Closing
shall occur on or before the Outside Closing Date, and Buyer shall be entitled
to a reduction in the Purchase Price in an amount equal to the Uninsured
Estimate to Repair.
12.2.4 If and to the extent that the Purchase Price is adjusted
pursuant to this SECTION 12.2 as a result of a disclaimer of coverage by
Seller's insurers, Buyer shall not be entitled to insurance proceeds due under
Seller's policies, or to be assigned any claim under or with respect to Seller's
policies, and Seller shall retain all rights thereunder or with respect thereto
and to proceeds therefrom, it being the intent of this SECTION 12 that there be
no double recovery by, or double compensation of, Buyer for the casualty.
SECTION 13
CONDEMNATION
If, prior to the Close of Escrow, a Material Taking has occurred or is
pending, Seller shall immediately notify Buyer of such fact. In such event,
Buyer may elect upon written notice
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to Seller given not later than fifteen (15) days after receipt of Seller's
notice to terminate this Agreement. If Buyer does not exercise option which
Buyer may have pursuant to this SECTION 13 to terminate this Agreement, or if
any such taking is not a Material Taking, then neither party shall have the
right to terminate this Agreement, but Seller shall assign and turn over, and
Buyer shall be entitled to receive and keep, all awards for the taking of any of
the Real Property by eminent domain which accrue to Seller (other than those
relating to loss of use prior to the Closing), and the parties shall proceed to
the Close of Escrow pursuant to the terms hereof, without modification of the
terms of this Agreement and without any reduction in the Purchase Price.
SECTION 14
EMPLOYEES
14.1 Hiring of Hotel Employees; WARN Act Compliance. Buyer agrees to
make an offer of employment to all existing Hotel Employees as of the Close of
Escrow, on terms and conditions generally comparable to their existing terms and
conditions of employment (to the extent such terms and conditions have been
disclosed by Seller and/or its agents to Buyer) and to make all reasonable
efforts to retain such employees for a reasonable period of time. Without
limiting the foregoing, Buyer shall offer to maintain without loss of employment
(as defined in the WARN Act) the employment at the Property (other than upon
good cause for termination) of such number of Hotel Employees and on such terms
and conditions as shall not result in, and only to the extent necessary to
prevent, a plant closing or mass layoff as defined in the WARN Act. Buyer (i)
shall also cause each of the health and medical benefit plans maintained for
Hotel Employees to waive any preexisting condition in connection with employment
at the Property that was not excluded under the applicable program as of the
Closing Date, (ii) shall also cause each of such benefit plans to take into
account any deductibles or coinsurance amounts incurred by each Hotel Employee
for the year in which the Closing Date occurs and (iii) shall also cause each of
the health and medical benefit plans to deem each Hotel Employee to be eligible
for participation in such plan as of the Close of Escrow. In the event that
Buyer fails to comply with any of the foregoing covenants, Buyer agrees that
Buyer shall be solely responsible for the payment of any and all costs, charges,
penalties, compensation, severance pay, benefits and liabilities, arising under
the WARN Act, and any other applicable law, rule or regulation on account
thereof, and Buyer agrees to indemnify, defend and hold Seller and the Employer
Corporation and their directors, officers, agents, affiliates, principals,
partners, shareholders representatives and controlling persons harmless from and
against any and all claims, causes of action, judgments, damages, penalties and
liabilities asserted under the WARN Act or any other applicable law, rule or
regulation, whether against Buyer or Seller, the Employer Corporation or any
other such indemnified party and whether based on employment of any of the Hotel
Employees prior to or following the Closing, arising from Buyer's failure to
comply with the foregoing covenants (collectively, "Termination Charges").
Following the Closing, if Buyer desires to terminate the employment of any Hotel
Employees other than for cause, Buyer shall be solely responsible for complying
with all applicable provisions of the WARN Act and all other applicable laws,
rules and regulations with respect to such termination, including without
limitation, the payment of all costs and termination payments owing under the
WARN Act and all other applicable laws, rules and regulations to any of such
employees. Buyer shall assume all obligations under the Employment Agreement for
the Director of Finance attributable to the period from and after the Closing
Date (it being agreed that the
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Director of Finance may resign thereunder at any time without penalty).
14.2 Collective Bargaining Agreements. Without limiting the provisions
of SECTION 14.1, immediately upon the Close of Escrow, without the necessity of
further action by Buyer, Buyer shall assume each collective bargaining agreement
or other labor union contracts identified on SCHEDULE 14.2 (the "Collective
Bargaining Agreements"). Buyer further agrees to indemnify Seller and the
Employer Corporation and their directors, officers, employees, agents,
affiliates, principals, partners, shareholders, representatives and controlling
persons for any and all liability to the bargaining agents or Hotel Employees,
resulting from the failure of Buyer to comply with the terms and conditions of
any of the Collective Bargaining Agreements with respect to periods beginning
after the Close of Escrow.
14.3 Continuation of Benefits.
14.3.1 (i) Except as provided in SECTION 14.3.2, on and after the
Closing Date, Seller (or any insurer at Seller's cost) shall continue to process
and pay (or cause applicable insurers and third party administrators, including
ITT Sheraton, to process and pay) in an expeditious manner and with respect to
all covered Hotel Employees (and, to the extent applicable, their covered
spouses, dependents and beneficiaries) all claims under the Employment
Agreements that provide health and medical, or other welfare, benefits submitted
for covered expenses with respect to occurrences commencing on or prior to the
Closing Date, including, but not limited to: (A) covered hospital benefits for
any confinements; (B) covered life and survivor income benefits, if any, for
deaths which occur on or prior to the Closing Date; (C) workers' compensation
benefits for disabilities resulting from a work-related accident which occurred
on or prior to the Closing Date; (D) all covered benefits that are being, or
that may be, paid to, or with respect to, any of such individuals who are on
short or long term disability, or medical, personal or other leaves of absence
as of the Closing Date; (E) covered benefits under any "spending account," or
similar arrangement, under any "cafeteria plan" (as defined under Section 125 of
the Internal Code) with respect to salary reduction elections made prior to the
Closing Date; and (F) covered benefits under all other such Employment
Agreements which accrue on or before the Closing Date; but, only in each
instance, to the extent that Buyer shall not have received a credit against the
Purchase Price on account of such item.
(ii) [Intentionally Omitted]
14.3.2 Buyer (or any plan maintained by Buyer) will provide
continued health and medical coverage as required under Section 4980B of the
Code, Part 6 of Title I of ERISA or any other applicable federal, state or local
law or ordinance to all current and former Hotel Employees (and their spouses,
dependents and beneficiaries) with respect to whom a "qualifying event" (as such
term is defined under Sections 4980B(f)(3) of the Code or 603 of ERISA) or other
triggering event described under the applicable federal, state or local laws or
ordinances occurred on or before the Closing Date.
14.3.3 Buyer shall maintain supplies of claims forms necessary for
Hotel Employees to make claims under Employment Agreements that provide health,
medical or other welfare benefits with respect to occurrences commencing on or
prior to the Closing Date, and shall furnish such forms to the Hotel Employees
when needed and otherwise assist the Hotel Employees in presenting such claims.
14.4 Buyer and Seller intend by this Agreement to comply with Section
4204 of ERISA, so as to prevent Seller from incurring at the Closing Date a
complete or partial withdrawal in respect of any employee benefit plans, if any,
in which the Hotel Employees
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currently participate that are "multiemployer plans," as defined in Section
4001(a)(3) of ERISA (and which have been disclosed to Buyer on the Schedule of
Employment Agreements), determined as if Buyer is the "buyer" referred to in
such Section 4204. Accordingly, with respect to such multiemployer plans, Buyer
agrees as follows:
(A) For the first plan year of each such multiemployer plan
commencing after the Close of Escrow, and for each of the succeeding four plan
years for each such plan, Buyer shall assume the obligation to contribute to
each such plan with respect to operations conducted with business assets
acquired from Seller for substantially the same number of contribution base
units (as defined in Section 4001(a)(11) of ERISA) for which Seller had an
obligation to contribute to such plan.
(B) Prior to each such multiemployer plan's first plan year
beginning after the Close of Escrow, Buyer shall apply to such plan for a
variance from the requirement of Section 4204(a)(1)(b) of ERISA, that a bond be
obtained or an amount be held in escrow as provided in said Section. In the
event any such plan determines that the request does not qualify for a variance
on it, Buyer shall obtain any required bond or establish any required escrow
within thirty (30) days after the date on which it receives notice of the plan's
decision, and shall maintain such bond or escrow until the earliest of: (i) the
date a variance is obtained from the plan; (ii) the date a variance or exemption
is obtained from the Pension Benefit Guaranty Corporation; or (iii) the last day
of the fifth (5th) plan year commencing after the Close of Escrow; which bond or
escrow shall be paid to such plan if Buyer withdraws therefrom or fails to make
a contribution to such plan when due, at any time during the first (1st) five
(5) plan years of such plan beginning after the Closing Date. In order to comply
with subsection (a)(1)(C) of such Section 4204, if Buyer withdraws in a complete
withdrawal or a partial withdrawal from any multiemployer plan with respect to
which Buyer has assumed an obligation to contribute pursuant to this Agreement
and such withdrawal or partial withdrawal occurs during the five (5) plan years
commencing with the first (1st) plan year beginning after the date of the Close
of Escrow, Seller shall be secondarily liable for any withdrawal liability it
would have had to such multiemployer plan on the date of the Close of Escrow
under Title IV of ERISA. Buyer agrees to provide Seller with reasonable advance
notice of its anticipated failure to pay any withdrawal liability and to furnish
Seller promptly with a copy of any notice of withdrawal liability it may receive
with respect to such plans.
14.5 Indemnification. Buyer and Seller (as applicable, the
"Indemnitor") agrees to indemnify, defend, protect and hold the other and, the
Employer Corporation in the case of Seller, and their directors, officers,
agents, affiliates, principals, partners, shareholders, representatives and
controlling persons (as applicable, the "Indemnitee") harmless from and against
any and all claims, damages, liabilities, losses, and expenses, (including
attorneys' fees and costs) paid, suffered or incurred by the Indemnitee, arising
out of or related to Indemnitor's failure to comply with any of the covenants,
obligations, or duties contained in SECTION 14.
14.6 Survival. The provisions of this SECTION 14 shall survive the
Close of Escrow.
SECTION 15
COOPERATION
15.1 Seller has advised Buyer that it may be necessary after the Close
of Escrow for Seller (or its representatives) to audit the Records and Plans
with respect to the period prior to the Closing Date. In addition, Seller may
require access to the such Books and Records in connection with any litigation
by or against Seller and its Affiliates with respect to the Property,
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any tax audit, examination or challenge or similar proceeding, or any
calculation of sums payable under SECTION 5. Accordingly, Buyer hereby: (i)
agrees to retain the Records and Plans with respect to the period prior to the
Closing Date at the Property for a period of seven (7) years after the Close of
Escrow or such additional period as may reasonably be requested by Seller; (ii)
grants Seller, its Affiliates and their respective representatives access to the
such Records and Plans and the Property after the Close of Escrow, at reasonable
times and upon reasonable prior notice, for such purposes; (iii) subject to the
rights of guests in guest rooms, tenants under tenant leases, grants Seller, its
Affiliates, and their respective representatives access to the Property after
the Close of Escrow for the purpose of conducting such inspections and/or
testing (including destructive testing) of the Property as may be necessary or
advisable in connection with any litigation and other proceedings to which
Seller is a party (provided that Seller shall give Buyer prior notice of the
scope of such inspections and testing) which shall be scheduled for such periods
as shall be reasonably agreeable to the parties;
15.1.1 All inspections fees, appraisal fees, engineering fees and
other expenses of any kind relating to the inspection of the Property by Seller
or Seller's Affiliate will paid for by Seller and/or Seller's Affiliate.
15.1.2 Prior to Seller or Seller's Affiliate's entry on the
Property for the purpose of conducting inspections and/or tests, Seller or
Seller's Affiliate shall provide Buyer with certificates of insurance from
Seller's agents from an insurance carrier and for such risks and policy limits
as Seller shall reasonably approve.
15.1.3 Seller agrees to keep the Property free from any liens
arising out of or in connection with such testing and inspection.
15.1.4 Seller, shall, at its sole cost and expense, clean up and
repair the Property as reasonably necessary, after Seller's or Seller's agents,
entry thereon.
15.1.5 Seller shall hold harmless, indemnify and defend Buyer for
all losses relating to any action by Seller, its Affiliates and/or agents at or
on the Property after the Closing; [and]
15.1.6 Buyer agrees to cooperate with Seller, its Affiliates and
their respective representatives in connection with any such litigation or
proceedings with respect to the Property, any such tax audit, examination or
challenge or similar proceeding, or any such calculation of sums payable under
SECTION 5, said cooperation to be at no material cost or expense to Buyer; and
15.2 Seller shall cooperate with Buyer in connection with the
assignment of all transferable Licenses and Permits to Buyer and the application
for and procurement of replacements of any non-transferable Licenses and
Permits.
SECTION 16
NOTICES
16.1 Addresses. Whenever any notice, demand or request is required or
permitted hereunder, such notice, demand or request shall be made in writing and
shall be (a) sent via a nationally recognized overnight courier service fully
prepaid, (b) deposited in the United States by mail, registered or certified,
return receipt requested, postage prepaid, or (c) sent via telefacsimile,
provided that the original of such notice, demand or request shall also be sent
via one of the methods described in (a) and (b) above, in each case to the
addressees (and individuals) set forth below:
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As to Seller:
D.C. Overnight Partners, L.P.
c/o Al Anwa USA International
1925 Century Park East
Suite 1900
Los Angeles, CA 90067
Attn: General Counsel
Telefacsimile: (310) 229-2939
With a copy to Seller's Additional Addressees:
Gordon Eng, Esq.
19191 S. Vermont Avenue
Suite 420
Torrance, CA 90502
Telefacsimile: (310) 207-1006
Morrison & Foerster LLP
555 West Fifth Street, Suite 3500
Los Angeles, CA 90013-1024
Attn: Thomas R. Fileti, Esq.
Telefacsimile: (213) 892-5454
As to Buyer:
Starwood Lodging Corporation
Starwood Lodging Trust
2231 E. Camelback Road
Suite 400
Phoenix, AZ 85016
Attn: Steven R. Goldman
Telefacsimile: (602) 852-0115
With a copy to Buyer's Additional Addressee:
Greenberg Traurig Hoffman Lipoff Rosen & Quentel
153 East 53rd Street
New York, NY 10022
Attn: Andrew E. Zobler, Esq.
Telefacsimile: (212) 223-7161
As to Escrow Holder:
Chicago Title Insurance Company
700 South Flower Street, Suite 900
Los Angeles, CA 90017
Attn: Maggie Watson
Telefacsimile: (213) 488-4388
16.2 Receipt of Notices. Any notice, demand or request that shall be
delivered to
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Buyer and its Additional Addressee in the manner aforesaid shall be deemed
sufficiently given to and received by Buyer for all purposes hereunder, and any
notice, demand or request that shall be delivered to Seller and its Additional
Addresses in the manner aforesaid shall be deemed sufficiently given to and
received by Seller for all purposes hereunder (i) the next business day
following the day such notice, demand or request is delivered by a nationally
recognized overnight courier service fully prepaid, to such party and its
Additional Addressee, (ii) if sent via registered or certified mail, at the time
of receipt by such party and its Additional Addressee, or (iii) if sent via
telefacsimile, as of the date and time stated upon confirmation reports
generated by the sending party's telefacsimile machine confirming the delivery
of such notice, demand or request to such party and its Additional Addressee.
16.3 Refusal of Delivery. The inability to deliver any notice, demand
or request because the individual to whom it is properly addressed in accordance
with this SECTION 16 refused delivery thereof or no longer can be located at
that address shall constitute delivery thereof to such individual.
16.4 Change of Address. Each party shall have the right from time to
time to designate by written notice to the other parties hereto such other
person or persons and such other place or places as said party may desire
written notices to be delivered or sent in accordance herewith.
SECTION 17
GENERAL PROVISIONS
17.1 Amendment. Except as provided in SECTION 4.1, no provision of this
Agreement or of any documents or instrument entered into, given or made pursuant
to this Agreement may be amended, changed, waived, discharged or terminated
except by an instrument in writing, signed by the party against whom enforcement
of the amendment, change, waiver, discharge or termination is sought.
17.2 Time of Essence. All times provided for in this Agreement for the
performance of any act will be strictly construed, time being of the essence.
17.3 Entire Agreement. This Agreement and other documents delivered at
Closing, set forth the entire agreement and understanding of the parties in
respect of the transactions contemplated by this Agreement, and supersede all
prior agreements, arrangements and understandings relating to the subject matter
hereof and thereof. No representation, promise, inducement or statement of
intention has been made by Seller or Buyer which is not embodied in this
Agreement, or in the attached Exhibits or the written certificates, schedules or
instruments of assignment or conveyance delivered pursuant to this Agreement,
and neither Buyer nor Seller shall be bound by or liable for any alleged
representations, promise, inducement or statement of intention not therein so
set forth.
17.4 No Waiver. No failure of any party to exercise any power given
such party hereunder or to insist upon strict compliance by the other party with
its obligations hereunder shall constitute a waiver of any party's right to
demand strict compliance with the terms of this Agreement.
17.5 Counterparts. This Agreement, any document or instrument entered
into, given or made pursuant to this Agreement or authorized hereby, and any
amendment or supplement thereto may be executed in two or more counterparts,
and, when so executed, will have the same force and effect as though all
signatures appeared on a single document. Any signature page of this Agreement
or of such an amendment, supplement, document or instrument may be detached
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from any counterpart without impairing the legal effect of any signatures
thereon, and may be attached to another counterpart identical in form thereto
but having attached to it one or more additional signature pages.
17.6 Costs and Attorneys' Fees. If any legal action or any arbitration
or other proceeding is brought for the enforcement of this Agreement or any
document or instrument entered into, given or made pursuant to this Agreement or
authorized hereby or thereby (including, without limitation, the enforcement of
any obligation to indemnify, defend or hold harmless provided for herein or
therein), or because of an alleged dispute, default, or misrepresentation in
connection with any of the provisions of this Agreement or of such document or
instrument, or if Escrow Holder commences any action with respect to the
Escrow(s), the successful or prevailing party shall be entitled to recover
actual attorneys' fees, charges and other costs incurred in that action or
proceeding, in addition to any other relief to which it may be entitled.
17.7 Payments; Interests. Except as otherwise provided herein, payment
of all amounts required by the terms of this Agreement shall be made in the
United States and in immediately available funds of the United States of America
which, at the time of payment, is accepted for the payment of all public and
private obligations and debts. Unless the parties otherwise agree, payments
shall be made through the Escrow Holder. If any payment due under this Agreement
is not paid when due, it shall thereafter bear interest at a variable rate equal
to the rate announced from time to time by Citibank, N.A. as its prime or
reference rate, plus five percent (5%) per annum, but in no event more than the
maximum rate, if any, allowed by law to be charged by the party receiving the
interest on such type of indebtedness.
17.8 Transfer By Buyer. Buyer shall not have the right to assign this
Agreement, but shall be permitted to designate an Affiliate or Affiliates to
take title to the Property. In the event that Buyer elects to so designate any
Affiliate or Affiliates to take title to the Property hereunder, (i) Buyer shall
upon close of Escrow be released of all obligations hereunder other than
pursuant to SECTION 6, SECTION 7.1, SECTION 10, SECTION 17.18, SECTION 17.19 and
SECTION 17.20 or arising prior to the Close of Escrow, (ii) such Affiliate or
Affiliates shall assume all of Buyer's obligations hereunder; and (iii) such
Affiliate of Affiliates shall represent and warrant to Seller that such entities
are duly organized and validly existing and otherwise as to the matters covered
in SECTION 6.1.1 and SECTION 6.1.2 as applicable.
17.9 Parties in Interest. Subject to SECTION 17.8, the rights and
obligations of the parties hereto shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors, assigns, heirs
and the legal representatives of their respective estates. Nothing in this
Agreement is intended to confer any right or remedy under this Agreement on any
person other than the parties to this Agreement and their respective successors
and permitted assigns, or to relieve or discharge the obligation or liability of
any person to any party to this Agreement or to give any person any right of
subrogation or action over or against any party to this Agreement.
17.10 Applicable Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the state in which the Real Property
is located without giving effect to the conflict-of-law rules and principles of
that state.
17.11 Incorporation of Recitals and Exhibits. The Recitals and Exhibits
attached to this Agreement are incorporated into and made a part of this
Agreement.
17.12 Construction of Agreement. The language in all parts of this
Agreement shall be
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in all cases construed simply according to its fair meaning and not strictly for
or against any of the parties hereto. Headings at the beginning of sections of
this Agreement are solely for the convenience of the parties and are not a part
of this Agreement. When required by the context, whenever the singular number is
used in this Agreement, the same shall include the plural, and the plural shall
include the singular, the masculine gender shall include the feminine and neuter
genders, and vice versa. As used in this Agreement, the term "Seller" shall
include the respective permitted successors and assigns of Seller, and the term
"Buyer" shall include the permitted successors and assigns of Buyer, if any.
17.13 Severability. If any term or provision of this Agreement is
determined to be illegal, unconscionable or unenforceable, all of the other
terms, provisions and sections hereof will nevertheless remain effective and be
in force to the fullest extent permitted by law.
17.14 Announcements. Seller and Buyer shall consult with each other and
provide each other One (1) Business Day prior notice with regard to all press
releases and other announcements issued at or prior to the Close of Escrow and
during the one year period thereafter concerning the existence of this Agreement
or the sale of the Property and, except as permitted under SECTION 17.19,
neither Seller nor Buyer shall issue any such press release or other such
publicity prior to the Close of Escrow without the prior written consent of the
other party, which consent may be withheld in such other party's sole and
absolute discretion. Buyer will not issue any public announcement with respect
to Seller (other than to describe the transaction contemplated hereby to the
extent permitted hereunder) without the prior written consent of Seller which
may be withheld in its sole and absolute discretion. The agreements of the
parties in this SECTION 17.14 shall survive the Close of Escrow or any
termination of this Agreement.
17.15 Submission of Agreement. The submission of this Agreement to
Buyer or its broker, agent or attorney for review or signature does not
constitute an offer to sell the Property to Buyer or the granting of an option
or other rights with respect to the Property to Buyer. No agreement with respect
to the purchase and sale of the Property shall exist, and this writing shall
have no binding force or effect, until this Agreement shall have been executed
and delivered by Buyer and by Seller and Buyer shall have deposited the Deposit
with Escrow Holder.
17.16 Further Assurances. Buyer and Seller agree to execute such
instructions to the Escrow Holder and such other instruments and take such
further actions either before or after the Close of Escrow as may be reasonably
necessary to carry out the provisions of this Agreement provided that no
material additional cost or liability shall be created thereby.
17.17 Cooperation. Buyer and Seller shall cooperate with the other to
carry out the purpose of this Agreement (provided, such cooperation shall not
require either party to expend any sum not otherwise required pursuant to the
other provisions of this Agreement). This SECTION 17.17 shall survive the Close
of Escrow.
17.18 Moratorium on Re-Sale. Buyer covenants and agrees that it will
not sell the Property to Marriott International, Inc., Host Marriott, the Ritz
Carlton Hotel Company, L.L.C. or any of their respective affiliates, successors
and assigns, or any other party that Buyer reasonably believes will sell, and/or
operate the Property pursuant to a franchise or operating agreement with any of
the above-described entities, (collectively, "Excluded Parties") during the
period (the "Transfer Restriction Period") commencing upon the Close of Escrow
and expiring upon the later of (a) five (5) years following the Close of Escrow
and (b) settlement of or the final non-appealable judgment is issued in
connection with the existing litigation between Seller
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and the Ritz Carlton Hotel Company, LLC and their respective affiliates and
shall cause any permitted purchaser of the Property during the Transfer
Restriction Period to covenant and agree not to sell the Property to any
Excluded Party for the balance of the Transfer Restriction Period. The
provisions of this SECTION 17.18 shall be specifically enforceable. Buyer hereby
waives any requirement for Seller to post a bond in order to seek or obtain any
temporary restraining order or other injunctive relief pursuant to this SECTION
17.18. The parties acknowledge and agree that the provisions of this Section
17.18 form a material part of the consideration to Seller for entering into this
Agreement. The parties agree that these provisions are reasonable in light of
Seller's ongoing litigation with Ritz Carlton Hotel Company and its affiliates.
17.19 Confidentiality. Buyer shall hold as confidential all information
concerning the transaction contemplated by this Agreement, Seller and the
Property disclosed in connection with this transaction and Buyer shall not,
prior to the Close of Escrow, release any such information relating to the
transaction, Seller or the Property to any governmental agencies or third
parties without Seller's prior written consent except as may be required by law
and in such case subject to the provisions of SECTION 17.14. Seller hereby gives
its consent to Buyer's disclosure of information relating to the transaction
contemplated hereby to Buyer's Counsel and other consultants, in each instance
to the extent reasonably necessary to verify information given to Buyer by
Seller or otherwise to carry out the purposes of this Agreement and provided in
each instance, such consultants agree in writing to be bound by the
confidentiality provisions of this SECTION 17.19. If the Close of Escrow shall
fail to occur for any reason, neither party shall issue any press release,
publicity or other public announcement of the subject matter of this Agreement,
or to make any other disclosure concerning the subject matter of this Agreement
(except as may be required by law and in such case subject to the provisions of
SECTION 17.14.), without the prior written consent of the other party, which
consent may be withheld in such other party's sole and absolute discretion. The
agreements of the parties in this SECTION 17.19 shall survive any termination of
this Agreement.
17.20 Interim Management Agreement. Seller shall provide Manager with a
notice of termination of the Management Agreement on January 2, 1998 or as soon
thereafter as Seller shall have obtained any required lender consent thereto.
Seller shall, on or prior to January 2, 1998, seek any required lender consents
and use all reasonable commercial efforts to obtain the same as promptly as
possible. Buyer and Seller shall enter into a management agreement with respect
to the Property in the form attached as EXHIBIT 17.20 hereto (the "Interim
Management Agreement") which shall be effective (and the Interim Management
Agreement shall be dated as of such effective date) on the earlier of (a) thirty
days from the date of the delivery to Manager of such termination notice, and
(b) the effective date of a written waiver of Manager of the notice of
termination required under the Management Agreement. Buyer shall advance any fee
payable to Manager under the Management Agreement on account of the termination
thereof up to $127,132.00. Buyer shall be deemed to have waived delivery of all
items under SECTIONS 4.2.1.15, 4.2.1.16, 4.2.1.17 and 4.2.1.19 in the event the
Management Agreement is terminated in accordance with the provisions of this
SECTION 17.20 prior to the Closing Date.
17.21 Starwood Lodging Trust. The parties hereto understand and agree
that the name "Starwood Lodging Trust" is a designation of the Trust and its
trustees (as trustees but not personally) under the Trust's Declaration of
Trust, and all persons dealing with the Trust shall look solely to the Trust's
assets for the enforcement of any claims against the Trust, and that the
Trustees, officers, agents and security holders of the Trust assume no personal
liability for
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obligations entered into on behalf of the Trust, and their respective individual
assets shall not be subject to the claims of any person relating to such
obligations.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, Buyer and Seller have caused this Agreement to be
executed as of the day and year first above written.
"Seller"
D.C. OVERNIGHT PARTNERS, L.P.,
a District of Columbia limited partnership
By: D.C. OVERNIGHT, INC. a District of Columbia
corporation, its sole General Partner
By: /s/ T. Ayoubi
----------------------
Name: Tarek Ayoubi
Its: President
"Buyer"
STARWOOD LODGING TRUST,
a Maryland real estate investment trust
By: /s/ Steven R. Goldman
----------------------
Name: Steven G. Goldman
Title: Senior Vice President
STARWOOD LODGING CORPORATION,
a Maryland corporation
By: /s/ Michael C. Mueller
----------------------
Name: Michael C. Mueller
Title: Vice President
"Escrow Agent"
CHICAGO TITLE INSURANCE COMPANY,
a Missouri corporation
By: /s/ Maggie G. Watson*
----------------------
Name: Maggie G. Watson
Title: Authorized Signatory
*Subject to receiving mutual instructions
in the event Paragraph #3.5 becomes operative
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TABLE OF CONTENTS
SECTION 1 - DEFINITIONS 1
1.1 Defined Terms 1
1.2 Other Definitional Provisions 10
SECTION 2 - PURCHASE AND SALE OF PROPERTY 10
SECTION 3 - PURCHASE PRICE; PAYMENT; BUYER'S DEFAULT; LIQUIDATED DAMAGES 11
3.1 Purchase Price 11
3.2 Payment 11
3.3 Investment of Escrowed Funds 11
3.4 Allocation of Purchase Price 12
3.5 Default by Buyer Prior to Closing; Liquidated Damages 12
SECTION 4 - ESCROW; CLOSING; COSTS 13
4.1 Escrow 13
4.2 Seller's Deliveries to Escrow Holder 13
4.2.1.1 Deed 13
4.2.1.2 Assignment and Assumption of Tenant Leases 13
4.2.1.3 General Assignment 13
4.2.1.4 Assignment and Assumption of Management Agreement 13
4.2.1.5 Bill of Sale 14
4.2.1.6 Stock Agreement 14
4.2.1.7 Liquor Licenses Management Agreement 14
4.2.1.8 [Intentionally Omitted] 14
4.2.1.9 [Intentionally Omitted] 14
4.2.1.10 [Intentionally Omitted] 14
4.2.1.11 [Intentionally Omitted] 14
4.2.1.12 [Intentionally Omitted] 14
4.2.1.13 Non-Foreign Person Certificate 14
4.2.1.14 Transfer Tax Forms 14
4.2.1.15 Certified Rent Roll 14
4.2.1.16 Certified Operating Statement 14
4.2.1.17 Guest Ledger 15
4.2.1.18 Closing Certificate 15
4.2.1.19 Schedule of Bookings 15
4.2.1.20 Title Requirements 15
4.2.1.21 Payoff Letters 15
4.2.1.22 Notices to Tenants 15
4.2.1.23 Opinion of Seller's Counsel 15
4.2.1.24 Other 15
4.3 Buyer's Deliveries to Escrow Holder 16
4.3.1.1 The Cash Purchase Price 16
4.3.1.2 Stock Certificates 16
4.3.1.3 Assignment and Assumption of Management Agreement 16
4.3.1.4 Value Letter 16
4.3.1.5 Opinion of Buyer's Counsel 16
4.3.1.6 Stock Agreement 16
<PAGE> 48
4.3.1.7 [Intentionally Omitted] 16
4.3.1.8 Liquor License Management Agreement 16
4.3.1.9 [Intentionally Omitted] 16
4.3.1.10 [Intentionally Omitted] 16
4.3.1.11 [Intentionally Omitted] 16
4.3.1.12 Closing Certificate 16
4.3.1.13 The Assignment and Assumption of Tenant Leases 17
4.3.1.14 The General Assignment and Assumption Agreement 17
4.3.1.15 Transfer Tax Forms 17
4.3.1.16 Other 17
4.4 Seller's Deliveries to Buyer 17
4.4.1 Tenant Leases/Tenant Deposits 17
4.4.2 Service Contracts 17
4.4.3 Licenses and Permits 17
4.4.4 Records and Plans 17
4.5 Possession 17
4.6 Evidence of Authorization 17
4.7 Close of Escrow 18
4.8 Costs of Escrow 18
4.9 Other Costs 19
4.10 Maintenance of Confidentiality by Escrow Holder 19
SECTION 5 - PRORATIONS AND ASSUMPTION OF OBLIGATIONS 20
5.1 General 20
5.2 General and Specific Prorations 20
5.3 Deposits 22
5.4 Tenant Leases 22
5.5 Service Contracts and Other Intangible Property 23
5.6 Tax Refunds and Proceedings 23
5.7 Guest Baggage 23
5.8 Safe Deposit Boxes 23
5.9 Advance Bookings 24
5.10 [Intentionally Omitted] 24
SECTION 6 - REPRESENTATIONS AND WARRANTIES; CONDITION OF PROPERTY 24
6.1 Of the Trust 24
6.1.1 Power and Authority 24
6.1.2 Authorization; Valid Obligation 24
6.1.3 Capital Structure 24
6.1.4 SEC Documents and Other Reports 25
6.1.5 Absence of Certain Changes or Events 25
6.1.6 Actions and Proceedings 25
6.1.7 REIT Status 26
6.1.8 Partnership Status 26
6.1.9 Hart-Scott-Rodino Act 26
6.2 Of the Corporation 26
48
<PAGE> 49
6.2.1 Power and Authority 26
6.2.2 Authorization; Valid Obligation 26
6.2.3 Capital Structure 27
6.2.4 SEC Documents and Other Reports 27
6.2.5 Absence of Certain Changes or Events 27
6.2.6 Actions and Proceedings 28
6.2.8 Hart-Scott-Rodino 28
6.3 Of Seller 28
6.3.1 Regarding Seller's Authority 28
6.3.2 Tenant Leases 29
6.3.3 Service Contracts 29
6.3.4 Claims 29
6.3.5 Employees 29
6.3.6 Compliance with Laws 30
6.3.7 Hazardous Materials 30
6.3.8 Records and Plans 30
6.3.9 Licenses and Permits 30
6.3.10 Management Agreements 30
6.3.11 Personal Property 30
6.3.12 Insurance 30
6.3.13 Real Estate Taxes 31
6.3.14 [Intentionally Omitted] 31
6.3.15 [Intentionally Omitted] 31
6.3.16 District of Columbia Underground Storage Tank Disclosure Notice 31
6.4 Buyer's Review of Records and Plans 31
6.4.1 Access to Records and Plans; Specific Disclosures 31
6.4.2 Limitation on Access to Records and Plans 31
6.5 PURCHASE AS IS 32
6.6 Limitation on Representations and Warranties of Seller 34
6.7 Right to Supplement Disclosures 34
6.8 Basket 35
6.9 Survival 35
6.10 Soil Disclosure 35
SECTION 7 - TITLE TO THE REAL PROPERTY: EXTENSION OF THE CLOSING 35
7.1 Buyer's Review of Title 35
7.1.1 Failure to Satisfy Certain Closing Conditions; Monetary Liens 36
7.1.2 [Intentionally Omitted] 36
7.2 Title Insurance Policy 37
7.3 Title to Real Property 37
SECTION 8 - INTERIM ACTIVITIES 37
SECTION 9 - CONDITIONS PRECEDENT TO CLOSING 38
9.1 Conditions Precedent to Buyer's Obligations 38
49
<PAGE> 50
9.1.1 Seller's Deliveries 38
9.1.2 Title Policy 38
9.1.3 Performance Under Related Agreements 38
9.1.4 [Intentionally Omitted] 38
9.1.5 Seller Performance 38
9.1.6 Representations and Warranties of Seller 38
9.2 Conditions Precedent to Seller's Obligations 38
9.2.1 Funds and Documents 38
9.2.2 Representations and Warranties of Buyer 39
9.2.3 No Material Changes 39
9.2.4 [Intentionally Omitted] 39
9.2.5 Performance Under Related Agreements 39
9.3 Failure of Condition 39
SECTION 10 - BROKER 40
SECTION 11 - REMEDIES FOR SELLER'S DEFAULT 40
11.1 Buyer's Remedies in General 40
11.2 MATERIAL INDUCEMENT 40
SECTION 12 - DAMAGE TO OR DESTRUCTION OF THE PROPERTY 41
12.1 Insured Casualty 41
12.2 Uninsured Casualty 41
SECTION 13 - CONDEMNATION 42
SECTION 14 -EMPLOYEES 42
14.1 Hiring of Hotel Employees; WARN Act Compliance 42
14.2 Collective Bargaining Agreements 43
14.3 Continuation of Benefits 44
14.5 Indemnification 45
14.6 Survival 45
SECTION 15 - COOPERATION 46
SECTION 16 - NOTICES 47
16.1 Addresses 47
16.2 Receipt of Notices 48
16.3 Refusal of Delivery 48
16.4 Change of Address 49
SECTION 17 - GENERAL PROVISIONS 49
17.1 Amendment 49
17.2 Time of Essence 49
17.3 Entire Agreement 49
17.4 No Waiver 49
17.5 Counterparts 49
17.6 Costs and Attorneys' Fees 49
17.7 Payments; Interests 50
17.8 Transfer By Buyer 50
17.9 Parties in Interest 50
17.10 Applicable Law 50
17.11 Incorporation of Recitals and Exhibits 50
50
<PAGE> 51
17.12 Construction of Agreement 50
17.13 Severability 51
17.14 Announcements 51
17.15 Submission of Agreement 51
17.16 Further Assurances 51
17.17 Cooperation 51
17.18 Moratorium on Re-Sale 51
17.19 Confidentiality 52
17.20 Interim Management Agreement 52
51
<PAGE> 52
EXHIBITS
Exhibit A Legal Description
Exhibit B Memorandum of Contract
Exhibit 4.2.1.1 Deed
Exhibit 4.2.1.2 Assignment and Assumption of Tenant Leases
Exhibit 4.2.1.3 General Assignment and Assumption Agreement
Exhibit 4.2.1.4 Assignment and Assumption of Management Agreement
Exhibit 4.2.1.5(a) Bill of Sale for Capitalized Tangible Property
Exhibit 4.2.1.5(b) Bill of Sale for Expensed Tangible Property
Exhibit 4.2.1.6 Stock Agreement
Exhibit 4.2.1.7 Liquor License Management Agreement
Exhibit 4.2.1.13 Non-Foreign Person Certificate
Exhibit 6.3.16 District of Columbia Storage Tank Disclosure
Exhibit 17.20 Interim Management Agreement
SCHEDULES
Schedule 1.1.1 Approved Service Contracts
Schedule 1.1.2 Employment Agreements
Schedule 1.1.3 Equipment Leases
Schedule 1.1.4 Excluded Property
Schedule 1.1.5 [Intentionally Omitted]
Schedule 1.1.6 Hotel Employees
Schedule 1.1.7 Schedule of Tenant Leases
Schedule 1.1.8 Seller's Due Diligence and Seller's Knowledge
Schedule 1.1.9 Specific Disclosure Matters
Schedule 6.3.2 Material Defaults Under Tenant Lease
Schedule 6.3.3 Material Defaults Under Approved Service Contracts
Schedule 6.3.4 Material Claims
Schedule 6.3.5 Material Defaults Under Employment Agreements
Schedule 6.3.6 Material Violations
Schedule 6.3.7 Material Environmental Conditions
Schedule 6.3.9 Licenses and Permits
Schedule 6.3.12 Seller's Insurance
Schedule 6.3.13 Pending Tax Protests
Schedule 7.3 Permitted Encumbrances
Schedule 14.2 Collective Bargaining Agreements
52
<PAGE> 1
Exhibit 10.60
STOCK AGREEMENT
by and among
D.C. OVERNIGHT PARTNERS, L.P.
a District of Columbia limited partnership
as Stock Purchaser
and
STARWOOD HOTELS & RESORTS TRUST,
a Maryland real estate investment trust
and
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.,
a Maryland corporation,
Dated as of January 15, 1998
<PAGE> 2
STOCK AGREEMENT
THIS STOCK AGREEMENT (this "Agreement") is entered into as of
January 15, 1998 (the "Closing Date") by and between D.C. OVERNIGHT PARTNERS,
L.P., a District of Columbia limted partnership, ("Stock Purchaser"), STARWOOD
HOTELS & RESORTS TRUST, a Maryland real estate investment trust (the "Trust"),
and STARWOOD HOTELS & RESORTS WORLDWIDE, INC., a Maryland corporation (the
"Corporation", and, with the Trust, "Starwood Lodging").
R E C I T A L S
A. Stock Purchaser has agreed to acquire from Starwood
Lodging, and Starwood Lodging has agreed to issue and deliver to Stock
Purchaser, Paired Shares in partial consideration for certain assets owned by
Stock Purchaser.
B. The parties desire to enter into this Agreement in order to
set forth certain terms and conditions under which the Paired Shares are to be
issued to and held by Stock Purchaser.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and agreements contained in this Agreement and for other good and
valuable consideration, the receipt and adequacy of which are hereby mutually
acknowledged, Starwood Lodging and Stock Purchaser agree as follows:
SECTION 1
DEFINITIONS
1.1 Defined Terms.
"Accredited Investor" shall have the meaning ascribed to that
term in Rule 501 promulgated by the SEC under the Securities Act.
"Affiliate" shall mean, with respect to any Person, any other
Person that controls, is controlled by or is under common control with such
first Person.
"Applicable Percentage" shall mean: (a) if Starwood Lodging
delivers Registered Shares to Stock Purchaser pursuant to Section 2.1 hereof,
100% and (b) if Starwood Lodging delivers Unregistered Shares pursuant to
Section 2.1 hereof, 91.95%.
"Business Day" shall mean any day on which the New York Stock
Exchange is open for business.
"Closing Date" shall mean the date hereof.
"Equity Value" shall mean One Million Six Hundred Fifty-Five
Thousand One Hundred Dollars ($1,655,100), divided by the Applicable Percentage,
rounded to the nearest whole number.
"ITT Closing" shall have the meaning set forth in the
Registration Rights Agreement.
"Joinder Agreement" means an agreement to be bound by this
Agreement in the form of Attachment A hereto.
"LIBOR" means the average of the interbank offered rates for
three-month dollar
<PAGE> 3
deposits in the London market based on quotations at five (5) major banks, as
published from time to time in The Wall Street Journal. If The Wall Street
Journal ceases to publish such a compilation of interbank offered rates, or if
The Wall Street Journal ceases to be published, then Starwood Lodging shall
propose a substitute method of determining the interest rate generally known as
the three-month LIBOR rate, which method, absent manifest error, shall be
binding on all holders of the Subject Shares and Starwood Lodging.
"Lock Price" shall mean the Market Price as of the Closing
Date, provided, however, that in the event that, at any time during the period
between December 30, 1997 and the Settlement Date, the Corporation or the Trust
effects any reclassification, stock split or stock dividend with respect to
their stock, any change or conversion of stock into other securities, or any
other dividend or distribution with respect to the Paired Shares, other than (i)
dividends contemplated by the Starwood Lodging Disclosure in effect as of
December 30, 1997, or (ii) dividends in the aggregate not to exceed the greater
of (a) the current rate (as of December 30, 1997) of their dividends (together
with any increases in such rate in the ordinary course) and (b) the Trust's
"real estate investment taxable income" (as such term is defined for purposes of
the Internal Revenue Code) without regard to any net capital gains or the
deduction for dividends paid, appropriate and proportionate adjustments shall be
made to the Lock Price.
"Market Price" shall mean, as of any date, the average closing
prices of the Paired Shares on the New York Stock Exchange during the ten
consecutive Business Days immediately preceding such date.
"Open Market Sale" means one or more sales of Stock Agreements
Shares (including "short sales" initiated with the intention of delivering Stock
Agreements Shares) made or proposed to be made by placing one or more sale
orders or offers to sell with one or more securities brokers or dealers with a
view toward the consummation of one or more sale transactions that are required
to be, or that actually are, reported to the New York Stock Exchange or the
National Association of Securities Dealers.
"Orderly Market Disposition" means the sale of Stock
Agreements Shares by placing one or more sell orders with one or more securities
brokers or dealers with a view toward the disposition in the market of such
Stock Agreements Shares.
"Other Stock Agreements" shall mean, collectively, (i) that
certain Stock Agreement, dated as of January 15, 1998, among Savanah Limited
Partnership, as stock purchaser, and Starwood Lodging, (ii) that certain Stock
Agreement, dated as of January 15, 1998, among New Remington Partners, as stock
purchaser, and Starwood Lodging, and (iii) that certain Stock Agreement, dated
as of January 15, 1998, among N.Y. Overnight Partners, L.P., as stock purchaser,
and Starwood Lodging.
"Paired Shares" shall mean one share of beneficial interest,
par value $.01 per share, of the Trust, and one share of common stock, par value
$.01 per share, of the Corporation that are subject to the Pairing Agreement.
For purposes of calculating the number of Paired Shares to be delivered
hereunder, each pair of the shares of the stock of the Trust and the Corporation
shall be considered one share.
"Pairing Agreement" shall mean the Pairing Agreement dated as
of June 25, 1980, as amended, between the Trust and the Corporation providing,
in relevant part, for the pairing of all outstanding shares of the Corporation
and the Trust.
"Payment Rights" shall have the meaning set forth in Section 5
hereof.
"Person" shall have the meaning set forth in the Registration
Rights Agreement.
"Proposed Disposition Shares" shall have the meaning set forth
in Section 3 hereof.
<PAGE> 4
"Put Price" and "Put Right" shall have the meaning set forth
in Section 2.4 hereof.
"Registered Shares" means Subject Shares the issuance of which
to Stock Purchaser has been registered under the Securities Act.
"Registration Rights Agreement" means the Registration Rights
Agreement by and among Stock Purchaser, the Trust and the Corporation in the
form of Attachment B hereto.
"Registration Statement" shall have the meaning set forth in
the Registration Rights Agreement.
"Required Effectiveness Date" shall have the meaning set forth
in the Registration Rights Agreement.
"Response Date" shall have the meaning set forth in Section 3
hereof.
"Restricted Group" shall mean two (2) or more Restricted
Holders acting in concert or under common direction.
"Restricted Holder" shall mean Stock Purchaser and any other
Person who shall have acquired any Stock Agreements Shares in a Transfer not
constituting an Open Market Sale. A Restricted Holder shall not include any
Person who shall have acquired any Stock Agreements Shares in a Transfer not
constituting an Open Market Sale if such Transfer occurs after the first Open
Market Sale of such Stock Agreements Shares.
"Sale Notice" shall have the meaning set forth in Section 3
hereof.
"SEC" shall mean the United States Securities and Exchange
Commission.
"SEC Documents" means all documents required to have been
filed by the Trust or the Corporation with the SEC since January 1, 1996 and
through the date hereof.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Settlement Date" shall mean, if Starwood Lodging shall
deliver Unregistered Shares pursuant to Section 2.1 hereof, the date on which
Starwood Lodging or its counsel shall notify Stock Purchaser that (i) the
Registration Statement has been declared effective by the SEC, (ii) that the
Subject Shares have been registered, on the terms and subject to the provisions
of the Registration Rights Agreement, for Transfer by the selling shareholders
named therein in Open Market Sales and in such other manner as is provided in
the Registration Statement, and (iii) that Starwood Lodging has completed all
deliveries and other actions required to enable trading of the Subject Shares on
the New York Stock Exchange; provided, however, that if such notice is given
later than 1:00 PM Eastern Time, the Settlement Date shall be deemed for all
purposes to occur on the Business Day following the date of such notice.
"Starwood Lodging Disclosure" shall mean, collectively, the
Form S-3 filed by the Corporation and the Trust with the SEC on November 12,
1997, and the Form S-4 filed by the Corporation and the Trust with the SEC on
November 20, 1997, as the same has been or may hereafter be amended by any
filing with the SEC made by the Trust or the Corporation.
"Stock Agreements Shares" shall mean the aggregate of the
Subject Shares and the other Paired Shares delivered pursuant to the Other Stock
Agreements.
<PAGE> 5
.
"Stock Purchaser Affiliates" shall have the meaning set forth
in Section 6.1 hereof.
"Subject Shares" means the 32,291 Paired Shares delivered by
Starwood Lodging pursuant to Section 2.1 hereof.
"Transfer" shall have the meaning set forth in the
Registration Rights Agreement.
"Transfer Agent" shall mean the transfer agent for the Paired
Shares.
"Unregistered Shares" means Subject Shares the issuance of
which to Stock Purchaser has not been registered under the Securities Act.
1.2 Other Definitional Provisions. The terms "hereof,"
"hereto," "hereunder" and similar terms when used in this Agreement shall refer
to this Agreement generally, rather than to the section in which such term is
used, unless otherwise specifically provided. Unless the context otherwise
requires, any defined term used in the plural shall refer to all members of the
relevant class, and any defined term used in the singular shall refer to any one
or more of the members of the relevant class.
SECTION 2
CALCULATION OF SUBJECT SHARES
2.1 Calculation of Subject Shares. Starwood Lodging shall
deliver to Stock Purchaser on the Closing Date Paired Shares in an amount equal
to the Equity Value divided by the Lock Price. Starwood Lodging shall have the
option to deliver Registered Shares or Unregistered Shares on the Closing Date.
2.2 Delivery Requirements for Paired Shares. The Paired
Shares to be delivered hereunder shall be properly endorsed and certificated
Paired Shares in the amount required to be delivered in accordance with the
provisions of this Agreement. If Registered Shares are delivered, such shares
shall be unlegended and fully and freely transferable without any consent of,
registration with or notice to any Person (except as provided for in Sections 3
and 4 hereof and in the Pairing Agreement). If Unregistered Shares are issued,
each certificate evidencing Subject Shares shall be stamped or otherwise
imprinted with a legend in substantially the following form (and no other
restrictive legends):
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT. THE SALE, PLEDGE OR OTHER TRANSFER OF THIS CERTIFICATE OR
THE SHARES EVIDENCED HEREBY IS SUBJECT TO THE TERMS OF A
REGISTRATION RIGHTS AGREEMENT DATED AS OF
JANUARY 15, 1998 BETWEEN THE ISSUER AND THE
HOLDER HEREOF.
There shall be no legend on the Paired Shares reflecting the restrictions in
Sections 3 or 4 hereof.
2.3 Other Deliveries. Concurrently with the delivery of the
Paired Shares, Starwood Lodging shall deliver to Stock Purchaser any statements,
such as a transfer or
<PAGE> 6
conveyance tax forms or returns required by applicable federal or New York law
to be executed by Starwood Lodging, as may reasonably be requested by Stock
Purchaser in order to effect the delivery of the Subject Shares to Stock
Purchaser.
2.4 Registration Rights and Requirements.
(a) If Starwood Lodging delivers Unregistered Shares pursuant
to Section 2.1 hereof, Stock Purchaser and Starwood Lodging shall on the Closing
Date execute and deliver to each other the Registration Rights Agreement and the
parties thereto shall perform their respective obligations thereunder. If
Starwood Lodging delivers Registered Shares pursuant to Section 2.1 hereof, the
Registration Rights Agreement shall not be executed or delivered and none of the
parties shall have any obligations thereunder.
(b) If Starwood Lodging delivers Unregistered Shares pursuant
to Section 2.1 hereof, and if the Settlement Date shall not have occurred on or
before the seventh Business Day after the Required Effectiveness Date, Starwood
Lodging shall pay to each Restricted Holder, on the Settlement Date, an amount
equal to the "Interest Factor." For each Restricted Holder, the "Interest
Factor" shall be an amount equal to the product of (i) LIBOR plus 2% per annum
for each day after the seventh Business Day after the Required Effectiveness
Date to and including the earlier of the Settlement Date or the date that is 60
days after the Required Effectiveness Date, multiplied by (ii) the Market Price
multiplied by the number of Subject Shares held by such Restricted Holder on the
date of such payment.
(c) In the event that the Settlement Date shall not have
occurred by the date that is 60 days after the Required Effectiveness Date, each
Person who is a Restricted Holder as of such date shall have the
non-transferrable right (its "Put Right"), exercisable at any one time for each
such Restricted Holder after such 60th day and through the earlier to occur of
(i) the Settlement Date, and (ii) the day immediately prior to the first
anniversary of the Closing, to "put" some or all of the Subject Shares held by
such Restricted Holder to Starwood Lodging for an amount per share equal to the
Put Price; provided, however, that the Put Right shall not be exercisable by any
Restricted Holder for a number of Subject Shares that is less than the lesser of
(i) 100,000, or (ii) the number of Subject Shares then held by such Restricted
Holder. Such right shall be exercised by such Restricted Holder giving Starwood
Lodging notice of its election to exercise its Put Right and the number of
Subject Shares to be purchased by Starwood Lodging, whereupon Starwood Lodging
shall purchase such shares at 9:00 a.m. (Eastern Time) on the second Business
Day following its receipt of such notice, with payment to be delivered (against
delivery to Starwood Lodging of such shares free of all rights of other Persons)
on the third Business Day thereafter in cash or immediately available funds to
such account as such Restricted Holder may designate in such notice. The Put
Price shall be the Market Price determined as of the date such notice is given.
Starwood Lodging shall have the right to satisfy its obligations under the Put
Rights by designating another Person as the purchaser of such shares, and such
obligations shall be deemed satisfied upon such other Person's purchase of such
shares for the Put Price and at the time and in the manner set forth herein.
Such designation shall not affect Starwood Lodging's obligation to pay the
Interest Factor as provided herein.
(d) The Interest Factor and the right of each Restricted
Holder to receive the Put Price in the event it elects to exercise its Put Right
shall be each Restricted Holder's sole and exclusive monetary remedies arising
from Starwood Lodging's failure to cause the Settlement Date to occur on or
before the seventh Business Day after the Required Effectiveness Date and shall
be deemed liquidated damages in respect of such failure; and each Restricted
Holder shall be deemed to have waived its other monetary remedies. However, from
and after the seventh Business Day after the Required Effectiveness Date, each
Holder shall at all times have such equitable remedies as may be available under
applicable law.
<PAGE> 7
SECTION 3
NOTICE PROCEDURES REGARDING OPEN MARKET SALE
OF STOCK AGREEMENTS SHARES
3.1 If, at any time any Restricted Holder or Restricted Group
elects to Transfer, in an Open Market Sale, more than 100,000 Stock Agreements
Shares on any single Business Day (300,000 Stock Agreements Shares from and
after the first Business Day after the ITT Closing), prior to executing such
Transfer the designated representative of such Restricted Holder or Restricted
Group shall provide Starwood Lodging's representative, the Chief Financial
Officer of the Trust (or any successor representative identified by a notice
given hereunder), with telephonic notice at (602) 852-3900 along with a
confirmation of such notice by telefacsimile to Starwood Lodging and Starwood
Lodging's additional addressees as provided in Section 7.1 hereof. Such notice
(the "Sale Notice") shall indicate the number of Stock Agreements Shares which
such Restricted Holder or Restricted Group has determined to Transfer in an Open
Market Sale (the "Proposed Disposition Shares") on such day or days and shall
comply with Section 3.5 hereof (if applicable). Such notice shall be deemed
given on the Business Day the telephonic notice described above is given so long
as such notice is given by 5:00 P.M., Eastern time, on such day; if given after
that time, it shall be deemed given on the next Business Day. In the event that,
at any time while this Section 3.1 is in effect, the Corporation or the Trust
effects any reclassification, stock split or stock dividend with respect to
their stock, any change or conversion of stock into other securities, or any
other dividend or distribution with respect to the Paired Shares, other than (i)
dividends contemplated by the Starwood Lodging Disclosure as in effect on
December 30, 1997, or (ii) dividends in the aggregate not to exceed the greater
of (a) the current rate (as of December 30, 1997) of their dividends (together
with any increases in such rate in the ordinary course) and (b) the Trust's
"real estate investment taxable income" (as such term is defined for purposes of
the Internal Revenue Code) without regard to any net capital gains or the
deduction for dividends paid, appropriate and proportionate adjustments shall be
made to the numbers of Stock Agreements Shares set forth in the first sentence
of this Section 3.1.
3.2 No later than noon, Eastern time, on the second Business
Day after the Sale Notice is given as described above, Starwood Lodging may
provide the representative(s) of such Restricted Holder or Restricted Group with
telephonic notice, along with a confirmation of such notice to such
representatives by telefacsimile, that Starwood Lodging is irrevocably offering
to purchase or place all of the Proposed Disposition Shares at a price per share
equal to the average of the closing prices on the New York Stock Exchange on the
first and second Business Days following the giving of the Sale Notice. Such
notice shall be given as provided in Section 3.5 hereof. It shall be a condition
to such notice and the consummation of such transaction that such transaction
not constitute a violation of Regulation M promulgated by the SEC. If Starwood
Lodging fails to make such an offer within such period, it shall have no further
rights under this Section 3 with respect to any Orderly Market Disposition by
such Restricted Holder or Restricted Group of Stock Agreements Shares up to the
amount of the Proposed Disposition Shares that is commenced not later than the
seventh Business Day after the Sale Notice is given.
3.3 If Starwood Lodging duly makes such an offer, such
Restricted Holder or Restricted Group shall elect by telephonic notice to
Starwood Lodging's representative delivered and confirmed as described above,
given by 8:30 a.m. (Eastern Time) on the Business Day following receipt of
Starwood Lodging's offer (such day is referred to herein as the "Response
Date"), in their sole and absolute discretion, to either (i) proceed with such
proposed disposition, in which instance Starwood Lodging shall purchase or place
the Proposed Disposition Shares at 9:00 a.m. (Eastern Time), on the Response
Date, with payment to be delivered (against delivery
<PAGE> 8
to Starwood Lodging of the Proposed Disposition Shares free of all rights of
other Persons) on the third Business Day after the Response Date in cash or
immediately available funds to such account as such Restricted Holder may
designate by notice to Starwood Lodging, or (ii) not to proceed with such
proposed disposition, in which instance the Sale Notice shall be withdrawn and
such Restricted Holder shall continue to hold the Proposed Disposition Shares
subject to the terms of this Section 3 (to the extent applicable). If such
Restricted Holder shall fail to so elect by 8:30 a.m. (Eastern Time) on the
Response Date, it shall irrevocably be deemed to have elected not to proceed
with such proposed disposition.
3.4 On the first anniversary of the Settlement Date, the
provisions of this Section 3 shall automatically lapse and be of no further
force or effect with respect to each Restricted Holder that holds less than
500,000 Stock Agreements Shares (except (i) to the extent that such Restricted
Holder acts on or after such date as a member of a Restricted Group that holds
in the aggregate 500,000 or more Stock Agreements Shares, and (ii) to the extent
such Restricted Holder, either alone or as a member of a Restricted Group, has
given or was required to have given Starwood Lodging a Sale Notice prior to such
date and as to which the procedures in this Section 3 have not been fully
performed).
3.5 Any notice given by Starwood Lodging pursuant to Section
3.2 hereof to Stock Purchaser shall be given telephonically to Tarek Ayoubi at
(310) 229-2929 and by telefacsimile to (310) 229-2927, or to such other
telephone and telefacsimile numbers as may be set forth for such purpose in the
Sale Notice. Any notice given by Starwood Lodging pursuant to Section 3.2 hereof
to any other Restricted Holder or Restricted Group shall be given to the
telephone and telefacsimile numbers as may be set forth for such purpose in the
Sale Notice, and no Sale Notice from a Restricted Holder other than Stock
Purchaser or from any Restricted Group shall be deemed properly given in
accordance with Section 3.1 unless such numbers are set forth in such Sale
Notice.
3.6 Time is of the essence in the performance by the parties
of their obligations under this Section 3.
SECTION 4
TRANSFERS NOT CONSTITUTING AN OPEN MARKET SALE; SHORT SALES
4.1 Each Restricted Holder covenants and agrees that, as a
condition to any Transfer by a such Restricted Holder of Subject Shares in a
transaction that does not constitute an Open Market Sale, such Restricted Holder
will obtain and deliver to Starwood Lodging a Joinder Agreement duly executed by
the transferee or the intended transferee; and any purported Transfer of Subject
Shares made in breach of this provision shall be null and void ab initio.
4.2 Each Restricted Holder covenants and agrees that, prior to
the effectiveness of the Registration Statement, it will not "sell short" (as
such term is commonly understood in the brokerage industry) any Paired Shares,
whether "against the box" or otherwise.
SECTION 5
PAYMENT RIGHTS
On the Settlement Date, Starwood Lodging shall pay to Stock
Purchaser in cash or other immediately available funds an amount equal to the
amount, if any, by which the Lock
<PAGE> 9
Price exceeds the Market Price as of the Settlement Date, multiplied by the
number of Paired Shares delivered by Starwood Lodging to Stock Purchaser
hereunder. Stock Purchaser's right to receive the payments from Starwood Lodging
described in this section are referred to herein as the "Payment Rights."
Pursuant to a written instrument a copy of which is delivered to Starwood
Lodging promptly following its execution by Stock Purchaser, Stock Purchaser may
distribute to its partners or their shareholders or assign to any other Person
all or any portion of the Payment Rights either together with or separately from
the Paired Shares delivered hereunder.
SECTION 6
REPRESENTATIONS AND WARRANTIES
6.1 Stock Purchaser represents and warrants to Starwood
Lodging as follows:
(a) Stock Purchaser has the power and authority to enter into
this Agreement and the Registration Rights Agreement and to perform its
obligations hereunder and thereunder. The execution and delivery hereof and
thereof and the performance by Stock Purchaser of its obligations hereunder and
thereunder will not violate or constitute an event of default under any material
term or material provision of any agreement, document, instrument, judgment,
order or decree to which Stock Purchaser is a party or by which it is bound, or
violate any law, rule or regulation the violation of which would have a material
adverse effect upon the principal benefits intended to be provided under this
Agreement or the Registration Rights Agreement.
(b) The individuals executing this Agreement and the
Registration Rights Agreement on behalf of Stock Purchaser have the legal power,
right and actual authority to bind Stock Purchaser to the terms and conditions
hereof and thereof. Each of this Agreement and the Registration Rights Agreement
is a valid and binding obligation of Stock Purchaser, enforceable in accordance
with its terms, except as the same may be affected by bankruptcy, insolvency,
moratorium or similar laws, or by legal or equitable principles relating to or
limiting the rights of contracting parties generally.
(c) Stock Purchaser is acquiring the Subject Shares to be
issued to it for investment, solely for the account of itself, on behalf of its
partners and Persons who are stockholders of such partners, or on behalf of
certain Persons each of whom is both an Affiliate of a partner of Stock
Purchaser and a creditor of Stock Purchaser (collectively, such partners and
other Persons the "Stock Purchaser Affiliates"). Neither Stock Purchaser nor any
of the Affiliates of Stock Purchaser is acquiring Subject Shares with a view to
or for sale in connection with any distribution of such Subject Shares in
violation of applicable securities laws.
(d) Stock Purchaser and each of the Stock Purchaser Affiliates
is an Accredited Investor.
(e) Stock Purchaser has obtained and reviewed the Starwood
Lodging Disclosure and the SEC Documents that have been filed with the SEC
through the date hereof.
6.2 By its execution of its Joinder Agreement, each Restricted
Holder other than Stock Purchaser shall be deemed to have represented and
warranted to Starwood Lodging, as of the date of its delivery of such Joinder
Agreement, as follows:
(a) Such Restricted Holder has the power and authority to
enter into this
<PAGE> 10
Agreement, the Registration Rights Agreement and its Joinder Agreement and to
perform its obligations hereunder and thereunder. The execution and delivery
hereof and thereof and the performance by such Restricted Holder of its
obligations hereunder and thereunder will not violate or constitute an event of
default under any material term or material provision of any agreement,
document, instrument, judgment, order or decree to which such Restricted Holder
is a party or by which it is bound, or violate any law, rule or regulation the
violation of which would have a material adverse effect upon the principal
benefits intended to be provided under this Agreement or the Registration Rights
Agreement.
(b) The individuals executing this Agreement, the Registration
Rights Agreement and its Joinder Agreement on behalf of such Restricted Holder
have the legal power, right and actual authority to bind such Restricted Holder
to the terms and conditions hereof and thereof. Each of this Agreement, the
Registration Rights Agreement and its Joinder Agreement is a valid and binding
obligation of such Restricted Holder, enforceable in accordance with its terms,
except as the same may be affected by bankruptcy, insolvency, moratorium or
similar laws, or by legal or equitable principles relating to or limiting the
rights of contracting parties generally.
(c) Such Restricted Holder is acquiring the Subject Shares
Transferred or to be Transferred to it for investment, solely for the account of
itself and not with a view to or for sale in connection with any distribution of
such Subject Shares in violation of applicable securities laws; provided,
however, that if such Restricted Holder is Stock Purchaser Affiliate, such
Restricted Holder may acquire the Subject Shares on behalf of Persons who are
stockholders of such Restricted Holder if each of such Persons is an Accredited
Investor.
(d) Such Restricted Holder is an Accredited Investor.
(e) Such Restricted Holder has had the opportunity, prior to
making the determination to acquire any Subject Shares, to obtain and review the
Starwood Lodging Disclosure and the SEC Documents that have been filed with the
SEC through the date of the execution of such Restricted Holder's Joinder
Agreement.
6.3 The Trust hereby represents and warrants to Stock
Purchaser as follows:
(a) The Trust has the power and authority to enter into this
Agreement and the Registration Rights Agreement and to consummate the
transactions herein contemplated; neither the execution and delivery of this
Agreement or the Registration Rights Agreement by the Trust, nor the performance
by the Trust of the Trust's obligations hereunder or thereunder will violate or
constitute an event of default under any material terms or material provisions
of any agreement, document, instrument, judgment, order or decree to which the
Trust is a party or by which the Trust is bound, or violate any law, rule or
regulation the violation of which would have a material adverse effect upon the
principal benefits intended to be provided under this Agreement or the
Registration Rights Agreement.
(b) The individuals executing this Agreement and the
Registration Rights Agreement and the documents referenced herein on behalf of
the Trust have the legal power, right and actual authority to bind the Trust to
the terms and conditions hereof. This Agreement and the Registration Rights
Agreement is a valid and binding obligation of Trust, enforceable in accordance
with its terms, except as the same may be affected by bankruptcy, insolvency,
moratorium or similar laws, or by legal or equitable principles relating to or
limiting the rights of contracting parties generally.
<PAGE> 11
(c) All Paired Shares to be delivered in accordance with
Section 2.1 hereof will, when so issued, be duly authorized, validly issued,
fully paid and nonassessable and free of preemptive rights and will be paired
with each other in the same ratio as all other shares are paired with each other
pursuant to the Pairing Agreement.
(d) The Trust has filed all of the SEC Documents. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of applicable law, and, at the respective times they were filed,
none of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements (including, in each
case, any notes thereto) of the Trust included in the SEC Documents complied as
to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto as of their
respective dates of filing, were prepared in accordance with generally accepted
accounting principles (except, in the case of the unaudited statements, as
permitted by Regulation S-X of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly presented the consolidated financial position of the Trust and its
consolidated subsidiaries as of the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described therein).
Except as disclosed in the SEC Documents or as required by generally accepted
accounting principles, the Trust has not, since December 31, 1996, made any
change in the accounting practices or policies applied in the preparation of
their financial statements.
(e) Except as disclosed in the SEC Documents or the Starwood
Lodging Disclosure, since December 31, 1996 and through the date hereof, (i)
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 change in or effect on the financial condition, properties, business,
results of operations or prospects of the Trust and its subsidiaries taken as a
whole, or (ii) there has not been any split, combination or reclassification of
any of the capital stock or units of the Trust or its operating partnership or
any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of, or in substitution for shares of such capital stock.
(f) Except as set forth in the SEC Documents or the Starwood
Lodging Disclosure or in a separate writing provided to Stock Purchaser on or
before the date hereof, as of the date hereof: there are no outstanding orders,
judgments, injunctions, awards or decrees of any governmental entity against or
involving the Trust or any of its subsidiaries, or against or involving any of
the directors, officers or employees of the Trust 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 change in or effect on the financial condition, properties,
business, results of operations or prospects of the Trust and its subsidiaries
taken as a whole; and there are no actions, suits or claims or legal,
administrative or arbitrative proceedings or investigations pending or, to the
knowledge of the Trust, threatened against or involving the Trust 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
change in or effect on the financial condition, properties, business, results of
operations or prospects of the Trust and its subsidiaries taken as a whole. As
of the date hereof, there are no actions, suits or other litigation, legal or
administrative proceedings or governmental investigations pending or, to the
knowledge of the Trust, threatened against or affecting the Trust or any of its
subsidiaries or any of their officers, directors or employees, as such, or any
of
<PAGE> 12
their properties, assets or business relating to the transactions contemplated
by this Agreement and the Registration Rights Agreement.
6.4 The Corporation hereby represents and warrants to Stock
Purchaser as follows:
(a) The Corporation has the power and authority to enter into
this Agreement and the Registration Rights Agreement and to consummate the
transactions herein contemplated; neither the execution and delivery of this
Agreement or the Registration Rights Agreement by the Corporation, nor the
performance by the Corporation of the Corporation's obligations hereunder or
thereunder will violate or constitute an event of default under any material
terms or material provisions of any agreement, document, instrument, judgment,
order or decree to which the Corporation is a party or by which the Corporation
is bound, or violate any law, rule or regulation the violation of which would
have a material adverse effect upon the principal benefits intended to be
provided under this Agreement or the Registration Rights Agreement.
(b) The individuals executing this Agreement and the
Registration Rights Agreement and the documents referenced herein on behalf of
the Corporation have the legal power, right and actual authority to bind the
Corporation to the terms and conditions hereof. This Agreement and the
Registration Rights Agreement is a valid and binding obligation of Corporation,
enforceable in accordance with its terms, except as the same may be affected by
bankruptcy, insolvency, moratorium or similar laws, or by legal or equitable
principles relating to or limiting the rights of contracting parties generally.
(c) All Paired Shares to be delivered in accordance with
Section 2.1 hereof will, when so issued, be duly authorized, validly issued,
fully paid and nonassessable and free of preemptive rights and will be paired
with each other in the same ratio as all other shares are paired with each other
pursuant to the Pairing Agreement.
(d) The Corporation has filed all of the SEC Documents. As of
their respective dates, the SEC Documents complied in all material respects with
the requirements of applicable law, and, at the respective times they were
filed, none of the SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The consolidated financial statements
(including, in each case, any notes thereto) of the Corporation included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto as of their respective dates of filing, were prepared in
accordance with generally accepted accounting principles (except, in the case of
the unaudited statements, as permitted by Regulation S-X of the SEC) applied on
a consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto) and fairly presented the consolidated financial
position of the Corporation and its consolidated subsidiaries as of the
respective dates thereof and the consolidated results of their operations and
their consolidated cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein). Except as disclosed in the SEC Documents or as
required by generally accepted accounting principles, the Corporation has not,
since December 31, 1996, made any change in the accounting practices or policies
applied in the preparation of their financial statements.
(e) Except as disclosed in the SEC Documents or the Starwood
Lodging Disclosure, since December 31, 1996 and through the date hereof, (i)
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 change in or effect on the financial
<PAGE> 13
condition, properties, business, results of operations or prospects of the
Corporation and its subsidiaries taken as a whole, or (ii) there has not been
any split, combination or reclassification of any of the capital stock or units
of the Corporation or its operating partnership or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of,
or in substitution for shares of such capital stock.
(f) Except as set forth in the SEC Documents or the Starwood
Lodging Disclosure or in a separate writing provided to Stock Purchaser on or
before the date hereof, as of the date hereof: there are no outstanding orders,
judgments, injunctions, awards or decrees of any governmental entity against or
involving the Corporation or any of its subsidiaries, or against or involving
any of the directors, officers or employees of the Corporation 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 change in or effect on the financial
condition, properties, business, results of operations or prospects of the
Corporation and its subsidiaries taken as a whole; and there are no actions,
suits or claims or legal, administrative or arbitrative proceedings or
investigations pending or, to the knowledge of the Corporation, threatened
against or involving the Corporation 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 change in or effect on the
financial condition, properties, business, results of operations or prospects of
the Corporation and its subsidiaries taken as a whole. As of the date hereof,
there are no actions, suits or other litigation, legal or administrative
proceedings or governmental investigations pending or, to the knowledge of the
Corporation, threatened against or affecting the Corporation 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 and the Registration Rights Agreement (other than
those arising in connection with the Registration Statement or the performance
by the Corporation of its obligations under the Registration Rights Agreement).
SECTION 7
NOTICES
7.1 Addresses. Except for the notices given pursuant to
Section 3, whenever any notice, demand or request is required or permitted
hereunder, such notice, demand or request shall be made in writing and shall be
(a) sent via a nationally recognized overnight courier service fully prepaid,
(b) deposited in the United States by mail, registered or certified, return
receipt requested, postage prepaid, or (c) sent via telefacsimile, provided that
the original of such notice, demand or request shall also be sent via one of the
methods described in (a) and (b) above, in each case to the addressees (and
individuals) set forth below:
As to Stock Purchaser:
c/o Al Anwa USA, Inc.
1925 Century Park East, Suite 1900
Los Angeles, CA 90067
Attn: Tarek Ayoubi
Telefacsimile: (310) 229-2927
With a copy to Stock Purchaser's additional addressees:
Morrison & Foerster LLP
555 West Fifth Street, Suite 3500
<PAGE> 14
Los Angeles, CA 90013-1024
Attn: Thomas R. Fileti, Esq.
Telefacsimile: (213) 892-5454
Gordon K. Eng, Esq.
19191 South Vermont Avenue, Suite 420
Torrance, California 90502
Telefacsimile: (310) 207-1066
As to Starwood Lodging:
Starwood Lodging Hotels & Resorts Trust
2231 E. Camelback Rd., Suite 410
Phoenix, AZ 85016
Attn: Ronald C. Brown or Chief Financial Officer
Telefacsimile: (602) 852-0115
Starwood Lodging Hotels & Resorts Worldwide, Inc.
2231 E. Camelback Rd., Suite 400
Phoenix, AZ 85016
Attn: Alan M. Schnaid or Vice President
With a copy to Starwood Lodging's additional addressees:
Greenberg Traurig Hoffman Lipoff Rosen & Quentel
153 East 53rd Street
New York, NY 10022
Attn: Andrew E. Zobler, Esq.
Telefacsimile: (212) 223-7161
Sidley & Austin
555 West Fifth Street, Suite 4000
Los Angeles, CA 90013
Attn: Sherwin L. Samuels, Esq.
and Kenneth H. Levin, Esq.
Telefacsimile: (213) 896-6600
If to any Restricted Holder other than Stock Purchaser: to the address and
telefacsimile number set forth in such Restricted Holder's Joinder Agreement (or
to any other address or telefacsimile number provided to Starwood Lodging in
writing pursuant to a notice given by such Restricted Holder pursuant to this
Section 7.1).
7.2 Receipt of Notices. Any notice, demand or request that
shall be delivered to Starwood Lodging and its Additional Addressee in the
manner aforesaid shall be deemed sufficiently given to and received by Starwood
Lodging for all purposes hereunder, and any notice, demand or request that shall
be delivered to Stock Purchaser and its Additional Addressee in the manner
aforesaid shall be deemed sufficiently given to and received by Stock Purchaser
for all purposes hereunder (i) the next business day following the day such
notice, demand or request is delivered by a nationally recognized overnight
courier service fully prepaid, to such party and its Additional Addressee, (ii)
if sent via registered or certified mail, at the time of receipt by such party
and its Additional Addressee, or (iii) if sent via telefacsimile, as of the date
and time stated upon confirmation reports generated by the sending party's
telefacsimile machine confirming the delivery of such notice, demand or request
to such party
<PAGE> 15
and its Additional Addressee.
7.3 Refusal of Delivery. The inability to deliver any notice,
demand or request because the individual to whom it is properly addressed in
accordance with this Section 7 refused delivery thereof or no longer can be
located at that address shall constitute delivery thereof to such individual.
7.4 Change of Address. Each party shall have the right from
time to time to designate by written notice to the other parties hereto such
other Person or Persons and such other place or places as said party may desire
written notices to be delivered or sent in accordance herewith.
SECTION 8
GENERAL PROVISIONS
8.1 Amendment. No provision of this Agreement or of any
documents or instrument entered into, given or made pursuant to this Agreement
may be amended, changed, waived, discharged or terminated except by an
instrument in writing, signed by the party against whom enforcement of the
amendment, change, waiver, discharge or termination is sought.
8.2 Time of Essence. All times provided for in this Agreement
for the performance of any act will be strictly construed, time being of the
essence.
8.3 Entire Agreement. This Agreement and other documents
delivered pursuant to this Agreement set forth the entire agreement and
understanding of the parties in respect of the transactions contemplated by this
Agreement, and supersede all prior agreements, arrangements and understandings
relating to the subject matter hereof and thereof. No representation, promise,
inducement or statement of intention with respect to the subject matter hereof
has been made by Stock Purchaser or Starwood Lodging which is not embodied in
this Agreement, and neither Starwood Lodging nor Stock Purchaser shall be bound
by or liable for any alleged representations, promise, inducement or statement
of intention not therein so set forth.
8.4 No Waiver. No failure of any party to exercise any power
given such party hereunder or to insist upon strict compliance by the other
party with its obligations hereunder shall constitute a waiver of any party's
right to demand strict compliance with the terms of this Agreement.
8.5 Counterparts. This Agreement, any document or instrument
entered into, given or made pursuant to this Agreement or authorized hereby, and
any amendment or supplement thereto may be executed in two or more counterparts,
and, when so executed, will have the same force and effect as though all
signatures appeared on a single document. Any signature page of this Agreement
or of such an amendment, supplement, document or instrument may be detached from
any counterpart without impairing the legal effect of any signatures thereon,
and may be attached to another counterpart identical in form thereto but having
attached to it one or more additional signature pages.
8.6 Costs and Attorneys' Fees. If any legal action or any
arbitration or other proceeding is brought for the enforcement of this Agreement
or because of an alleged dispute, default, or misrepresentation in connection
with any of the provisions of this Agreement the successful or prevailing party
shall be entitled to recover reasonable attorneys' fees, charges and other costs
incurred in that action or proceeding, in addition to any other relief to which
it
<PAGE> 16
may be entitled.
8.7 Payments; Interests. Except as otherwise provided herein,
payment of all amounts required by the terms of this Agreement shall be made in
the United States and in immediately available funds of the United States of
America which, at the time of payment, is accepted for the payment of all public
and private obligations and debts. If any payment due under this Agreement is
not paid when due, it shall thereafter bear interest at a variable rate equal to
the rate announced from time to time by Citibank, N.A. as its prime or reference
rate, plus five percent (5%) per annum, but in no event more than the maximum
rate, if any, allowed by law to be charged by the party receiving the interest
on such type of indebtedness.
8.8 Parties in Interest. The rights and obligations of the
parties hereto shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors, heirs and the legal
representatives of their respective estates. However, none of Stock Purchaser's
rights under this Agreement shall be assignable except (i) in the case of the
Payment Rights, as provided in Section 5 hereof, and (ii) in the case of all
other rights of Stock Purchaser or another Restricted Holder, to a transferee of
Subject Shares in a transaction not constituting an Open Market Sale if such
transferee delivers a Joinder Agreement in compliance with Section 4 hereof.
Nothing in this Agreement is intended to confer any right or remedy under this
Agreement on any Person other than the parties to this Agreement and their
respective successors and assigns, or to relieve or discharge the obligation or
liability of any Person to any party to this Agreement or to give any Person any
right of subrogation or action over or against any party to this Agreement.
8.9 Applicable Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without giving effect to the conflict-of-law rules and principles of that state.
8.10 Incorporation of Recitals. The recitals of this Agreement
are incorporated into and made a part of this Agreement.
8.11 Construction of Agreement. The language in all parts of
this Agreement shall be in all cases construed simply according to its fair
meaning and not strictly for or against any of the parties hereto. Headings at
the beginning of sections of this Agreement are solely for the convenience of
the parties and are not a part of this Agreement. When required by the context,
whenever the singular number is used in this Agreement, the same shall include
the plural, and the plural shall include the singular, the masculine gender
shall include the feminine and neuter genders, and vice versa. As used in this
Agreement, the term "Stock Purchaser" shall include the respective permitted
successors and assigns of Stock Purchaser, and the term "Starwood Lodging" shall
include the permitted successors and assigns of Starwood Lodging, if any.
8.12 Severability. If any term or provision of this Agreement
is determined to be illegal, unconscionable or unenforceable, all of the other
terms, provisions and sections hereof will nevertheless remain effective and be
in force to the fullest extent permitted by law.
8.13 Further Assurances. Starwood Lodging and Stock Purchaser
agree to execute upon the request of the other party such instruments and take
such actions as may be reasonably necessary to carry out the provisions of this
Agreement provided that no material additional cost or liability shall incurred
thereby by the party of whom such request is made.
8.14 Starwood Hotels & Resorts Trust. The parties hereto
understand and agree that the name "Starwood Hotels & Resorts Trust" is a
designation of the Trust and its trustees (as trustees but not personally) under
the Trust's Declaration of Trust, and all persons
<PAGE> 17
dealing with the Trust shall look solely to the Trust's assets for the
enforcement of any claims against the Trust, and that the Trustees, officers,
agents and security holders of the Trust assume no personal liability for
obligations entered into on behalf of the Trust, and their respective individual
assets shall not be subject to the claims of any person relating to such
obligations.
<PAGE> 18
IN WITNESS WHEREOF, Starwood Lodging and Stock Purchaser have
caused this Agreement to be executed as of the day and year first above written.
"Stock Purchaser"
D.C. OVERNIGHT PARTNERS, L.P.,
a District of Columbia limited partnership
By: D.C. OVERNIGHT, INC., a District of Columbia
corporation, its sole General Partner
By: /s/ Tarek Ayoubi
---------------------------
Tarek Ayoubi
President
"Starwood Lodging"
STARWOOD HOTELS & RESORTS TRUST,
a Maryland real estate investment trust
By: /s/ Steven R. Goldman
----------------------------
Steven R. Goldman
Senior Vice President
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.,
a Maryland corporation
By: /s/ Nir E. Margalit
------------------------------
Nir E. Margalit
Secretary
<PAGE> 19
ATTACHMENT A
to Stock Agreement
AGREEMENT TO BE BOUND
BY THE STOCK AGREEMENT
(JOINDER AGREEMENT)
The undersigned, being the transferee or the intended
transferee of ________________ Paired Shares (the "Subject Shares") of Starwood
Hotels & Resorts Trust, a Maryland real estate investment trust, and Starwood
Hotels & Resorts Worldwide, Inc., a Maryland corporation (together, the
"Company"), as a condition to the transfer to and acquisition by the undersigned
of such Subject Shares, acknowledges that certain sales or other transfers of
such Subject Shares are governed by the Stock Agreement (the "Stock Agreement"),
dated as of January 15, 1998, initially among the Company and D.C. Overnight
Partners, L.P., and the undersigned hereby (1) acknowledges receipt of a copy of
the Stock Agreement, and (2) agrees to be bound as a "Restricted Holder" by the
terms of the Stock Agreement, as the same has been or may be amended from time
to time (including without limitation the representations and warranties of the
undersigned set forth therein that will be deemed made by virtue hereof).
The undersigned is hereby advised that the Subject Shares have
not been registered under the Securities Act of 1933 and in such event cannot be
resold unless they are registered under said act or unless an exemption from
registration under said act is available.
The following is the undersigned's representative and such
representative's address, telephone number and fax number for all purposes under
the Stock Agreement:
_________________________________
_________________________________
_________________________________
Agreed to this ____ day of __________, ____.
_________________________________
By: __________________________
Its: __________________________
<PAGE> 20
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of
January 15, 1998 among STARWOOD HOTELS & RESORTS TRUST, a Maryland real estate
investment trust (the "Trust"), STARWOOD HOTELS & RESORTS WORLDWIDE, INC., a
Maryland corporation (the "Corporation" and, together with the Trust, the
"Company"), and D.C. OVERNIGHT PARTNERS, L.P., a District of Columbia limited
partnership ("Shareholder").
RECITALS
WHEREAS, pursuant to a Stock Agreement of even date herewith and by and
among the parties hereto (the "Stock Agreement"), the Company is issuing and
delivering to Shareholder certain Paired Shares; and
WHEREAS, the Stock Agreement provides that if such Paired Shares are
Unregistered Shares, the Company shall effect the registration of such Paired
Shares under the Securities Act; and
WHEREAS, the parties desire to set forth their rights and obligations
with respect to such registration and certain other matters;
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions. Each capitalized term used in this Agreement but not defined
herein shall have the meaning ascribed to such term in the Stock Agreement; and
as used in this Agreement the following terms shall have the following meanings:
"Commission" means the Securities and Exchange Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holder Information" means, with respect to a Selling Holder, (i) such
information regarding such Selling Holder as is required by Section 507 of
Regulation S-K promulgated by the Commission under the Securities Act, (ii)
information as to whether (and if so, in what manner) the intended method of
disposition of such Holder's Registrable Shares differs from the Plan of
Distribution, and (iii) any such additional information as may be required to be
included in the Registration Statement by a Selling Holder; in each case as
shall be required to effect the registration of such Registrable Shares pursuant
to the Registration Statement, the disclosures required in the Prospectus with
respect thereto and the offer and Transfer of such Registrable Shares pursuant
to the Prospectus.
"Holders" means (i) Shareholder, and (ii) any other Person who acquires
any of the Registrable Shares from Shareholder or another Holder if (a) the
Transferor and such Person shall have delivered to the Company a written notice
of such Transfer setting forth the name of such Person, and (b) such Person
shall have executed and delivered to the Company a properly completed Joinder
Agreement; in each case at such times as such Persons shall own Registrable
Shares.
"ITT Closing" means the consummation of the acquisition of ITT
Corporation by the Company.
<PAGE> 21
"ITT Termination" means the issuance by the Company of a press release
stating that the Company will not consummate the acquisition of ITT Corporation.
"Joinder Agreement" means an agreement to be bound by this Agreement in
the form of Annex A hereto.
"Paired Shares" means (i) "paired shares" (as such term is defined in
the Purchase and Sale Agreement), and (ii) shares of capital stock of the Trust
or the Corporation issued by the Trust or the Corporation in respect of or in
exchange for paired shares in connection with any stock dividend or
distribution, stock split-up, recapitalization, recombination or exchange by the
Trust or the Corporation generally of such paired shares.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization or other entity, or government or other agency or
political subdivision thereof.
"Proposed Plan of Distribution" means a draft of the portion of the
Registration Statement that describes the intended methods of disposition of the
Registrable Shares by the Selling Holders.
"Prospectus" means, with respect to the Registration Statement and each
amendment thereto, the form of prospectus included therein.
"Registrable Shares" means, as of any date of determination, (i) the
Paired Shares that are Unregistered Shares and that constitute the Subject
Shares; (ii) any shares or other securities issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange by the
Trust or the Corporation generally for, or in replacement by the Trust or the
Corporation generally of, such Paired Shares; and (iii) any securities issued in
exchange for such Paired Shares in any merger or reorganization of the Company;
in each case that continue to be owned by a Holder on such date of
determination.
"Registration Statement" means a registration statement on Form S-3, as
amended from time to time, registering the offer and sale by the Selling Holders
of such Selling Holders' Registrable Shares included therein for offer and
Transfer on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act.
"Required Effectiveness Date" means the later of (i) the 30th day after
the Closing Date, or (ii) the earliest of:
(a) The 30th day after the date of the ITT Closing;
(b) The 30th day after the date of the ITT Termination; and
(c) If neither the ITT Closing nor the ITT Termination has occurred
prior to April 1, 1998, the 30th day after a demand for registration is made by
notice given by Shareholder to the Company on or after April 1, 1998;
provided, however, that in the event that, following the initial filing of the
Registration Statement, the Company is advised by the Commission that the
Registration Statement will be reviewed, each of the time periods set forth
above shall be extended for 20 days.
"Securities Act" shall mean the Securities Act of 1933, as amended.
<PAGE> 22
"Selling Holders" means
(a) each Holder (i) who complies with Sections 3.1.1 hereof, (ii) who
holds not less than 100,000 Subject Shares at the both at the time such notice
is given and the date the Registration Statement is declared effective (or such
lesser number as the Company, in its sole and absolute discretion, shall
determine for such Holder), and (iii) whose Registrable Shares are included in
the Registration Statement; and
(b) each Transferee of such a Holder who (x) provides such Transferee's
Holder Information promptly after its acquisition of Subject Shares and prior
to the Company's request for acceleration of the Registration Statement, and (y)
satisfies the conditions set forth in clauses (ii) and (iii) above.
"Transfer" means the act of selling, giving, transferring, creating a
trust (voting or otherwise), assigning or otherwise disposing of (other than
pledging, hypothecating or otherwise transferring as security) (and correlative
words shall have correlative meanings).
"Transferee" means a Person to whom Registerable Shares are
Transferred.
"Violation" shall have the meaning set forth in Section 5.1 hereof.
2. Registration Obligations of the Company. The Company shall:
2.1 File the Registration Statement with the Commission not later than
15 days prior to the Required Effectiveness Date (determined without reference
to the proviso included in the definition of such term) and thereafter use its
best efforts to cause the Registration Statement to be declared effective on the
Required Effectiveness Date.
2.2 Furnish to the Shareholder a copy of the Registration Statement for
its review and comment not later than concurrently with the filing of the
Registration Statement with the Commission.
2.3 The Company shall give notice to the Shareholder of the expected
effectiveness of the Registration Statement no later than the date acceleration
of such effectiveness is requested of the Commission; provided, however, that in
no event shall the Company have any liability for any failure to give such
notice.
2.4 Include in the Registration Statement the number of each Holder's
Registrable Shares for each Holder as shall be specified for such Holder
pursuant to Section 3.1 hereof.
2.5 Use its best efforts to keep the Registration Statement effective
until the earlier of (i) one year after the Closing Date, or (ii) such date as
of which all the Selling Holders have completed the distribution or other
disposition of the Registrable Shares registered under the Registration
Statement. If the Registration Statement is terminated pursuant to clause (i)
above, the Company shall timely file with the Commission all reports and other
information required to enable all holders of Registrable Shares to Transfer
such shares pursuant to Rule 144 promulgated by the Commission under the
Exchange Act, as amended.
2.6 During the effectiveness of the Registration Statement, upon notice
to the Company by a Selling Holder of a Transfer of Registrable Shares pursuant
to the Registration
<PAGE> 23
Statement and receipt (i) by the Company of a certificate from such Selling
Holder in the form of Annex B attached hereto, and (ii) by counsel for the
Company of a certificate from such Selling Holder in the form of Annex C
attached hereto, in each case representing that such Registrable Shares were
offered and have been Transferred by such Selling Holder in a manner consistent
with the description set under the caption "Plan of Distribution" in the
Prospectus, the Company shall use its best efforts to cause such Registrable
Shares to be reissued as soon as practicable (and not later than three Business
Days following receipt by the Company and such counsel of such certificates) in
the name of the transferee free of any restrictive legend under the Securities
Act and to take all such actions as may be reasonably required to cause its
transfer agent to comply with the undertakings set forth in this section.
2.7 Use its best efforts to amend the Registration Statement or
supplement the Prospectus so that they will remain current and in compliance
with the requirements of the Securities Act for the period specified in Section
2.4 hereof, and use its best efforts to give the Selling Holders notice of the
happening of any event or development as a result of which the Registration
Statement or Prospectus may contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements made therein not misleading. In the event that any Registrable
Shares included in the Registration Statement remain unsold at the end of the
period during which the Company is obligated to use its best efforts to maintain
the effectiveness of the Registration Statement, the Company may file a
post-effective amendment to the Registration Statement for the purpose of
de-registering such unsold Registrable Shares.
2.8 Furnish to each Selling Holder, without charge, such numbers of
copies of the Registration Statement, any pre-effective or post-effective
amendment thereto, the final Prospectus, and any amendments or supplements
thereto, in each case in conformity with the requirements of the Securities Act,
and such other related documents, as each Selling Holder may reasonably request
in order to facilitate the Transfer of the Registrable Shares owned by such
Selling Holder.
2.9 Use its best efforts to register and qualify the Registrable Shares
covered by the Registration Statement under such securities laws of such states
or jurisdictions as shall be reasonably requested by the Selling Holders;
provided, however, that neither the Trust nor the Corporation shall be required
in connection therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such states or
jurisdictions.
2.10 Promptly notify each Selling Holder of any stop order issued or
threatened to be issued by the Commission or any of the jurisdictions referred
to in Section 2.9 hereof in connection with the Registration Statement (and use
its best efforts to prevent the entry of such stop order or to remove it if
entered as promptly as practicable).
2.11 Use its best efforts to cause the Registrable Shares covered by
the Registration Statement, if the Paired Shares are then listed on a securities
exchange or included for quotation in a recognized trading market, to continue
to be so listed or included.
3. The Holders' Obligations.
3.1 The obligations of the Company under Section 2 with respect to each
Holder are subject to the satisfaction of each of the following conditions:
3.1.1 Not later than 10 days after the later of (i) the date
hereof, or (ii) the date on which the Company delivers the Proposed
Plan of Distribution to the Shareholder
<PAGE> 24
(or such later date as the Company, in its sole and absolute
discretion, shall determine), such Holder shall furnish all of its
Holder Information to the Company, if such Holder Information discloses
that such Holder holds not less than 100,000 Subject Shares (or such
lesser number as the Company, in its sole and absolute discretion,
shall determine for such Holder).
3.1.2 Prior to the effectiveness of the Registration Statement,
such Holder shall furnish to the Company by a notice such amendments
and supplements to its Holder Information provided pursuant to Section
3.1.1 hereof as may be necessary in order to assure that the Holder
Information included in the Registration Statement for each Selling
Holder does not include a misstatement of a material fact or omits to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading.
3.1.3 Such Holder shall cooperate with the Company in the
preparation of the Registration Statement in the manner and to the
extent reasonably requested by the Company, including accurately and
fully completing, executing and delivering to the Company such
documents as the Company may reasonably request in order to permit the
Company to obtain the Holder Information or to otherwise comply with
all applicable laws or to obtain acceleration of the effectiveness of
the Registration Statement.
3.1.4 Such Holder shall not have breached any of its obligations
to the Company set forth in this Section 3.1 or in Sections 3 or 4 of
the Stock Agreement; provided, however, that if such breach is one that
is capable of being cured and is actually cured by such Holder in all
material respects, the obligations of the Company to such Holder that
arises, or which the Company is obligated to perform in whole or in
part, after such cure shall be reinstated on the terms and subject to
the conditions set forth herein. A Transferee of Subject Shares who is
otherwise entitled to have such shares included in the Registration
Statement shall be deemed not have breached its obligation to provide
its Holder Information to the Company if it provides such information
promptly after its acquisition of such shares and prior to the
Company's request for acceleration of the Registration Statement
3.1.5 Such Holder shall not have made any material
misrepresentation pursuant to Section 6 of the Stock Agreement.
3.2 No action taken or omitted to be taken by or on behalf of any
Holder shall adversely affect the rights of any other Holder hereunder.
3.3 After the effectiveness of the Registration Statement, each Selling
Holder (and each transferee thereof) shall furnish to the Company by a notice
such amendments and supplements to its Holder Information provided pursuant to
Section 3.1 hereof as may be necessary in order to assure that the Holder
Information included in the Registration Statement for such Holder does not
include a misstatement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
4. Expenses of Registration. The Company shall pay all expenses incurred in
connection with the registration, filing and qualification of the Registrable
Shares, including all registration, filing and NASD or securities exchange fees;
all fees and expenses of complying with securities or blue sky laws; all word
processing, duplicating and printing expenses; and the fees and disbursements of
counsel and accountants for the Company; but excluding all discounts,
commissions or fees of selling brokers or similar securities industry
professionals and all fees and expenses of counsel and accountants for the
Selling Holders.
<PAGE> 25
5. Indemnification; Contribution.
5.1 To the extent permitted by applicable law, the Company shall
indemnify and hold harmless each Selling Holder; each Person, if any, who
controls such Selling Holder within the meaning of the Securities Act; and each
officer, director, partner and employee of such Selling Holder and such
controlling Person; against any and all losses, claims, damages, liabilities and
expenses incurred by such party pursuant to any actual or threatened action,
suit, proceeding or investigation, or to which any of the foregoing Persons may
become subject under the Securities Act, to the extent such losses, claims,
damages, liabilities and expenses arise out of or are based upon any of the
following (collectively a "Violation"):
5.1.1 Any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, including any
final Prospectus, or any amendments or supplements thereto;
5.1.2 The omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the
statements therein not misleading; or
provided, however, that the indemnification required by this Section 5.1 shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or expense if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld or delayed), nor shall
the Company be liable in any such case for any such loss, claim, damage,
liability or expense incurred by a Selling Holder (or any Person, if any, who
controls such Selling Holder within the meaning of the Securities Act, or any
officer, director, partner and employee of such Selling Holder and such
controlling Person) to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with the Holder
Information or other information furnished to the Company by or on behalf of
such Selling Holder expressly for use in connection with the Registration
Statement.
5.2 To the extent permitted by applicable law, each Selling Holder
shall indemnify and hold harmless the Company; each of its directors, each of
its officers who shall have signed the Registration Statement; each Person, if
any, who controls the Company within the meaning of the Securities Act; any
other Selling Holder, any controlling Person of any such other Selling Holder
and each officer, director, partner, and employee of such other Selling Holder
and such controlling Person; against any and all losses, claims, damages,
liabilities and expenses, incurred by such party pursuant to any actual or
threatened action, suit, proceeding or investigation, or to which any of the
foregoing Persons may otherwise become subject under the Securities Act, to the
extent such losses, claims, damages, liabilities and expenses arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with the
Holder Information or other information furnished to the Company by or on behalf
of that Selling Holder expressly for use in connection with the Registration
Statement.
5.3 Promptly after receipt by an indemnified party under this Section 5
of notice of the commencement of any action, suit, proceeding, investigation or
threat thereof made in writing for which such indemnified party may make a claim
under this Section 5, such indemnified party shall deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof
<PAGE> 26
with counsel mutually satisfactory to the parties. The failure of an Indemnified
Party to deliver written notice to the indemnifying party within a reasonable
time following the commencement of any such action shall not relieve such
indemnifying party of any liability to the indemnified party under this Section
5 unless such failure is prejudicial to such indemnifying party's ability to
defend such action. Any fees and expenses incurred by the indemnified party
(including any fees and expenses incurred in connection with investigating or
preparing to defend such action or proceeding) shall be paid to the indemnified
party, as incurred, within 30 days of written notice thereof to the indemnifying
party (regardless of whether it is ultimately determined that an indemnified
party is not entitled to indemnification hereunder). Any such indemnified party
shall have the right to employ separate counsel in any such action, claim or
proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be the expenses of such indemnified party unless (i) the
indemnifying party has agreed to pay such fees and expenses, or (ii) the
indemnifying party shall have failed to promptly assume the defense of such
action, claim or proceeding, or (iii) the named parties to any such action,
claim or proceeding (including any impleaded parties) include both such
indemnified party and the indemnifying party, and such indemnified party shall
have been advised by counsel that there may be one or more legal defenses
available to it which are different from or in addition to those available to
the indemnifying party and that the assertion of such defenses would create a
conflict of interest such that counsel employed by the indemnifying party could
not faithfully represent the indemnified party (in which case, if such
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such
action, claim or proceeding on behalf of such indemnified party, it being
understood, however, that the indemnifying party shall not, in connection with
any one such action, claim or proceeding or separate but substantially similar
or related actions, claims or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all such indemnified parties, unless
in the reasonable judgment of such indemnified party a conflict of interest
would exist between such indemnified party and any other of such indemnified
parties with respect to such action, claim or proceeding, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels). No indemnifying party shall be liable to an
indemnified party for any settlement of any action, proceeding or claim without
the written consent of the indemnifying party, which consent shall not be
unreasonably withheld or delayed.
5.4 If the indemnification required by this Section 5 from the
indemnifying party is determined by a court of competent jurisdiction to be
unavailable to an indemnified party hereunder in respect of any losses, claims,
damages, liabilities or expenses referred to in this Section 5:
5.4.1 The indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect
the relative fault of the indemnifying party and indemnified parties in
connection with the actions which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among
other things, whether any Violation has been committed by, or relates
to information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such Violation. The
amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 5.1 and 5.2,
any legal or other fees or expenses reasonably incurred by such party
in connection with any investigation or proceeding.
<PAGE> 27
5.4.2 The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5.4 were determined
by pro rata allocation or by any other method of allocation which does
not take into account the equitable considerations referred to in
Section 5.4.1. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled
to contribution from any Person who was not guilty of a fraudulent
misrepresentation.
5.5 If indemnification is available under this Section 5, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in this Section 5 without regard to the relative fault of such
indemnifying party or indemnified party or any other equitable consideration
referred to in Section 5.4.
5.6 The obligations of the Company and the Selling Holders under this
Section 5 shall survive the completion of any offering of Registrable Shares
pursuant to the Registration Statement and any termination of this Agreement.
6. Amendment, Modification and Waivers; Further Assurances.
6.1 This Agreement may be amended with the consent of the Company and
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it; in each case only if the Company shall
have obtained the written consent of Holders holding more than 50% of the
Registrable Shares. Such amendment, action or omission shall not require the
consent of any other Holder. In addition, the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
that affects the rights hereunder of a specific Holder with the written consent
of such Holder.
6.2 No waiver of any terms or conditions of this Agreement shall
operate as a waiver of any other breach of such terms and conditions or any
other term or condition, nor shall any failure to enforce any provision hereof
operate as a waiver of such provision or of any other provision hereof. No
written waiver hereunder, unless it by its own terms explicitly provides to the
contrary, shall be construed to effect a continuing waiver of the provisions
being waived and no such waiver in any instance shall constitute a waiver in any
other instance or for any other purpose or impair the right of the party against
whom such waiver is claimed in all other instances or for all other purposes to
require full compliance with such provision.
6.3 Each of the parties hereto shall execute all such further
instruments and documents and take all such further action as any other party
hereto may reasonably require in order to effectuate the terms and purposes of
this Agreement.
7. Miscellaneous.
7.1 Business Day. Whenever this Agreement requires that an action be
taken or a notice be given on a date that would otherwise not be a Business Day,
the time period for taking such action or giving such notice shall be extended
to the first day thereafter that is a Business Day.
7.2 Governing Law. This agreement shall be governed by and construed in
accordance with the laws of the state of New York, without giving regard to the
conflict of laws principles thereof.
7.3 Notices. All notices, requests, demands, consents, approvals,
designations and other deliveries and communications called for or contemplated
by this Agreement shall be in
<PAGE> 28
writing and shall be given (i) in the case of Shareholder or the Company, to the
address and in the manner set forth in Section 7 of the Stock Agreement, and
(ii) in the case of any Holder other than Shareholder, in the manner set forth
in Section 7 of the Stock Agreement and to the address provided to the Company
in such Holder's Joinder Agreement.
7.4 Entire Agreement; Integration. This Agreement, together with the
Stock Agreement, supersedes all prior agreements between or among any of the
parties hereto with respect to the subject matter contained herein and therein,
and such agreements embody the entire understanding among the parties relating
to such subject matter.
7.5 Section Headings. Section headings are for convenience of
reference only and shall not affect the meaning of any provision of this
Agreement.
7.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, and all of which shall
together constitute one and the same instrument. All signatures need not be on
the same counterpart.
7.7 Severability. If any provision of this Agreement shall be invalid
or unenforceable, such invalidity or unenforceability shall not affect the
validity and enforceability of the remaining provisions of this Agreement,
unless the result thereof would be unreasonable, in which case the parties
hereto shall negotiate in good faith as to appropriate amendments hereto.
7.8 Termination. This Agreement may be terminated at any time by a
written instrument signed by the parties hereto. Unless sooner terminated in
accordance with the preceding sentence, this Agreement (other than Section 5
hereof) shall terminate in its entirety on such date as there shall be no
Registrable Shares.
7.9 Attorneys' Fees. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees (including any fees incurred in any appeal) in
addition to its costs and expenses and any other available remedy.
7.10 No Third Party Beneficiaries or Assignees. Nothing herein
expressed or implied is intended to confer upon any person, other than the
parties hereto or the Holders (to the extent expressly provided herein) any
rights, remedies, obligations or liabilities under or by reason of this
Agreement. Neither this Agreement not the rights or obligations hereunder may be
assigned or otherwise transferred by any Holder except as permitted herein with
respect to a Transfer of Registrable Shares.
7.11 Starwood Hotels & Resorts Trust. The parties hereto understand and
agree that the name "Starwood Hotels & Resorts Trust" is a designation of the
Trust and its trustees (as trustees but not personally) under the Trust's
Declaration of Trust, and all persons dealing with the Trust shall look solely
to the Trust's assets for the enforcement of any claims against the Trust, and
that the Trustees, officers, agents and security holders of the Trust assume no
personal liability for obligations entered into on behalf of the Trust, and
their respective individual assets shall not be subject to the claims of any
person relating to such obligations.
<PAGE> 29
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first written above.
"Shareholder"
D.C. OVERNIGHT PARTNERS, L.P.,
a District of Columbia limited partnership
By: D.C. OVERNIGHT, INC., a District of Columbia
corporation, its sole General Partner
/s/ Tarek Ayoubi
-----------------------------
Tarek Ayoubi
President
STARWOOD HOTELS & RESORTS TRUST
a Maryland real estate investment trust
By: /s/ Steven R. Goldman
-----------------------------
Steven R. Goldman
Senior Vice President
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
a Maryland corporation
By: /s/ Nir E. Margalit
-----------------------------
Nir E. Margalit
Secretary
<PAGE> 30
ANNEX A
to Registration
Rights Agreement
AGREEMENT TO BE BOUND
BY THE REGISTRATION RIGHTS AGREEMENT
The undersigned, being the transferee or the intended transferee of
_________ Paired Shares (the "Registrable Shares") of Starwood Hotels & Resorts
Trust, a Maryland real estate investment trust, and Starwood Lodging
Corporation, a Maryland corporation (together, the "Company"), as a condition to
the transfer to and acquisition by the undersigned of such Registrable Shares,
acknowledges that matters pertaining to the sale and registration of such
Registrable Shares are governed by the Registration Rights Agreement (the
"Registration Rights Agreement"), dated as of January 15, 1998, initially among
the Company and D.C. Overnight Partners, L.P., a District of Columbia limited
partnership, and the undersigned hereby (1) acknowledges receipt of a copy of
such agreement, and (2) agrees to be bound as a "Holder" by the terms of the
Registration Rights Agreement, as the same has been or may be amended from time
to time.
Agreed to this ____ day of __________, _____.
___________________________________
By: __________________________
Its: __________________________
Address, telephone number and telecopy number
for notices:
___________________________________
___________________________________
___________________________________
___________________________________
<PAGE> 31
ANNEX B
to Registration
Rights Agreement
[Letterhead of Selling Holder]
____________, 199__
BY TELECOPIER
Starwood Hotels & Resorts Trust
2231 E. Camelback Road, Suite 410
Phoenix, Arizona 85016
Attention: Ronald C. Brown or Chief Financial Officer
Starwood Hotels & Resorts Worldwide, Inc.
2231 E. Camelback Road, Suite 400
Phoenix, Arizona 85016
Attention: Alan M. Schnaid or Vice President
Re: Starwood Hotels & Resorts
Ladies and Gentlemen:
Reference is made to the prospectus (the "Prospectus") included in the
Registration Statement on Form S-3 (Registration No. ___________) filed by
Starwood Hotels & Resorts Trust (the "Trust") and Starwood Hotels & Resorts
Worldwide, Inc. (the "Corporation" and, together with the Trust, the "Company")
with the Securities and Exchange Commission on _________, 1998, under the
Securities Act of 1933, as amended (the "Securities Act"), relating to the
registration for resale by the shareholders named therein of certain shares of
beneficial interest, par value $.01 per share, of the Trust, and shares of
common stock, par value $.01 per share, of the Corporation (the "Paired
Shares"), including _______ Paired Shares held by the undersigned.
___________ of the Paired Shares held by the undersigned were offered
for sale and have been sold by the undersigned in a manner consistent with the
description set under the caption "Plan of Distribution" in the Prospectus.
Thus, the undersigned requests that new certificates evidencing such Paired
Shares be issued in the name of _________________________, the transferee, free
of any restrictive legend under the Securities Act.
Very truly yours,
[Name and signature of Selling Holder]
<PAGE> 32
ANNEX C
to Registration
Rights Agreement
[Letterhead of Selling Holder]
____________, 199__
BY TELECOPIER
Sidley & Austin
555 West Fifth Street
Los Angeles, California 90013
Attention: Sherwin L. Samuels, Esq.,
Kenneth H. Levin, Esq. and
James V. Robertson, Esq.
Re: Starwood Hotels & Resorts
Ladies and Gentlemen:
Reference is made to the prospectus (the "Prospectus") included in the
Registration Statement on Form S-3 (Registration No. ___________) filed by
Starwood Hotels & Resorts Trust (the "Trust") and Starwood Hotels & Resorts
Worldwide, Inc. (the "Corporation" and, together with the Trust, the "Company")
with the Securities and Exchange Commission on _________, 1998, under the
Securities Act of 1933, as amended (the "Securities Act"), relating to the
registration for resale by the shareholders named therein of certain shares of
beneficial interest, par value $.01 per share, of the Trust, and shares of
common stock, par value $.01 per share, of the Corporation (the "Paired
Shares"), including _______ Paired Shares held by the undersigned.
The undersigned understands that you have been requested by the Company
to deliver an opinion to the Company's transfer agent that, upon the sale by the
undersigned of the Paired Shares, certificates evidencing such shares may be
issued to the transferee(s) without any restrictive legend under the Securities
Act. For the purpose of facilitating the delivery by you of such opinion, the
undersigned, hereby represents that _______ of the Paired Shares held by the
undersigned were offered for sale and have been sold in a manner consistent with
the description set under the caption "Plan of Distribution" in the Prospectus.
The undersigned understands that you will be relying on the foregoing
representations in rendering your opinion, and the undersigned consents to such
reliance.
Very truly yours,
[Name and signature of Selling Holder]
<PAGE> 1
Exhibit 10.63
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT, dated as of February 23, 1998 (as amended,
modified or supplemented from time to time, this "Agreement"), made by each of
the undersigned (each a "Pledgor", and together with any entity that becomes a
party hereto pursuant to Section 24 hereof, the "Pledgors"), in favor of BANKERS
TRUST COMPANY, as Collateral Agent (the "Pledgee"), for the benefit of the
Secured Creditors (as defined below). Except as otherwise defined herein, terms
used herein and defined in the Credit Agreement (as defined below) shall be used
herein as therein defined.
W I T N E S S E T H :
WHEREAS, Starwood Hotels & Resorts ("Starwood REIT"), SLT Realty
Limited Partnership ("SLT RLP"), Starwood Hotels & Resorts Worldwide, Inc. (the
"Corporation"), ITT Corporation (as successor in interest to Chess Acquisition
Corp., "ITT"), each Alternate Currency Revolving Loan Borrower from time to time
party thereto (together with Starwood REIT, SLT RLP, the Corporation and ITT,
each a "Borrower" and collectively, the "Borrowers"), various lenders from time
to time party thereto (the "Lenders"), Bankers Trust Company and The Chase
Manhattan Bank, as Administrative Agents (in such capacity and together with any
successor agent, the "Administrative Agents,"), and Lehman Commercial Paper Inc.
and Bank of Montreal, as Syndication Agents (in such capacity, the "Syndication
Agents" and, together with the Pledgee, the Administrative Agents, and the
Lenders and their respective successors and assigns, and together with any other
lenders from time to time party to the Credit Agreement hereinafter referred to,
the "Lender Creditors"), have entered into a Credit Agreement, dated as of
February 23, 1998, providing for the making of Loans to the Borrowers and the
issuance of, and participation in, Letters of Credit for the account of the
Dollar Revolving Loan Borrowers, all as contemplated therein (as used herein,
the term "Credit Agreement" means the Credit Agreement described above in this
paragraph, as the same may be amended, modified, extended, renewed, replaced
restated, supplemented or refinanced from time to time, and including any
agreement extending the maturity of, or refinancing or restructuring (including,
but not limited to, the inclusion of additional borrowers or guarantors
thereunder or any increase in the amount borrowed) all or any portion of, the
indebtedness under such agreement or any successor agreement, whether or not
with the same agent, trustee, representative, lenders or holders; provided that,
with respect to any agreement providing for the refinancing or replacement of
indebtedness under the Credit Agreement, such agreement shall only be treated
as, or as part of, the Credit Agreement hereunder if (i) either (A) all
obligations under the Credit Agreement being refinanced or replaced shall be
paid in full at the time of such refinancing or replacement, and all commitments
and letters of credit issued pursuant to the refinanced or replaced Credit
Agreement shall have terminated in accordance with their terms or (B) the
Required Lenders shall have consented in writing to the refinancing or
replacement indebtedness being treated as indebtedness pursuant to the Credit
Agreement, and (ii) a notice to the effect that the refinancing or replacement
indebtedness shall be treated as issued under the Credit Agreement shall be
<PAGE> 2
delivered by the Parent Companies to the Pledgee);
WHEREAS, each Borrower may from time to time be party to (or guaranty the
obligations of one or more of its Subsidiaries under) one or more Interest Rate
Protection Agreements with a Lender Creditor or an affiliate of a Lender
Creditor (each such Lender Creditor or affiliate, even if the respective Lender
Creditor subsequently ceases to be a Lender under the Credit Agreement for any
reason, together with such Lender Creditor's or affiliate's successors and
assigns, collectively, the "Interest Rate Protection Creditors");
WHEREAS, pursuant to the Guaranty, the Guarantors have jointly and
severally guaranteed to the Lender Creditors and the Interest Rate Protection
Creditors the payment when due of all obligations and liabilities of each
Borrower under or with respect to (x) the Credit Documents (as used herein, the
term "Credit Documents" shall have the meaning provided in the Credit Agreement
and shall include any documentation executed and delivered in connection with
any replacement or refinancing Credit Agreement) and (y) each Interest Rate
Protection Agreement with one or more Interest Rate Protection Creditors;
WHEREAS, ITT has, prior to the date hereof, issued $2,000,000,000 in
aggregate principal amount of ITT Notes (with the holders from time to time of
such ITT Notes being herein called the "ITT Noteholders") pursuant to the ITT
Indenture;
WHEREAS, to the extent permitted pursuant to the Credit Agreement, various
of the Pledgors may issue, or enter into, guarantees of the payment when due of
the obligations and liabilities of ITT under or with respect to the ITT Notes
and the ITT Indenture (with any such guarantees, together with the ITT Notes and
ITT Indenture being herein collectively called "ITT Note Documents");
WHEREAS, Permitted Refinancing Indebtedness may from time to time be
incurred in accordance with the requirements of the Credit Agreement in respect
of the ITT Notes or Permitted Refinancing Indebtedness which previously
refinanced the ITT Notes, and any such Permitted Refinancing Indebtedness (such
Permitted Refinancing Indebtedness being herein called "Qualified Permitted
Refinancing Indebtedness") may be (in accordance with the terms thereof and to
the extent permitted pursuant to the Credit Agreement) (x) guaranteed by various
of the Pledgors and (y) secured hereunder on an equal and ratable basis as with
the Credit Document Obligations (as defined below) as provided herein (with any
holders or lenders of such Qualified Permitted Refinancing Indebtedness from
time to time being herein collectively called the "Permitted Refinancing
Creditors" and with all documentation evidencing any Qualified Permitted
Refinancing Indebtedness or any guarantees thereof being herein called the
"Permitted Refinancing Documents");
WHEREAS, the Corporate Borrowers may in the future issue Senior Secured
Notes as provided in Section 9.04(viii) of the Credit Agreement that may be (in
accordance with the terms thereof and to the extent permitted pursuant to the
Credit Agreement as same is in effect on the date of the respective issuance)
(x) guaranteed by various of the Pledgors and (y) equally and ratably secured
hereunder with the Credit Document Obligations as hereinafter provided (with any
holders of Senior Secured Notes from time to time being herein collectively
<PAGE> 3
called "Senior Secured Noteholders" and with all documentation evidencing any
Senior Secured Notes or any guarantees thereof being herein called "Senior
Secured Note Documents");
WHEREAS, it is a condition precedent to the extensions of credit under the
Credit Agreement that each Pledgor shall have executed and delivered to the
Pledgee this Agreement;
WHEREAS, each Pledgor desires to execute this Agreement to satisfy the
conditions described in the immediately preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to each Pledgor,
the receipt and sufficiency of which are hereby acknowledged, each Pledgor
hereby makes the following representations and warranties to the Pledgee and
hereby covenants and agrees with the Pledgee as follows:
1. SECURITY FOR OBLIGATIONS; CERTAIN EXCLUDED OBLIGATIONS; SUBORDINATION
OF CERTAIN SECURITY INTERESTS. (a) Subject to the provisions of the following
clauses (b) and (c) of this Section 1, this Agreement is made by each Pledgor
for the benefit of the Lender Creditors and, to the extent from time to time
holding Obligations (as defined below) of such Pledgor secured hereunder, each
of the Interest Rate Protection Creditors, the ITT Noteholders, the Permitted
Refinancing Creditors and the Senior Secured Noteholders (collectively, together
with the Pledgee, the "Secured Creditors"), to secure:
(i) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) and liabilities (including, without
limitation, indemnities, Fees and interest thereon) of such Pledgor to the
Lender Creditors, now existing or hereafter incurred under, arising out of
or in connection with each Credit Agreement and all other Credit Document
to which it is at any time a party (including, without limitation, all
such obligations and liabilities of such Pledgor under each Credit
Agreement (if a party thereto) and under the Guaranty or under any other
guarantee by it of obligations pursuant to any Credit Agreement) and the
due performance and compliance by such Pledgor with the terms of each such
Credit Document (all such obligations and liabilities under this clause
(i) being herein collectively called the "Credit Document Obligations");
(ii) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) and liabilities of such Pledgor to the
Interest Rate Protection Creditors, now existing or hereafter incurred
under, arising out of or in connection with any Interest Rate Protection
Agreement (including, without limitation, all such obligations and
liabilities of such Pledgor under the Guaranty with respect thereto or
under any other guarantee by it of obligations pursuant to any Interest
Rate Protection Agreement) and the due performance and compliance by such
Pledgor with the terms of each such Interest Rate Protection Agreement
(all such obligations and liabilities under this clause (ii) being herein
<PAGE> 4
collectively called the "Interest Rate Protection Obligations");
(iii) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) and liabilities of such Pledgor (as
obligor or guarantor, as the case may be) to the ITT Noteholders, whether
now existing or hereafter incurred under, arising out of or in connection
with the ITT Notes and the other ITT Note Documents to which such Pledgor
is at any time a party and the due performance and compliance by such
Pledgor with all of the terms, conditions and agreements on its part
contained in the ITT Note Documents (all such obligations and liabilities
under this clause (iii) being herein collectively, called the "ITT Note
Obligations");
(iv) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) and liabilities of such Pledgor (as
obligor or guarantor, as the case may be) to the Permitted Refinancing
Creditors, whether now existing or hereafter incurred under, arising out
of or in connection with the Permitted Refinancing Documents to which such
Pledgor is at any time a party and the due performance and compliance by
such Pledgor with all of the terms, conditions and agreements on its part
contained in the Permitted Refinancing Documents (all such obligations and
liabilities under this clause (iv) being herein collectively, called the
"Permitted Refinancing Obligations");
(v) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) and liabilities of such Pledgor (as
obligor or guarantor, as the case may be) to the Senior Secured
Noteholders, whether now existing or hereafter incurred under, arising out
of or in connection with the Senior Secured Notes and the other Senior
Secured Note Documents to which such Pledgor is at any time a party and
the due performance and compliance by such Pledgor with all of the terms,
conditions and agreements on its part contained in the Senior Secured Note
Documents (all such obligations and liabilities under this clause (v)
being herein collectively, called the "Senior Secured Note Obligations");
(vi) any and all sums advanced by the Pledgee in order to preserve
the Collateral (as hereinafter defined) or preserve its security interest
in the Collateral;
(vii) in the event of any proceeding for the collection or
enforcement of any indebtedness, obligations, or liabilities referred to
in clauses (i) through (vi) above, after an Event of Default (such term,
as used in this Agreement, shall mean any Event of Default at any time
under, and as defined in, any of the Credit Agreement and, if the related
Obligations (as defined below) are secured hereunder at such time, the ITT
Note Documents, the Permitted Refinancing Documents and the Senior Secured
Note Documents and any payment default (after the expiration of any
applicable grace period)
<PAGE> 5
on any of the Obligations secured hereunder at such time) shall have
occurred and be continuing, the reasonable expenses of retaking, holding,
preparing for sale or lease, selling or otherwise disposing or realizing
on the Collateral, or of any exercise by the Pledgee of its rights
hereunder, together with reasonable attorneys' fees and court costs; and
(viii) all amounts paid by any Secured Creditor as to which such
Secured Creditor has the right to reimbursement under Section 11 of this
Agreement;
all such obligations, liabilities, sums and expenses set forth in clauses (i)
through (viii) of this Section 1, subject to the provisions of following clause
(b), being herein collectively called the "Obligations," it being acknowledged
and agreed that the "Obligations" shall include extensions of credit of the type
described above, whether outstanding on the date of this Agreement or extended
from time to time after the date of this Agreement.
(b) Notwithstanding anything to the contrary contained above in this
Section 1 or elsewhere in this Agreement, (i) obligations and liabilities which
would otherwise constitute Obligations as defined in clauses (iii) through (v)
inclusive, of Section 1(a) shall not constitute Obligations for purposes of (or
be secured pursuant to) this Agreement if same were incurred (or guaranteed) in
violation of the provisions of Section 9.04 of the Credit Agreement as same is
in effect on the date of the incurrence of the respective obligations or
liabilities (or, in the case of ITT Note Obligations, as same is in effect on
the Initial Borrowing Date), (ii) no Obligations as otherwise described in
clauses (iii) through (v) inclusive, of Section 1(a) of this Agreement shall be
secured pursuant hereto if the respective security interests are prohibited by
the terms of Section 9.01 of the Credit Agreement as same is in effect on the
date of the incurrence of the respective obligations or liabilities (or, in the
case of ITT Note Obligations, as same is in effect on the Initial Borrowing
Date) and (iii) no obligations of the types described in clauses (iii) through
(v), inclusive, of Section 1(a) of this Agreement shall constitute Obligations
secured pursuant to this Agreement unless, within 30 days of the date of the
incurrence of the respective Indebtedness (or within 30 days after the Initial
Borrowing Date in the case of Indebtedness outstanding on the Initial Borrowing
Date), the following condition is satisfied:
A written notice from the Parent Companies, stating that it is a
"Notice of Pledge Agreement Entitlement" (each a "Notice of Pledge
Agreement Entitlement") shall be delivered to the Pledgee, which
written notice shall describe the respective Obligations (and which
shall describe the Pledgors obligated, as obligors or guarantors, with
respect thereto) to be secured hereby. Each Notice of Pledge Agreement
Entitlement shall state that it is delivered pursuant to Section 1(b)
of this Pledge and Security Agreement and shall reference the aggregate
principal amount of the respective Indebtedness constituting
Obligations hereunder and shall specify the sub-clause of Section 1(a)
pursuant to which same constitute Obligations. At the option of the
Parent Companies, a Notice of Pledge Agreement Entitlement may also
contain an election as described in the immediately succeeding
sentence.
<PAGE> 6
Notwithstanding anything to the contrary contained in Section 1 or elsewhere in
this Agreement, if the Parent Companies elect, in the respective Notice of
Pledge Agreement Entitlement, that any Pledgor's or Pledgors' obligations with
respect to any Indebtedness of the type described in clauses (iii) through (v)
inclusive, of Section 1(a) of this Agreement shall not be secured pursuant to
this Agreement, then any obligations of the respective Pledgor or Pledgors so
designated shall not be secured pursuant to this Agreement.
2. DEFINITION OF STOCK, LIMITED LIABILITY COMPANY INTERESTS, PARTNERSHIP
INTERESTS, SECURITIES, ETC. (a) As used herein: (i) the term "Stock" shall mean
(x) with respect to corporations incorporated under the laws of the United
States or any State or territory thereof (each a "Domestic Corporation"), all of
the issued and outstanding shares of capital stock of any Domestic Corporation
at any time owned by any Pledgor and (y) with respect to corporations that are
not Domestic Corporations (each a "Foreign Corporation"), all of the issued and
outstanding shares of capital stock of any Foreign Corporation at any time owned
by any Pledgor, provided that, (A) except as provided in the last sentence of
this Section 2(a), such Pledgor shall not be required to pledge hereunder more
than 65% of the total combined voting power of all classes of capital stock
entitled to vote for the directors of such Foreign Corporation (herein called
"Voting Stock") owned by such Pledgor of any Foreign Corporation, (B) the
Pledgor shall be required to pledge hereunder 100% of the issued and outstanding
shares of all capital stock which is not Voting Stock (herein called "Non-Voting
Stock") at any time owned by the Pledgor of any Foreign Corporation, (C) to the
extent provided in Section 8.16 of the Credit Agreement, such Pledgor shall not
be required to pledge hereunder any Margin Stock owned by such Pledgor
(although, to the extent required by Section 8.16 of the Credit Agreement,
Margin Stock may be required to be pledged hereunder from time to time) (and (D)
to the extent provided in Section 13.19 of the Credit Agreement, such Pledgor
shall not be required to pledge hereunder any outstanding shares of ITT MSG,
Inc. capital stock (although, to the extent required by Section 13.19 of the
Credit Agreement, the capital stock of ITT MSG, Inc. shall be required to be
pledged hereunder); (ii) the term "Limited Liability Company Interest" shall
mean the entire limited liability company interests at any time owned by each
Pledgor in any limited liability company; (iii) the term "Partnership Interest"
shall mean the entire partnership interests (whether general and/or limited
partnership interests) at any time owned by each Pledgor in any Person; and (iv)
the term "Securities" shall mean all of the Stock, Limited Liability Company
Interests and Partnership Interests. Each Pledgor represents and warrants that
on the date hereof (i) the Stock held by such Pledgor consists of the number and
type of shares of the stock of the corporations as described in Annex A hereto;
(ii) such Stock constitutes that percentage of the issued and outstanding
capital stock of the issuing corporation as is set forth in Annex A hereto;
(iii) the Limited Liability Interests held by such Pledgor consist of the number
and type of interest of the issuing Person as described in Annex B hereto; (iv)
such Limited Liability Company Interests constitute that percentage of the
issued and outstanding equity interests of the issuing Person as set forth in
Annex B hereto; (v) the Partnership Interests held by such Pledgor constitute
that percentage of the entire Partnership Interest of the respective Pledged
Partnership as is set forth in Annex C hereto for such Pledgor; and (vi) on the
date hereof, such Pledgor owns no other Securities. In the circumstances and to
the extent provided in Section 8.14 of the Credit Agreement, the limitation set
forth in part (A) of the proviso to clause (i)(y) of this Section 2(a) and in
Section 3.2 hereof shall no longer be applicable and such
<PAGE> 7
Pledgor shall duly pledge and deliver to the Pledgee such of the Securities not
theretofore required to be pledged hereunder.
(b) All Stock at any time pledged or required to be pledged hereunder is
hereinafter called the "Pledged Stock," all Limited Liability Company Interests
at any time pledged or required to be pledged hereunder are hereinafter called
the "Pledged Limited Liability Company Interests," all Partnership Interests at
any time pledged or required to be pledged hereunder are hereinafter called the
"Pledged Partnership Interests," all of the Pledged Stock, Pledged Limited
Liability Interests and Pledged Partnership Interests together are hereinafter
called the "Pledged Securities," which together with all proceeds thereof,
including any securities and moneys received and at the time held by the Pledgee
hereunder and all rights under Section 3.1(a)(iv) and (v) are hereinafter called
the "Collateral".
3. PLEDGE OF SECURITIES, ETC.
3.1. Pledge. (a) To secure all Obligations of such Pledgor and for the
purposes set forth in Section 1 hereof, each Pledgor hereby: (i) grants to the
Pledgee a security interest in all of the Collateral owned by such Pledgor; (ii)
pledges and deposits as security with the Pledgee the Securities owned by such
Pledgor on the date hereof, and delivers to the Pledgee certificates or
instruments therefor, accompanied by undated stock powers duly executed in blank
by such Pledgor in the case of Stock, or such other instruments of transfer as
are reasonably acceptable to the Pledgee; (iii) assigns, transfers,
hypothecates, mortgages, charges and sets over to the Pledgee all of such
Pledgor's right, title and interest in and to such Securities (and in and to all
certificates or instruments evidencing such Securities), to be held by the
Pledgee, upon the terms and conditions set forth in this Agreement; (iv)
transfers and assigns to the Pledgee all of such Pledgor's Limited Liability
Company Interests and all of such Pledgor's right, title and interest in each
limited liability company to which such interests relate, whether now existing
or hereafter acquired, including, without limitation:
(A) all the capital thereof and its interest in all profits, losses,
Limited Liability Company Assets (as defined below) and other
distributions to which such Pledgor shall at any time be entitled in
respect of such Limited Liability Company Interests;
(B) all other payments due or to become due to such Pledgor in
respect of Limited Liability Company Interests, whether under any limited
liability company agreement or otherwise, whether as contractual
obligations, damages, insurance proceeds or otherwise;
(C) all of its claims, rights, powers, privileges, authority,
options, security interest, liens and remedies, if any, under any limited
liability company agreement or operating agreement, or at law or otherwise
in respect of such Limited Liability Company Interests;
(D) all present and future claims, if any, of such Pledgor against
any such limited liability company for moneys loaned or advanced, for
services rendered or otherwise;
<PAGE> 8
(E) all of such Pledgor's rights under any limited liability company
agreement or operating agreement or at law to exercise and enforce every
right, power, remedy, authority, option and privilege of such Pledgor
relating to such Limited Liability Company Interests, including any power
to terminate, cancel or modify any limited liability company agreement or
operating agreement, to execute any instruments and to take any and all
other action on behalf of and in the name of such Pledgor in respect of
such Limited Liability Company Interest and any such limited liability
company, to make determinations, to exercise any election (including, but
not limited to, election of remedies) or option or to give or receive any
notice, consent, amendment, waiver or approval, together with full power
and authority to demand, receive, enforce, collect or receipt for any of
the foregoing or for any Limited Liability Company Asset, to enforce or
execute any checks, or other instruments or orders, to file any claims and
to take any action in connection with any of the foregoing;
(F) all other property hereafter delivered in substitution for or in
addition to any of the foregoing, all certificates and instruments
representing or evidencing such other property and all cash, securities,
interest, dividends, rights and other property at any time and from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all thereof; and
(G) to the extent not otherwise included, all proceeds of any or all
of the foregoing;
and (v) transfers and assigns to the Pledgee such Pledgor's Partnership
Interests (and delivers any certificates or instruments evidencing such
partnership interests, duly endorsed in blank) and all of such Pledgor's right,
title and interest in each Pledged Partnership including, without limitation:
(A) all of the capital thereof and its interest in all profits,
losses, Partnership Assets (as defined below) and other distributions to
which such Pledgor shall at any time be entitled in respect of any such
Collateral;
(B) all other payments due or to become due to such Pledgor in
respect of any such Collateral, whether under any partnership agreement or
otherwise, whether as contractual obligations, damages, insurance proceeds
or otherwise;
(C) all of its claims, rights, powers, privileges, authority,
options, security interest, liens and remedies, if any, under any
partnership or other agreement or at law or otherwise in respect of any
such Collateral;
(D) all present and future claims, if any, of such Pledgor against
any Pledged Partnership for moneys loaned or advanced, for services
rendered or otherwise;
(E) all of such Pledgor's rights under any partnership agreement or
at law to exercise and enforce every right, power, remedy, authority,
option and privilege of such Pledgor relating to any Partnership Interest,
including any power, if any, to terminate,
<PAGE> 9
cancel or modify any general or limited partnership agreement, to execute
any instruments and to take any and all other action on behalf of and in
the name of such Pledgor in respect of such Partnership Interest and any
Pledged Partnership, to make determinations, to exercise any election
(including, but not limited to, election of remedies) or option or to give
or receive any notice, consent, amendment, waiver or approval, together
with full power and authority to demand, receive, enforce, collect or
receipt for any of the foregoing or for any Partnership Asset, to enforce
or execute any checks, or other instruments or orders, to file any claims
and to take any action in connection with any of the foregoing;
(F) all other property hereafter delivered in substitution for or in
addition to any of the foregoing, all certificates and instruments
representing or evidencing such other property and all cash, securities,
interest, dividends, rights and other property at any time and from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all thereof; and
(G) to the extent not otherwise included, all proceeds of any or all
of the foregoing.
(b) As used herein, the term "Limited Liability Company Assets"
shall mean all assets, whether tangible or intangible and whether real, personal
or mixed (including, without limitation, all limited liability company capital
and interests in other limited liability companies), at any time owned or
represented by any Limited Liability Company Interest.
(c) As used herein, the term "Partnership Assets" shall mean all
assets, whether tangible or intangible and whether real, personal or mixed
(including, without limitation, all partnership capital and interests in other
partnerships), at any time owned by any Pledged Partnership or represented by
any Partnership Interest.
3.2. Subsequently Acquired Securities. If any Pledgor shall acquire
(by purchase, stock dividend or otherwise) any additional Securities at any time
or from time to time after the date hereof, such Securities shall automatically
(and without any further action being required to be taken) be subject to the
pledge and security interests created pursuant to Section 3.1(a) and,
furthermore, such Pledgor will forthwith deliver and deposit such Securities (or
certificates or instruments representing such Securities) as security with the
Pledgee and deliver to the Pledgee certificates therefor or instruments thereof,
and accompanied by undated stock powers duly executed in blank in the case of
Stock, Limited Liability Company Interests or Partnership Interests or such
other instruments of transfer as are reasonably acceptable to the Pledgee, and
will promptly thereafter deliver to the Pledgee a certificate executed by any
Authorized Officer of such Pledgor describing such Securities and certifying
that the same have been duly pledged with the Pledgee hereunder. Subject to the
last sentence of Section 2(a) hereof, any pledge of Voting Stock of any Foreign
Corporation shall be subject to the provisions of part (A) of the proviso to
clause (i)(y) of Section 2(a) hereof.
3.3. Uncertificated Securities. If any Securities (whether now owned
or hereafter acquired) are uncertificated securities, the respective Pledgor
shall promptly notify the Pledgee
<PAGE> 10
thereof, and shall promptly take all actions required to perfect the security
interest of the Pledgee under applicable law (including, in any event, under
Sections 8-106 and 9-115 of the New York UCC, if applicable). Each Pledgor
further agrees to take such actions as the Pledgee deems reasonably necessary or
desirable to effect the foregoing and to permit the Pledgee to exercise any of
its rights and remedies hereunder, and agrees to provide an opinion of counsel
reasonably satisfactory to the Pledgee with respect to any such pledge of
uncertificated Securities promptly upon request of the Pledgee.
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. (a) The Pledgee
shall have the right to appoint one or more sub-agents for the purpose of
retaining physical possession of the Pledged Securities, which may be held (in
the discretion of the Pledgee) in the name of such Pledgor, endorsed or assigned
in blank or in favor of the Pledgee or any nominee or nominees of the Pledgee or
a sub-agent appointed by the Pledgee. The Pledgee agrees to promptly notify the
relevant Pledgor after the appointment of any sub-agent; provided, however, that
the failure to give such notice shall not affect the validity of such
appointment.
(b) In the case of any Pledgor's grant to the Pledgee of Securities
of any corporation, partnership or limited liability company that holds a Nevada
gaming license, such Securities shall be held by a sub-agent of the Pledgee
residing in the state of Nevada.
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until an
Event of Default shall have occurred and be continuing, each Pledgor shall be
entitled to (i) exercise any and all voting and other consensual rights
pertaining to the Pledged Stock and to give all consents, waivers or
ratification's in respect thereof; and (ii) exercise any and all voting,
consent, administration, management and other rights and remedies under (x) any
limited liability company agreement or operating agreement or otherwise with
respect to the Pledged Limited Liability Interests of such Pledgor and (y) any
partnership agreement or otherwise with respect to the Pledged Partnership
Interests of such Pledgor; provided, that no vote shall be cast or any consent,
waiver or ratification given or any action taken which would violate or be
inconsistent with any of the terms of this Agreement or any other Credit
Document, or which would have the effect of impairing the rights, priorities or
remedies of the Pledgee or any other Secured Creditor under this Agreement or
any other Credit Documents. All such rights of such Pledgor to vote and to give
consents, waivers and ratification's shall cease in case an Event of Default
shall occur and be continuing, and Section 7 hereof shall become applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless an Event of Default
shall have occurred and be continuing, all cash dividends and other cash
distributions payable in respect of the Pledged Securities shall be paid to the
respective Pledgor; provided, that all cash dividends and other cash
distributions payable in respect of any Pledged Security which are determined by
the Pledgee to represent in whole or in part an extraordinary, liquidating or
other distribution in return of capital shall be paid, to the extent so
determined to represent an extraordinary, liquidating or other distribution in
return of capital, to the Pledgee and retained by it as part of the Collateral.
The Pledgee shall also be entitled to receive directly, and to retain as part of
the Collateral:
(i) all other or additional stock or other securities or
property (other than cash)
<PAGE> 11
paid or distributed by way of dividend or otherwise in respect of
the Pledged Stock, Pledged Limited Liability Company Interests and
Pledged Partnership Interests;
(ii) all other or additional stock or other securities or
property (including cash) paid or distributed in respect of the
Pledged Stock, Pledged Limited Liability Company Interests or
Pledged Partnership Interests by way of stock-split, spin-off,
split-up, reclassification, combination of shares or similar
rearrangement; and
(iii) all other or additional stock or other securities or
property (including cash) which may be paid in respect of the
Collateral by reason of any consolidation, merger, exchange of
stock, conveyance of assets, liquidation or similar corporate
reorganization.
Nothing contained in this Section 6 shall limit or restrict in any way the
Pledgee's right to receive proceeds of the Collateral in any form in accordance
with Section 3 of this Agreement. All dividends, distributions or other payments
which are received by the Pledgor contrary to the provisions of this Section 6
and Section 7 below shall be received in trust for the benefit of the Pledgee,
shall be segregated from other property or funds of the Pledgor and shall be
forthwith paid over to the Pledgee as Collateral in the same form as so received
(with any necessary endorsement).
7. REMEDIES IN CASE OF EVENT OF DEFAULT. In case an Event of
Default shall have occurred and be continuing, the Pledgee shall be entitled to
exercise all of the rights, powers and remedies (whether vested in it by this
Agreement or by any other Credit Document or, to the extent then in effect and
secured hereby, any Interest Rate Protection Agreement, any ITT Note Document,
any Permitted Refinancing Document, any Senior Secured Note Document (with all
of the Documents listed above being herein collectively called the "Senior
Documents" or the "Secured Debt Agreements") or by law) for the protection and
enforcement of its rights in respect of the Collateral, and the Pledgee shall be
entitled to exercise all the rights and remedies of a secured party under the
UCC and also shall be entitled, without limitation, to exercise the following
rights, which each Pledgor hereby agrees to be commercially reasonable:
(i) to receive all amounts payable in respect of the
Collateral payable to such Pledgor under Section 6 hereof;
(ii) to transfer all or any part of the Pledged Securities
into the Pledgee's name or the name of its nominee or nominees (the
Pledgee agrees to promptly notify the relevant Pledgor after such
transfer; provided, however, that the failure to give such notice
shall not affect the validity of such transfer);
(iii) to vote all or any part of the Pledged Stock, Pledged
Limited Liability Company Interests or Pledged Partnership Interests
(whether or not transferred into the name of the Pledgee) and give
all consents, waivers and ratification's in respect of the
Collateral and otherwise act with respect thereto as though it were
the outright owner thereof (each Pledgor hereby irrevocably
constituting and appointing the Pledgee the proxy and
attorney-in-fact of such Pledgor, with full power of substitution to
do so); and
<PAGE> 12
(iv) at any time or from time to time to sell, assign and
deliver, or grant options to purchase, all or any part of the
Collateral, or any interest therein, at any public or private sale,
without demand of performance, advertisement or notice of intention
to sell or of the time or place of sale or adjournment thereof or to
redeem or otherwise (all of which are hereby waived by each
Pledgor), for cash, on credit or for other property, for immediate
or future delivery without any assumption of credit risk, and for
such price or prices and on such terms as the Pledgee in its
absolute discretion may determine; provided, that at least 10
Business Days' notice of the time and place of any such sale shall
be given to such Pledgor. Each Pledgor hereby waives and releases to
the fullest extent permitted by law any right or equity of
redemption with respect to the Collateral, whether before or after
sale hereunder, and all rights, if any, of marshalling the
Collateral and any other security for the Obligations or otherwise.
At any such sale, unless prohibited by applicable law, the Pledgee
on behalf of the Secured Creditors may bid for and purchase all or
any part of the Collateral so sold free from any such right or
equity of redemption. Neither the Pledgee nor any Secured Creditor
shall be liable for failure to collect or realize upon any or all of
the Collateral or for any delay in so doing nor shall any of them be
under any obligation to take any action whatsoever with regard
thereto.
8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of
the Pledgee provided for in this Agreement or any other Secured Debt Agreement
or now or hereafter existing at law or in equity or by statute shall be
cumulative and concurrent and shall be in addition to every other such right,
power or remedy. The exercise or beginning of the exercise by the Pledgee or any
other Secured Creditor of any one or more of the rights, powers or remedies
provided for in this Agreement or any other Secured Debt Agreement or now or
hereafter existing at law or in equity or by statute or otherwise shall not
preclude the simultaneous or later exercise by the Pledgee or any other Secured
Creditor of all such other rights, powers or remedies, and no failure or delay
on the part of the Pledgee or any other Secured Creditor to exercise any such
right, power or remedy shall operate as a waiver thereof. The Secured Creditors
agree that this Agreement may be enforced only by the action of the
Administrative Agents or the Pledgee, in each case acting upon the instructions
of the Required Secured Creditors (as defined in Annex G hereto) and that no
other Secured Creditor shall have any right individually to seek to enforce or
to enforce this Agreement or to realize upon the security to be granted hereby,
it being understood and agreed that such rights and remedies may be exercised by
the Administrative Agents or the Pledgee, as the case may be, for the benefit of
the Secured Creditors upon the terms of this Agreement.
9. APPLICATION OF PROCEEDS. (a) All moneys collected by the
Collateral Agent upon any sale or other disposition of the Collateral of each
Pledgor, together with all other moneys received by the Collateral Agent
hereunder, shall be applied as follows:
(i) first, to the payment of all Obligations owing to the
Collateral Agent of the type provided in clauses (vii) and (viii) of
the definition of Obligation;
(ii) second, to the extent proceeds remain after the
application pursuant to the preceding clause (i), an amount equal to
the outstanding Primary Obligations of the respective Pledgor shall
be paid to the Secured Creditors (with such Secured Creditors
<PAGE> 13
being herein called the "Senior Secured Creditors") as provided in
Section 9(e) hereof, with each Senior Secured Creditor receiving an
amount equal to its outstanding Primary Obligations of such Pledgor
or, if the proceeds are insufficient to pay in full all such Primary
Obligations, its Pro Rata Share of the amount remaining to be
distributed;
(iii) third, to the extent proceeds remain after the
application pursuant to the preceding clauses (i) and (ii), an
amount equal to the outstanding Secondary Obligations of the
respective Pledgor shall be paid to the Senior Secured Creditors as
provided in Section 9(e) hereof, with each Senior Secured Creditor
receiving an amount equal to its outstanding Secondary Obligations
of such Pledgor or, if the proceeds are insufficient to pay in full
all such Secondary Obligations, its Pro Rata Share of the amount
remaining to be distributed; and
(iv) fifth, to the extent proceeds remain after the
application pursuant to the preceding clauses (i) through (iii),
inclusive, and following the termination of this Agreement pursuant
to Section 18 hereof, to the relevant Pledgor or to whomever may be
lawfully entitled to receive such surplus.
(b) For purposes of this Agreement (x) "Pro Rata Share" shall
mean, when calculating a Secured Creditor's portion of any distribution or
amount, that amount (expressed as a percentage) equal to a fraction the
numerator of which is the then unpaid amount of such Secured Creditor's Primary
Obligations or Secondary Obligations, as the case may be, of the respective
Pledgor and the denominator of which is the then outstanding amount of all
Primary Obligations or Secondary Obligations, as the case may be, of the
respective Pledgor, (y) "Primary Obligations" of any Pledgor shall mean (i) in
the case of the Credit Document Obligations, all Obligations of such Pledgor
arising out of or in connection with (including, without limitation, as obligor
or guarantor, as the case may be) the principal of, and interest on, all Loans,
all Unpaid Drawings theretofore made (together with all interest accrued
thereon), and the aggregate Stated Amounts of all Letters of Credit issued under
the Credit Agreement, and all regularly accruing Fees, (ii) in the case of the
ITT Note Obligations, all Obligations of such Pledgor secured hereby arising out
of or in connection with (including, without limitation, as obligor or
guarantor, as the case may be) the principal of, and interest on, the ITT Notes,
(iii) in the case of Qualified Permitted Refinancing Obligations, all
Obligations of such Pledgor secured hereby arising out of or in connection with
(including, without limitation, as obligor or guarantor, as the case may be) the
principal of, and interest on, the Qualified Permitted Refinancing Indebtedness,
(iv) in the case of the Senior Secured Note Obligations, all Obligations of such
Pledgor secured hereby arising out of or in connection with (including, without
limitation, as obligor or guarantor, as the case may be) the principal of, and
interest on, the Senior Secured Notes and (v) in the case of the Interest Rate
Protection Obligations, all Obligations of such Pledgor arising out of or in
connection with (including, without limitation, as a direct obligor or a
guarantor, as the case may be) Interest Rate Protection Agreements (other than
indemnities, fees (including, without limitation, attorneys' fees) and similar
obligations and liabilities), and (z) "Secondary Obligations" of any Pledgor
shall mean all Obligations of such Pledgor secured hereby other than Primary
Obligations.
(c) When payments to Senior Secured Creditors are based upon
their respective
<PAGE> 14
Pro Rata Shares, the amounts received by such Senior Secured Creditors hereunder
shall be applied (for purposes of making determinations under this Section 9
only) (i) first, to the Primary Obligations of the respective Pledgor and (ii)
second, to the Secondary Obligations of the respective Pledgor.
(d) Each of the Secured Creditors agrees and acknowledges that
if the Lender Creditors are to receive a distribution on account of undrawn
amounts with respect to Letters of Credit issued under the Credit Agreement,
such amounts shall be paid to the Paying Agent under the Credit Agreement and
held by it, for the equal and ratable benefit of the Lender Creditors as such.
If any amounts are held as cash security pursuant to the immediately preceding
sentence, then upon the termination of all outstanding Letters of Credit, and
after the application of all such cash security to the repayment of all
Obligations owing to the Lender Creditors after giving effect to the termination
of all such Letters of Credit, if there remains any excess cash, such excess
cash shall be returned by the Paying Agent to the Collateral Agent for
distribution in accordance with Section 9(a) hereof.
(e) Except as set forth in Section 9(d) hereof, all payments
required to be made hereunder shall be made (i) if to the Lender Creditors, to
the Paying Agent under the Credit Agreement for the account of the Lender
Creditors, and (ii) if to any other Secured Creditors (other than the Collateral
Agent), to the trustee, paying agent or other similar representative (each a
"Representative") for such Secured Creditors or, in the absence of such a
Representative, directly to the other Secured Creditors.
(f) For purposes of applying payments received in accordance
with this Section 9, the Collateral Agent shall be entitled to rely upon (i) the
Paying Agent under the Credit Agreement and (ii) the Representative for any
other Secured Creditors or, in the absence of such a Representative, upon the
respective Secured Creditors for a determination (which the Paying Agent, each
Representative for any other Secured Creditors and the Secured Creditors agree
(or shall agree) to provide upon request of the Collateral Agent) of the
outstanding Primary Obligations and Secondary Obligations owed to the Secured
Creditors. Unless it has actual knowledge (including by way of written notice
from a Representative for any Secured Creditor or directly from a Secured
Creditor) to the contrary, the Collateral Agent, in acting hereunder, shall be
entitled to assume that no Interest Rate Protection Agreements are in existence.
(g) It is understood and agreed that each Pledgor shall remain
liable to the extent of any deficiency between the amount of the proceeds of the
Collateral pledged by it hereunder and the aggregate amount of the Obligations
of such Pledgor.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral
by the Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Pledgee or such officer or be answerable in any way for the
misapplication or nonapplication thereof.
<PAGE> 15
11. INDEMNITY. Each Pledgor jointly and severally agrees (i)
to indemnify and hold harmless the Pledgee in such capacity and each other
Secured Creditor from and against any and all claims, demands, losses, judgments
and liabilities of whatsoever kind or nature, and (ii) to reimburse the Pledgee
and each other Secured Creditor for all reasonable costs and expenses, including
reasonable attorneys' fees, in each case to the extent growing out of or
resulting from the exercise by the Pledgee of any right or remedy granted to it
hereunder or under any other Secured Debt Agreement except, with respect to
clauses (i) and (ii) above, to the extent arising from the Pledgee's or such
other Secured Creditor's gross negligence or willful misconduct. In no event
shall the Pledgee be liable, in the absence of gross negligence or willful
misconduct on its part, for any matter or thing in connection with this
Agreement other than to account for moneys actually received by it in accordance
with the terms hereof. If and to the extent that the obligations of the Pledgors
under this Section 11 are unenforceable for any reason, each Pledgor hereby
agrees to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
12. FURTHER ASSURANCES; POWER OF ATTORNEY. (a) Each Pledgor
agrees that it will join with the Pledgee in executing and, at such Pledgor's
own expense, file and refile under the applicable UCC or such other law such
financing statements, continuation statements and other documents in such
offices as the Pledgee may reasonably deem necessary or appropriate and wherever
required or permitted by law in order to perfect and preserve the Pledgee's
security interest in the Collateral and hereby authorizes the Pledgee to file
financing statements and amendments thereto relative to all or any part of the
Collateral without the signature of such Pledgor where permitted by law, and
agrees to do such further acts and things and to execute and deliver to the
Pledgee such additional conveyances, assignments, agreements and instruments as
the Pledgee may reasonably deem necessary or advisable to carry into effect the
purposes of this Agreement or to further assure and confirm unto the Pledgee its
rights, powers and remedies hereunder.
(b) Each Pledgor hereby appoints the Pledgee such Pledgor's
attorney-in-fact, with full authority in the place and stead of such Pledgor and
in the name of such Pledgor or otherwise, to act from time to time after the
occurrence and during the continuance of an Event of Default in the Pledgee's
reasonable discretion to take any action and to execute any instrument which the
Pledgee may deem necessary or advisable to accomplish the purposes of this
Agreement.
13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance
with this Agreement all items of the Collateral at any time received under this
Agreement. It is expressly understood and agreed that the obligations of the
Pledgee as holder of the Collateral and interests therein and with respect to
the disposition thereof, and otherwise under this Agreement, are only those
expressly set forth in this Agreement. The Pledgee shall act hereunder on the
terms and conditions set forth in Annex G hereto, the terms of which shall be
deemed incorporated herein by reference as fully as if same were set forth
herein in their entirety.
14. TRANSFER BY PLEDGORS. No Pledgor will sell or otherwise
dispose of, grant any option with respect to, or mortgage, pledge or otherwise
encumber any of the Collateral or any interest therein (except in accordance
with the terms of this Agreement and as permitted
<PAGE> 16
by the terms of the Credit Agreement).
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGORS. (a)
Each Pledgor represents, warrants and covenants that:
(i) it is the legal, record and beneficial owner of, and has
good title to, all Pledged Securities purported to be owned by such
Pledgor (including as shown on Annexes A, B and C hereof), subject
to no Lien, except the Liens created by this Agreement and Liens
permitted under Section 9.01 of the Credit Agreement;
(ii) it has full power, authority and legal right to pledge
all the Pledged Securities;
(iii) this Agreement has been duly authorized, executed and
delivered by such Pledgor and constitutes the legal, valid and
binding obligation of such Pledgor enforceable in accordance with
its terms, except to the extent that the enforceability hereof may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights
generally and by equitable principles (regardless of whether
enforcement is sought in equity or at law);
(iv) no consent of any other party (including, without
limitation, any stockholder or creditor of such Pledgor or any of
its Subsidiaries and any other partners or members of such Pledgor's
partnerships or limited liability companies) and no consent,
license, permit, approval or authorization of, exemption by, notice
or report to, or registration, filing (except any filings required
under the UCC, which filings have been made) or declaration with,
any governmental authority is required to be obtained by such
Pledgor in connection with the execution, delivery or performance of
this Agreement, or in connection with the exercise of its rights and
remedies pursuant to this Agreement, except those which have been
obtained or made or as may be required by laws affecting the offer
and sale of securities generally in connection with the exercise by
the Pledgee of certain of its remedies hereunder or which may be
required to be obtained by the Pledgee pursuant to Section 22 or 23
hereof in connection with the exercise of its rights and remedies
hereunder;
(v) the execution, delivery and performance of this Agreement
by such Pledgor does not violate any provision of any applicable law
or regulation or of any order, judgment, writ, award or decree of
any court, arbitrator or governmental authority, domestic or
foreign, or of the certificate of incorporation or by-laws (or
analogous organizational documents) of such Pledgor or of any
securities issued by such Pledgor or any of its Subsidiaries, or of
any mortgage, indenture, lease, deed of trust, credit agreement or
loan agreement, or any other material agreement, contract or
instrument to which such Pledgor or any of its Subsidiaries is a
party or which purports to be binding upon such Pledgor or any of
its Subsidiaries or upon any of their respective assets and will not
result in the creation or imposition (or the obligation to create or
impose) of any lien or encumbrance on any of the assets of such
Pledgor or any of its Subsidiaries except as contemplated by this
Agreement;
<PAGE> 17
(vi) all the shares of Stock and all Pledged Limited Liability
Company Interests have been duly and validly issued, are fully paid
and nonassessable and subject to no options to purchase or similar
rights;
(vii) the pledge, assignment and delivery (which delivery has
been made) to the Pledgee of the Pledged Stock creates a valid and
perfected first security interest in such Stock, subject to no prior
lien or encumbrance or to any agreement purporting to grant to any
third party a lien or encumbrance on the property or assets of such
Pledgor which would include the Securities;
(viii) each Pledged Partnership Interest has been validly
acquired and is fully paid for (to the extent applicable) and is
duly and validly pledged hereunder;
(ix) each partnership agreement is the legal, valid and
binding obligation of the applicable Pledgor, enforceable in
accordance with its terms;
(x) no Pledgor is in default in the payment of any portion of
any mandatory capital contribution, if any, required to be made
under any general or limited partnership agreement to which such
Pledgor is a party, and no Pledgor is in violation of any other
material provisions of any partnership agreement to which such
Pledgor is a party, or otherwise in default or violation
thereunder;
(xi) no Pledged Partnership Interest is subject to any
defense, offset or counterclaim, nor have any of the foregoing been
asserted or alleged against such Pledgor by any Person with respect
thereto;
(xii) the pledge and assignment of the Pledged Partnership
Interests and/or Pledged Limited Liability Company Interests
pursuant to this Agreement, together with the relevant filings or
recordings under the UCC (which filings and recordings have been or
will be made), create a valid perfected and continuing first
priority security interest in such Partnership Interests and/or
Limited Liability Company Interests and the proceeds thereof,
subject to no prior lien or encumbrance or to any agreement
purporting to grant to any third party a lien or encumbrance on the
property or assets of such Pledgee or which would include the
collateral;
(xiii) there are no currently effective financing statements
in respect of the UCC covering property which is now or hereafter
may be included in the Collateral and such Pledgor will not, without
the prior written consent of the Pledgee, execute and, until the
Termination Date (as hereinafter defined), there will not ever be on
file in any public office any enforceable financing statement or
statements covering any or all of the Collateral, except financing
statements filed or to be filed in favor of the Pledgee as secured
party;
(xiv) each Pledgor shall give the Pledgee prompt notice of any
written claim it receives relating to the Collateral; and
(xv) each Pledgor shall deliver to the Pledgee a copy of each
other demand, notice
<PAGE> 18
or document received by it which may adversely affect the Pledgee's
interest in the Collateral promptly upon, but in any event within 10
days after, such Pledgor's receipt thereof.
Each Pledgor covenants and agrees that it will defend the
Pledgee's right, title and security interest in and to the Securities and the
proceeds thereof against the claims and demands of all persons whomsoever; and
such Pledgor covenants and agrees that it will have like title to and right to
pledge any other property at any time hereafter pledged to the Pledgee as
Collateral hereunder and will likewise defend the right thereto and security
interest therein of the Pledgee and the other Secured Creditors.
(b) Each Pledgor hereby further represents, warrants and
covenants that as of the date hereof, the chief executive office of such Pledgor
is located at the address indicated on Annex F hereto for such Pledgor. Such
Pledgor will not move its chief executive office except to such new location as
such Pledgor may establish in accordance with the last sentence of this Section
15(b). No Pledgor shall establish new locations for such offices until (i) it
shall have given to the Pledgee not less than 30 days' prior written notice of
its intention to do so, clearly describing such new location and providing such
other information in connection therewith as the Pledgee may reasonably request,
(ii) it shall have delivered to the Pledgee a written supplement to Annex F
hereto in the form of Exhibit A-1 hereto as provided in clause (c) below showing
the new location of its chief executive office and (iii) with respect to such
new location, it shall have taken all action, reasonably satisfactory to the
Pledgee, to maintain all security interest of the Pledgee in the Collateral
intended to be granted hereby at all times fully perfected and in full force and
effect.
(c) Without in any way limiting Section 3.2 hereof, at any
time and from time to time that any Pledgor (x) determines that the information
with respect to it contained on Annex A, B, C and/or F, as the case may be, is
inaccurate or (y) acquires any additional Securities which have not already been
pledged hereunder and reflected on Annexes A through C, as appropriate, such
Pledgor shall deliver a supplement to this Agreement, substantially in the form
of Exhibit A-1 hereto (each a "Pledge and Security Agreement Supplement") adding
(or, in the case of any Securities released pursuant to Section 18(b) hereof,
deleting) such Securities to (from) Annexes A through C hereto, as appropriate.
The execution and delivery of any such supplement shall not require the consent
of any Pledgor hereunder. It is understood and agreed that the pledge and
security interests granted hereunder shall apply to all Collateral as provided
in Section 3.1 regardless of the failure of any Pledgor to deliver, or any
inaccurate information stated in, the Pledge and Security Agreement Supplement
as otherwise provided above.
(d) Each Pledgor hereby covenants and agrees that with respect
to all Partnership Interests or Limited Liability Company Interests, in each
case required to be pledged by it hereunder, such Pledgor will deliver to the
respective Pledged Partnerships or Pledged Limited Liability Companies, as the
case may be (with copies to the Collateral Agent) a notice (appropriately
completed) in the form of Annex D attached hereto and by this reference made a
part hereof (each such notice a "Partnership/LLC Notice") and such Pledgor will
use its reasonable best efforts to cause to be delivered to the Collateral Agent
an acknowledgment in the form set forth as Annex E attached hereto (each such
acknowledgment, a "Pledge
<PAGE> 19
Acknowledgment"), duly executed by the relevant Pledged Partnership and/or
Pledged Limited Liability Company, as the case may be, in each case within
forty-five days following the date of any pledge of any Pledged Partnership
Interests or Pledged Limited Liability Company Interests hereunder.
16. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of
each Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
suspended, discharged, terminated or otherwise affected by, any circumstance or
occurrence whatsoever, including, without limitation: (i) any renewal,
extension, amendment or modification of or addition or supplement to or deletion
from any Secured Debt Agreement or any other instrument or agreement referred to
therein, or any assignment or transfer of any thereof; (ii) any waiver, consent,
extension, indulgence or other action or inaction under or in respect of any
such agreement or instrument or this Agreement; (iii) any furnishing of any
additional security to the Pledgee or its assignee or any acceptance thereof or
any release of any security by the Pledgee or its assignee; (iv) any limitation
on any party's liability or obligations under any such instrument or agreement
or any invalidity or unenforceability, in whole or in part, of any such
instrument or agreement or any term thereof; (v) any limitation on any other
Pledgor's liability or obligations under this Agreement, the Guaranty or any
other Credit Document or any invalidity or unenforceability, in whole or in
part, of this Agreement, the Guaranty or any other Credit Document or any term
thereof; or (vi) any bankruptcy, insolvency, reorganization, composition,
adjustment, dissolution, liquidation or other like proceeding relating to such
Pledgor or any Subsidiary of such Pledgor, or any action taken with respect to
this Agreement by any trustee or receiver, or by any court, in any such
proceeding, whether or not such Pledgor shall have notice or knowledge of any of
the foregoing.
17. REGISTRATION, ETC. (a) If an Event of Default shall have
occurred and be continuing and any Pledgor shall have received from the Pledgee
a written request or requests that such Pledgor cause any registration,
qualification or compliance under any Federal or state securities law or laws to
be effected with respect to all or any part of the Pledged Securities, such
Pledgor as soon as practicable and at its expense will use its best efforts to
cause such registration to be effected (and be kept effective) and will use its
best efforts to cause such qualification and compliance to be effected (and be
kept effective) as may be so requested and as would permit or facilitate the
sale and distribution of such Pledged Securities, including, without limitation,
registration under the Securities Act as then in effect (or any similar statute
then in effect), appropriate qualifications under applicable blue sky or other
state securities laws and appropriate compliance with any other government
requirements; provided, that the Pledgee shall furnish to such Pledgor such
information regarding the Pledgee as such Pledgor may request in writing and as
shall be required in connection with any such registration, qualification or
compliance. Such Pledgor will cause the Pledgee to be kept reasonably advised in
writing as to the progress of each such registration, qualification or
compliance and as to the completion thereof, will furnish to the Pledgee such
number of prospectuses, offering circulars or other documents incident thereto
as the Pledgee from time to time may reasonably request, and will indemnify the
Pledgee, each other Secured Creditor and all others participating in the
distribution of the Pledged Securities against all claims, losses, damages and
liabilities caused by any untrue statement (or alleged untrue statement) of a
material fact contained therein (or in any related
<PAGE> 20
registration statement, notification or the like) or by any omission (or alleged
omission) to state therein (or in any related registration statement,
notification or the like) a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same may have been caused by an untrue statement or omission based upon
information furnished in writing to such Pledgor by the Pledgee or such other
Secured Creditor expressly for use therein.
(b) If at any time when the Pledgee shall determine to
exercise its right to sell all or any part of the Pledged Securities pursuant to
Section 6 hereof, such Pledged Securities or the part thereof to be sold shall
not, for any reason whatsoever, be effectively registered under the Securities
Act, as then in effect, the Pledgee may, in its sole and absolute discretion,
sell such Pledged Securities or part thereof by private sale in such manner and
under such circumstances as the Pledgee may deem necessary or advisable in order
that such sale may legally be effected without such registration; provided, that
at least 10 Business Days' notice of the time and place of any such sale shall
be given to such Pledgor. Without limiting the generality of the foregoing, in
any such event the Pledgee, in its sole and absolute discretion: (i) may proceed
to make such private sale notwithstanding that a registration statement for the
purpose of registering such Pledged Securities or part thereof shall have been
filed under such Securities Act; (ii) may approach and negotiate with a single
possible purchaser to effect such sale; and (iii) may restrict such sale to a
purchaser who will represent and agree that such purchaser is purchasing for its
own account, for investment, and not with a view to the distribution or sale of
such Pledged Securities or part thereof. In the event of any such sale, the
Pledgee shall incur no responsibility or liability for selling all or any part
of the Pledged Securities at a price which the Pledgee, in its sole and absolute
discretion, may in good faith deem reasonable under the circumstances,
notwithstanding the possibility that a substantially higher price might be
realized if the sale were deferred until after registration as aforesaid.
18. TERMINATION, RELEASE. (a) After the Termination Date (as
defined below), this Agreement shall terminate (provided that all indemnities
set forth herein including, without limitation, in Section 11 hereof shall
survive any such termination) and the Pledgee, at the request and expense of the
respective Pledgor, will promptly execute and deliver to such Pledgor a proper
instrument or instruments acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to such Pledgor (without
recourse and without any representation or warranty) such of the Collateral as
may be in the possession of the Pledgee and as has not theretofore been sold or
otherwise applied or released pursuant to this Agreement. As used in this
Agreement, "Termination Date" shall mean the date upon which the Total
Commitments and all Interest Rate Protection Agreements have been terminated, no
Note or Letter of Credit is outstanding and all other Obligations (excluding
normal continuing indemnity obligations which survive in accordance with their
terms, so long as no amounts are then due and payable in respect thereof) have
been indefeasibly paid in full.
(b) So long as no ITT Note Event (as defined below) has
occurred and is continuing, in the event that any part of the Collateral is sold
(but not to any Borrower or a Subsidiary thereof) in connection with a sale
permitted by Section 9.02 of the Credit Agreement or is otherwise released at
the direction of the Required Secured Creditors), the Pledgee, at the request
and expense of such Pledgor will duly assign, transfer and deliver to such
Pledgor
<PAGE> 21
(without recourse and without any representation or warranty) such of the
Collateral as is then being (or has been) so sold or released and as may be in
possession of the Pledgee and has not theretofore been released pursuant to this
Agreement. Any proceeds of Collateral sold as contemplated by the immediately
preceding sentence may be applied in accordance with the requirements of the
Credit Agreement. As used herein, an "ITT Note Event" shall mean the
acceleration of the maturity of any ITT Notes or the failure to pay at maturity
any ITT Notes, or the occurrence of any default or event of default of the types
specified in Section 6.1(f) or (g) of the ITT Indenture; provided that no ITT
Note Event shall be deemed to exist (x) at any time when no ITT Note Obligations
are secured hereunder or (y) after all ITT Note Obligations have been repaid in
full.
(c) At any time that a Pledgor desires that Collateral be
released as provided in the foregoing Section 18(a) or (b), it shall deliver to
the Pledgee a certificate signed by an Authorized Officer of such Pledgor
stating that the release of the respective Collateral is permitted pursuant to
Section 18(a) or (b), and the Pledgee shall be entitled (but not required) to
conclusively rely thereon.
19. NOTICES, ETC. Except as otherwise specified herein, all
notices, requests, demands or other communications to or upon the respective
parties hereto shall be deemed to have been given or made when delivered to the
party to which such notice, request, demand or other communication is required
or permitted to be given or made under this Agreement, addressed as follows:
(a) if to any Pledgor, at:
c/o Starwood Hotels & Resorts
2231 East Camelback Road
Suite 410
Phoenix, AZ 85016
Attention: Chief Executive Officer
Telephone No.: (602) 852-3900
Facsimile No.: (602) 852-0115
(b) if to the Pledgee, at:
Bankers Trust Company
130 Liberty Street
New York, New York 10006
Attention: Laura S. Burwick
Telephone No.: (212) 250-2568
Telecopier No.: (212)669-0743
(c) if to any Lender Creditor (other than the Pledgee), (x) to
the Paying Agent, at the address of the Paying Agent specified in
the Credit Agreement or (y) at such address as such Lender Creditor
shall have specified in the Credit Agreement;
<PAGE> 22
(d) if to any other Secured Creditor, (x) to the
Representative for such Secured Creditor or (y) if there is no such
Representative, at such address as such Secured Creditor shall have
specified in writing to each Pledgor and the Pledgee;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
20. WAIVER; AMENDMENT. None of the terms and conditions of
this Agreement may be changed, waived, modified or varied in any manner
whatsoever unless in writing duly signed by each Pledgor directly affected
thereby (it being understood that additional Pledgors may be added as parties
hereto from time to time in accordance with Section 24 and Pledgors may be
released as parties hereto in accordance with Section 21, and that no consent of
any other Pledgor or of the Secured Creditors shall be required in connection
therewith) and the Pledgee (with the written consent of either (x) the Required
Lenders (or all the Lenders if required by Section 13.12 of the Credit
Agreement) at all times prior to the time at which all Credit Document
Obligations have been paid in full and all commitments pursuant to the Credit
Agreement have terminated (with such date being herein called the "Credit
Document Obligations Termination Date") or (y) the holders of at least a
majority of the then outstanding Obligations secured hereby at all times after
the Credit Document Obligations Termination Date provided, that any change,
waiver, modification or variance affecting the rights and benefits of a single
Class (as defined below), with outstanding Obligations of the respective Class
secured hereby at such time, of Secured Creditors (and not all Secured Creditors
in a like or similar manner) shall require the written consent of the Requisite
Creditors (as defined below) of such Class. Notwithstanding anything to the
contrary contained above, it is understood and agreed that the Required Lenders
may agree to modifications to this Agreement for the purpose, among other
things, of securing additional extensions of credit (including, without
limitation, pursuant to the Credit Agreement or any refinancing or extension
thereof), with such changes not being subject to the proviso to the immediately
preceding sentence. Furthermore, the proviso to the second preceding sentence
shall not apply to any release of collateral effected in accordance with the
requirements of Section 18 of this Agreement, or any other release of collateral
or termination of this Agreement so long as the Parent Companies certify that
such actions will not violate the terms of any Secured Debt Agreement then in
effect. For the purpose of this Agreement, the term "Class" shall mean each
class of Secured Creditors with outstanding Obligations secured hereby at such
time, i.e., whether (i) the Lender Creditors as holders of the Credit Document
Obligations, (ii) the ITT Noteholders as holders of ITT Note Obligations secured
hereby, (iii) the Permitted Refinancing Creditors as holders of Permitted
Refinancing Obligations secured hereby, (iv) the Senior Secured Noteholders as
the holders of Senior Secured Note Obligations secured hereby and (v) the
Interest Rate Protection Creditors as holders of the Interest Rate Protection
Obligations. For the purpose of this Agreement, the term "Requisite Creditors"
of any Class shall mean each of (i) with respect to the Credit Document
Obligations, the Required Lenders and (ii) with respect to any other
Obligations, the holders of at least a majority of all obligations outstanding
from time to time under the respective Secured Debt Agreement.
21. RELEASE OF GUARANTORS. In the event any Pledgor which is a
Subsidiary of any Borrower party to the Guaranty is released from the Guaranty,
such Pledgor (so long as not a Borrower) shall be released from this Agreement
and this Agreement shall, as to
<PAGE> 23
such Pledgor only, have no further force or effect.
22. GAMING APPROVALS. (a) Unless approved in advance by the
Nevada Gaming Commission (the "NGC"), the Pledged Securities issued by ITT
Corporation, a Nevada corporation ("ITT"), and ITT Sheraton Corporation, a
Nevada Corporation ("ITTSC"), shall not be subject to the pledge under this
Pledge Agreement, and the grant of any security interest shall not be effective
for any purpose as to any Pledged Securities issued by ITT or ITTSC, nor shall
any interest in any Pledged Securities issued by ITT or ITTSC be transferred in
any manner whatsoever to the Pledgee or any other Person.
(b) No Pledged Securities issued by ITT or ITTSC shall be
otherwise sold, assigned, transferred, pledged or otherwise disposed of, whether
pursuant to the Pledge Agreement or the exercise of any right, power or remedy
provided for therein or otherwise, unless the grant of the security interest or
such other disposition as the case may be, has been approved in advance by the
NGC, and unless the transferee of the Pledged Securities issued by ITT and ITTSC
disposed of shall have first obtained any and all licenses, findings of
suitability or approvals required by the Nevada Gaming Control Act and the
regulations thereunder, or shall have been found to be individually qualified to
be licensed, as appropriate. Without limiting the generality of foregoing,
approval of the Pledge Agreement by the NGC shall not constitute permission to
foreclose on the same or make any other disposition of the Pledged Securities
issued by ITT or ITTSC without a further order of the NGC.
(c) Unless the Pledgee or any other Person required to do so,
has obtained any and all licenses, findings of suitability or approvals required
by the Nevada Gaming Control Act and the regulations thereunder, such Pledgee or
other Person shall not receive any dividend, payment or other distribution from
or exercise any right in respect to, any Pledged Securities issued by ITT or
ITTSC.
(d) Unless approved in advance by the NGC, no restriction on
the transfer of any Pledged Securities issued by ITT or ITTSC, or any covenant
or agreement not to encumber any Pledged Securities issued by ITT or ITTSC,
shall be effective for any purpose whatsoever.
(e) If at any time after the Pledgee or any other Person
becomes the owner of any Pledged Securities issued by ITT or ITTSC, whether
pursuant to the Pledge Agreement or the exercise of any right, power or remedy
provided for therein or otherwise, the NGC finds that such Pledgee or other
Person is unsuitable to continue as a gaming licensee or otherwise to be
associated with a gaming licensee in the state of Nevada (hereinafter referred
to as an "Unsuitable Person"), such Unsuitable Person shall immediately offer
any and all Pledged Securities of ITT and ITTSC owned by such Unsuitable Person
to ITT or ITTSC, respectively, for purchase and shall allow ITT and ITTSC,
respectively, to purchase such Pledged Securities for cash at fair market value
thereof, as determined by the NGC, within ten (10) days after the date of the
offer or upon such other terms and conditions for such acquisition of such
Pledged Securities as may be prescribed by the NGC.
(f) The Pledgee and any such other Person hereby acknowledge,
understand and agree and each other person that concurrently with the execution
and delivery of the Pledge
<PAGE> 24
Agreement or at any time thereafter, acquires any right, title or interest in
any Pledged Securities of ITT or ITTSC, pursuant to the Pledge Agreement or the
exercise of any right, power or remedy provided for therein by virtue of such
acquisition of the Pledged Securities, shall be deemed to have acknowledged.
understood and agreed that:
(i) Beginning upon the date on which the NGC serves upon ITT
or ITTSC, respectively, notice of the determination of unsuitability
pursuant to Section 2 of Nevada Revised Statutes ("NRS") 463.510, it
will be unlawful for the Unsuitable Person owning any Pledged
Securities issued by ITT or ITTSC:
(A) To receive any dividend or interest upon any such
securities;
(B) To exercise, directly or through any Pledgee or
nominee, any voting right conferred by such
security;
(C) To receive any remuneration in any form from ITT or
ITTSC, for services rendered or otherwise; or,
(D) To receive any other payment or distribution, of
any kind whatsoever, in respect of any such
security, by way of or pursuant to payment of
principal, redemption, conversion, exchange or
liquidation or any other transaction.
(ii) Each certificate evidencing one or more of the Pledged
Securities issued by ITT or ITTSC shall bear a statement on both
sides of the certificate of the restrictions described in subsection
(f) (i) above, to the extent required by Nevada law or any order of
the NGC.
(iii) The physical location of each certificate evidencing one
or more of the Pledged Securities issued by ITT or ITTSC shall at
all times remain within the territory of the state of Nevada, and
each of such certificates shall be made available for inspection by
agents of the NGC or the Nevada State Gaming Control Board ("SGCB"),
immediately upon request during normal business hours. Except as
permitted by the NGC for the purpose of perfecting the Pledge
Agreement, the holder of any such certificate shall not surrender or
transfer possession of the same without the prior approval of the
NGC. The person located within the territory of the state of Nevada
designated to hold the Pledged Securities on behalf of the Pledgee
for the purpose of perfecting the Pledge Agreement is FIRST SECURITY
TRUST COMPANY OF NEVADA.
(g) No covenant or provision in the Pledge Agreement shall
preclude ITT or ITTSC from satisfying any financial obligation or requirement
imposed by the Nevada Gaming Control Act or regulations thereunder, including
but not limited to minimum casino bankroll requirements, mandatory game security
reserves, redemption of casino chips and tokens, or payment of winning wagers to
gaming patrons.
(h) The Pledgee and any other Person who becomes the owner of
any Pledged
<PAGE> 25
Securities issued by ITT or ITTSC, each severally agree to cooperate with the
NGC and the SGCB in connection with the administration of their regulatory
jurisdiction over ITT, ITTSC and their affiliated companies, including the
provision of such documents or other information as may be reasonably requested
by the NGC or SGCB relating to ITT, ITTSC or any of their affiliated companies
or to the Pledge Agreement.
(i) The Pledgee or any other Person who becomes the owner of
any Pledged Securities issued by ITT or ITTSC, each severally agree to comply
with any order or directive of the NGC or SGCB requiring such person or persons
to submit an application for any license, finding of suitability or other
approval pursuant to the Nevada Gaming Control Act and the regulations
thereunder.
(j) The provisions of this Section 22 of this Pledge Agreement
shall not modify or restrict the rights and remedies of the Pledgee or any other
Person under the Pledge Agreement in any other pledged collateral except for the
Pledged Securities of ITT or ITTSC; provided, the Pledgee and other Persons
acknowledge, understand and agree that the Nevada Gaming Control Act and the
regulations thereunder impose certain licensing or transaction approval
requirements prior to the exercise of such rights and remedies under the Pledge
Agreement with the respect to the Pledged Securities and other pledged
collateral subject to the Nevada Gaming Control Act and the regulations
thereunder.
(k) Notwithstanding any provision contained in this Pledge
Agreement to the contrary, if the granting of a security interest in the capital
stock of any Subsidiary shall conflict with or violate any Gaming Laws, the
Pledgee agrees to (i) release such capital stock from the pledge of this Pledge
Agreement to the extent necessary to avoid such conflict or violation or, (ii)
take any other action, including filing for applicable Approvals, sufficient to
avoid such conflict or violation. The Pledgee further acknowledges and agrees
that, prior to exercising any remedies set forth in the Pledge Agreement with
respect to the Pledged Securities of ITT or ITTSC subject to or affected by any
Gaming Laws, the Pledgee shall obtain any and all Approvals as may be required
by applicable Gaming Laws.
23. ACTIONS REQUIRING FCC APPROVAL. (a) Notwithstanding
anything to the contrary contained in this Agreement, or any of the documents
executed pursuant hereto, the Pledgee will not take any action pursuant to this
Agreement, or any such documents, which would constitute or result in any
assignment of any FCC license or any transfer of control of the holder of any
FCC license if such assignment of such license or such transfer of control would
require under then existing law (including the Communications Act and the
written rules and regulations promulgated by the FCC), the prior approval of the
FCC, without first obtaining such approval. In connection with this Section
23(a), the Pledgee shall be entitled to rely in good faith upon an opinion of
outside FCC counsel of the Pledgee's choice with respect to such assignment or
transfer whether or not the advice rendered is ultimately determined to have
been accurate. To the extent such an opinion is requested, a copy of such
opinion shall be delivered to the Pledgor. The Pledgee specifically agrees that
to the extent required by the Communications Act (i) even after an Event of
Default shall have occurred, voting rights in the Collateral will remain with
the respective Pledgor until any and all required approval of the FCC shall be
obtained to the transfer of such voting rights, (ii) after an Event of Default
and a foreclosure on the Collateral by the
<PAGE> 26
Pledgee, there will be either a private or public sale of the Collateral, and
(iii) pursuant to Section 310(d) of the Communications Act, prior to the
exercise of stockholder rights by a purchaser at such sale, the prior consent of
the FCC will be obtained to such exercise.
(b) If an Event of Default shall have occurred and be
continuing, the Pledgors shall take any action which the Pledgee may reasonably
request in the exercise of its rights and remedies under this Agreement in order
to transfer or assign the Collateral to the Pledgee or to such one or more third
parties as the Pledgee may designate, or to a combination of the foregoing. To
enforce the provisions of this Section 23, upon an Event of Default the Pledgee
is empowered to seek from the FCC and any other governmental authority, to the
extent required, consent to or approval of any involuntary transfer of control
of any entity whose Collateral is subject to this Agreement for the purpose of
seeking a bona fide purchaser to whom control will ultimately be transferred.
Each Pledgor agrees to cooperate with any such purchaser and with the Pledgee in
the preparation, execution and filing of any forms and providing any information
that may be necessary or helpful in obtaining the FCC's consent to the
assignment to such purchaser of the Collateral. Each Pledgor hereby agrees to
consent to any such an involuntary transfer of control upon the request of the
Pledgee after and during the continuation of an Event of Default and, without
limiting any rights of the Pledgee under this Agreement, to authorize the
Pledgee to nominate a trustee or receiver to assume control of the Collateral,
subject only to required judicial, FCC or other consent required by governmental
authorities, in order to effectuate the transactions contemplated in this
Section 23. Such trustee or receiver shall have all the rights and powers as
provided to it by law or court order, or to the Pledgee under this Agreement.
Each Pledgor shall cooperate fully in obtaining the consent of the FCC and the
approval or consent of each other governmental authority required to effectuate
the foregoing.
(c) Each Pledgor shall use its best efforts to assist in
obtaining consent or approval of the FCC and any other governmental authority,
if required, for any action or transactions contemplated by this Agreement,
including, without limitation, the preparation, execution and filing with the
FCC of the transferor's or assignor's portion of any application or applications
for consent to the transfer of control or assignment necessary or appropriate
under the FCC's rules and regulations for approval of the transfer or assignment
of any portion of the Collateral. Anything herein to the contrary
notwithstanding, the Pledgors shall not be obligated to sign any such document
which such Pledgor has reasonable cause to believe contains any inaccuracy or to
make any statements concerning the qualifications of any transferee or assignee.
(d) Each Pledgor hereby acknowledges and agrees that the
Collateral is a unique asset and that a violation of the Pledgor's covenant to
cooperate with respect to any regulatory consents would result in irreparable
harm to the Pledgee for which monetary damages are not readily ascertainable.
The Pledgor further agrees that, because of the unique nature of its undertaking
in this Section 23, the same may be specifically enforced, and it hereby waives,
and agrees to waive, any claim or defense that the Pledgee would have an
adequate remedy at law for the breach of this undertaking.
(e) Without limiting the obligations of the Pledgors hereunder
in any respect, each Pledgor further agrees that if such Pledgor, upon or after
the occurrence of an Event of Default, should fail or refuse for any reason
whatsoever, without limitation, including any refusal
<PAGE> 27
pursuant to Section 23(c), to execute any application necessary or appropriate
to obtain any governmental consent necessary or appropriate for the exercise of
any right of the Pledgee hereunder, such Pledgor agrees that such application
may be executed on such Pledgor's behalf by the clerk of any competent
jurisdiction without notice to such Pledgor pursuant to court order.
24. ADDITIONAL PLEDGORS. Pursuant to Section 8.15 of the
Credit Agreement, certain Subsidiaries of a Borrower may after the date hereof
be required to enter into this Agreement as a Pledgor. Upon execution and
delivery, after the date hereof, by the Collateral Agent and such Subsidiary of
an instrument in the form of Exhibit A-2, such Subsidiary shall become a Pledgor
hereunder with the same force and effect as if originally named as a Pledgor
hereunder. Each Subsidiary which is required to become a party to this Agreement
shall so execute and deliver a copy of Exhibit A-2 to the Collateral Agent and,
at such time, shall execute a Pledge and Security Agreement Supplement in the
form of Exhibit A-1 to this Agreement with respect to all Collateral of such
Pledgor required to be pledged hereunder, which Supplement shall be completed in
accordance with Exhibit A-1. The execution and delivery of any such instrument
shall not require the consent of any other Pledgor hereunder. Upon the execution
and delivery by the Collateral Agent and such Subsidiary of an instrument in the
form of Exhibit A-2 as provided above, it is understood and agreed that the
pledge and security interests hereunder shall apply to all Collateral of such
additional Pledgor as provided in Section 3.1 hereof regardless of any failure
of any additional Pledgor to deliver, or any inaccurate information stated in,
the Pledge and Security Agreement Supplement.
25. RECOURSE. This Agreement is made with full recourse to the
Pledgors and pursuant to and upon all representations, warranties, covenants and
agreements on the part of the Pledgors contained herein and otherwise in writing
in connection herewith.
26. LIMITATION BY LAW; SEVERABILITY. All rights, remedies and
powers in this Agreement may be exercised only to the extent that the exercise
thereof does not violate any applicable law and may be limited to the extent
necessary so that they will not render this Agreement invalid or unenforceable,
in whole or in part.
27. PLEDGEE NOT BOUND. (a) Nothing herein shall be construed
to make the Pledgee or any other Secured Creditor liable as a member of any
limited liability company or any partnership and the Pledgee or any other
Secured Creditor by virtue of this Agreement or otherwise (except as referred to
in the following sentence) shall not have any of the duties, obligations or
liabilities of a member of any limited liability company or partnership. The
parties hereto expressly agree that, unless the Pledgee shall become the
absolute owner of the respective Pledged Limited Liability Interest or Pledged
Partnership Interest pursuant hereto, this Agreement shall not be construed as
creating a partnership or joint venture among the Pledgee, any other Secured
Creditor and/or any Pledgor.
(b) Except as provided in the last sentence of paragraph (a)
of this Section, the Pledgee, by accepting this Agreement, did not intend to
become a member of any limited liability company or partnership or otherwise be
deemed to be a co-venturer with respect to any Pledgor or any limited liability
company or partnership either before or after an Event of Default shall have
occurred. The Pledgee shall have only those powers set forth herein and shall
assume none
<PAGE> 28
of the duties, obligations or liabilities of a member of any limited liability
company or partnership or any Pledgor.
(c) The Pledgee shall not be obligated to perform or discharge
any obligation of any Pledgor as a result of the collateral assignment hereby
effected.
(d) The acceptance by the Pledgee of this Agreement, with all
the rights, powers, privileges and authority so created, shall not at any time
or in any event obligate the Pledgee to appear in or defend any action or
proceeding relating to the Collateral to which it is not a party, or to take any
action hereunder or thereunder, or to expend any money or incur any expenses or
perform or discharge any obligation, duty or liability under the Collateral.
28. CONTINUING PLEDGORS. The rights and obligations of each
Pledgor (other than the respective released Pledgor in the case of following
clause (y)) hereunder shall remain in full force and effect notwithstanding (x)
the addition of any new Pledgor as a party to this Agreement as contemplated by
preceding Section 24 or otherwise and/or (y) the release of any Pledgor under
this Agreement as contemplated by Section 21 or otherwise.
29. NO FRAUDULENT CONVEYANCE. Each Pledgor hereby confirms
that it is its intention that this Agreement not constitute a fraudulent
transfer or conveyance for purposes of any bankruptcy, insolvency or similar
law, the Uniform Fraudulent Conveyance Act or any similar Federal, state or
foreign law. To effectuate the foregoing intention, each Pledgor hereby
irrevocably agrees that its obligations and liabilities hereunder shall be
limited to the maximum amount as will, after giving effect to such maximum
amount and all other (contingent or otherwise) liabilities of such Pledgor that
are relevant under such laws, result in the obligations and liabilities of such
Pledgor hereunder in respect of such maximum amount not constituting a
fraudulent transfer or conveyance.
30. ALTERNATE CURRENCY REVOLVING LOAN BORROWERS. The Pledgors
hereby acknowledge that pursuant to the terms of the Credit Agreement various
Alternate Currency Revolving Loan Borrowers may become a party to the Credit
Agreement from time to time and incur Loans thereunder. The Pledgors further
acknowledge and agree that all obligations and liabilities of any Alternate
Currency Revolving Loan Borrower under the Credit Agreement shall be fully
secured hereunder as provided in Section 3.1 and no consent of the Pledgors is
required to effect the same.
31. MISCELLANEOUS. This Agreement shall be binding upon the
successors and assigns of each Pledgor and shall inure to the benefit of and be
enforceable by the Pledgee and its successors and assigns; provided that no
Pledgor may assign any of its rights or obligations hereunder without the prior
written consent of the Pledgee (with the consent of the Required Secured
Creditors and, if required by Section 13.12 of the Credit Agreement, all
Lenders). THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND
GOVERNED BY THE LAW OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS). The headings in this Agreement are for purposes of reference
only and shall not limit or define the meaning hereof. This Agreement may be
executed in any number of counterparts, each of which
<PAGE> 29
shall be an original, but all of which shall constitute one instrument.
32. STARWOOD REIT. 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
be 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.
<PAGE> 30
IN WITNESS WHEREOF, each Pledgor has caused this Agreement to
be duly executed and delivered by its duly authorized officer on the date first
above written.
STARWOOD HOTELS & RESORTS WORLDWIDE, INC., a
Maryland corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
STARWOOD HOTELS & RESORTS
By: /s/ Ronald C. Brown
-----------------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial Officer
SLT REALTY LIMITED PARTNERSHIP
By: Starwood Hotels & Resorts, a Maryland real estate
investment trust, its general partner
By: /s/ Ronald C. Brown
-----------------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial Officer
ITT CORPORATION
By: /s/ Theodore W. Darnall
-----------------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating Officer
W&S SEATTLE CORP.,
<PAGE> 31
a Delaware corporation
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/ Ronald C. Brown
-----------------------------------------------------------
Name: Ronald C. Brown
Title:Senior Vice President and Chief Financial Officer
W&S REALTY CORPORATION OF DELAWARE
a Delaware corporation
By: /s/ Ronald C. Brown
-----------------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial Officer
BENJAMIN FRANKLIN HOTEL, INCORPORATED, a
Washington corporation
By: /s/ Ronald C. Brown
-----------------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial Officer
W&S LAUDERDALE CORPORATION, a Delaware corporation
By: /s/ Ronald C. Brown
-----------------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial Officer
LAUDERDALE HOTEL COMPANY, a Delaware corporation
<PAGE> 32
By: /s/ Ronald C. Brown
-----------------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial Officer
WESTIN BAY HOTEL CO., a Delaware corporation
By: /s/ Ronald C. Brown
-----------------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial Officer
CINCINNATI PLAZA CO., a Delaware corporation
By: /s/ Ronald C. Brown
-----------------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial Officer
SOUTH COAST WESTIN HOTEL CO., a Delaware corporation
By: /s/ Ronald C. Brown
-----------------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial Officer
TOWNHOUSE MANAGEMENT INC., a Delaware corporation
By: /s/ Ronald C. Brown
-----------------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial Officer
WESTIN PREMIER INCORPORATED, a Delaware corporation
<PAGE> 33
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN VACATION MANAGEMENT CORPORATION, a
Delaware corporation
By: /s/ Ronald C. Brown
-----------------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial Officer
WVC RANCHO MIRAGE, INCORPORATED, a Delaware
corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN VACATION EXCHANGE COMPANY, a Delaware
corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN ASSET MANAGEMENT COMPANY, a Delaware
corporation
By: /s/ Ronald C. Brown
-----------------------------------------------------------
Name: Ronald C. Brown
<PAGE> 34
Title: Senior Vice President and Chief Financial Officer
MIDLAND BUILDING CORPORATION, an Illinois corporation
By: /s/ Theodore W. Darnall
-----------------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating Officer
WESTIN HOTEL COMPANY, a Delaware company
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
W&S ATLANTA CORPORATION, a Delaware corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN ONTARIO (LONDON) HOTEL COMPANY, a
Delaware corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN ASIA MANAGEMENT HOLDING COMPANY, a
Delaware corporation
<PAGE> 35
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN ASIA MANAGEMENT COMPANY, a Delaware
corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN CANADA MANAGEMENT COMPANY, a Delaware
corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
WESTIN OTTAWA MANAGEMENT COMPANY, a Delaware
corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN MEXICO MANAGEMENT COMPANY, a Delaware
corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
<PAGE> 36
WESTIN CHARLOTTE MANAGEMENT COMPANY, a
Delaware corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN RIVER NORTH MANAGEMENT COMPANY, a
Delaware corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN HILTON HEAD MANAGEMENT COMPANY, a
Delaware corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN KANSAS CITY MANAGEMENT COMPANY, a
Delaware corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN MAUI MANAGEMENT COMPANY, a Delaware
corporation
<PAGE> 37
By: /s/ Theodore W. Darnall
-----------------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating Officer
WESTIN BOSTON MANAGEMENT HOLDING COMPANY, a
Delaware corporation
By: /s/ Theodore W. Darnall
-----------------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating Officer
WESTIN BOSTON MANAGEMENT COMPANY, a Delaware
corporation
By: /s/ Theodore W. Darnall
-----------------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating Officer
WESTIN CENTURY CITY MANAGEMENT HOLDING
COMPANY, a Delaware corporation
By: /s/ Theodore W. Darnall
-----------------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating Officer
WESTIN CENTURY CITY MANAGEMENT COMPANY, a
Delaware corporation
By: /s/ Theodore W. Darnall
-----------------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating Officer
<PAGE> 38
WESTIN NEW ORLEANS MANAGEMENT COMPANY,
a Delaware corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN NEW ORLEANS MANAGEMENT COMPANY,
a Delaware corporation
By: /s/ Theodore W. Darnall
-----------------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating Officer
WESTIN SANTA CLARA MANAGEMENT COMPANY,
a Delaware corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN TUCSON MANAGEMENT COMPANY,
a Delaware corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN INTERNATIONAL MANAGEMENT COMPANY,
a Delaware corporation
<PAGE> 39
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN INNISBROOK MANAGEMENT COMPANY,
a Delaware corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN PITTSBURGH MANAGEMENT COMPANY,
a Delaware corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN PITTSBURGH MANAGEMENT HOLDING
COMPANY,
a Delaware Corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN PEACHTREE MANAGEMENT COMPANY,
a Delaware corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
<PAGE> 40
WESTIN DALLAS MANAGEMENT COMPANY,
a Delaware corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN RIVERWALK MANAGEMENT COMPANY,
a Delaware corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN REPRESENTATION COMPANY,
a Delaware corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN LICENSE COMPANY SOUTH,
a Delaware corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
<PAGE> 41
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN LICENSE COMPANY NORTH,
a Delaware corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN LICENSE COMPANY EAST,
a Delaware corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN LICENSE COMPANY WEST,
a Delaware corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN LICENSE COMPANY,
a Delaware corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
WESTIN INTERNATIONAL SERVICES COMPANY,
a Delaware corporation
By: /s/ Alan M. Schnaid
-----------------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
SHERATON FLORIDA CORPORATION,
<PAGE> 42
a Delaware corporation
By: /s/ James D. Latham
------------------------------------------
Name: James D. Latham
Title: Senior Vice President and Secretary
SHERATON HARBOR ISLAND CORPORATION,
a Delaware corporation
By: /s/ James D. Latham
------------------------------------------
Name: James D. Latham
Title: Senior Vice President and Secretary
SHERATON HARTFORD CORPORATION,
a Connecticut corporation
By: /s/ James D. Latham
------------------------------------------
Name: James D. Latham
Title: Senior Vice President and Secretary
SHERATON HAWAII HOTELS CORPORATION,
a Hawaii corporation
By: /s/ James D. Latham
------------------------------------------
Name: James D. Latham
Title: Senior Vice President and Secretary
SHERATON INTERNATIONAL, INC.,
a Delaware corporation
By: /s/ James D. Latham
------------------------------------------
<PAGE> 43
Name: James D. Latham
Title: Senior Vice President and Secretary
SHERATON INTER-AMERICAS, LTD.,
a Delaware corporation
By: /s/ James D. Latham
------------------------------------------
Name: James D. Latham
Title: Senior Vice President and Secretary
SHERATON INTERNATIONAL DE MEXICO, INC.,
a Delaware corporation
By: /s/ James D. Latham
------------------------------------------
Name: James D. Latham
Title: Senior Vice President and Secretary
SHERATON MANAGEMENT CORPORATION,
a Delaware corporation
By: /s/ James D. Latham
------------------------------------------
Name: James D. Latham
Title: Senior Vice President and Secretary
SHERATON OVERSEAS MANAGEMENT CORPORATION,
a Delaware corporation
By: /s/ James D. Latham
------------------------------------------
Name: James D. Latham
Title: Senior Vice President and Secretary
SHERATON WARSAW CORPORATION,
a Delaware corporation
<PAGE> 44
By: /s/ James D. Latham
------------------------------------------
Name: James D. Latham
Title: Senior Vice President and Secretary
SHERATON MARKETING CORPORATION,
a Delaware corporation
By: /s/ James D. Latham
------------------------------------------
Name: James D. Latham
Title: Senior Vice President and Secretary
ITT SHERATON CORPORATION,
a Delaware corporation
By: /s/ James D. Latham
------------------------------------------
Name: James D. Latham
Title: Senior Vice President and Secretary
DESTINATION SERVICES OF SCOTTSDALE, INC.,
a Delaware corporation
By: /s/ James D. Latham
------------------------------------------
Name: James D. Latham
Title: Senior Vice President and Secretary
GENERAL FIDUCIARY CORPORATION,
a Massachusetts corporation
By: /s/ James D. Latham
------------------------------------------
Name: James D. Latham
Title: Senior Vice President and Secretary
<PAGE> 45
GLOBAL CONNECTIONS, INC.,
a Delaware corporation
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
HUDSON SHERATON LLC,
a New York corporation
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
ITT SHERATON RESERVATIONS CORPORATION,
a Delaware corporation
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
MANHATTAN SHERATON CORPORATION,
a New York corporation
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
SAN DIEGO SHERATON CORPORATION,
a Delaware corporation
<PAGE> 46
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
SAN FERNANDO SHERATON CORPORATION,
a Delaware corporation
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
SHERATON 45 PARK CORPORATION,
a Delaware corporation
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
SHERATON ARIZONA CORPORATION,
a Delaware corporation
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
SHERATON ASIA-PACIFIC CORPORATION,
a Delaware corporation
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
<PAGE> 47
SHERATON BLACKSTONE CORPORATION,
a Delaware corporation
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
SHERATON BOSTON CORPORATION,
a Massachusetts corporation
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
SHERATON CALIFORNIA CORPORATION,
a Delaware corporation
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
SHERATON CAMELBACK CORPORATION,
a Delaware corporation
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
SHERATON MIAMI CORPORATION,
a Delaware corporation
<PAGE> 48
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
SHERATON MIDDLE EAST MANAGEMENT
CORPORATION,
a Delaware corporation
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
SHERATON NEW YORK CORPORATION,
a New York corporation
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
SHERATON O'HARE CORPORATION,
a Delaware corporation
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
SHERATON OVERSEAS TECHNICAL SERVICES
CORPORATION,
a Delaware corporation
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
<PAGE> 49
SHERATON PEACHTREE CORPORATION,
a Delaware corporation
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
SHERATON PHOENICIAN CORPORATION,
a Delaware corporation
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
SHERATON SAVANNAH CORPORATION,
a Delaware corporation
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
SHERATON SERVICES CORPORATION,
a Delaware corporation
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
SOUTH CAROLINA SHERATON CORPORATION,
a Delaware corporation
<PAGE> 50
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
ST. REGIS SHERATON CORPORATION,
a New York corporation
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
SHERATON VERMONT CORPORATION,
a Vermont corporation
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
WORLDWIDE FRANCHISE SYSTEMS, INC.,
a Delaware corporation
By: /s/ James D. Latham
-------------------------------------
Name: James D. Latham
Title: Sr. Vice President & Secretary
ITT BROADCASTING CORPORATION,
a Delaware corporation
By: /s/ Alan M. Schnaid
----------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
<PAGE> 51
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/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
By: SLT Financing Partnership,
a Delaware general partnership,
its member
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/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
CRYSTAL CITY HOTEL ASSOCIATES, L.L.C.,
a New Jersey limited liability company
By: SLT Realty Limited Partnership,
a Delaware limited partnership,
<PAGE> 52
its managing member
By: Starwood Hotels & Resorts,
a Maryland real estate investment trust,
its general partner
By: /s/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
By: SLT Financing Partnership,
a Delaware general partnership,
its member
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/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
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
<PAGE> 53
By: /s/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
By: SLT Financing Partnership,
a Delaware general partnership,
its member
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/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
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/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
<PAGE> 54
Officer
By: SLT Financing Partnership,
a Delaware general partnership,
its limited partner
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/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
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/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
By: SLT Financing Partnership,
a Delaware general partnership,
its member
<PAGE> 55
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/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
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 investment trust,
its general partner
By: /s/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
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,
<PAGE> 56
its general partner
By: /s/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
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
By: /s/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
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 general partner
By: /s/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
<PAGE> 57
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 and Resorts,
a Maryland real estate investment trust,
its managing general partner
By: /s/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
SLT DANIA 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 general partner
By: /s/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
SLT DC MASSACHUSETTS AVENUE, LLC,
a Delaware limited liability company
By: SLT Realty Limited Partnership,
<PAGE> 58
a Delaware limited partnership,
its managing member
By: Starwood Hotels and Resorts,
a Maryland real estate investment trust,
its managing general partner
By: /s/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
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/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
By: SLT Financing Partnership,
a Delaware general partnership,
its member
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
<PAGE> 59
By: /s/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
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/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
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/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
<PAGE> 60
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/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
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/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
SLT PHILADELPHIA L.L.C.,
a Delaware limited liability company
By: SLT Realty Limited Partnership,
<PAGE> 61
a Delaware limited partnership,
its managing member
By: Starwood Hotels & Resorts,
a Maryland real estate investment trust,
its general partner
By: /s/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
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/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
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
<PAGE> 62
By: /s/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
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/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
By: SLT Financing Partnership,
a Delaware general partnership,
its member
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/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
<PAGE> 63
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/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
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/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
STARLEX L.L.C.,
a New York limited liability company
By: SLT Realty Limited Partnership,
a Delaware limited partnership,
<PAGE> 64
its managing member
By: Starwood Hotels & Resorts,
a Maryland real estate investment trust,
its general partner
By: /s/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
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/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
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
<PAGE> 65
By: /s/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
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/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
By: SLT Financing Partnership,
a Delaware general partnership,
its member
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/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
<PAGE> 66
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/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
STARWOOD WALTHAM 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/ Ronald C. Brown
------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
OPERATING PHILADELPHIA L.L.C.,
a Delaware limited liability company
By: SLT Operating Limited Partnership,
a Delaware limited partnership,
its managing member
<PAGE> 67
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation,
its general partner
By: /s/ Theodore W. Darnall
---------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating
Officer
SLC ALLENTOWN L.L.C.,
a Delaware limited liability company
By: SLT Operating Limited Partnership,
a Delaware limited partnership,
its managing member
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation,
its general partner
By: /s/ Theodore W. Darnall
---------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating
Officer
SLC ARLINGTON L.L.C.,
a Delaware limited liability company
By: SLT Operating Limited Partnership,
a Delaware limited partnership,
its managing member
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation,
its general partner
<PAGE> 68
By: /s/ Theodore W. Darnall
---------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating
Officer
SLC ATLANTA L.L.C.,
a Delaware limited liability company
By: SLT Operating Limited Partnership,
a Delaware limited partnership,
its managing member
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation,
its general partner
By: /s/ Theodore W. Darnall
---------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating
Officer
SLC ATLANTA II L.L.C.,
a Delaware limited liability company
By: SLT Operating Limited Partnership,
a Delaware limited partnership,
its managing member
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation,
its general partner
By: /s/ Theodore W. Darnall
---------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating
Officer
SLC BLOOMINGTON L.L.C.,
<PAGE> 69
a Delaware limited liability company
By: SLT Operating Limited Partnership,
a Delaware limited partnership,
its managing member
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation,
its general partner
By: /s/ Theodore W. Darnall
---------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating
Officer
SLC CENTRAL PARK SOUTH, L.L.C.,
a Delaware limited liability company
By: SLT 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/ Alan M. Schnaid
---------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
SLC DANIA L.L.C.,
a Delaware limited liability company
By: SLT Operating Limited Partnership,
a Delaware limited partnership,
its managing member
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation,
<PAGE> 70
its general partner
By: /s/ Theodore W. Darnall
---------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating
Officer
SLC DC MASSACHUSETTS AVENUE, L.L.C.,
a Delaware limited liability company
By: SLT 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/ Alan M. Schnaid
----------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
SLC KANSAS CITY L.L.C.,
a Delaware limited liability company
By: SLT Operating Limited Partnership,
a Delaware limited partnership,
its managing member
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation,
its general partner
By: /s/ Theodore W. Darnall
---------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating
<PAGE> 71
Officer
SLC LOS ANGELES L.L.C.,
a Delaware limited liability company
By: SLT Operating Limited Partnership,
a Delaware limited partnership,
its managing member
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation,
its general partner
By: /s/ Theodore W. Darnall
---------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating
Officer
SLC MINNEAPOLIS L.L.C.,
a Delaware limited liability company
By: SLT Operating Limited Partnership,
a Delaware limited partnership,
its managing member
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation,
its general partner
By: /s/ Theodore W. Darnall
---------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating
Officer
SLC NEEDHAM L.L.C.,
<PAGE> 72
a Delaware limited liability company
By: SLT Operating Limited Partnership,
a Delaware limited partnership,
its managing member
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation,
its general partner
By: /s/ Theodore W. Darnall
---------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating
Officer
SLC PALM DESERT L.L.C.,
a Delaware limited liability company
By: SLT Operating Limited Partnership,
a Delaware limited partnership,
its managing member
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation,
its general partner
By: /s/ Theodore W. Darnall
---------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating
Officer
SLC SAN DIEGO L.L.C.,
a Delaware limited liability company
By: SLT Operating Limited Partnership,
a Delaware limited partnership,
its managing member
<PAGE> 73
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation,
its general partner
By: /s/ Theodore W. Darnall
---------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating
Officer
SLC SOUTHFIELD L.L.C.,
a Delaware limited liability company
By: SLT Operating Limited Partnership,
a Delaware limited partnership,
its managing member
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation,
its general partner
By: /s/ Theodore W. Darnall
---------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating
Officer
SLC ST. LOUIS L.L.C.,
a Delaware limited liability company
By: SLT Operating Limited Partnership,
a Delaware limited partnership,
its managing member
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation,
its general partner
<PAGE> 74
By: /s/ Theodore W. Darnall
---------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating
Officer
SLC TUCSON L.L.C.,
a Delaware limited liability company
By: SLT Operating Limited Partnership,
a Delaware limited partnership,
its managing member
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation,
its general partner
By: /s/ Theodore W. Darnall
---------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating
Officer
SLC WALTHAM L.L.C.,
a Delaware limited liability company
By: SLT Operating Limited Partnership,
a Delaware limited partnership,
its managing member
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation,
its general partner
By: /s/ Theodore W. Darnall
---------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating
<PAGE> 75
Officer
STARWOOD MANAGEMENT COMPANY, L.L.C.,
a Delaware limited liability company
By: SLT Operating Limited Partnership,
a Delaware limited partnership,
its managing member
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation,
its general partner
By: /s/ Alan M. Schnaid
---------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
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/ Ronald C. Brown
---------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
By: SLT Financing Partnership,
a Delaware general partnership,
its limited partner
By: SLT Realty Limited Partnership,
<PAGE> 76
a Delaware limited partnership,
its general partner
By: Starwood Hotels & Resorts,
a Maryland real estate investment trust,
its general partner
By: /s/ Ronald C. Brown
---------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
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/ Ronald C. Brown
---------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
EDISON HOTEL ASSOCIATES LIMITED PARTNERSHIP,
a New Jersey 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
<PAGE> 77
By: /s/ Ronald C. Brown
---------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
By: SLT Financing Partnership,
a Delaware general partnership,
its limited partner
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/ Ronald C. Brown
---------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
NOVI 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: /s/ Ronald C. Brown
---------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
<PAGE> 78
By: SLT Financing Partnership,
a Delaware general partnership,
its limited partner
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/ Ronald C. Brown
---------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
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
By: /s/ Ronald C. Brown
---------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
By: SLT Financing Partnership,
a Delaware general partnership,
its limited partner
<PAGE> 79
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/ Ronald C. Brown
---------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
SLT FINANCING PARTNERSHIP,
a Delaware partnership
By: SLT Realty Limited Partnership,
a Delaware partnership,
its general partner
By: Starwood Hotels & Resorts,
a Maryland real estate investment trust,
its general partner
By: /s/ Ronald C. Brown
---------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
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
<PAGE> 80
By: /s/ Ronald C. Brown
---------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
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: /s/ Ronald C. Brown
---------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
By: SLT Financing Partnership,
a Delaware general partnership,
its limited partner
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/ Ronald C. Brown
---------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
<PAGE> 81
Officer
MOORLAND HOTEL LIMITED PARTNERSHIP,
a Wisconsin limited liability company
By: SLT Operating Limited Partnership,
a Delaware limited partnership,
its general partner
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation,
its general partner
By: /s/ Theodore W. Darnall
---------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating
Officer
SLC-CALVERTON LIMITED PARTNERSHIP,
a Delaware limited partnership
By: SLT Operating Limited Partnership,
a Delaware limited partnership,
its general partner
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation,
its general partner
By: /s/ Theodore W. Darnall
---------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating
Officer
SLC HOUSTON BRIAR OAKS, LP,
a Delaware limited partnership
By: SLT Operating Limited Partnership,
<PAGE> 82
a Delaware limited partnership,
its managing general partner
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation,
its general partner
By: /s/ Alan M. Schnaid
---------------------------------------------------
Name: Alan M. Schnaid
Title: Vice President and Corporate Controller
SLC OPERATING LIMITED PARTNERSHIP,
a Delaware limited partnership
By: Starwood Hotels & Resorts Worldwide, Inc.,
a Maryland corporation,
its general partner
By: /s/ Theodore W. Darnall
---------------------------------------------------
Name: Theodore W. Darnall
Title: Executive Vice President and Chief Operating
Officer
WESTIN SEATTLE HOTEL COMPANY,
a Washington general partnership
By: W&S Realty Corp. of Delaware,
a Delaware corporation, its general partnership
By: /s/ Ronald C. Brown
---------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
By: Benjamin Franklin Hotel, Inc.,
a Washington corporation
<PAGE> 83
By: /s/ Ronald C. Brown
---------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial
Officer
SLT REALTY LIMITED PARTNERSHIP
By: Starwood Hotels & Resorts, a Maryland real estate
investment trust, its general partner
By: /s/ Ronald C. Brown
---------------------------------------------------
Name: Ronald C. Brown
Title: Senior Vice President and Chief Financial Officer
ACCEPTED AND AGREED TO:
BANKERS TRUST COMPANY
as Collateral Agent and Pledgee
By: /s/ Laura S. Burwick
---------------------------------------------------
Name: Laura S. Burwick
Title: Principal
<PAGE> 84
ANNEX A
to
PLEDGE AND SECURITY AGREEMENT
LIST OF STOCK
<PAGE> 85
Annex C
Page 34
LIST OF LIMITED LIABILITY COMPANY INTERESTS
<PAGE> 86
Annex D
Page 35
LIST OF PARTNERSHIP INTERESTS
<PAGE> 87
ANNEX D
Page 36
FORM OF PARTNERSHIP/LLC NOTICE
[Letterhead of Pledgor]
- -------- --, ----
TO: [Name of Pledged Partnership/Limited Liability Company]
Notice is hereby given that pursuant to a Pledge Agreement (a
true and correct copy of which is attached hereto), dated as of February 23,
1998 (as amended, modified or supplemented from time to time in accordance with
the terms thereof, the "Pledge Agreement"), among [NAME OF PLEDGOR] (the
"Pledgor"), the other pledgors from time to time party thereto and Bankers Trust
Company (the "Pledgee"), as Collateral Agent on behalf of the Secured Creditors
described therein, the Pledgor has pledged and assigned to the Pledgee for the
benefit of the Secured Creditors, and granted to the Pledgee for the benefit of
the Secured Creditors, a continuing security interest in, all right, title and
interest of the Pledgor, whether now existing or hereafter arising or acquired,
[as a [limited] [general] partner in [NAME OF PLEDGED PARTNERSHIP] (the
"Partnership"), and in, to and under the [TITLE OF APPLICABLE PARTNERSHIP
AGREEMENT] (the "Partnership Agreement"),] [as a member in [Name of Pledged
Limited Liability Company] (the "LLC"), and into and under its Articles of
Organization (the "Articles")] including, without limitation:
(i) the Pledgor's interest in all of the capital of the
Partnership/LLC and the Pledgor's interest in all profits, losses, (as
defined in the Pledge Agreement) and other distributions to which the
Pledgor shall at any time be entitled in respect of such
partnership/limited liability company interest;
(ii) all other payments due or to become due to the Pledgor in
respect of such partnership/limited liability company interest, whether
under the Partnership Agreement/Articles or otherwise, whether as
contractual obligations, damages, insurance proceeds or otherwise;
(iii) all of the Pledgor's claims, rights, powers, privileges,
authority, options, security interest, liens and remedies, if any,
under the Partnership Agreement/Articles or at law or otherwise in
respect of such partnership/membership interest;
(iv) all present and future claims, if any, of the Pledgor
against the Partnership/LLC for moneys loaned or advanced, for services
rendered or otherwise;
(v) all of the Pledgor's rights under the Partnership
Agreement/Articles or at law to exercise and enforce every right,
power, remedy, authority, option and privilege of the Pledgor relating
to the partnership/limited liability company interest, including any
power to terminate, cancel or modify the Partnership
Agreement/Articles, to execute any instruments and to take any and all
other action on behalf of and in the name of the
<PAGE> 88
ANNEX D
Page 37
Pledgor in respect of the partnership/limited liability company
interest and the Partnership/LLC, to make determinations, to
exercise any election (including, but not limited, election of
remedies) or option or to give or receive any notice, consent,
amendment, waiver or approval, together with full power and
authority to demand, receive, enforce, collect or receipt for any of
the foregoing, to enforce or execute any checks, or other
instruments or orders, to file any claims and to take any action in
connection with any of the foregoing;
(vi) all other property hereafter delivered to the Pledgor in
substitution for or in addition to any of the foregoing, all
certificates and instruments representing or evidencing such other
property and all cash, securities, interest, dividends,
distributions, rights and other property at any time and from time
to time received, receivable or otherwise distributed in respect of
or in exchange for any or all thereof; and
(vii) to the extent not otherwise included, all proceeds of
any or all of the foregoing.
Pursuant to the Pledge Agreement, the Partnership/LLC is
hereby authorized and directed to register the Pledgor's pledge to the Pledgee
on behalf of the Secured Creditors of the interest of the Pledgor on the
Partnership/LLC's books.
The Pledgor hereby irrevocably agrees and authorizes and
directs the Partnership/LLC that instructions originated by the Pledgee on
behalf of the Secured Creditors with respect to the Pledgor's claims, rights,
interests, powers, remedies, authorities, options and privileges set forth above
shall, unless written notice to the contrary is given by the Pledgee to the
Partnership/LLC, be complied with by the Partnership/LLC, without further
consent by the Pledgor.
The Pledgor hereby requests the Partnership/LLC to indicate
its acceptance of this Notice and consent to and confirmation of its terms and
provisions by signing a copy hereof where indicated on the attached page and
returning the same to the Pledgee on behalf of the Secured Creditors.
[NAME OF PLEDGOR]
By:
Name:
Title:
<PAGE> 89
ANNEX E
to
PLEDGE AND SECURITY AGREEMENT
FORM OF ACKNOWLEDGMENT
[NAME OF PLEDGED PARTNERSHIP/LIMITED LIABILITY COMPANY] (the
"Partnership"/"LLC") hereby acknowledges receipt of a copy of the assignment by
[NAME OF PLEDGOR] ("Pledgor") of its interest under the [TITLE OF APPLICABLE
PARTNERSHIP AGREEMENT/ARTICLES OF ORGANIZATION] (the "Partnership
Agreement"/"Articles") pursuant to the terms of the Pledge Agreement, dated as
of February 23, 1998 (as amended, modified or supplemented from time to time in
accordance with the terms thereof, the "Pledge Agreement"), among the Pledgor,
the other pledgors from time to time party thereto and Bankers Trust Company
(the "Pledgee"), as Collateral Agent on behalf of the Secured Creditors
described therein. The undersigned hereby further confirms the registration of
the Pledgor's pledge of its interest to the Pledgee on behalf of the Secured
Creditors on the Partnership's/LLC's books.
The Partnership/LLC hereby acknowledges the rights of and
remedies available to the Secured Creditors under the Pledge Agreement.
The Partnership/LLC hereby irrevocably agrees to comply with
the instructions originated by the Pledgee, on behalf of the Secured Creditors,
of the type referred to in the penultimate paragraph of the Partnership/LLC
Notice dated ___________ __, ____ signed by the Pledgor, without further consent
by the Pledgor. The undersigned further hereby irrevocably agrees, except upon
the prior written consent of the Pledgee, not to honor any such instructions
given by any other person or entity.
Dated: ___________ __, ____
[NAME OF PLEDGED PARTNERSHIP/LLC]
By:
Name:
Title:
<PAGE> 90
ANNEX F
to
PLEDGE AND SECURITY AGREEMENT
CHIEF EXECUTIVE OFFICE
1. Starwood Hotels and Resorts
2231 East Camelback Road
Suite 410
Phoenix, AZ 85016
2. Starwood Hotels & Resorts Worldwide, Inc.
2231 East Camelback Road
Suite 400
Phoenix, AZ 85016
3. Westin Hotel Company
The Westin Building
2001 Sixth Avenue
Seattle, WA 98121
4. ITT Corporation
1330 Avenue of the Americas
New York, NY 10019
5. ITT Sheraton Corporation
60 State Street
Boston, MA 02109
6. Sheraton International, Inc.
60 State Street
Boston, MA 02109
Attached to this Annex F to the Pledge and Security Agreement is a list
of entities whose ownership is being pledged with the legal address at such
noted alongside; such address corresponds entity with the address set forth
above.
<PAGE> 91
ANNEX G
Page 40
THE PLEDGEE
1. Appointment. The Secured Creditors, by their acceptance of
the benefits of the Pledge and Security Agreement to which this Annex G is
attached (the "Pledge Agreement") hereby irrevocably designate Bankers Trust
Company (and any successor Pledgee) to act as specified herein and therein.
Unless otherwise defined herein, all capitalized terms used herein (x) and
defined in the Pledge Agreement, are used herein as therein defined and (y) not
defined in the Pledge Agreement, are used herein as defined in the Credit
Agreement referenced in the Pledge Agreement. Each Secured Creditor hereby
irrevocable authorizes, and each holder of any Obligation by the acceptance of
such Obligation and by the acceptance of the benefits of the Pledge Agreement
shall be deemed irrevocably to authorize, the Pledgee to take such action on its
behalf under the provisions of the Pledge Agreement and any instruments and
agreements referred to therein and to exercise such powers and to perform such
duties thereunder as are specifically delegated to or required of the Pledge
Agreement by the terms thereof and such other powers as are reasonably
incidental thereto. The Pledgee may perform any of its duties hereunder or
thereunder by or through its authorized agents, sub-agents or employees.
2. Nature of Duties. (a) The Pledgee shall have no duties or
responsibilities except those expressly set forth herein or in the Pledge
Agreement. The duties of the Pledgee shall be mechanical and administrative in
nature; the Pledgee shall not have by reason of this Agreement, any other Credit
Document or any other Secured Debt Agreement a fiduciary relationship in respect
of any Secured Creditor; and nothing in this Agreement, any other Credit
Document or any other Secured Debt Agreement, expressed or implied, is intended
to or shall be so construed as to impose upon the Pledgee any obligations in
respect of the Pledge Agreement except as expressly set forth herein and
therein.
(b) The Pledgee shall not be responsible for insuring the
Collateral or for the payment of taxes, charges or assessments or discharging of
Liens upon the collateral or otherwise as to the maintenance of the Collateral.
(c) The Pledgee shall not be required to ascertain or inquire
as to the performance by any Pledgor of any of the covenants or agreements
contained in the Pledge Agreement, any other Credit Document or any other
Secured Debt Agreement.
(d) The Pledgee shall be under no obligation or duty to take
any action under, or with respect to, the Pledge Agreement if taking such action
(i) would subject the Pledgee to a tax in any jurisdiction where it is not then
subject to a tax or (ii) would require the Pledgee to qualify to do business, or
obtain any license, in any jurisdiction where it is not then so qualified or
licensed or (iii) would subject the Pledgee to in personam jurisdiction in any
locations where it is not then so subject.
(e) Notwithstanding any other provision of this Annex G,
neither the Pledgee nor any of its officers, directors, employees, affiliates or
agents shall, in its individual capacity, be personally liable for any action
taken or omitted to be taken by it in accordance with, or pursuant to this Annex
G or the Pledge Agreement except for its own gross negligence or willful
<PAGE> 92
ANNEX G
Page 41
misconduct.
3. Lack of Reliance on the Pledgee. Independently and without
reliance upon the Pledgee, each Secured Creditor, to the extent it deems
appropriate, has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of each Pledgor and its
Subsidiaries in connection with the making and the continuance of the
Obligations and the taking or not taking of any action in connection therewith,
and (ii) its own appraisal of the creditworthiness of each Pledgor and its
Subsidiaries, and the Pledgee shall have no duty or responsibility, either
initially or on a continuing basis, to provide any Secured Creditor with any
credit or other information with respect thereto, whether coming into its
possession before the extension of any Obligations or the purchase of any notes
or at any time or times thereafter. The Pledgee shall not be responsible in any
manner whatsoever to any Secured Creditor for the correctness of any recitals,
statements, information, representations or warranties herein or in any
document, certificate or other writing delivered in connection herewith or for
the execution, effectiveness, genuineness, validity, enforceability, perfection,
collectibility, priority or sufficiency of the Pledge Agreement or the security
interests granted hereunder or the financial condition of any Pledgor or any
Subsidiary of any Pledgor or be required to make any inquiry concerning either
the performance or observance of any of the terms, provisions or conditions of
the Pledge Agreement, or the financial condition of any Pledgor or any
Subsidiary of any Pledgor, or the existence or possible existence of any default
or event of default. The Pledgee makes no representations as to the value or
condition of the Collateral or any part thereof, or as to the title of any
Pledgor thereto or as to the security afforded by the Pledge Agreement.
4. Certain Rights of the Pledgee. (a) No Secured Creditor
shall have the right to cause the Pledgee to take any action with respect to the
Collateral, with only the Required Secured Creditors having the right to direct
the Pledgee to take any such action. If the Pledgee shall request instructions
from the Required Secured Creditors, with respect to any act or action
(including failure to act) in connection with the Pledge Agreement, the Pledgee
shall be entitled to refrain from such act or taking such action unless and
until it shall have received instructions from the Required Secured Creditors
and to the extent requested, appropriate indemnification in respect of actions
to be taken, and the Pledgee shall not incur liability to any Person by reason
of so refraining. Without limiting the foregoing, no Secured Creditor shall have
any right of action whatsoever against the Pledgee as a result of the Pledgee
acting or refraining from acting hereunder in accordance with the instructions
of the Required Secured Creditors. As used herein, the term "Required Secured
Creditors" shall mean (i) the Required Lenders (or, to the extent required by
Section 13.12 of the Credit Agreement, each of the Lenders) at all times prior
to the occurrence of the Credit Document Obligations Termination Date (as
defined in the Pledge and Security Agreement) and (ii) the holders of at least
the majority of the then outstanding Obligations secured hereby at all times
after the Credit Document Obligations Termination Date and prior to the
repayment in full, in cash, of all outstanding Obligations secured hereby.
Notwithstanding anything to the contrary contained in clause (i) or (ii) of the
immediately preceding sentence, if at any time the principal of any Obligations
secured hereby has been accelerated, or the final maturity date with respect to
any such principal Obligations has occurred, and as a result thereof one or more
payment Events of Default (where the aggregate
<PAGE> 93
ANNEX G
Page 42
principal amount of such Obligations accelerated or not paid at final maturity
equals or exceeds $100,000,000), which payment Events of Default shall have
continued in existence for at least 90 consecutive days after the date of such
acceleration or final maturity, and the Required Secured Creditors at such time
(determined without regard to this sentence) have not directed the Pledgee to
commence enforcement proceedings pursuant to the Pledge Agreement, then so long
as such payment Event of Default is continuing the Secured Creditors holding at
least a majority of the outstanding Obligations secured hereby subject to such
payment Event of Default shall constitute the Required Secured Creditors for
purposes of causing the Pledgee to commence enforcement proceedings pursuant to
the Pledge Agreement, provided that in such event the Secured Creditors who
would constitute the Required Secured Creditors in the absence of this sentence
shall have the right to direct the manner and method of enforcement so long as
such directions do not materially delay or impair the taking of enforcement
action.
(b) Notwithstanding anything to the contrary contained herein,
the Pledgee is authorized, but not obligated, (i) to take any action reasonably
required to perfect or continue the perfection of the liens on the Collateral
for the benefit of the Secured Creditors and (ii) when instructions from the
Required Secured Creditors have been requested by the Pledgee but have not yet
been received, to take any action which the Pledgee, in good faith, believes to
be reasonably required to promote and protect the interests of the Secured
Creditors in the Collateral; provided that once instructions have been received,
the actions of the Pledgee shall be governed thereby and the Pledgee shall not
take any further action which would be contrary thereto.
(c) Notwithstanding anything to the contrary contained herein
or in the Pledge Agreement, the Pledgee shall not be required to take any action
that exposes or, in the good faith judgment of the Pledgee may expose, the
Pledgee or its officers, directors, agents or employees to personal liability,
unless the Pledgee shall be adequately indemnified as provided herein, or that
is, or in the good faith judgment of the Pledgee may be, contrary to the Pledge
Agreement, any Secured Debt Agreement or applicable law.
5. Reliance. The Pledgee shall be entitled to rely, and shall
be fully protected in relying, upon, any note, writing, resolution, notice,
statement, certificate, telex, teletype or telescopes message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
the proper Person or entity, and, with respect to all legal matters pertaining
hereto or to the Pledge Agreement and its duties thereunder and hereunder, upon
advice of counsel selected by it.
6. Indemnification. To the extent the Pledgee is not
reimbursed and indemnified by the Pledgors under the Pledge Agreement, the
Secured Creditors will reimburse and indemnify the Pledgee, in proportion to
their respective outstanding principal amounts (including, for this purpose, the
Stated Amount of outstanding Letters of Credit, as well as any unpaid Primary
Obligations in respect of Interest Rate Protection Agreements, as outstanding
principal) of Obligations, for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature
<PAGE> 94
ANNEX G
Page 43
whatsoever which may be imposed on, incurred by or asserted against the Pledgee
in performing its duties hereunder, or in any way relating to or arising out of
its actions as Pledgee in respect of the Pledge Agreement except for those
resulting solely from the Pledgee's own gross negligence or willful misconduct.
The indemnities set forth in this Section 6 shall survive the repayment of all
Obligations, with the respective indemnification at such time to be based upon
the outstanding principal amounts (determined as described above) of Obligations
at the time of the respective occurrence upon which the claim against the
Pledgee is based or, if same is not reasonably determinable, based upon the
outstanding principal amounts (determined as described above) of Obligations as
in effect immediately prior to the termination of the Pledge Agreement. The
indemnities set forth in this Section 6 are in addition to any indemnities
provided by the Lenders to the Pledgee pursuant to the Credit Agreement, with
the effect being that the Lenders shall be responsible for indemnifying the
Pledgee to the extent the Pledgee does not receive payments pursuant to this
Section 6 from the Secured Creditors (although in such event, and upon the
payment in full of all such amounts owing to the Pledgee by the Lenders, the
Lenders shall be subrogated to the rights of the Pledgee to receive payment from
the Secured Creditors).
7. The Pledgee in its Individual Capacity. With respect to its
obligations as a lender under the Credit Agreement and any other Credit
Documents to which the Pledgee is a party, and to act as agent under one or more
of such Credit Documents, the Pledgee shall have the rights and powers specified
therein and herein for a "Lender", or an "Agent", as the case may be, and may
exercise the same rights and powers as though it were not performing the duties
specified herein; and the terms "Lenders," "Required Lenders," "holders of
Notes," or any similar terms shall, unless the context clearly otherwise
indicates, include the Pledgee in its individual capacity. The Pledgee and its
affiliates may accept deposits from, lend money to, and generally engage in any
kind of banking, investment banking, trust or other business with any Pledgor or
any Affiliate or Subsidiary of any Pledgor as if it were not performing the
duties specified herein or in the other Credit Documents, and may accept fees
and other consideration from the Pledgors for services in connection with the
Credit Agreement, the other Credit Documents and otherwise without having to
account for the same to the Secured Creditors.
8. Holders. The Pledgee may deem and treat the payee of any
note as the owner thereof for all purposes hereof unless and until written
notice of the assignment, transfer or endorsement thereof, as the case may be,
shall have been filed with the Pledgee. Any request, authority or consent of any
person or entity who, at the time of making such request or giving such
authority or consent, is the holder of any note, shall be final and conclusive
and binding on any subsequent holder, transferee, assignee or endorsee, as the
case may be, of such note or of any note or notes issued in exchange therefor.
9. Resignation by the Pledgee. (a) The Pledgee may resign from
the performance of all of its functions and duties hereunder and under the
Pledge Agreement at any time by giving 15 Business Days' prior or written notice
to the Parent Companies and the Secured Creditors. Such resignation shall take
effect upon the appointment of a successor Pledgee pursuant to clause (b) or (c)
below.
<PAGE> 95
ANNEX G
Page 44
(b) If a successor Pledgee shall not have been appointed
within said 15 Business Day period by the Required Secured Creditors, the
Pledgee, with the consent of the Parent Companies, which consent shall not be
unreasonably withheld or delayed, shall then appoint a successor Pledgee who
shall serve as Pledgee hereunder or thereunder until such time, if any, as the
Required Secured Creditors appoint a successor Pledgee as provided above.
(c) If no successor Pledgee has been appointed pursuant to
clause (b) above by the 15th Business Day after the date of such notice of
resignation was given by the Pledgee, as a result of a failure by the Parent
Companies to consent to the appointment of such a successor Pledgee, the
Required Secured Creditors shall then appoint a successor Pledgee who shall
serve as Pledgee hereunder or thereunder until such time, if any, as the
Required Secured Creditors appoint a successor Pledgee as provided above.
<PAGE> 96
EXHIBIT A-1
to
PLEDGE AND SECURITY AGREEMENT
FORM OF
PLEDGE AND SECURITY AGREEMENT SUPPLEMENT
PLEDGE AND SECURITY SUPPLEMENT, dated as of [ ] (this
"Supplement"), made by , a [ ] corporation (the
"Pledgor"), in favor of BANKERS TRUST COMPANY, as pledgee and as collateral
agent (in such capacities, the "Pledgee") for the Secured Creditors (such term
and each other capitalized term used but not defined having the meaning given in
the Pledge and Security Agreement referred to below).
1. Reference is hereby made to that certain Pledge and Security
Agreement, dated as of February 23, 1998 (as amended, supplemented or otherwise
modified as of the date hereof, the "Pledge and Security Agreement"), made by
the Pledgors party thereto in favor of the Pledgee for the benefit of the
Secured Creditors described therein.
2. The Pledgor hereby confirms and reaffirms the security
interest in the Collateral granted to the Pledgee for the benefit of the Secured
Creditors under the Pledge and Security Agreement, and, as additional collateral
security for the prompt and complete payment when due (whether at stated
maturity, by acceleration or otherwise) of the Obligations and in order to
induce the Secured Creditors to make loans and other extensions of credit
constituting Obligations, the Pledgor hereby delivers to the Pledgee, for the
benefit of the Secured Creditors, [(i) all of the issued and outstanding shares
of capital stock listed in Schedule I hereto, together with all stock
certificates, options, or rights of any nature whatsoever which may be issued or
granted in respect of such stock while the Pledge and Security Agreement, as
supplemented hereby, is in force (the "Additional Pledged Stock"; as used in the
Pledge and Security Agreement as supplemented by this Supplement, "Pledged
Stock" shall be deemed to include the Additional Pledged Stock)], [(ii) all
limited liability company interests listed on Schedule II hereto (the
"Additional Pledged Limited Liability Company Interests" as used in the Pledge
and Security Agreement as supplemented by this Supplement, "Pledged Limited
Liability Company Interests" shall be deemed to include the Additional Pledged
Limited Liability Company Interests)], [(iii) all partnership interests listed
on Schedule III here to (the "Additional Pledged Partnership Interests"; as used
in the Pledged and Security Agreement as supplemented by this Supplement,
"Pledged Partnership Interests" shall be deemed to include Additional Pledged
Partnership Interests)], and hereby grants to the Pledgee, for the benefit of
the Secured Creditors, a first security interest in the Additional Pledged
Stock, Additional Pledged Partnership Interests and/or Additional Pledged
Limited Liability Company Interests, as the case may be, and all Proceeds
thereof.
3. The Pledgor hereby represents and warrants that the
representations and warranties contained in Section 15 of the Pledge and
Security Agreement are true and correct on the date of this Supplement [with
references therein with the "Pledged Stock" to include the Additional Pledged
Stock,] [with references to the "Pledged Partnership Interests" to include the
Additional Pledged Partnership Interests,] [with references to the "Pledged
Limited Liability Company Interests" to include the Additional Pledged Limited
Liability Company Interests,] and with references to the "Pledge and Security
Agreement" to mean the Pledge and Security Agreement as supplemented by this
Supplement.
<PAGE> 97
EXHIBIT A-1
Page 46
4. The Pledgor hereby represents and warrants that, as of the
date hereof, the chief executive office of the Pledgor is located at the address
indicated on Schedule IV hereto.
5. This Supplement is supplemental to the Pledge and Security
Agreement, forms a part thereof and is subject to the terms thereof and the
Pledge and Security Agreement is hereby supplemented as provided herein. Without
limiting the foregoing, Annex A to the Pledge and Security Agreement shall
hereby be deemed to include each item listed on Schedule I to this Supplement
and Annexes B and C to the Pledge and Security Agreement shall hereby be deemed
to include each item listed on Schedule II to this Supplement. Annex C to the
Pledge and Security Agreement shall hereby be deemed to include each term listed
on Schedule III to this Supplement and Annex F to the Pledge and Security
Agreement shall be deemed to include the location listed on Schedule IV to this
Supplement.
<PAGE> 98
EXHIBIT A-1
Page 47
IN WITNESS WHEREOF, the Pledgor and the Pledgee have caused this Supplement to
be duly executed and delivered on the date first set forth above.
[PLEDGOR]
By:_______________________
Name:
Title:
BANKERS TRUST COMPANY, as Pledgee
By:________________________
Name:
Title:
<PAGE> 99
SCHEDULE I
to
PLEDGE AND SECURITY AGREEMENT SUPPLEMENT
PLEDGED STOCK
Pledgor Issuer Pledged Stock Ownership
Interest
<PAGE> 100
EXHIBIT A-2
Page 49
PLEDGED LIMITED LIABILITY COMPANY INTERESTS
Pledged Limited Percentage Owned
Liability Interests
<PAGE> 101
EXHIBIT A-2
Page 50
PLEDGED PARTNERSHIP INTERESTS
Pledged Partnership Percentage Owned Type of Partnership
<PAGE> 102
EXHIBIT A-2
Page 51
CHIEF EXECUTIVE OFFICE
<PAGE> 103
ANNEX 1
Page 52
SUPPLEMENT NO. dated as of [ ],
to the Pledge and Security Agreement dated as of
February 23, 1998 (the "Pledge and Security
Agreement"), among the Pledgors party thereto
(immediately before giving effect to this Supplement)
and BANKERS TRUST COMPANY as collateral agent and as
pledgee (in such capacities, the "Pledgee") for the
Secured Creditors (such term and each other
capitalized term used but not defined having the
meaning given it in the Pledge and Security Agreement
referred to below).
A. The Pledgors have entered into the Pledge and Security
Agreement in order to induce the Secured Creditors to make loans and other
extensions of credit constituting Obligations as defined in the Pledge and
Security Agreement. Pursuant to Section 8.15 of the Credit Agreement, certain
Subsidiaries of the Borrowers are, after the date of the Pledge and Security
Agreement, required to enter into the Pledge and Security Agreement as a
Pledgor. Section 24 of the Pledge and Security Agreement provides that
additional Subsidiaries may become Pledgors under the Pledge and Security
Agreement by execution and delivery of an instrument in the form of this
Supplement. The undersigned (the "New Pledgor") is a Subsidiary of a Borrower
and is executing this Supplement in accordance with the requirements of the
Credit Agreement and/or the Pledge and Security Agreement to become a Pledgor
under the Pledge and Security Agreement in order to induce the Secured Creditors
to extend, or maintain, Obligations.
Accordingly, the Pledgee and the New Pledgor agree as follows:
SECTION 1. The New Pledgor by its signature below becomes a
Pledgor under the Pledge and Security Agreement with the same force and effect
as if originally named therein as a Pledgor and the New Pledgor hereby agrees to
all the terms and provisions of the Pledge and Security Agreement applicable to
it as a Pledgor thereunder. Each reference to a "Pledgor" in the Pledge and
Security Agreement shall be deemed to include the New Pledgor. The Pledge and
Security Agreement is hereby incorporated herein by reference.
SECTION 2. The New Pledgor represents and warrants to the
Secured Creditors that this Supplement has been duly authorized, executed and
delivered by it and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms, subject to the effects of
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally and equitable principles of general applicability.
SECTION 3. This Supplement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but
<PAGE> 104
ANNEX 1
Page 53
one instrument. This Supplement shall become effective when the Pledgee shall
have received counterparts of this Supplement that, when taken together, bear
the signatures of the New Pledgor and the Pledgee.
SECTION 4. Except as expressly supplemented hereby, the Pledge
and Security Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained
in this Supplement should be held invalid, illegal or unenforceable in any
respect, neither party hereto shall be required to comply with such provision
for so long as such provision is held to be invalid, illegal or unenforceable,
but the validity, legality and enforceability of the remaining provisions
contained herein and in the Pledge and Security Agreement shall not in any way
be affected or impaired. The parties hereto shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
SECTION 7. All communications and notices hereunder shall be in
writing and given as provided in the Pledge and Security Agreement. All
communications and notices hereunder to the New Pledgor shall be given to it at
the address set forth under its signature, with a copy to the Parent Companies.
<PAGE> 105
ANNEX 1
Page 54
IN WITNESS WHEREOF, the New Pledgor and the Pledgee have duly
executed this Supplement to the Pledge and Security Agreement as of the day and
year first above written.
[NAME OF NEW PLEDGOR]
By:_______________________
Name:
Title:
Address:
BANKERS TRUST COMPANY,
as Pledgee
By:_________________________
Name:
Title:
<PAGE> 106
Annex F
TO
PLEDGE AND SECURITY AGREEMENT
1. Starwood Hotels and Resorts
2231 East Camelback Road
Suite 410
Phoenix, AZ 85016
2. Starwood Hotels & Resorts Worldwide, Inc.
2231 East Camelback Road
Suite 400
Phoenix, AZ 85016
3. Westin Hotel Company
The Westin Building
2001 Sixth Avenue
Seattle, WA 98121
4. ITT Corporation
1330 Avenue of the Americas
New York, NY 10019
5. ITT Sheraton Corporation
60 State Street
Boston, MA 02109
6. Sheraton International, Inc.
60 State Street
Boston, MA 02109
ATTACHED TO THIS ANNEX F TO THE PLEDGE AND SECURITY AGREEMENT IS A LIST
OF ENTITIES WHOSE OWNERSHIP IS BEING PLEDGED WITH THE LEGAL ADDRESS OF SUCH
ENTITY NOTED ALONGSIDE; SUCH ADDRESS CORRESPONDS WITH THE ADDRESS SET FORTH
BELOW.
<PAGE> 1
Exhibit 10.65
LOAN AGREEMENT
between
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
and
STARWOOD HOTELS & RESORTS
------------------------------------
Dated as of February 23, 1998
------------------------------------
$3,282,000,000
<PAGE> 2
LOAN AGREEMENT, dated as of February 23, 1998, between
STARWOOD HOTELS & RESORTS WORLDWIDE, INC., a Maryland corporation (the
"Borrower"), and STARWOOD HOTELS & RESORTS, a Maryland real estate investment
trust (the "Lender").
W I T N E S S E T H :
WHEREAS, the Borrower and the Lender are among the parties to
that certain Agreement and Plan of Merger, dated as of October 19, 1997 (as
amended, supplemented or otherwise modified from time to time in accordance with
the terms thereof, the "Merger Agreement");
WHEREAS, in connection with the transactions contemplated by
the Merger Agreement and the Stock Purchase Agreement, the Lender has agreed to
advance the loan to the Borrower and, along with SLT Realty Limited Partnership,
a Delaware limited partnership (SLT"), to guaranty the repayment of any
indebtedness of the Borrower to third parties on the terms provided for herein.
NOW, THEREFORE, the parties hereto have agreed as follows:
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the meanings
herein specified unless the context otherwise requires. Defined terms in this
Agreement shall include in the singular number the plural and in the plural the
singular:
"Affiliate" means, to any Person, any Person which, directly
or indirectly, controls, is controlled by or is under common control with such
Person and includes each executive officer, director, trustee, limited liability
company manager or general partner of such Person, and each Person who is the
beneficial owner of 10% or more of any class of voting stock of such Person. For
the purposes of this definition, "control" means the possession of the power to
direct or cause the direction of management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Business Day" means a day of the year on which banks are not
required or authorized to close in New York City.
"Closing Date" means the date on which all conditions
precedent to the Loan set forth in Article IV shall have been satisfied and the
Loan is made.
<PAGE> 3
"Default" means any event which with the passing of time or
the giving of notice or both would become an Event of Default.
"Default Rate" has the meaning specified in Section 2.5(b).
"Event of Default" has the meaning specified in Article VII.
"Final Maturity Date" means February 23, 2005.
"Governmental Authority" means any federal, state, county or
municipal government, or political subdivision thereof, any governmental or
quasi-governmental agency, authority, board, bureau, commission, department,
instrumentality, or public body, or any court, administrative tribunal or public
utility.
"Guaranties" means those certain guaranties dated as of the
date hereof made by each of the Owners of hotels in New York and Florida.
"Indebtedness" of any Person means such Person's (a)
obligations for borrowed money, (b) obligations representing the deferred
purchase price of property or services (other than accounts payable arising in
the ordinary course of such Person's business payable on terms customary in the
trade), (c) obligations secured by liens or payable out of the proceeds or
production from property or assets now or hereafter owned or acquired by such
Person and (d) obligations which are evidenced by notes, acceptances or other
instruments.
"Interest Rate" means the rate of 8.5% per annum.
"Laws" means collectively, all federal, state and local laws,
statutes, codes, ordinances, orders, rules and regulations, including judicial
opinions or precedential authority in the applicable jurisdiction, and all
directions, requirements, orders and notices of violation of any governmental or
quasi-governmental agency, body or office having or asserting jurisdiction over
Borrower, the properties identified on Exhibit A attached hereto or both, as the
same may be amended, modified or supplemented from time to time.
"Loan" has the meaning specified in Section 2.1(b).
"Loan Documents" shall mean this Loan Agreement, the Note, the
Mortgages, the Guaranties, the Subordination Agreement and any other documents,
agreements or instruments now or hereafter executed which evidence, secure or
otherwise relate to the Loan.
-3-
<PAGE> 4
"Merger Agreement" has the meaning specified in the Recitals
to this Agreement.
"Mortgages" means the Mortgage (or Deed of Trust), Security
Agreement and Financing Statement in favor of the Lender dated as of the date
hereof encumbering each of the properties identified on Exhibit A attached
hereto and made a part hereof.
"Note" has the meaning specified in Section 2.1(a).
"Obligations" means the Loan and all other advances, debts,
liabilities, obligations, covenants and duties owing by the Borrower to the
Lender, any Affiliate of the Lender or any Indemnitee, of every type and
description, present or future, arising under this Agreement or the Note,
whether direct or indirect (including, without limitation, those acquired by
assignment), absolute or contingent, due or to become due, now existing or
hereafter arising and however acquired. The term "Obligations" includes, without
limitation, all interest, charges, expenses, fees, attorneys' fees and
disbursements and any other sum then payable by the Borrower under this
Agreement or the Note.
"Owners" means the Persons holding fee simple title to the
real property identified on Exhibit A attached hereto.
"Person" means an individual, partnership, corporation
(including, without limitation, a business trust), limited liability company,
joint stock company, trust, unincorporated association, joint venture or other
entity, or a governmental authority.
"Principal Balance" means the outstanding principal balance of
the Note from time to time.
"Stock Purchase Agreement" means that certain Stock Purchase
Agreement dated as of the date hereof between the Borrower and the Lender.
"Subordination Agreement" means that certain Subordination and
Intercreditor Agreement dated as of the date hereof to which the Borrower and
the Lender are parties.
"Taxes" means any and all present or future taxes, levies,
imposts, deductions, charges or withholdings or any liabilities with respect
thereto including those arising after the date hereof as a result of the
adoption of or any change in any law, treaty, rule, regulation, guideline or
determination of a Governmental Authority or by any change in the interpretation
or application thereof by a Governmental Authority, but excluding such taxes as
are imposed on or measured by the Lender's income.
-4-
<PAGE> 5
ARTICLE II
AMOUNT AND TERM OF THE LOAN
2.1. The Note; The Loan. (a) The Borrower's obligation to pay
the principal of, and interest on, the Loan shall be evidenced by a promissory
note, in the form attached hereto as Exhibit B, dated the date hereof and made
by the Borrower payable to the order of the Lender in a stated principal amount
equal to the amount of the Loan (as the same may be amended, modified,
supplemented, extended or consolidated, the "Note").
(b) On the terms and subject to the conditions contained in
this Agreement, the Lender agrees to make to the Borrower a loan in the maximum
principal amount of $3,282,000,000 (the "Loan").
2.2. Advances. The Lender will, on the Closing Date, advance
the sum of $2,699,467,038.25 to the Borrower. Subject to the requirements set
forth in Section 9.05(viii)(III) of the Credit Agreement (as defined in the
Subordination Agreement), the Lender will make further advances of the Loan to
the Borrower from time to time upon the Borrower's request, provided that in no
event shall the aggregate amount of all advances exceed $3,282,000,000.
2.3. Repayment. The Borrower shall repay the entire Principal
Balance on the Final Maturity Date.
2.4. Prepayments. (a) The Borrower shall have no right to
prepay the Principal Balance other than as provided in this Section 2.4.
(b) The Borrower may, upon at least two (2) Business Days'
prior notice (which may be by telephone, provided that confirmation in writing
is received within one (1) Business Day after such telephonic notice) to the
Lender, stating the proposed date and aggregate principal amount of the
prepayment, prepay Principal Balance in whole or ratably in part, without
premium or penalty, together with accrued interest to the date of such
prepayment on the principal amount prepaid. Upon the giving of such notice of
prepayment, the principal amount of the Loan specified to be prepaid shall
become due and payable on the date specified for such prepayment.
2.5. Interest. (a) The Borrower shall pay interest on the
Principal Balance until the Principal Balance and all Obligations shall be paid
in full, at the Interest Rate.
(b) Unless prohibited by the terms of the Subordination
Agreement, any overdue amount payable hereunder shall bear interest from the
date due, until the date paid in full, at a rate per annum (calculated for the
actual number of days elapsed
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<PAGE> 6
on the basis of a 365-day year) equal to, on a daily basis, 1% plus the Interest
Rate (the "Default Rate"), provided, however, that such interest rate shall in
no event exceed the maximum interest rate which the Borrower may by law pay.
2.6. Increased Costs. If due to (a) the introduction of or any
change in or in the interpretation of any law or regulation, (b) compliance by
the Lender with any law or regulation or with any guideline or request from any
central bank or other Governmental Authority (whether or not having the force of
law) or (c) payment by the Lender of Taxes, there shall be any increase in the
cost to the Lender of funding or maintaining the Loan, then the Borrower shall
from time to time, upon demand by the Lender, pay to the Lender additional
amounts sufficient to compensate the Lender for such increased cost. A
certificate as to the amount of such increased cost, submitted to the Borrower
by the Lender, shall be conclusive and binding for all purposes, absent manifest
error.
2.7. Payments and Computations. (a) The Borrower shall pay to
Lender at its address referred to opposite its signature to this Agreement not
later than 11:00 A.M. (New York City time) on the first (1st) day of each
calendar month after the date hereof, in immediately available funds without
set-off or counterclaim, all interest accrued under the Note during the
immediately prior calendar month; provided, however, in the event the Borrower
gives telephonic notice to the Lender by 11:00 AM (New York City time) on the
day when due that a payment has been made by wire transfer of immediately
available funds, such payment may be received by the Lender not later than 2:00
PM (New York City time) on the same day. Payment received by the Lender after
11:00 A.M. (New York City time) or after 2:00 P.M. (New York City time), if the
Borrower has given the Lender the notice required above, shall be deemed to be
received on the next Business Day.
(b) All computations of interest and fees shall be made by the
Lender on the basis of the actual number of days elapsed in a 365-day year.
(c) Whenever any payment hereunder or under the Note shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or fees, as the case
may be.
ARTICLE III
GUARANTIES
3.1. Guaranties. Subject to the terms and conditions set forth
in this Agreement and in the Subordination Agreement, the Lender hereby agrees
to issue and to cause SLT and certain Affiliates of the Lender and SLT to issue
for the account of the Borrower and certain of the Borrower's Affiliates one or
more guaranties of indebtedness of
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the Borrower and certain of the Borrower's Affiliates other than this Loan,
subject to the following provisions:
(a) Conditions. The obligation of the Lender and SLT to issue
a guaranty is subject to the satisfaction in full of the following conditions:
(i) the proposed guaranty must be permitted under the terms of
the Credit Agreement and comply with the terms and conditions of the
Subordination Agreement;
(ii) the Borrower shall have executed and/or delivered to the
Lender and SLT such documents and materials as may be reasonably
required by the Lender and SLT in connection with the guaranty; and
(iii) the terms of the proposed guaranty shall be satisfactory
to the Lender and SLT in their sole discretion and in no event shall be
inconsistent with or put at risk the Lender's status as a real estate
investment trust.
(b) Issuance of Guaranty. (i) The Borrower shall give the
Lender and SLT written notice that it needs the Lender and SLT to issue a
guaranty not later than the twentieth (20th) Business Day preceding the
requested date for issuance thereof under this Agreement, or such shorter notice
as may be acceptable to the Lender and SLT. Such notice shall specify (A) the
amount that the guaranty requested is to cover, (B) the effective date (which
shall be a Business Day) of such guaranty, (C) the date or conditions upon which
such guaranty is to terminate (which shall be no later than the Business Day
immediately preceding the scheduled Final Maturity Date), (D) the Person(s) for
whose benefit such guaranty is to be issued, and (E) other relevant terms of
such guaranty.
(c) Reimbursement Obligations:
(A) subject to the terms of the Credit Agreement and the
Subordination Agreement and to the same limits on subrogation and
subordination as provided in the relevant guaranty, the Borrower shall
reimburse the Lender and SLT, as applicable, for any and all amounts
paid and expenses incurred under or in connection with any guaranty
(the "Reimbursement Obligations") no later than the date (the
"Reimbursement Date") which is three (3) Business Days after the
Borrower receives written notice from the Lender and SLT that payment
has been made under a guaranty by the Lender and SLT; and
(B) all Reimbursement Obligations with respect to any guaranty
shall bear interest at the Interest Rate from the date of the relevant
payment under such guaranty until the Reimbursement Date. If any
Reimbursement Obligations are not paid by the Reimbursement Date, the
outstanding amounts shall bear interest at the Default Rate from the
Reimbursement Date until the date paid.
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(C) No action taken or omitted in good faith by the Lender or
SLT under or in connection with any guaranty shall put such party under any
resulting liability to the Borrower.
(d) Payment of Reimbursement Obligations. Subject to the terms
of the Credit Agreement and the Subordination Agreement, the Borrower
unconditionally agrees to pay to each of the Lender and SLT the amount of all
Reimbursement Obligations, interest and other amounts payable to the Lender and
SLT under or in connection with the guaranties when such amounts are due and
payable, irrespective of any claim, setoff, defense or other right which the
Borrower may have at any time against the Lender, SLT or any other Person.
(e) Charges. Commencing April 1, 1998, the Borrower shall pay
to the SLT on the first day of each calendar quarter, an amount equal to
one-quarter (1/4) of one percent (0.25%) per annum, payable quarterly on the
average amount guaranteed by the Lender and SLT for the immediately prior
calendar quarter, as consideration for the issuance, administration, amendment
and payment or cancellation of any guaranties. SLT shall pay the Lender an
equitable portion of such amount.
(f) Indemnification; Exoneration. (i) In addition to all other
amounts payable to the Lender and SLT, the Borrower hereby agrees to defend,
indemnify, and save each of the Lender and SLT harmless from and against any and
all claims, demands, liabilities, penalties, damages, losses (other than loss of
profits), costs, charges and expenses (including reasonable attorneys' fees)
which the Lender or SLT may incur or be subject to as a consequence, direct or
indirect, of (A) the issuance of any guaranty other than as a result of the
gross negligence or willful misconduct of the Lender or SLT, as determined by a
court of competent jurisdiction, or (B) the failure of the Lender or SLT to
honor a payment request under any guaranty as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
government or Governmental Authority.
(g) Acts or Omissions. The Borrower assumes (and not the
Lender or SLT) all risks of the acts and omissions of, or misuse of guaranties
by, the respective beneficiaries of the guaranties. In furtherance and not in
limitation of the foregoing, the Lender and SLT shall not be responsible for:
(A) the form, validity, legality, sufficiency, accuracy, genuineness or legal
effect of any document submitted by any party in connection with the issuance of
or payment under the guaranties, even if it should in fact prove to be in any or
all respects invalid, insufficient, inaccurate, fraudulent or forged; (B) the
validity, legality or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a guaranty or the rights or benefits thereunder
or proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason; (C) failure of the beneficiary of a guaranty to duly
comply with conditions required in order to receive a payment under such
guaranty; (D) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether
or not they be in cipher; (E) errors in
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<PAGE> 9
interpretation of technical terms; (F) any loss or delay in the transmission or
otherwise of any document required in order to make a request for payment under
any guaranty or of the proceeds thereof; (G) the misapplication by the
beneficiary of a guaranty of the proceeds of any payment under such guaranty;
and (H) any consequences arising from causes beyond the control of the Lender or
SLT.
3.2 Obligations Several. The obligations of each of the Lender
and SLT under this Article III are several and not joint, and neither party
shall be responsible for the obligation to issue guaranties of the other party.
3.3 Assignment by Lender. The obligations of the Lender to
issue guaranties pursuant to this Article III shall continue to be binding on
Starwood Hotels & Resorts, as the initial Lender hereunder, after any assignment
of the Loan to SLT.
ARTICLE IV
CONDITIONS PRECEDENT
The obligation of the Lender to make the Loan on the Closing
Date shall be subject to the satisfaction of all of the following conditions
precedent any of which may be waived by Lender at any time either orally or in
writing:
(a) Documents. The Lender shall have received this Agreement,
the Note, the Mortgages and the Guaranties duly executed by the Borrower or the
Owners, as applicable, and in form and substance satisfactory to the Lender,
together with such other documents, certificates and opinions as shall be
reasonably requested by the Lender.
(b) Merger. The conditions set forth in Article VI of the
Merger Agreement shall have been satisfied or waived, and the Merger (as defined
in the Merger Agreement) shall have taken place.
(c) No Default. No Default or Event of Default shall have
occurred and be continuing or would result from the making of the Loan on the
Closing Date.
(d) Representations and Warranties. The representations and
warranties described in Article V shall be true and correct on and as of the
Closing Date.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
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In order to induce the Lender to enter into this Agreement and
to make the Loan provided for herein, the Borrower hereby represents and
warrants as follows:
(a) Borrower is a corporation duly formed, validly existing
and in good standing under the laws of the State of Maryland. Borrower is
qualified and authorized to do business in the State of Maryland.
(b) Borrower has full power and authority to perform the
obligations and carry out the duties imposed upon Borrower by this Agreement and
the Note, and Borrower has taken all action necessary to carry out Borrower's
obligations and duties in connection with the Loan.
(c) No aspect of the Loan transaction violates or will violate
any usury laws or laws of the State of Maryland, regarding the validity of
agreements to pay interest in effect on the date hereof.
(d) Borrower is not a "foreign person" within the meaning of
Section 1445 or 7701 of the Internal Revenue Code.
(e) Borrower has delivered to Lender a true, correct and
complete copy of Borrower's organizational documents and the same are in full
force and effect. To the best of Borrower's knowledge, there are no defaults by
any party under Borrower's organizational documents, nor do circumstances exist
which, with the passage of time, the giving of notice, or both, would constitute
a default thereunder.
ARTICLE VI
COVENANTS
The Borrower hereby covenants and agrees that for so long as
this Agreement is in effect and the Note is outstanding and until the Loan,
together with interest and all other Obligations incurred hereunder, are paid in
full, unless otherwise permitted by Lender:
6.1 Use of Proceeds. The proceeds of the Loan shall be used to
purchase shares of ITT Corporation, a Nevada corporation, from the Lender
pursuant to the Stock Purchase Agreement and shares of beneficial interest of
the Lender.
6.2 Compliance with Merger Agreement. The Borrower shall
comply in all respects with the Merger Agreement and shall not take any action
to terminate the Merger Agreement (other than in accordance with Article VII
thereof) without the prior written consent of the Lender.
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6.3 Negative Covenants. Borrower shall not, on or after the
date hereof, without the prior written consent of Lender:
(a) Materially alter the character of its business from that
conducted on the date hereof;
(b) Wind up, liquidate or dissolve its affairs;
(c) Take any action or omit to take any action that would
cause it not to be in good standing in the State of Maryland;
(d) Amend, modify or change in any manner materially adverse
to the interests of the Lender the certificate of incorporation (including,
without limitation, by the filing of any certificate of designation) or by-laws
of the Borrower;
ARTICLE VII
EVENTS OF DEFAULT
Upon the occurrence and continuation of any of the following
specified events (each, an "Event of Default"):
7.1 Payments. The Borrower shall (i) default in the payment
when due of any Principal Balance or (ii) default, and such default shall
continue for ten (10) or more Business Days after written notice from Lender, in
the payment when due of any interest on the Loan or any fees or any other
Obligations owing hereunder or under the Note; or
7.2 Covenants. The Borrower shall default in the due
performance or observance by it of any term, covenant or agreement (other than
those referred to in Section 7.1) contained in this Agreement or one of the
Owners shall default in the due performance or observance by it of any term,
covenant or agreement contained in the Mortgages and such default shall continue
beyond the period of time specified by Lender in its written notice of default,
which period shall be no less than twenty (20) Business Days; or
7.3 Default Under Other Agreements The Borrower shall (i)
default in any payment with respect to any Indebtedness (other than the
Obligations) beyond the period of grace, if any, applicable thereto or (ii)
default in the observance or performance of any agreement or condition relating
to any such Indebtedness or
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<PAGE> 12
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of which
default or other event or condition is to cause, or to permit the holder or
holders of such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause any such Indebtedness to become due prior to its stated
maturity; or (b) any such Indebtedness shall be declared to be due and payable
(other than to the extent the Borrower promptly denies in writing to the
applicable creditor the validity of such declaration and is contesting same in
good faith), or required to be prepaid other than by a regularly scheduled
required prepayment, prior to the stated maturity thereof, and such default
shall continue beyond the period of time specified by Lender in its written
notice of default, which period shall be no less than twenty (20) Business Days.
Borrower shall have the right to cure any default under this Section 7.3 by
repaying or refinancing the Indebtedness with respect to which a default has
occurred.
7.4 Bankruptcy, etc. The Borrower shall commence a voluntary
case concerning itself under Title 11 of the United States Code entitled
"Bankruptcy", as now or here after in effect, or any successor thereto (the
"Bankruptcy Code"); or an involuntary case is commenced against the Borrower and
the petition is not controverted within 20 days, or is not dismissed within 60
days, after commencement of the case; or a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or substantially all
of the property of the Borrower, or the Borrower commences any other proceeding
under any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Borrower, or there is
commenced against the Borrower any such proceeding which is not controverted
within 20 days or remains undismissed for a period of 60 days; or the Borrower
is adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the Borrower suffers any
appointment of any custodian or the like for it or any substantial part of its
property to continue undischarged or unstayed for a period of 60 days; or the
Borrower makes a general assignment for the benefit of creditors; or any
corporate action is taken by the Borrower for the purpose of effecting any of
the foregoing;
then, and in any such event, and at any time thereafter, if
any Event of Default shall then be continuing, the Lender may, at its sole
discretion, but subject to (and only to the extent permitted by) the
Subordination Agreement, by written notice to the Borrower, take any or all of
the following actions, without prejudice to the rights of the Lender to enforce
its claims against the Borrower, except as otherwise specifically provided for
in this Agreement: (i) declare the Lender's obligation to advance the Loan or
any portion thereof terminated; and (ii) declare the principal of and any
accrued interest in respect of the Loan and all Obligations to be, whereupon the
same shall become, forthwith due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower.
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ARTICLE VIII
MISCELLANEOUS
8.1. Payment of Expenses, etc. The Borrower agrees to: (i) pay
all reasonable out-of-pocket costs and expenses of the Lender in connection with
the administration and enforcement of this Agreement and the Note and any
amendment, waiver or consent relating thereto (including, without limitation,
the reasonable fees and disbursements of counsel for the Lender), provided that
each of the parties hereto shall pay its own costs and expenses relating to the
negotiation, preparation and delivery of this Agreement and the Note; and (ii)
indemnify the Lender, its Affiliates and their respective officers, directors,
employees, representatives and agents from and hold each of them harmless
against any and all losses, liabilities, claims, damages or expenses incurred
by any of them as a result of, or arising out of, or in any way related to, or
by reason of, an investigation, litigation or other proceeding (whether or not
the Lender is a party thereto) related to the entering into and/or performance
of this Agreement or the Note or the use of the proceeds of the Loan hereunder.
8.2. Notices. Except as otherwise expressly provided herein,
all notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier, facsimile or cable communication) and
mailed, telegraphed, telexed, telecopied, faxed, cabled or delivered at the
address specified opposite its signature below or at such other address as shall
be designated by any party in a written notice to the other party hereto. All
such notices and communications shall be mailed, telegraphed, telexed,
telecopied, or cabled or sent by overnight courier, and shall be effective when
received.
8.3. Benefit of Agreement. This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto, provided that the Borrower may not assign or
transfer any of its rights or obligations hereunder other than in accordance
with the Transaction Agreement.
8.4. No Waiver; Remedies Cumulative. No failure or delay on
the part of the Lender in exercising any right, power or privilege hereunder and
no course of dealing between the Borrower and the Lender shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. The rights and
remedies herein expressly provided are cumulative and not exclusive of any
rights or remedies which the Lender would otherwise have. No notice to or demand
on the Borrower in any case shall entitle the Borrower to any
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<PAGE> 14
other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of the Lender to any other or further action
in any circumstances without notice or demand.
8.5. Governing Law; Submission to Jurisdiction; Venue; Waiver
of Jury Trial. (a) This Agreement and the Note and the rights and obligations of
the parties hereunder and thereunder shall be construed in accordance with and
be governed by the law of the State of New York, in accordance with the
provisions of New York State General Obligations Law Section 5-1401. The parties
hereto irrevocably submit to the jurisdiction of the courts of the State of New
York and the Federal courts of the United States of America located in the State
of New York solely in respect of the interpretation and enforcement of the
provisions of this Agreement and the Note, and in respect of the transactions
contemplated hereby, and hereby waive, and agree not to assert, as a defense in
any action, suit or proceeding for the interpretation or enforcement hereof or
of any such document, that it is not subject thereto or that such action, suit
or proceeding may not be brought or is not maintainable in said courts or that
the venue thereof may not be appropriate or that this Agreement or the Note may
not be enforced in or by such courts, and the parties hereto irrevocably agree
that all claims with respect to such action or proceeding shall be heard and
determined in such a New York State or Federal court. The parties hereby consent
to and grant any such court jurisdiction over the person of such parties and
over the subject matter of such dispute and agree that mailing of process or
other papers in connection with any such action or proceeding in the manner
provided in Section 8.2 or in such other manner as may be permitted by law shall
be valid and sufficient service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (i) 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, (ii) EACH
PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 7.5.
8.6. Counterparts. This Agreement may be executed in any
number of
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counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
8.7. Headings Descriptive. The headings of the several
sections and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.
8.8. Amendment or Waiver. Neither this Agreement nor the Note
nor any terms hereof or thereof may be changed, waived, discharged or terminated
unless such change, waiver, discharge or termination is in writing signed by the
Borrower and the Lender.
8.9. Survival. All indemnities set forth herein shall survive
the execution and delivery of this Agreement and the making and repayment of the
Loan.
8.10 Recourse to Trust. The Borrower acknowledges and agrees
that the name "Starwood Hotels & Resorts" is a designation of the Lender and its
trustees (as trustees but not personally) under a Declaration of Trust dated
August 25, 1969, as amended and restated as of June 6, 1988, and as the same has
been or may be amended from time to time thereafter, and that the Borrower shall
look solely to the Lender's assets for the enforcement of any claims against the
Lender, as the trustees, officers, agents and security holders of the Lender
assume no personal liability for obligations entered into on behalf of the
Lender, and their respective individual assets shall not be subject to the
claims of any person relating to such obligations. The foregoing shall govern
all direct and indirect obligations of the Lender under this Agreement and the
Note.
8.11 Subordination. The Lender and the Borrower acknowledge
and agree that all rights of the Lender to receive any payments from the
Borrower hereunder or under any guarantees, mortgages, other types of security
documents or otherwise are and shall continue to be subject and subordinate in
payment to the prior payment in full, in cash, of all Senior Indebtedness (as
defined in the Subordination Agreement), to the extent, and in the manner set
forth in the Subordination Agreement. All of the terms, covenants and conditions
hereof are hereby and shall continue to be subordinate to all of the terms,
covenants and conditions of the Senior Indebtedness. The foregoing shall apply,
notwithstanding the availability of other collateral to the Senior Creditors (as
defined in the Subordination Agreement) or the actual date and time of
execution, delivery, recordation, filing or perfection of any of the Senior
Indebtedness, or the lien or priority of payment thereof, and in any instance
wherein the Senior Indebtedness or any claim for the Senior Indebtedness is
subordinated, avoided or disallowed, in whole or in part, under Title 11 of the
United States Code (the "Bankruptcy Code") or other applicable federal or state
law.
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IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.
BORROWER:
Address: STARWOOD HOTELS & RESORTS
WORLDWIDE, INC., a Maryland corporation
Starwood Hotels & Resorts
Worldwide, Inc.
2231 Camelback Road, Suite 400
Phoenix, Arizona 85016 By: /s/ Richard A. Smith
Attention: Alan M. Schnaid -----------------------------------
Fax: (602) 852-0984 Name: Richard A. Smith
Title: Authorized Signatory
Copies to:
Sherwin Samuels, Esq.
Sidley & Austin
555 West Fifth Street
Los Angeles, California 90013
Fax: (213) 896-6600
LENDER:
Address: STARWOOD HOTELS & RESORTS, a Maryland
real estate investment trust
Starwood Hotels & Resorts
2231 East Camelback Road, Ste. 410
Phoenix, Arizona 85016
Attention: Ronald C. Brown By: /s/ Ronald C. Brown
Fax: (602) 852-0984 -----------------------------------
Name: Ronald C. Brown
Copies to: Title: Senior Vice President
Sherwin Samuels
Sidley & Austin
555 West Fifth Street
Los Angeles, California 90013
Fax: (203) 861-2101
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EXHIBIT A
OWNED PROPERTIES
1. The Phoenician
6000 E. Camelback Road
Scottsdale, Arizona 85251
2. Sheraton San Diego Hotel & Marina
1380 Harbor Island Drive
San Diego, California 92101
3. The Carlton
923 16th & K Streets, NW
Washington, D.C. 20006
4. Sheraton Bal-Harbour
9701 Collins Avenue
Bal Harbour, Florida 33154
5. Sheraton Boston Hotel & Towers
39 Dalton Street
Boston, Massachusetts 02199
6. Sheraton Manhattan
790 Seventh Avenue
New York, New York 10019
7. Sheraton New York Hotel & Towers
811 Seventh Avenue
New York, New York 10019
8. Sheraton Russell
45 Park Avenue
New York, New York 10016
9. The St. Regis
Two East 55th Street
New York, New York 10022
10. Caesars Cove Haven
Route 590
Lakeville, Pennsylvania 18438
11. Caesars Paradise Stream
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Route 940
Mt. Pocono, Pennsylvania 18344
12. Caesars Pocono Palace
Route 209
Marshalls Creek, Pennsylvania 18335
13. Caesars Brookdale
Route 611
Scotrun, Pennsylvania 18355
14. Caesars Atlantic City
2100 Pacific Avenue
Atlantic City, New Jersey 08401
15. The Desert Inn
3145 Las Vegas Blvd. South
Las Vegas, Nevada 89109
16. Caesars Palace
3570 Las Vegas Blvd., South
Las Vegas, Nevada 89109
17. Caesars Tahoe
55 Highway 50
Stateline, Nevada 89449
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<PAGE> 19
EXHIBIT B
FORM OF NOTE
SEE ATTACHED
<PAGE> 20
PROMISSORY NOTE
U.S. $3,282,000,000 Dated: February 23, 1998
FOR VALUE RECEIVED, the undersigned, STARWOOD HOTELS & RESORTS
WORLDWIDE, INC., a Maryland corporation (the "Borrower"), HEREBY PROMISES TO PAY
to the order of STARWOOD HOTELS & RESORTS, a Maryland real estate investment
trust (the "Lender"), the principal sum of THREE BILLION TWO HUNDRED EIGHTY-TWO
MILLION UNITED STATES DOLLARS ($3,282,000,000), or so much thereof as may have
been advanced to or for the benefit of the Borrower and remains unpaid from time
to time (the "Principal Balance") payable at such times, and in such amounts, as
are specified in the Loan Agreement (defined below). Capitalized terms used but
not otherwise defined herein shall have the meanings set forth in the Loan
Agreement.
The Borrower promises to pay, together with all fees and other
amounts due under the Loan Agreement, interest on the Principal Balance of this
Promissory Note ("Note") from the date made until such Principal Balance is paid
in full, at such interest rates, and payable at such times, as are specified in
the Loan Agreement.
Both principal and interest are payable in lawful money of the
United States of America to the Lender at 2231 East Camelback Road, Suite 410,
Phoenix, Arizona 85016, in immediately available funds, or to such other address
or bank account as the Lender shall direct.
This Note is the Note referred to in, and is entitled to the
benefits of, the Loan Agreement, dated as of the date hereof (said Agreement, as
it may be amended or otherwise modified from time to time, being the "Loan
Agreement"), among the Borrower and the Lender. The Loan Agreement, among other
things, (i) provides for the advance of the Loan in an aggregate amount not to
exceed at any time outstanding the United States dollar amount first above
mentioned, the indebtedness of the Borrower to the Lender resulting from such
Loan being evidenced by this Note, and (ii) contains provisions for acceleration
of the maturity of the Principal Balance of this Note upon the happening of
certain stated events and also for prepayments on account of the Principal
Balance hereof prior to the maturity hereof upon the terms and conditions
therein specified.
Demand, presentment, protest and notice of nonpayment and
protest are hereby waived by the Borrower.
<PAGE> 21
The Lender and the Borrower acknowledge and agree that all
rights of the Lender to receive any payments from the Borrower hereunder or
under any guarantees, mortgages, other types of security documents or otherwise
are and shall continue to be subject and subordinate in payment to the prior
payment in full, in cash, of all Senior Indebtedness (as defined in the
Subordination Agreement (as defined in the Loan Agreement)), to the extent, and
in the manner set forth in the Subordination Agreement. All of the terms,
covenants and conditions hereof are hereby and shall continue to be subordinate
to all of the terms, covenants and conditions of the Senior Indebtedness. The
foregoing shall apply, notwithstanding the availability of other collateral to
the Senior Creditors (as defined in the Subordination Agreement) or the actual
date and time of execution, delivery, recordation, filing or perfection of any
of the Senior Indebtedness, or the lien or priority of payment thereof, and in
any instance wherein the Senior Indebtedness or any claim for the Senior
Indebtedness is subordinated, avoided or disallowed, in whole or in part, under
Title 11 of the United States Code (the "Bankruptcy Code") or other applicable
federal or state law.
[Remainder of page intentionally left blank]
<PAGE> 22
This Note shall be governed by, and construed and interpreted
in accordance with, the law of the State of New York.
STARWOOD HOTELS & RESORTS
WORLDWIDE, INC., a Maryland corporation
By: /s/ Richard A. Smith
------------------------------
Name: Richard A. Smith
Title: Authorized Signatory
<PAGE> 1
Exhibit 10.66
LOAN AGREEMENT
between
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
and
STARWOOD HOTELS & RESORTS
------------------------------------
Dated as of February 23, 1998
------------------------------------
$100,000,000
<PAGE> 2
LOAN AGREEMENT, dated as of February 23, 1998, between
STARWOOD HOTELS & RESORTS WORLDWIDE, INC., a Maryland corporation (the
"Borrower"), and STARWOOD HOTELS & RESORTS, a Maryland real estate investment
trust (the "Lender").
W I T N E S S E T H :
WHEREAS, the Borrower and the Lender are among the parties to
that certain Agreement and Plan of Merger, dated as of October 19, 1997 (as
amended, supplemented or otherwise modified from time to time in accordance with
the terms thereof, the "Merger Agreement");
WHEREAS, in connection with the transactions contemplated by
the Merger Agreement and the Stock Purchase Agreement, the Lender has agreed to
advance the loan to the Borrower and, along with SLT Realty Limited Partnership,
a Delaware limited partnership (SLT"), to guaranty the repayment of any
indebtedness of the Borrower to third parties on the terms provided for herein.
NOW, THEREFORE, the parties hereto have agreed as follows:
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the meanings
herein specified unless the context otherwise requires. Defined terms in this
Agreement shall include in the singular number the plural and in the plural the
singular:
"Affiliate" means, to any Person, any Person which, directly
or indirectly, controls, is controlled by or is under common control with such
Person and includes each executive officer, director, trustee, limited liability
company manager or general partner of such Person, and each Person who is the
beneficial owner of 10% or more of any class of voting stock of such Person. For
the purposes of this definition, "control" means the possession of the power to
direct or cause the direction of management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Business Day" means a day of the year on which banks are not
required or authorized to close in New York City.
"Closing Date" means the date on which all conditions
precedent to the Loan set forth in Article IV shall have been satisfied and the
Loan is made.
<PAGE> 3
"Default" means any event which with the passing of time or
the giving of notice or both would become an Event of Default.
"Default Rate" has the meaning specified in Section 2.5(b).
"Event of Default" has the meaning specified in Article VII.
"Final Maturity Date" means February 23, 2005.
"Governmental Authority" means any federal, state, county or
municipal government, or political subdivision thereof, any governmental or
quasi-governmental agency, authority, board, bureau, commission, department,
instrumentality, or public body, or any court, administrative tribunal or public
utility.
"Indebtedness" of any Person means such Person's (a)
obligations for borrowed money, (b) obligations representing the deferred
purchase price of property or services (other than accounts payable arising in
the ordinary course of such Person's business payable on terms customary in the
trade), (c) obligations secured by liens or payable out of the proceeds or
production from property or assets now or hereafter owned or acquired by such
Person and (d) obligations which are evidenced by notes, acceptances or other
instruments.
"Interest Rate" means the rate of 8.5% per annum.
"Laws" means collectively, all federal, state and local laws,
statutes, codes, ordinances, orders, rules and regulations, including judicial
opinions or precedential authority in the applicable jurisdiction, and all
directions, requirements, orders and notices of violation of any governmental or
quasi-governmental agency, body or office having or asserting jurisdiction over
Borrower, the properties identified on Exhibit A attached hereto or both, as the
same may be amended, modified or supplemented from time to time.
"Loan" has the meaning specified in Section 2.1(b).
"Loan Documents" shall mean this Loan Agreement, the Note, the
Mortgage, the Subordination Agreement and any other documents, agreements or
instruments now or hereafter executed which evidence, secure or otherwise relate
to the Loan.
"Merger Agreement" has the meaning specified in the Recitals
to this Agreement.
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<PAGE> 4
"Mortgage" means the Deed of Trust, Security Agreement and
Financing Statement made by the Owner in favor of the Lender dated as of the
date hereof.
"Note" has the meaning specified in Section 2.1(a).
"Obligations" means the Loan and all other advances, debts,
liabilities, obligations, covenants and duties owing by the Borrower to the
Lender, any Affiliate of the Lender or any Indemnitee, of every type and
description, present or future, arising under this Agreement or the Note,
whether direct or indirect (including, without limitation, those acquired by
assignment), absolute or contingent, due or to become due, now existing or
hereafter arising and however acquired. The term "Obligations" includes, without
limitation, all interest, charges, expenses, fees, attorneys' fees and
disbursements and any other sum then payable by the Borrower under this
Agreement or the Note.
"Owner" means Harbor-Cal S.D.
"Person" means an individual, partnership, corporation
(including, without limitation, a business trust), limited liability company,
joint stock company, trust, unincorporated association, joint venture or other
entity, or a governmental authority.
"Principal Balance" means the outstanding principal balance of
the Note from time to time.
"Stock Purchase Agreement" means that certain Stock Purchase
Agreement dated as of the date hereof between the Borrower and the Lender.
"Subordination Agreement" means that certain Subordination and
Intercreditor Agreement dated as of the date hereof to which the Borrower and
the Lender are parties.
"Taxes" means any and all present or future taxes, levies,
imposts, deductions, charges or withholdings or any liabilities with respect
thereto including those arising after the date hereof as a result of the
adoption of or any change in any law, treaty, rule, regulation, guideline or
determination of a Governmental Authority or by any change in the interpretation
or application thereof by a Governmental Authority, but excluding such taxes as
are imposed on or measured by the Lender's income.
ARTICLE II
AMOUNT AND TERM OF THE LOAN
2.1. The Note; The Loan. (a) The Borrower's obligation to pay
the principal of, and interest on, the Loan shall be evidenced by a promissory
note, in the form attached hereto as Exhibit A, dated the date hereof and made
by the Borrower
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<PAGE> 5
payable to the order of the Lender in a stated principal amount equal to the
amount of the Loan (as the same may be amended, modified, supplemented, extended
or consolidated, the "Note").
(b) On the terms and subject to the conditions contained in
this Agreement, the Lender agrees to make to the Borrower a loan in the
principal amount of $100,000,000 (the "Loan") on the Closing Date.
2.2. No Additional Advance. The Borrower shall have no right
to any further advances or readvances under this Agreement after the funding of
the Loan on the Closing Date.
2.3. Repayment. The Borrower shall repay the entire Principal
Balance on the Final Maturity Date.
2.4. Prepayments. (a) The Borrower shall have no right to
prepay the Principal Balance other than as provided in this Section 2.4.
(b) The Borrower may, upon at least two (2) Business Days'
prior notice (which may be by telephone, provided that confirmation in writing
is received within one (1) Business Day after such telephonic notice) to the
Lender, stating the proposed date and aggregate principal amount of the
prepayment, prepay the Principal Balance in whole or ratably in part, without
premium or penalty, together with accrued interest to the date of such
prepayment on the principal amount prepaid. Upon the giving of such notice of
prepayment, the principal amount of the Loan specified to be prepaid shall
become due and payable on the date specified for such prepayment.
2.5. Interest. (a) The Borrower shall pay interest on the
Principal Balance from the date hereof until the Principal Balance and all
Obligations shall be paid in full, at the Interest Rate.
(b) Unless prohibited by the terms of the Subordination
Agreement, any overdue amount payable hereunder shall bear interest from the
date due, until the date paid in full, at a rate per annum (calculated for the
actual number of days elapsed on the basis of a 365-day year) equal to, on a
daily basis, 1% plus the Interest Rate (the "Default Rate"), provided, however,
that such interest rate shall in no event exceed the maximum interest rate which
the Borrower may by law pay.
2.6. Increased Costs. If due to (a) the introduction of or any
change in or in the interpretation of any law or regulation, (b) compliance by
the Lender with any law or regulation or with any guideline or request from any
central bank or other Governmental Authority (whether or not having the force of
law) or (c) payment by the Lender of Taxes, there shall be any increase in the
cost to the Lender of funding or maintaining the Loan, then the Borrower shall
from time to time, upon demand by the Lender, pay to the Lender
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<PAGE> 6
additional amounts sufficient to compensate the Lender for such increased cost.
A certificate as to the amount of such increased cost, submitted to the Borrower
by the Lender, shall be conclusive and binding for all purposes, absent manifest
error.
2.7. Payments and Computations. (a) The Borrower shall pay to
Lender at its address referred to opposite its signature to this Agreement not
later than 11:00 A.M. (New York City time) on the first (1st) day of each
calendar month after the date hereof, in immediately available funds without
set-off or counterclaim, all interest accrued under the Note during the
immediately prior calendar month; provided, however, in the event the Borrower
gives telephonic notice to the Lender by 11:00 AM (New York City time) on the
day when due that a payment has been made by wire transfer of immediately
available funds, such payment may be received by the Lender not later than 2:00
PM (New York City time) on the same day. Payment received by the Lender after
11:00 A.M. (New York City time) or after 2:00 P.M. (New York City time), if the
Borrower has given the Lender the notice required above, shall be deemed to be
received on the next Business Day.
(b) All computations of interest and fees shall be made by the
Lender on the basis of the actual number of days elapsed in a 365-day year.
(c) Whenever any payment hereunder or under the Note shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or fees, as the case
may be.
ARTICLE III
GUARANTIES
3.1. Guaranties. Subject to the terms and conditions set forth
in this Agreement and in the Subordination Agreement, the Lender hereby agrees
to issue and to cause SLT and certain Affiliates of the Lender and SLT to issue
for the account of the Borrower and certain of the Borrower's Affiliates one or
more guaranties of indebtedness of the Borrower and certain of the Borrower's
Affiliates other than this Loan, subject to the following provisions:
(a) Conditions. The obligation of the Lender and SLT to issue
a guaranty is subject to the satisfaction in full of the following conditions:
(i) the proposed guaranty must be permitted under the terms of
the Credit Agreement (as defined in the Subordination Agreement) and
comply with the terms and conditions of the Subordination Agreement;
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<PAGE> 7
(ii) the Borrower shall have executed and/or delivered to the
Lender and SLT such documents and materials as may be reasonably
required by the Lender and SLT in connection with the guaranty; and
(iii) the terms of the proposed guaranty shall be satisfactory
to the Lender and SLT in their sole discretion and in no event shall be
inconsistent with or put at risk the Lender's status as a real estate
investment trust.
(b) Issuance of Guaranty. (i) The Borrower shall give the
Lender and SLT written notice that it needs the Lender and SLT to issue a
guaranty not later than the twentieth (20th) Business Day preceding the
requested date for issuance thereof under this Agreement, or such shorter notice
as may be acceptable to the Lender and SLT. Such notice shall specify (A) the
amount that the guaranty requested is to cover, (B) the effective date (which
shall be a Business Day) of such guaranty, (C) the date or conditions upon which
such guaranty is to terminate (which shall be no later than the Business Day
immediately preceding the scheduled Final Maturity Date), (D) the Person(s) for
whose benefit such guaranty is to be issued, and (E) other relevant terms of
such guaranty.
(c) Reimbursement Obligations:
(A) subject to the terms of the Credit Agreement and the
Subordination Agreement and to the same limits on subrogation and
subordination as provided in the relevant guaranty, the Borrower shall
reimburse the Lender and SLT, as applicable, for any and all amounts
paid and expenses incurred under or in connection with any guaranty
(the "Reimbursement Obligations") no later than the date (the
"Reimbursement Date") which is three (3) Business Days after the
Borrower receives written notice from the Lender and SLT that payment
has been made under a guaranty by the Lender and SLT; and
(B) all Reimbursement Obligations with respect to any guaranty
shall bear interest at the Interest Rate from the date of the relevant
payment under such guaranty until the Reimbursement Date. If any
Reimbursement Obligations are not paid by the Reimbursement Date, the
outstanding amounts shall bear interest at the Default Rate from the
Reimbursement Date until the date paid.
(C) No action taken or omitted in good faith by the Lender or
SLT under or in connection with any guaranty shall put such party under any
resulting liability to the Borrower.
(d) Payment of Reimbursement Obligations. Subject to the terms
of the Credit Agreement and the Subordination Agreement, the Borrower
unconditionally agrees to pay to each of the Lender and SLT the amount of all
Reimbursement Obligations, interest and other amounts payable to the Lender and
SLT under or in connection with the guaranties when such amounts are due and
payable, irrespective of any claim, setoff, defense or other right
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<PAGE> 8
which the Borrower may have at any time against the Lender, SLT or any other
Person.
(e) Charges. Commencing April 1, 1998, the Borrower shall pay
to the SLT on the first day of each calendar quarter, an amount equal to
one-quarter (1/4) of one percent (0.25%) per annum, payable quarterly on the
average amount guaranteed by the Lender and SLT for the immediately prior
calendar quarter, as consideration for the issuance, administration, amendment
and payment or cancellation of any guaranties. SLT shall pay the Lender an
equitable portion of such amount.
(f) Indemnification; Exoneration. (i) In addition to all other
amounts payable to the Lender and SLT, the Borrower hereby agrees to defend,
indemnify, and save each of the Lender and SLT harmless from and against any and
all claims, demands, liabilities, penalties, damages, losses (other than loss of
profits), costs, charges and expenses (including reasonable attorneys' fees)
which the Lender or SLT may incur or be subject to as a consequence, direct or
indirect, of (A) the issuance of any guaranty other than as a result of the
gross negligence or willful misconduct of the Lender or SLT, as determined by a
court of competent jurisdiction, or (B) the failure of the Lender or SLT to
honor a payment request under any guaranty as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
government or Governmental Authority.
(g) Acts or Omissions. The Borrower assumes (and not the
Lender or SLT) all risks of the acts and omissions of, or misuse of guaranties
by, the respective beneficiaries of the guaranties. In furtherance and not in
limitation of the foregoing, the Lender and SLT shall not be responsible for:
(A) the form, validity, legality, sufficiency, accuracy, genuineness or legal
effect of any document submitted by any party in connection with the issuance of
or payment under the guaranties, even if it should in fact prove to be in any or
all respects invalid, insufficient, inaccurate, fraudulent or forged; (B) the
validity, legality or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a guaranty or the rights or benefits thereunder
or proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason; (C) failure of the beneficiary of a guaranty to duly
comply with conditions required in order to receive a payment under such
guaranty; (D) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether
or not they be in cipher; (E) errors in interpretation of technical terms; (F)
any loss or delay in the transmission or otherwise of any document required in
order to make a request for payment under any guaranty or of the proceeds
thereof; (G) the misapplication by the beneficiary of a guaranty of the proceeds
of any payment under such guaranty; and (H) any consequences arising from causes
beyond the control of the Lender or SLT.
3.2 Obligations Several. The obligations of each of the Lender
and SLT under this Article III are several and not joint, and neither party
shall be responsible for the obligation to issue guaranties of the other party.
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3.3 Assignment by Lender. The obligations of the Lender to
issue guaranties pursuant to this Article III shall continue to be binding on
Starwood Hotels & Resorts, as the initial Lender hereunder, after any assignment
of the Loan to SLT.
ARTICLE IV
CONDITIONS PRECEDENT
The obligation of the Lender to make the Loan on the Closing
Date shall be subject to the satisfaction of all of the following conditions
precedent any of which may be waived by Lender at any time either orally or in
writing:
(a) Documents. The Lender shall have received this Agreement,
the Note and the Mortgage duly executed by the Borrower or the Owner, as
applicable, and in form and substance satisfactory to the Lender, together with
such other documents, certificates and opinions as shall be reasonably requested
by the Lender.
(b) Merger. The conditions set forth in Article VI of the
Merger Agreement shall have been satisfied or waived, and the Merger (as defined
in the Merger Agreement) shall have taken place.
(c) No Default. No Default or Event of Default shall have
occurred and be continuing or would result from the making of the Loan on the
Closing Date.
(d) Representations and Warranties. The representations and
warranties described in Article V shall be true and correct on and as of the
Closing Date.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and
to make the Loan provided for herein, the Borrower hereby represents and
warrants as follows:
(a) Borrower is a corporation duly formed, validly existing
and in good standing under the laws of the State of Maryland. Borrower is
qualified and authorized to do business in the State of Maryland.
(b) Borrower has full power and authority to perform the
obligations and carry out the duties imposed upon Borrower by this Agreement and
the Note, and Borrower has taken all action necessary to carry out Borrower's
obligations and duties in connection with the Loan.
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(c) No aspect of the Loan transaction violates or will violate
any usury laws or laws of the State of Maryland, regarding the validity of
agreements to pay interest in effect on the date hereof.
(d) Borrower is not a "foreign person" within the meaning of
Section 1445 or 7701 of the Internal Revenue Code.
(e) Borrower has delivered to Lender a true, correct and
complete copy of Borrower's organizational documents and the same are in full
force and effect. To the best of Borrower's knowledge, there are no defaults by
any party under Borrower's organizational documents, nor do circumstances exist
which, with the passage of time, the giving of notice, or both, would constitute
a default thereunder.
ARTICLE VI
COVENANTS
The Borrower hereby covenants and agrees that for so long as
this Agreement is in effect and the Note is outstanding and until the Loan,
together with interest and all other Obligations incurred hereunder, are paid in
full, unless otherwise permitted by Lender:
6.1 Use of Proceeds. The proceeds of the Loan shall be used to
purchase shares of ITT Corporation, a Nevada corporation, from the Lender
pursuant to the Stock Purchase Agreement and shares of beneficial interest of
Lender.
6.2 Compliance with Merger Agreement. The Borrower shall
comply in all respects with the Merger Agreement and shall not take any action
to terminate the Merger Agreement (other than in accordance with Article VII
thereof) without the prior written consent of the Lender.
6.3 Negative Covenants. Borrower shall not, on or after the
date hereof, without the prior written consent of Lender:
(a) Materially alter the character of its business from that
conducted on the date hereof;
(b) Wind up, liquidate or dissolve its affairs;
(c) Take any action or omit to take any action that would
cause it not to be in good standing in the State of Maryland;
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<PAGE> 11
(d) Amend, modify or change in any manner materially adverse
to the interests of the Lender the certificate of incorporation (including,
without limitation, by the filing of any certificate of designation) or by-laws
of the Borrower;
ARTICLE VII
EVENTS OF DEFAULT
Upon the occurrence and continuation of any of the following
specified events (each, an "Event of Default"):
7.1 Payments. The Borrower shall (i) default in the payment
when due of any Principal Balance or (ii) default, and such default shall
continue for ten (10) or more Business Days after written notice from Lender, in
the payment when due of any interest on the Loan or any fees or any other
Obligations owing hereunder or under the Note; or
7.2 Covenants. The Borrower shall default in the due
performance or observance by it of any term, covenant or agreement (other than
those referred to in Section 7.1) contained in this Agreement or one of the
Owners shall default in the due performance or observance by it of any term,
covenant or agreement contained in the Mortgages and such default shall continue
beyond the period of time specified by Lender in its written notice of default,
which period shall be no less than twenty (20) Business Days; or
7.3 Default Under Other Agreements. The Borrower shall (i)
default in any payment with respect to any Indebtedness (other than the
Obligations) beyond the period of grace, if any, applicable thereto or (ii)
default in the observance or performance of any agreement or condition relating
to any such Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or holders of such Indebtedness (or a trustee or agent on
behalf of such holder or holders) to cause any such Indebtedness to become due
prior to its stated maturity; or (b) any such Indebtedness shall be declared to
be due and payable (other than to the extent the Borrower promptly denies in
writing to the applicable creditor the validity of such declaration and is
contesting same in good faith), or required to be prepaid other than by a
regularly scheduled required prepayment, prior to the stated maturity thereof,
and such default shall continue beyond
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the period of time specified by Lender in its written notice of default, which
period shall be no less than twenty (20) Business Days. Borrower shall have the
right to cure any default under this Section 7.3 by repaying or refinancing the
Indebtedness with respect to which a default has occurred.
7.4 Bankruptcy, etc. The Borrower shall commence a voluntary
case concerning itself under Title 11 of the United States Code entitled
"Bankruptcy", as now or here after in effect, or any successor thereto (the
"Bankruptcy Code"); or an involuntary case is commenced against the Borrower and
the petition is not controverted within 20 days, or is not dismissed within 60
days, after commencement of the case; or a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or substantially all
of the property of the Borrower, or the Borrower commences any other proceeding
under any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Borrower, or there is
commenced against the Borrower any such proceeding which is not controverted
within 20 days or remains undismissed for a period of 60 days; or the Borrower
is adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the Borrower suffers any
appointment of any custodian or the like for it or any substantial part of its
property to continue undischarged or unstayed for a period of 60 days; or the
Borrower makes a general assignment for the benefit of creditors; or any cor-
porate action is taken by the Borrower for the purpose of effecting any of the
foregoing;
then, and in any such event, and at any time thereafter, if
any Event of Default shall then be continuing, the Lender may, at its sole
discretion, but subject to (and only to the extent permitted by) the
Subordination Agreement, by written notice to the Borrower, take any or all of
the following actions, without prejudice to the rights of the Lender to enforce
its claims against the Borrower, except as otherwise specifically provided for
in this Agreement: (i) declare the Lender's obligation to advance the Loan or
any portion thereof terminated; and (ii) declare the principal of and any
accrued interest in respect of the Loan and all Obligations to be, whereupon the
same shall become, forthwith due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower.
ARTICLE VIII
MISCELLANEOUS
8.1. Payment of Expenses, etc. The Borrower agrees to: (i) pay
all reasonable out-of-pocket costs and expenses of the Lender in connection with
the
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<PAGE> 13
administration and enforcement of this Agreement and the Note and any
amendment, waiver or consent relating thereto (including, without limitation,
the reasonable fees and disbursements of counsel for the Lender), provided that
each of the parties hereto shall pay its own costs and expenses relating to the
negotiation, preparation and delivery of this Agreement and the Note; and (ii)
indemnify the Lender, its Affiliates and their respective officers, directors,
employees, representatives and agents from and hold each of them harmless
against any and all losses, liabilities, claims, damages or expenses incurred
by any of them as a result of, or arising out of, or in any way related to, or
by reason of, an investigation, litigation or other proceeding (whether or not
the Lender is a party thereto) related to the entering into and/or performance
of this Agreement or the Note or the use of the proceeds of the Loan hereunder.
8.2. Notices. Except as otherwise expressly provided herein,
all notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier, facsimile or cable communication) and
mailed, telegraphed, telexed, telecopied, faxed, cabled or delivered at the
address specified opposite its signature below or at such other address as shall
be designated by any party in a written notice to the other party hereto. All
such notices and communications shall be mailed, telegraphed, telexed,
telecopied, or cabled or sent by overnight courier, and shall be effective when
received.
8.3. Benefit of Agreement. This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto, provided that the Borrower may not assign or
transfer any of its rights or obligations hereunder other than in accordance
with the Transaction Agreement.
8.4. No Waiver; Remedies Cumulative. No failure or delay on
the part of the Lender in exercising any right, power or privilege hereunder and
no course of dealing between the Borrower and the Lender shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. The rights and
remedies herein expressly provided are cumulative and not exclusive of any
rights or remedies which the Lender would otherwise have. No notice to or demand
on the Borrower in any case shall entitle the Borrower to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
rights of the Lender to any other or further action in any circumstances without
notice or demand.
8.5. Governing Law; Submission to Jurisdiction; Venue; Waiver
of Jury Trial. (a) This Agreement and the Note and the rights and obligations of
the parties hereunder and thereunder shall be construed in accordance with and
be governed by the law of the State of New York, in accordance with the
provisions of New York State
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<PAGE> 14
General Obligations Law Section 5-1401. The parties hereto irrevocably submit to
the jurisdiction of the courts of the State of New York and the Federal courts
of the United States of America located in the State of New York solely in
respect of the interpretation and enforcement of the provisions of this
Agreement and the Note, and in respect of the transactions contemplated hereby,
and hereby waive, and agree not to assert, as a defense in any action, suit or
proceeding for the interpretation or enforcement hereof or of any such document,
that it is not subject thereto or that such action, suit or proceeding may not
be brought or is not maintainable in said courts or that the venue thereof may
not be appropriate or that this Agreement or the Note may not be enforced in or
by such courts, and the parties hereto irrevocably agree that all claims with
respect to such action or proceeding shall be heard and determined in such a New
York State or Federal court. The parties hereby consent to and grant any such
court jurisdiction over the person of such parties and over the subject matter
of such dispute and agree that mailing of process or other papers in connection
with any such action or proceeding in the manner provided in Section 8.2 or in
such other manner as may be permitted by law shall be valid and sufficient
service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND
DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (i) 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, (ii) EACH
PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 7.5.
8.6. Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument.
8.7. Headings Descriptive. The headings of the several
sections and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.
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<PAGE> 15
8.8. Amendment or Waiver. Neither this Agreement nor the Note
nor any terms hereof or thereof may be changed, waived, discharged or terminated
unless such change, waiver, discharge or termination is in writing signed by the
Borrower and the Lender.
8.9. Survival. All indemnities set forth herein shall survive
the execution and delivery of this Agreement and the making and repayment of the
Loan.
8.10 Recourse to Trust. The Borrower acknowledges and agrees
that the name "Starwood Hotels & Resorts" is a designation of the Lender 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 the same has
been or may be amended from time to time thereafter, and that the Borrower shall
look solely to the Lender's assets for the enforcement of any claims against the
Lender, as the trustees, officers, agents and security holders of the Lender
assume no personal liability for obligations entered into on behalf of the
Lender, and their respective individual assets shall not be subject to the
claims of any person relating to such obligations. The foregoing shall govern
all direct and indirect obligations of the Lender under this Agreement and the
Note.
8.11 Subordination. The Lender and the Borrower acknowledge
and agree that all rights of the Lender to receive any payments from the
Borrower hereunder or under any guarantees, mortgages, other types of security
documents or otherwise are and shall continue to be subject and subordinate in
payment to the prior payment in full, in cash, of all Senior Indebtedness (as
defined in the Subordination Agreement), to the extent, and in the manner set
forth in the Subordination Agreement. All of the terms, covenants and conditions
hereof are hereby and shall continue to be subordinate to all of the terms,
covenants and conditions of the Senior Indebtedness. The foregoing shall apply,
notwithstanding the availability of other collateral to the Senior Creditors (as
defined in the Subordination Agreement) or the actual date and time of
execution, delivery, recordation, filing or perfection of any of the Senior
Indebtedness, or the lien or priority of payment thereof, and in any instance
wherein the Senior Indebtedness or any claim for the Senior Indebtedness is
subordinated, avoided or disallowed, in whole or in part, under Title 11 of the
United States Code (the "Bankruptcy Code") or other applicable federal or state
law.
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<PAGE> 16
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.
BORROWER:
Address: STARWOOD HOTELS & RESORTS
WORLDWIDE, INC., a Maryland corporation
Starwood Hotels & Resorts
Worldwide, Inc.
2231 East Camelback Road, Ste. 400 By: /s/ Richard A. Smith
Phoenix, Arizona 85016 ---------------------------
Attention: Alan M. Schnaid Name: Richard A. Smith
Fax: (602)852-0984 Title: Authorized Signatory
Copies to:
Sherwin Samuels, Esq.
Sidley & Austin
555 West Fifth Street
Los Angeles, California 90013
Fax: (213) 896-6600
LENDER:
Address: STARWOOD HOTELS & RESORTS, a Maryland
real estate investment trust
Starwood Hotels & Resorts
2231 East Camelback Road, Ste. 410
Phoenix, Arizona 85016
Attention: Ronald C. Brown By: /s/ Ronald C. Brown
Fax: (602) 852-3379 ---------------------------
Name: Ronald C. Brown
Copies to: Title: Senior Vice President
Sherwin Samuels, Esq.
Sidley & Austin
555 West Fifth Street
Los Angeles, California 90013
Fax: (213) 896-6600
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<PAGE> 17
EXHIBIT A
FORM OF NOTE
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<PAGE> 18
PROMISSORY NOTE
U.S. $100,000,000 Dated: February 23, 1998
FOR VALUE RECEIVED, the undersigned, STARWOOD HOTELS & RESORTS
WORLDWIDE, INC., a Maryland corporation (the "Borrower"), HEREBY PROMISES TO PAY
to the order of STARWOOD HOTELS & RESORTS, a Maryland real estate investment
trust (the "Lender"), the principal sum of ONE HUNDRED MILLION UNITED STATES
DOLLARS ($100,000,000), payable at such times, and in such amounts, as are
specified in the Loan Agreement (defined below). Capitalized terms used but not
otherwise defined herein shall have the meanings set forth in the Loan
Agreement.
The Borrower promises to pay, together with all fees and other
amounts due under the Loan Agreement, interest on the unpaid principal amount of
this Promissory Note ("Note") from the date made until such principal amount is
paid in full, at such interest rates, and payable at such times, as are
specified in the Loan Agreement.
Both principal and interest are payable in lawful money of the
United States of America to the Lender at 2231 East Camelback Road, Suite 410,
Phoenix, Arizona 85016, in immediately available funds, or to such other address
or bank account as the Lender shall direct.
This Note is the Note referred to in, and is entitled to the
benefits of, the Loan Agreement, dated as of the date hereof (said Agreement, as
it may be amended or otherwise modified from time to time, being the "Loan
Agreement"), among the Borrower and the Lender. The Loan Agreement, among other
things, (i) provides for the advance of the Loan in an aggregate amount not to
exceed at any time outstanding the United States dollar amount first above
mentioned, the indebtedness of the Borrower to the Lender resulting from such
Loan being evidenced by this Note, and (ii) contains provisions for acceleration
of the maturity of the unpaid principal amount of this Note upon the happening
of certain stated events and also for prepayments on account of the principal
hereof prior to the maturity hereof upon the terms and conditions therein
specified.
Demand, presentment, protest and notice of nonpayment and
protest are hereby waived by the Borrower.
<PAGE> 19
The Lender and the Borrower acknowledge and agree that all
rights of the Lender to receive any payments from the Borrower hereunder or
under any guarantees, mortgages, other types of security documents or otherwise
are and shall continue to be subject and subordinate in payment to the prior
payment in full, in cash, of all Senior Indebtedness (as defined in the
Subordination Agreement (as defined in the Loan Agreement)), to the extent, and
in the manner set forth in the Subordination Agreement. All of the terms,
covenants and conditions hereof are hereby and shall continue to be subordinate
to all of the terms, covenants and conditions of the Senior Indebtedness. The
foregoing shall apply, notwithstanding the availability of other collateral to
the Senior Creditors (as defined in the Subordination Agreement) or the actual
date and time of execution, delivery, recordation, filing or perfection of any
of the Senior Indebtedness, or the lien or priority of payment thereof, and in
any instance wherein the Senior Indebtedness or any claim for the Senior
Indebtedness is subordinated, avoided or disallowed, in whole or in part, under
Title 11 of the United States Code (the "Bankruptcy Code") or other applicable
federal or state law.
[Remainder of page intentionally left blank]
<PAGE> 20
This Note shall be governed by, and construed and interpreted
in accordance with, the law of the State of New York.
STARWOOD HOTELS & RESORTS
WORLDWIDE, INC., a Maryland corporation
By: /s/ Richard A. Smith
--------------------------------
Name: Richard A. Smith
Title: Authorized Signatory
<PAGE> 1
Exhibit 10.67
LOAN AGREEMENT
between
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
and
STARWOOD HOTELS & RESORTS
------------------------------------
Dated as of February 23, 1998
------------------------------------
$50,000,000
<PAGE> 2
LOAN AGREEMENT, dated as of February 23, 1998, between STARWOOD
HOTELS & RESORTS WORLDWIDE, INC., a Maryland corporation (the "Borrower"), and
STARWOOD HOTELS & RESORTS, a Maryland real estate investment trust (the
"Lender").
W I T N E S E T H :
WHEREAS, the Borrower and the Lender are among the parties to that
certain Agreement and Plan of Merger, dated as of October 19, 1997 (as amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof, the "Merger Agreement");
WHEREAS, in connection with the transactions contemplated by the
Merger Agreement and the Stock Purchase Agreement, the Lender has agreed to
advance the loan to the Borrower and, along with SLT Realty Limited Partnership,
a Delaware limited partnership (SLT"), to guaranty the repayment of any
indebtedness of the Borrower to third parties on the terms provided for herein.
NOW, THEREFORE, the parties hereto have agreed as follows:
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the meanings herein
specified unless the context otherwise requires. Defined terms in this Agreement
shall include in the singular number the plural and in the plural the singular:
"Affiliate" means, to any Person, any Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person and includes each executive officer, director, trustee, limited liability
company manager or general partner of such Person, and each Person who is the
beneficial owner of 10% or more of any class of voting stock of such Person. For
the purposes of this definition, "control" means the possession of the power to
direct or cause the direction of management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Business Day" means a day of the year on which banks are not
required or authorized to close in New York City.
"Closing Date" means the date on which all conditions precedent to
the Loan set forth in Article IV shall have been satisfied and the Loan is made.
<PAGE> 3
"Default" means any event which with the passing of time or the
giving of notice or both would become an Event of Default.
"Default Rate" has the meaning specified in Section 2.5(b).
"Event of Default" has the meaning specified in Article VII.
"Final Maturity Date" means February 23, 2005.
"Governmental Authority" means any federal, state, county or
municipal government, or political subdivision thereof, any governmental or
quasi-governmental agency, authority, board, bureau, commission, department,
instrumentality, or public body, or any court, administrative tribunal or public
utility.
"Indebtedness" of any Person means such Person's (a) obligations for
borrowed money, (b) obligations representing the deferred purchase price of
property or services (other than accounts payable arising in the ordinary course
of such Person's business payable on terms customary in the trade), (c)
obligations secured by liens or payable out of the proceeds or production from
property or assets now or hereafter owned or acquired by such Person and (d)
obligations which are evidenced by notes, acceptances or other instruments.
"Interest Rate" means the rate of 8.5% per annum.
"Laws" means collectively, all federal, state and local laws,
statutes, codes, ordinances, orders, rules and regulations, including judicial
opinions or precedential authority in the applicable jurisdiction, and all
directions, requirements, orders and notices of violation of any governmental or
quasi-governmental agency, body or office having or asserting jurisdiction over
Borrower, the properties identified on Exhibit A attached hereto or both, as the
same may be amended, modified or supplemented from time to time.
"Loan" has the meaning specified in Section 2.1(b).
"Loan Documents" shall mean this Loan Agreement, the Note, the
Mortgage, the Subordination Agreement and any other documents, agreements or
instruments now or hereafter executed which evidence, secure or otherwise relate
to the Loan.
"Merger Agreement" has the meaning specified in the Recitals to this
Agreement.
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<PAGE> 4
"Mortgage" means the Deed of Trust, Security Agreement and Financing
Statement made by the Owner in favor of the Lender dated as of the date hereof.
"Note" has the meaning specified in Section 2.1(a).
"Obligations" means the Loan and all other advances, debts,
liabilities, obligations, covenants and duties owing by the Borrower to the
Lender, any Affiliate of the Lender or any Indemnitee, of every type and
description, present or future, arising under this Agreement or the Note,
whether direct or indirect (including, without limitation, those acquired by
assignment), absolute or contingent, due or to become due, now existing or
hereafter arising and however acquired. The term "Obligations" includes, without
limitation, all interest, charges, expenses, fees, attorneys' fees and
disbursements and any other sum then payable by the Borrower under this
Agreement or the Note.
"Owner" means Harbor-Cal S.D.
"Person" means an individual, partnership, corporation (including,
without limitation, a business trust), limited liability company, joint stock
company, trust, unincorporated association, joint venture or other entity, or a
governmental authority.
"Principal Balance" means the outstanding principal balance of the
Note from time to time.
"Stock Purchase Agreement" means that certain Stock Purchase
Agreement dated as of the date hereof between the Borrower and the Lender.
"Subordination Agreement" means that certain Subordination and
Intercreditor Agreement dated as of the date hereof to which the Borrower and
the Lender are parties.
"Taxes" means any and all present or future taxes, levies, imposts,
deductions, charges or withholdings or any liabilities with respect thereto
including those arising after the date hereof as a result of the adoption of or
any change in any law, treaty, rule, regulation, guideline or determination of a
Governmental Authority or by any change in the interpretation or application
thereof by a Governmental Authority, but excluding such taxes as are imposed on
or measured by the Lender's income.
ARTICLE II
AMOUNT AND TERM OF THE LOAN
2.1. The Note; The Loan. (a) The Borrower's obligation to pay the
principal of, and interest on, the Loan shall be evidenced by a promissory note,
in the form attached hereto as Exhibit A, dated the date hereof and made by the
Borrower
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<PAGE> 5
payable to the order of the Lender in a stated principal amount equal
to the amount of the Loan (as the same may be amended, modified, supplemented,
extended or consolidated, the "Note").
(b) On the terms and subject to the conditions contained in this
Agreement, the Lender agrees to make to the Borrower a loan in the principal
amount of $50,000,000 (the "Loan") on the Closing Date.
2.2. No Additional Advance. The Borrower shall have no right to any
further advances or readvances under this Agreement after the funding of the
Loan on the Closing Date.
2.3. Repayment. The Borrower shall repay the entire Principal
Balance on the Final Maturity Date.
2.4. Prepayments. (a) The Borrower shall have no right to prepay the
Principal Balance other than as provided in this Section 2.4.
(b) The Borrower may, upon at least two (2) Business Days' prior
notice (which may be by telephone, provided that confirmation in writing is
received within one (1) Business Day after such telephonic notice) to the
Lender, stating the proposed date and aggregate principal amount of the
prepayment, prepay the Principal Balance in whole or ratably in part, without
premium or penalty, together with accrued interest to the date of such
prepayment on the principal amount prepaid. Upon the giving of such notice of
prepayment, the principal amount of the Loan specified to be prepaid shall
become due and payable on the date specified for such prepayment.
2.5. Interest. (a) The Borrower shall pay interest on the Principal
Balance from the date hereof until the Principal Balance and all Obligations
shall be paid in full, at the Interest Rate.
(b) Unless prohibited by the terms of the Subordination Agreement,
any overdue amount payable hereunder shall bear interest from the date due,
until the date paid in full, at a rate per annum (calculated for the actual
number of days elapsed on the basis of a 365-day year) equal to, on a daily
basis, 1% plus the Interest Rate (the "Default Rate"), provided, however, that
such interest rate shall in no event exceed the maximum interest rate which the
Borrower may by law pay.
2.6. Increased Costs. If due to (a) the introduction of or any
change in or in the interpretation of any law or regulation, (b) compliance by
the Lender with any law or regulation or with any guideline or request from any
central bank or other Governmental Authority (whether or not having the force of
law) or (c) payment by the Lender of Taxes, there shall be any increase in the
cost to the Lender of funding or maintaining the Loan, then the Borrower shall
from time to time, upon demand by the Lender, pay to the Lender
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<PAGE> 6
additional amounts sufficient to compensate the Lender for such increased cost.
A certificate as to the amount of such increased cost, submitted to the Borrower
by the Lender, shall be conclusive and binding for all purposes, absent manifest
error.
2.7. Payments and Computations. (a) The Borrower shall pay to Lender
at its address referred to opposite its signature to this Agreement not later
than 11:00 A.M. (New York City time) on the first (1st) day of each calendar
month after the date hereof, in immediately available funds without set-off or
counterclaim, all interest accrued under the Note during the immediately prior
calendar month; provided, however, in the event the Borrower gives telephonic
notice to the Lender by 11:00 AM (New York City time) on the day when due that a
payment has been made by wire transfer of immediately available funds, such
payment may be received by the Lender not later than 2:00 PM (New York City
time) on the same day. Payment received by the Lender after 11:00 A.M. (New York
City time) or after 2:00 P.M. (New York City time), if the Borrower has given
the Lender the notice required above, shall be deemed to be received on the next
Business Day.
(b) All computations of interest and fees shall be made by the
Lender on the basis of the actual number of days elapsed in a 365-day year.
(c) Whenever any payment hereunder or under the Note shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or fees, as the case may be.
ARTICLE III
GUARANTIES
3.1. Guaranties. Subject to the terms and conditions set forth in
this Agreement and in the Subordination Agreement, the Lender hereby agrees to
issue and to cause SLT and certain Affiliates of the Lender and SLT to issue for
the account of the Borrower and certain of the Borrower's Affiliates one or more
guaranties of indebtedness of the Borrower and certain of the Borrower's
Affiliates other than this Loan, subject to the following provisions:
(a) Conditions. The obligation of the Lender and SLT to issue a
guaranty is subject to the satisfaction in full of the following conditions:
(i) the proposed guaranty must be permitted under the terms of the
Credit Agreement (as defined in the Subordination Agreement) and comply
with the terms and conditions of the Subordination Agreement;
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<PAGE> 7
(ii) the Borrower shall have executed and/or delivered to the Lender
and SLT such documents and materials as may be reasonably required by the
Lender and SLT in connection with the guaranty; and
(iii) the terms of the proposed guaranty shall be satisfactory to
the Lender and SLT in their sole discretion and in no event shall be
inconsistent with or put at risk the Lender's status as a real estate
investment trust.
6
(b) Issuance of Guaranty. (i) The Borrower shall give the Lender and
SLT written notice that it needs the Lender and SLT to issue a guaranty not
later than the twentieth (20th) Business Day preceding the requested date for
issuance thereof under this Agreement, or such shorter notice as may be
acceptable to the Lender and SLT. Such notice shall specify (A) the amount that
the guaranty requested is to cover, (B) the effective date (which shall be a
Business Day) of such guaranty, (C) the date or conditions upon which such
guaranty is to terminate (which shall be no later than the Business Day
immediately preceding the scheduled Final Maturity Date), (D) the Person(s) for
whose benefit such guaranty is to be issued, and (E) other relevant terms of
such guaranty.
(c) Reimbursement Obligations:
(A) subject to the terms of the Credit Agreement and the
Subordination Agreement and to the same limits on subrogation and
subordination as provided in the relevant guaranty, the Borrower shall
reimburse the Lender and SLT, as applicable, for any and all amounts paid
and expenses incurred under or in connection with any guaranty (the
"Reimbursement Obligations") no later than the date (the "Reimbursement
Date") which is three (3) Business Days after the Borrower receives
written notice from the Lender and SLT that payment has been made under a
guaranty by the Lender and SLT; and
(B) all Reimbursement Obligations with respect to any guaranty shall
bear interest at the Interest Rate from the date of the relevant payment
under such guaranty until the Reimbursement Date. If any Reimbursement
Obligations are not paid by the Reimbursement Date, the outstanding
amounts shall bear interest at the Default Rate from the Reimbursement
Date until the date paid.
(C) No action taken or omitted in good faith by the Lender or SLT
under or in connection with any guaranty shall put such party under any
resulting liability to the Borrower.
(d) Payment of Reimbursement Obligations. Subject to the terms of
the Credit Agreement and the Subordination Agreement, the Borrower
unconditionally agrees to pay to each of the Lender and SLT the amount of all
Reimbursement Obligations, interest and other amounts payable to the Lender and
SLT under or in connection with the guaranties when
-7-
<PAGE> 8
such amounts are due and payable, irrespective of any claim, setoff, defense or
other right which the Borrower may have at any time against the Lender, SLT or
any other Person.
(e) Charges. Commencing April 1, 1998, the Borrower shall pay to the
SLT on the first day of each calendar quarter, an amount equal to one-quarter
(1/4) of one percent (0.25%) per annum, payable quarterly on the average amount
guaranteed by the Lender and SLT for the immediately prior calendar quarter, as
consideration for the issuance, administration, amendment and payment or
cancellation of any guaranties. SLT shall pay the Lender an equitable portion of
such amount.
(f) Indemnification; Exoneration. (i) In addition to all other
amounts payable to the Lender and SLT, the Borrower hereby agrees to defend,
indemnify, and save each of the Lender and SLT harmless from and against any and
all claims, demands, liabilities, penalties, damages, losses (other than loss of
profits), costs, charges and expenses (including reasonable attorneys' fees)
which the Lender or SLT may incur or be subject to as a consequence, direct or
indirect, of (A) the issuance of any guaranty other than as a result of the
gross negligence or willful misconduct of the Lender or SLT, as determined by a
court of competent jurisdiction, or (B) the failure of the Lender or SLT to
honor a payment request under any guaranty as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure or de facto
government or Governmental Authority.
(g) Acts or Omissions. The Borrower assumes (and not the Lender or
SLT) all risks of the acts and omissions of, or misuse of guaranties by, the
respective beneficiaries of the guaranties. In furtherance and not in limitation
of the foregoing, the Lender and SLT shall not be responsible for: (A) the form,
validity, legality, sufficiency, accuracy, genuineness or legal effect of any
document submitted by any party in connection with the issuance of or payment
under the guaranties, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (B) the
validity, legality or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a guaranty or the rights or benefits thereunder
or proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason; (C) failure of the beneficiary of a guaranty to duly
comply with conditions required in order to receive a payment under such
guaranty; (D) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether
or not they be in cipher; (E) errors in interpretation of technical terms; (F)
any loss or delay in the transmission or otherwise of any document required in
order to make a request for payment under any guaranty or of the proceeds
thereof; (G) the misapplication by the beneficiary of a guaranty of the proceeds
of any payment under such guaranty; and (H) any consequences arising from causes
beyond the control of the Lender or SLT.
3.2 Obligations Several. The obligations of each of the Lender and
SLT under this Article III are several and not joint, and neither party shall be
responsible for the obligation to issue guaranties of the other party.
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3.3 Assignment by Lender. The obligations of the Lender to issue
guaranties pursuant to this Article III shall continue to be binding on Starwood
Hotels & Resorts, as the initial Lender hereunder, after any assignment of the
Loan to SLT.
ARTICLE IV
CONDITIONS PRECEDENT
The obligation of the Lender to make the Loan on the Closing Date
shall be subject to the satisfaction of all of the following conditions
precedent any of which may be waived by Lender at any time either orally or in
writing:
(a) Documents. The Lender shall have received this Agreement, the
Note and the Mortgage duly executed by the Borrower or the Owner, as applicable,
and in form and substance satisfactory to the Lender, together with such other
documents, certificates and opinions as shall be reasonably requested by the
Lender.
(b) Merger. The conditions set forth in Article VI of the Merger
Agreement shall have been satisfied or waived, and the Merger (as defined in the
Merger Agreement) shall have taken place.
(c) No Default. No Default or Event of Default shall have occurred
and be continuing or would result from the making of the Loan on the Closing
Date.
(d) Representations and Warranties. The representations and
warranties described in Article V shall be true and correct on and as of the
Closing Date.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and to
make the Loan provided for herein, the Borrower hereby represents and warrants
as follows:
(a) Borrower is a corporation duly formed, validly existing and in
good standing under the laws of the State of Maryland. Borrower is qualified and
authorized to do business in the State of Maryland.
(b) Borrower has full power and authority to perform the obligations
and carry out the duties imposed upon Borrower by this Agreement and the Note,
and Borrower has taken
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<PAGE> 10
all action necessary to carry out Borrower's obligations and duties in
connection with the Loan.
(c) No aspect of the Loan transaction violates or will violate any
usury laws or laws of the State of Maryland, regarding the validity of
agreements to pay interest in effect on the date hereof.
(d) Borrower is not a "foreign person" within the meaning of Section
1445 or 7701 of the Internal Revenue Code.
(e) Borrower has delivered to Lender a true, correct and complete
copy of Borrower's organizational documents and the same are in full force and
effect. To the best of Borrower's knowledge, there are no defaults by any party
under Borrower's organizational documents, nor do circumstances exist which,
with the passage of time, the giving of notice, or both, would constitute a
default thereunder.
ARTICLE VI
COVENANTS
The Borrower hereby covenants and agrees that for so long as this
Agreement is in effect and the Note is outstanding and until the Loan, together
with interest and all other Obligations incurred hereunder, are paid in full,
unless otherwise permitted by Lender:
6.1 Use of Proceeds. The proceeds of the Loan shall be used to
purchase shares of ITT Corporation, a Nevada corporation, from the Lender
pursuant to the Stock Purchase Agreement and shares of beneficial interest of
the Lender.
6.2 Compliance with Merger Agreement. The Borrower shall comply in
all respects with the Merger Agreement and shall not take any action to
terminate the Merger Agreement (other than in accordance with Article VII
thereof) without the prior written consent of the Lender.
6.3 Negative Covenants. Borrower shall not, on or after the date
hereof, without the prior written consent of Lender:
(a) Materially alter the character of its business from that
conducted on the date hereof;
(b) Wind up, liquidate or dissolve its affairs;
(c) Take any action or omit to take any action that would cause it
not to be in
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<PAGE> 11
good standing in the State of Maryland;
(d) Amend, modify or change in any manner materially adverse to the
interests of the Lender the certificate of incorporation (including, without
limitation, by the filing of any certificate of designation) or by-laws of the
Borrower;
ARTICLE VII
EVENTS OF DEFAULT
Upon the occurrence and continuation of any of the following
specified events (each, an "Event of Default"):
7.1 Payments. The Borrower shall (i) default in the payment when due
of any Principal Balance or (ii) default, and such default shall continue for
ten (10) or more Business Days after written notice from Lender, in the payment
when due of any interest on the Loan or any fees or any other Obligations owing
hereunder or under the Note; or
7.2 Covenants. The Borrower shall default in the due performance or
observance by it of any term, covenant or agreement (other than those referred
to in Section 7.1) contained in this Agreement or one of the Owners shall
default in the due performance or observance by it of any term, covenant or
agreement contained in the Mortgages and such default shall continue beyond the
period of time specified by Lender in its written notice of default, which
period shall be no less than twenty (20) Business Days; or
7.3 Default Under Other Agreements The Borrower shall (i) default in
any payment with respect to any Indebtedness (other than the Obligations) beyond
the period of grace, if any, applicable thereto or (ii) default in the
observance or performance of any agreement or condition relating to any such
Indebtedness or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist, the effect
of which default or other event or condition is to cause, or to permit the
holder or holders of such Indebtedness (or a trustee or agent on behalf of such
holder or holders) to cause any such Indebtedness to become due prior to its
stated maturity; or (b) any such Indebtedness shall be declared to be due and
payable (other than to the extent the Borrower promptly denies in writing to the
applicable creditor the validity of such declaration and is contesting same in
good faith), or required to be prepaid other than by a regularly scheduled
required
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<PAGE> 12
prepayment, prior to the stated maturity thereof, and such default shall
continue beyond the period of time specified by Lender in its written notice of
default, which period shall be no less than twenty (20) Business Days. Borrower
shall have the right to cure any default under this Section 7.3 by repaying or
refinancing the Indebtedness with respect to which a default has occurred.
7.4 Bankruptcy, etc. The Borrower shall commence a voluntary case
concerning itself under Title 11 of the United States Code entitled
"Bankruptcy", as now or here after in effect, or any successor thereto (the
"Bankruptcy Code"); or an involuntary case is commenced against the Borrower and
the petition is not controverted within 20 days, or is not dismissed within 60
days, after commencement of the case; or a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or substantially all
of the property of the Borrower, or the Borrower commences any other proceeding
under any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to the Borrower, or there is
commenced against the Borrower any such proceeding which is not controverted
within 20 days or remains undismissed for a period of 60 days; or the Borrower
is adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the Borrower suffers any
appointment of any custodian or the like for it or any substantial part of its
property to continue undischarged or unstayed for a period of 60 days; or the
Borrower makes a general assignment for the benefit of creditors; or any cor-
porate action is taken by the Borrower for the purpose of effecting any of the
foregoing;
then, and in any such event, and at any time thereafter, if any
Event of Default shall then be continuing, the Lender may, at its sole
discretion, but subject to (and only to the extent permitted by) the
Subordination Agreement, by written notice to the Borrower, take any or all of
the following actions, without prejudice to the rights of the Lender to enforce
its claims against the Borrower, except as otherwise specifically provided for
in this Agreement: (i) declare the Lender's obligation to advance the Loan or
any portion thereof terminated; and (ii) declare the principal of and any
accrued interest in respect of the Loan and all Obligations to be, whereupon the
same shall become, forthwith due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower.
ARTICLE VIII
MISCELLANEOUS
8.1. Payment of Expenses, etc. The Borrower agrees to: (i) pay all
reasonable out-of-pocket costs and expenses of the Lender in connection with the
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<PAGE> 13
administration and enforcement of this Agreement and the Note and any amendment,
waiver or consent relating thereto (including, without limitation, the
reasonable fees and disbursements of counsel for the Lender), provided that each
of the parties hereto shall pay its own costs and expenses relating to the
negotiation, preparation and delivery of this Agreement and the Note; and (ii)
indemnify the Lender, its Affiliates and their respective officers, directors,
employees, representatives and agents from and hold each of them harmless
against any and all losses, liabilities, claims, damages or expenses incurred
by any of them as a result of, or arising out of, or in any way related to, or
by reason of, an investigation, litigation or other proceeding (whether or not
the Lender is a party thereto) related to the entering into and/or performance
of this Agreement or the Note or the use of the proceeds of the Loan hereunder.
8.2. Notices. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier, facsimile or cable communication) and
mailed, telegraphed, telexed, telecopied, faxed, cabled or delivered at the
address specified opposite its signature below or at such other address as shall
be designated by any party in a written notice to the other party hereto. All
such notices and communications shall be mailed, telegraphed, telexed,
telecopied, or cabled or sent by overnight courier, and shall be effective when
received.
8.3. Benefit of Agreement. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto, provided that the Borrower may not assign or
transfer any of its rights or obligations hereunder other than in accordance
with the Transaction Agreement.
8.4. No Waiver; Remedies Cumulative. No failure or delay on the part
of the Lender in exercising any right, power or privilege hereunder and no
course of dealing between the Borrower and the Lender shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. The rights and
remedies herein expressly provided are cumulative and not exclusive of any
rights or remedies which the Lender would otherwise have. No notice to or demand
on the Borrower in any case shall entitle the Borrower to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
rights of the Lender to any other or further action in any circumstances without
notice or demand.
8.5. Governing Law; Submission to Jurisdiction; Venue; Waiver of
Jury Trial. (a) This Agreement and the Note and the rights and obligations of
the parties hereunder and thereunder shall be construed in accordance with and
be governed by the law of the State of New York, in accordance with the
provisions of New York State
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<PAGE> 14
General Obligations Law Section 5-1401. The parties hereto irrevocably submit to
the jurisdiction of the courts of the State of New York and the Federal courts
of the United States of America located in the State of New York solely in
respect of the interpretation and enforcement of the provisions of this
Agreement and the Note, and in respect of the transactions contemplated hereby,
and hereby waive, and agree not to assert, as a defense in any action, suit or
proceeding for the interpretation or enforcement hereof or of any such document,
that it is not subject thereto or that such action, suit or proceeding may not
be brought or is not maintainable in said courts or that the venue thereof may
not be appropriate or that this Agreement or the Note may not be enforced in or
by such courts, and the parties hereto irrevocably agree that all claims with
respect to such action or proceeding shall be heard and determined in such a New
York State or Federal court. The parties hereby consent to and grant any such
court jurisdiction over the person of such parties and over the subject matter
of such dispute and agree that mailing of process or other papers in connection
with any such action or proceeding in the manner provided in Section 8.2 or in
such other manner as may be permitted by law shall be valid and sufficient
service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH
MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) 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, (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 7.5.
8.6. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument.
8.7. Headings Descriptive. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
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<PAGE> 15
8.8. Amendment or Waiver. Neither this Agreement nor the Note nor
any terms hereof or thereof may be changed, waived, discharged or terminated
unless such change, waiver, discharge or termination is in writing signed by the
Borrower and the Lender.
8.9. Survival. All indemnities set forth herein shall survive the
execution and delivery of this Agreement and the making and repayment of the
Loan.
8.10 Recourse to Trust. The Borrower acknowledges and agrees that
the name "Starwood Hotels & Resorts" is a designation of the Lender and its
trustees (as trustees but not personally) under a Declaration of Trust dated
August 25, 1969, as amended and restated as of June 6, 1988, and as the same has
been or may be amended from time to time thereafter, and that the Borrower shall
look solely to the Lender's assets for the enforcement of any claims against the
Lender, as the trustees, officers, agents and security holders of the Lender
assume no personal liability for obligations entered into on behalf of the
Lender, and their respective individual assets shall not be subject to the
claims of any person relating to such obligations. The foregoing shall govern
all direct and indirect obligations of the Lender under this Agreement and the
Note.
8.11 Subordination. The Lender and the Borrower acknowledge and
agree that all rights of the Lender to receive any payments from the Borrower
hereunder or under any guarantees, mortgages, other types of security documents
or otherwise are and shall continue to be subject and subordinate in payment to
the prior payment in full, in cash, of all Senior Indebtedness (as defined in
the Subordination Agreement), to the extent, and in the manner set forth in the
Subordination Agreement. All of the terms, covenants and conditions hereof are
hereby and shall continue to be subordinate to all of the terms, covenants and
conditions of the Senior Indebtedness. The foregoing shall apply,
notwithstanding the availability of other collateral to the Senior Creditors (as
defined in the Subordination Agreement) or the actual date and time of
execution, delivery, recordation, filing or perfection of any of the Senior
Indebtedness, or the lien or priority of payment thereof, and in any instance
wherein the Senior Indebtedness or any claim for the Senior Indebtedness is
subordinated, avoided or disallowed, in whole or in part, under Title 11 of the
United States Code (the "Bankruptcy Code") or other applicable federal or state
law.
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<PAGE> 16
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.
BORROWER:
Address: STARWOOD HOTELS & RESORTS
WORLDWIDE, INC., a Maryland corporation
Starwood Hotels & Resorts
Worldwide, Inc.
2231 Camelback Road, Suite 400
Phoenix, Arizona 85016 By: /s/ Richard A. Smith
Attention: Alan M. Schnaid -------------------------------
Fax: (602)852-0984 Name: Richard A. Smith
Title: Authorized Signatory
Copies to:
Sherwin Samuels, Esq.
Sidley & Austin
555 West Fifth Avenue
Los Angeles, California 90013
Fax: (203)896-6600
LENDER:
Address: STARWOOD HOTELS & RESORTS, a Maryland
real estate investment trust
Starwood Hotels & Resorts
2231 East Camelback Road, Ste. 410
Phoenix, Arizona 85016
Attention: Ronald C. Brown By: /s/ Ronald C. Brown
Fax: (602) 852-3379 --------------------------
Name: Ronald C. Brown
Copies to: Title: Senior Vice President
Sherwin Samuels, Esq.
Sidley & Austin
555 West Fifth Avenue
Los Angeles, California 90013
Fax: (203)896-6600
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<PAGE> 17
EXHIBIT A
FORM OF NOTE
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<PAGE> 18
PROMISSORY NOTE
U.S. $50,000,000 Dated: February 23, 1998
FOR VALUE RECEIVED, the undersigned, STARWOOD HOTELS & RESORTS
WORLDWIDE, INC., a Maryland corporation (the "Borrower"), HEREBY PROMISES TO PAY
to the order of STARWOOD HOTELS & RESORTS, a Maryland real estate investment
trust (the "Lender"), the principal sum of FIFTY MILLION UNITED STATES DOLLARS
($50,000,000), payable at such times, and in such amounts, as are specified in
the Loan Agreement (defined below). Capitalized terms used but not otherwise
defined herein shall have the meanings set forth in the Loan Agreement.
The Borrower promises to pay, together with all fees and other
amounts due under the Loan Agreement, interest on the unpaid principal amount of
this Promissory Note ("Note") from the date made until such principal amount is
paid in full, at such interest rates, and payable at such times, as are
specified in the Loan Agreement.
Both principal and interest are payable in lawful money of the
United States of America to the Lender at 2231 East Camelback Road, Suite 410,
Phoenix, Arizona 85016, in immediately available funds, or to such other address
or bank account as the Lender shall direct.
This Note is the Note referred to in, and is entitled to the
benefits of, the Loan Agreement, dated as of the date hereof (said Agreement, as
it may be amended or otherwise modified from time to time, being the "Loan
Agreement"), among the Borrower and the Lender. The Loan Agreement, among other
things, (i) provides for the advance of the Loan in an aggregate amount not to
exceed at any time outstanding the United States dollar amount first above
mentioned, the indebtedness of the Borrower to the Lender resulting from such
Loan being evidenced by this Note, and (ii) contains provisions for acceleration
of the maturity of the unpaid principal amount of this Note upon the happening
of certain stated events and also for prepayments on account of the principal
hereof prior to the maturity hereof upon the terms and conditions therein
specified.
Demand, presentment, protest and notice of nonpayment and protest
are hereby waived by the Borrower.
<PAGE> 19
The Lender and the Borrower acknowledge and agree that all rights of
the Lender to receive any payments from the Borrower hereunder or under any
guarantees, mortgages, other types of security documents or otherwise are and
shall continue to be subject and subordinate in payment to the prior payment in
full, in cash, of all Senior Indebtedness (as defined in the Subordination
Agreement (as defined in the Loan Agreement)), to the extent, and in the manner
set forth in the Subordination Agreement. All of the terms, covenants and
conditions hereof are hereby and shall continue to be subordinate to all of the
terms, covenants and conditions of the Senior Indebtedness. The foregoing shall
apply, notwithstanding the availability of other collateral to the Senior
Creditors (as defined in the Subordination Agreement) or the actual date and
time of execution, delivery, recordation, filing or perfection of any of the
Senior Indebtedness, or the lien or priority of payment thereof, and in any
instance wherein the Senior Indebtedness or any claim for the Senior
Indebtedness is subordinated, avoided or disallowed, in whole or in part, under
Title 11 of the United States Code (the "Bankruptcy Code") or other applicable
federal or state law.
[Remainder of page intentionally left blank]
<PAGE> 20
This Note shall be governed by, and construed and interpreted in
accordance with, the law of the State of New York.
STARWOOD HOTELS & RESORTS
WORLDWIDE, INC., a Maryland corporation
By: /s/ Richard A. Smith
--------------------------
Name: Richard A. Smith
Title: Authorized Signatory
<PAGE> 1
Exhibit 10.68
EXECUTION COPY
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT is made as of the 23rd day of
February, 1998, by and among Starwood Hotels & Resorts (the "REIT"), a Maryland
real estate investment trust, Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation (the "OPCO") (the REIT and the OPCO, each a "Company" and
together the "Companies"), Lehman Brothers Inc. ("LBI") and, solely with respect
to the covenants, representation and warranties in Sections 5 and 6, Lehman
Brothers Finance S.A. ("LBF").
IN CONSIDERATION of the mutual covenants contained in this
Purchase Agreement, the Companies and LBI hereby agrees as follows:
SECTION 1. Authorization of Sale of the Shares. Subject to the
terms and conditions of this Purchase Agreement, the REIT has authorized the
sale to LBI of 1,547,000 shares of beneficial interest, $.01 par value per
share, of the REIT (the "REIT Shares") and the OPCO has authorized the sale to
LBI of 1,547,000 shares of common stock, $.01 par value per share, of the OPCO
(the "OPCO Shares"), which REIT Shares and OPCO Shares are paired as a unit
consisting of one (1) REIT Share and one (1) OPCO Share (hereinafter each such
paired unit is referred to as a "Paired Share") and the Paired Shares referred
to in this sentence are herein called the "Purchase Shares"). In addition, the
REIT and the OPCO may issue to LBF additional Paired Shares in settlement of
certain of their obligations under that certain Agreement (the "Agreement"),
dated as of the date hereof, between the REIT, the OPCO and LBF (the "Additional
Shares"). The Paired Shares and the Additional Shares are hereinafter
collectively called the "Shares."
SECTION 2. Agreement to Sell and Purchase the Purchase Shares.
Subject to the terms and conditions of this Purchase Agreement, on the Closing
Date (as defined in Section 3 hereof), the Companies will sell to LBI the
Purchase Shares for a per Paired Share purchase price equal to 98.00% of the
Closing Price. The "Closing Price" shall equal the closing price reported on the
New York Stock Exchange for a Paired Share on February 23, 1998.
SECTION 3. Delivery of the Purchase Shares at the Closing.
3.1 Closing. The completion of the purchase and sale of the
Purchase Shares (the "Closing") shall occur as soon as practicable on or after
the date hereof on a business day to be agreed upon by the Companies and LBI,
but in no event later than five business days after the execution of this
Purchase Agreement (hereinafter, the "Closing Date").
3.2 Conditions. At Closing, the Companies shall deliver to LBI
one or more stock certificates registered in the name of LBI representing the
number of Purchase Shares set forth in Section 2 above.
<PAGE> 2
The obligation of the Companies to complete the purchase and
sale of the Purchase Shares and deliver such stock certificate(s) to LBI at the
Closing shall be subject to the following conditions, any one or more of which
may be waived by both of the Companies acting together: (i) receipt by the
Companies of Federal Funds (or other mutually agreed upon form of payment) in
the full amount of the purchase price for the Purchase Shares being purchased
hereunder, (ii) the accuracy in all material respects as of the Closing Date, of
the representations and warranties made by LBI herein and the fulfillment, in
all material respects, of those undertakings of LBI to be fulfilled prior to the
Closing, (iii) execution and delivery of the Agreement by LBF, (iv) receipt by
the Companies of a cross-receipt with respect to the Purchase Shares executed by
LBI and (v) receipt by the Companies of a certificate by an officer or
authorized representative of LBI to the effect that the representations and
warranties of LBI set forth in Section 5 hereof are true and correct as of the
date of this Purchase Agreement and as of the Closing Date.
LBI's obligation to accept delivery of such stock
certificate(s) and to pay for the Purchase Shares evidenced thereby shall be
subject to the following conditions, any one or more of which may be waived by
LBI: (i) the accuracy in all material respects, as of the Closing Date, of the
representations and warranties made by the Companies herein and the fulfillment,
in all material respects, of those undertakings of the Companies to be fulfilled
prior to the Closing, (ii) receipt by LBI of all opinions, letters and
certificates to be delivered by the Companies pursuant to this Purchase
Agreement, (iii) execution and delivery of the Agreement by each of the
Companies, and (iv) receipt by LBI of a cross-receipt with respect to the
purchase price for the Purchase Shares executed by the Companies.
SECTION 4. Representations, Warranties and Covenants of the
Companies. Except as disclosed in the Companies' SEC Filings (as defined below),
each of the REIT and the OPCO, severally and not jointly, hereby represents and
warrants to LBI, and covenants with LBI, with respect to such Company and its
Subsidiaries (as defined below) only, as follows:
4.1 Organization and Qualification of the Companies. Each of
the REIT and the OPCO has been duly organized and is validly existing in good
standing under the laws of Maryland with power and authority to own and lease
its properties and to conduct its business as currently conducted. Each of the
REIT and the OPCO is duly qualified to transact business and is in good standing
in each jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing or managing of property or the conduct of business,
except where the failure to so qualify would not have a material adverse effect
on the condition, financial or otherwise, or the earnings, assets, business
affairs or business prospects of the Companies and the Subsidiaries of the
Companies considered as one enterprise (a "Material Adverse Effect"). Entities
in which either of the Companies directly or indirectly has at least a 50%
ownership interest are herein referred to as the "Subsidiaries," and each
individually, as a "Subsidiary."
4.2 Organization and Qualification of Subsidiaries. Each of
the Subsidiaries has been duly organized and is validly existing as a
corporation, limited partnership, or limited liability company, as the case may
be, in good standing under the laws of its respective jurisdiction of
organization, with full power and authority to own, lease and operate its
properties
<PAGE> 3
and to conduct the business in which it currently is engaged. Each of the
Subsidiaries is duly qualified as a foreign corporation, limited partnership, or
limited liability company, as the case may be, to transact business and is in
good standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure to so qualify would not have a Material
Adverse Effect. All of the issued and outstanding shares of capital stock of
each of the corporate Subsidiaries have been duly authorized and validly issued
and are fully paid and non-assessable. The ownership by the Companies or the
Subsidiaries of the shares of capital stock or limited partnership or equity
interests, as the case may be, of each of the Subsidiaries is as described in
the Companies' SEC Filings.
4.3 Authorized Capital Stock. The REIT has the following
authorized shares: 1,000,000,000 REIT shares par value $0.01 per share,
200,000,000 excess shares of beneficial interest, par value $.01 per share,
100,000,000 shares of trust preferred, par value $.01 per share, and 50,000,000
shares of excess trust preferred, par value $0.01 per share. The OPCO has the
following authorized shares: 1,000,000,000 OPCO shares, par value $0.01 per
share, 200,000,000 shares of preferred stock, par value $0.01 per share,
50,000,000 shares of excess common stock, par value $0.01 per share and
100,000,000 shares of excess preferred stock, par value $0.01 per share. As of
January 20, 1998, there were 55,392,389 Paired Shares, 6,285,765 Class A
Exchangeable Preferred Shares of the Trust and 5,502,711 Class B Exchangeable
Preferred Shares of the Trust outstanding, and 21,292,005 REIT shares and
21,292,005 OPCO shares were reserved for issuance. The issued and outstanding
Paired Shares of the Companies have been duly authorized and validly issued, are
fully paid and nonassessable, have been issued in compliance with all federal
and state securities laws, were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities, and
conform to the description thereof in the Companies' SEC Filings. Other than as
described in the Companies' SEC Filings, the REIT does not have outstanding any
options to purchase, or other rights to subscribe for or purchase, any
securities or obligations convertible into, or any contracts or commitments to
issue or sell, shares of its capital stock or any such options, rights,
convertible securities or obligations. The description of the Companies' stock,
stock bonus and other stock plans or arrangements and the options or other
rights granted and exercised thereunder in the Companies' SEC Filings accurately
and fairly presents the information required to be shown with respect to such
plans, arrangements, options and rights.
4.4 Issuance, Sale and Delivery of the Shares. The Purchase
Shares to be sold by the Companies have been duly authorized for issuance and,
when issued, delivered and paid for in the manner set forth in this Purchase
Agreement, will be validly issued, fully paid and non-assessable. The Additional
Shares, if and when issued pursuant to the Agreement, have been duly authorized
and will be validly issued, fully paid and non-assessable. Upon payment of the
purchase price and delivery of the Shares in accordance with this Purchase
Agreement, LBI will receive good, valid and marketable title to the Shares, free
and clear of all security interests, mortgages, pledges, liens, encumbrances and
claims. No approval of or authorization by the respective shareholders or boards
of trustees or directors of the Companies will be required for the issuance
and/or sale of the Shares to be sold by the Companies as contemplated herein or
in the Agreement, except such as shall have been obtained on or before the
Closing Date or the
<PAGE> 4
applicable Settlement Date. The issuance and/or sale of the Shares to LBI or LBF
by the Companies pursuant to this Purchase Agreement or the Agreement (as the
case may be), the compliance by the Companies with the other provisions of this
Purchase Agreement or the Agreement and the consummation of the other
transactions contemplated hereby or thereby do not require the consent,
approval, authorization, registration or qualification of or with any court,
governmental authority or agency, except such as shall have been obtained on or
before the Closing Date or in connection with any Resale Registration Statement
filed with respect to any of the Shares. The Companies meet and will continue to
meet the requirements for use of Form S-3 under the Securities Act of 1933, as
amended (the "Securities Act"), and the rules and regulations of the U.S.
Securities and Exchange Commission (the "Commission") under the Securities Act
(the "1933 Act Regulations"). The Companies have filed and will file all
documents which they are required to file under the Securities Exchange Act of
1934, as amended (the "Exchange Act") and the rules and regulations promulgated
thereunder (the "1934 Act Regulations") within the time periods prescribed by
the Exchange Act and the 1934 Act Regulations since December 31, 1996 and all
such documents (collectively, together with the Companies' registration
statements filed under the Securities Act which have been declared effective
since January 1, 1997 and have not been withdrawn, the "Companies' SEC Filings")
comply and will comply in all material respects with the requirements of the
Exchange Act and the 1934 Act Regulations, as applicable, and none of such
documents, when so filed, contained or will contain any untrue statement of a
material fact or omitted or will omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. No Resale
Registration Statement filed in respect of any of the Shares, when so filed,
contained or will contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein not misleading.
4.5 Due Execution, Delivery and Performance by the Company.
Each of the Companies has full right, power and authority to enter into this
Purchase Agreement and the Agreement and perform the transactions contemplated
hereby and thereby. This Purchase Agreement and the Agreement have been duly
authorized, executed and delivered by each of the Companies. The execution and
delivery of the Purchase Agreement and the Agreement by each of the Companies
and the consummation of the transactions and the performance of the obligations
herein and therein contemplated will not violate any provision of the
declaration of trust, certificate of incorporation, bylaws, or other
organizational documents of either of the Companies, and will not conflict with,
result in the breach or violation of, or constitute, either by itself or upon
notice or the passage of time or both, a default under any material agreement,
mortgage, deed of trust, credit agreement, lease, franchise, license, indenture,
note, permit or other instrument to which either Company is a party or by which
either Company or its respective properties may be bound or affected, any
statute or any authorization, judgment, decree, order, rule or regulation of any
court or any regulatory body, administrative agency or other governmental body
applicable to either Company or any of its respective properties other than
violations, conflicts, breaches or defaults that individually or in the
aggregate would not have a Material Adverse Effect. No consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body is required for the execution and delivery of
this Purchase Agreement, the Agreement or the consummation of the transactions
<PAGE> 5
contemplated hereby or thereby, except in connection with the filing of any
Resale Registration Statements pursuant to Section 7 below or for compliance
with the blue sky laws applicable to the offering of the Shares.
4.6 Accountants. The Companies' independent certified public
accountants, who have expressed their opinion with respect to the Most Recent
Financial Statements (as defined below) are independent accountants as required
by the Securities Act and the 1933 Act Regulations.
4.7 No Defaults. Except as to defaults, violations and
breaches which individually or in the aggregate would not have a Material
Adverse Effect, neither of the Companies nor any of their respective
Subsidiaries is in violation or default of any provision of its declaration of
trust, certificate of incorporation or bylaws, or other organizational
documents, and is not in breach of or default with respect to any provision of
any agreement, judgment, decree, order, mortgage, deed of trust, credit
agreement, lease, franchise, license, indenture, permit or other instrument to
which it is a party or by which it or any of its properties are bound.
4.8 No Actions. There is no action, suit or proceeding before
or by any court or governmental agency or body, domestic or foreign, now
pending, or, to the knowledge of each Company, threatened against or affecting
such Company or any of its Subsidiaries, any real property or improvements
thereon owned or leased by such Company or its Subsidiaries, including any
property underlying indebtedness held by such Company (each, individually, a
"Property" and collectively, the "Properties"), or any officer of such Company
or any of its Subsidiaries that, if determined adversely to such Company or any
Subsidiary, any Property, including any property underlying indebtedness held by
such Company and any of its Subsidiaries, or any such officer, would reasonably
be expected to (A) result in any Material Adverse Effect or (B) materially and
adversely affect the consummation of the transactions contemplated by this
Purchase Agreement or the Agreement.
4.9 Properties. (A) Each Company and its respective
Subsidiaries, as the case may be, has good and marketable title to all the
properties and assets reflected as owned by such entities in the Most Recent
Financial Statements, subject to no lien, mortgage, pledge, charge or
encumbrance of any kind except (i) those, if any, reflected in the Most Recent
Financial Statements, or (ii) those which would not have a Material Adverse
Effect, (B) the leases of any real property and buildings held under lease by
such Company or any of its Subsidiaries are in full force and effect, and such
entities are not in default in respect of any of the terms or provisions of such
leases and have not received notice of the assertion of any claim by anyone
adverse to such entities' rights as lessee under such leases, or affecting or
questioning such entity's right to the continued possession or use of the real
property and buildings held under such leases or of a default under such leases,
in each case with such exceptions as would not have a Material Adverse Effect;
(C) neither Company nor any of its respective Subsidiaries or any tenant of any
of the Properties is in default under any of the leases pursuant to which such
Company or its Subsidiaries, as lessor, leases its Property (and to the best
knowledge of such Company no
<PAGE> 6
event has occurred which, but for the passage of time or the giving of notice,
or both, would constitute a default under any of such leases) other than such
defaults that would not have a Material Adverse Effect; (D) no person has an
option or right of first refusal to purchase all or part of any Property or any
interest therein, other than such options or rights of first refusal which would
not have a Material Adverse Effect; (E) each of the Properties complies with all
applicable codes, laws and regulations (including, without limitation, building
and zoning codes, laws and regulations and laws relating to access to the
Properties), except for such failures to comply that would not individually or
in the aggregate have a Material Adverse Effect; and (F) neither Company has
knowledge of any pending or threatened condemnation proceedings, zoning change,
or other proceeding or action that will in any manner affect the size of, use
of, improvements on, construction on or access to the Properties, including any
property underlying indebtedness held by either Company or any of its respective
Subsidiaries, except such proceedings or actions that would not have a Material
Adverse Effect.
4.10 REIT Qualification. The REIT qualified as a real estate
investment trust under the Internal Revenue Code of 1986, as amended (the
"Code"), with respect to its taxable years ended December 31, 1995, December 31,
1996 and December 31, 1997, and is organized in conformity with the requirements
for qualification as a real estate investment trust, and its manner of operation
has enabled it to meet the requirements for qualification as a real estate
investment trust as of the date hereof, and its proposed manner of operation
will enable it to meet the requirements for qualification as a real estate
investment trust in the future.
4.11 No Material Change. Since the date of the Most Recent
Financial Statements, and except as otherwise disclosed in the Companies' SEC
Filings as of the Closing Date, (i) no material casualty loss or material
condemnation or other material adverse event with respect to any Property or any
of the Subsidiaries, has occurred that would singly or in the aggregate have a
Material Adverse Effect; (ii) neither of the Companies, nor any of their
respective Subsidiaries is in default in the payment of principal or interest on
any outstanding debt obligations; (iii) except as a result of (a) the Companies'
acquisition of Westin Hotels & Resorts Worldwide, Inc. and certain affiliates
and the related financing transactions and (b) the OPCO's acquisition of ITT
Corporation and the related financing transactions, there has not been any
change in the capital stock of either Company or the Subsidiaries (other than
the sale of the Purchase Shares hereunder or those reserved for issuance
pursuant to the Agreement, issuances pursuant to the incentive compensation
plans of the Companies), or any increase in the indebtedness of either Company
or their respective Subsidiaries that is material to such entities, considered
as one enterprise; (iv) and except for regular quarterly distributions on the
REIT Shares, there has been no dividend or distribution of any kind declared,
paid or made by the REIT or the OPCO; and (v) there has not been any material
adverse change in the condition, financial or otherwise, or in the earnings,
assets, business affairs or business prospects of the Companies and the
Subsidiaries, considered as one enterprise, whether or not arising in the
ordinary course of business.
4.12 Intellectual Property. Neither of the Companies nor the
Subsidiaries is required to own or possess trademarks, trade names, patent
rights, copyrights, licenses, approvals and governmental authorizations, which
it does not already own or possess to conduct its
<PAGE> 7
businesses as now conducted; and neither Company has knowledge of any material
infringement by it of trademark, trade name rights, patent rights, copyrights,
licenses, trade secrets or other similar rights of others, and has not received
any notice that any claim has been made against such Company regarding
trademark, trade name, patent, copyright, license, trade secrets or other
infringement that would not singly or in the aggregate have a Material Adverse
Effect.
4.13 Compliance. Neither Company has been advised, or has
reason to believe, that it is not conducting business in compliance with all
applicable laws, rules and regulations of the jurisdictions in which it is
conducting business, except where failure to be so in compliance will not have a
Material Adverse Effect.
4.14 Taxes. Each of the Companies and its Subsidiaries have
filed all material federal, state and foreign income and franchise tax returns
which have been required to be filed and has paid or accrued all taxes shown as
due thereon (except for those taxes which are being contested in good faith
through appropriate proceeding, for which adequate reserves have been
established and which are either reflected in the Most Recent Financial
Statements or disclosed by the Companies to LBI), and neither Company has any
knowledge of any tax deficiency which has been or might be asserted or
threatened against such Company and its Subsidiaries which would singly or in
the aggregate have a Material Adverse Effect.
4.15 Transfer Taxes. On the Closing Date, all stock transfer
or other taxes, if any (other than income taxes) which are required to be paid
in connection with the sale and transfer of the Purchase Shares to be sold to
LBI hereunder will be, or will have been, fully paid or provided for by the
Companies and all laws imposing such taxes will be or will have been fully
complied with.
4.16 Investment Company. Neither of the Companies nor any of
their Subsidiaries is required to register as an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended.
4.17 Offering Materials. Neither the REIT nor the OPCO has
distributed nor will distribute prior to the Closing Date any offering material
in connection with the offering and sale of the Purchase Shares other than the
documents and information provided to LBI pursuant to this Section 4.
4.18 Additional Information. Each of the Companies represents
and warrants that the information contained in the following documents, which
the Companies have furnished to LBI, or will be furnished or made available upon
request prior to the Closing, is true and correct in all material respects as of
their respective filing dates:
(a) Joint Annual Report on Form 10-K for the year ended
December 31, 1996, which Joint Annual Report includes the Companies' most
recently available audited financial statements together with the report thereon
of the independent certified public accountants (the "Most Recent Financial
Statements"),
<PAGE> 8
(b) Joint Quarterly Reports on Form 10-Q, as amended if
applicable, for the quarters ended March 31, 1997, June 30, 1997 and September
30, 1997;
(c) the Companies' proxy statements on Form 14A relating
to (i) the most recent Annual Meetings of the REIT's Shareholders and the OPCO's
Shareholders and (ii) the Special Meetings of the REIT's Shareholders and the
OPCO's Shareholders which occurred during the 12 month period prior to the date
hereof or for which a meeting date has been fixed and a proxy statement
distributed;
(d) all other documents, if any, filed by or with respect
to the REIT and the OPCO with the Commission since January 1, 1997 pursuant to
Section 13, 15(d) or 16(a) of the Exchange Act; and
(e) covenant compliance certificates stating that none of
the REIT, the OPCO or their respective Subsidiaries are in default under any of
their respective credit agreements or other financing arrangements.
4.19 Legal Opinion. At or prior to the Closing, counsel to the
Companies will deliver their legal opinions dated the Closing Date to LBI in
substantially the form of Exhibit A hereto.
4.20 ERISA. Each of the Companies and their respective
Subsidiaries are in compliance with all applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended and the rules and regulations
promulgated thereunder ("ERISA"), except for such failures to comply as will not
have a Material Adverse Effect. Neither a Reportable Event (as defined under
ERISA) nor a Prohibited Transaction (as defined under ERISA) has occurred with
respect to any Plan (as defined below) of the Companies and/or their respective
affiliates; no notice of intent to terminate a Plan has been filed nor has any
Plan been terminated within the past five years; to the Companies' knowledge, no
circumstance exists which constitutes grounds under Section 402 of ERISA
entitling the Pension Benefit Guaranty Corporation ("PBGC") to institute
proceedings to terminate, or appoint a trustee to administer, a Plan, nor has
the PBGC instituted any such proceedings; neither Company nor their respective
affiliates has completely or partially withdrawn under Section 4201 or 4202 of
ERISA from any Multiemployer Plan (as defined therein); each of the Companies
and their respective affiliates have met the minimum funding requirements of
Section 412 of the Code and Section 302 of ERISA with respect to each Plan and
there is no unfunded current liability (as defined below) with respect to any
Plan; each of the Companies and their respective affiliates have not incurred
any liability to the PBGC under ERISA (other than for the payment of premiums
under Section 4007 of ERISA); no part of the funds to be used by the Companies
in satisfaction of their respective obligations under this Purchase Agreement or
the Agreement constitute "plan assets" of any "employee benefit plan" within the
meaning of ERISA or of any "plan" within the meaning of Section 4957(e)(I) of
the Code, as interpreted by the Internal Revenue Service and the U.S. Department
of Labor in rules, regulations, releases and bulletins or as interpreted under
applicable case law. As used below,"Plan" means an "employee benefit plan" or
"plan" as described in Section 3(3) of ERISA; and "unfunded current liability"
has the meaning provided in Section 302(d)(8)(A) of ERISA.
<PAGE> 9
4.21 Environmental Protection. Except as otherwise disclosed
in the Companies' SEC Filings and except for such exceptions as would not singly
or in the aggregate have a Material Adverse Effect, none of the REIT's or the
OPCO's or their respective affiliates' properties contain any Hazardous
Materials that, under any Environmental Law, (i) would impose liability on such
Company or any affiliate that is likely to have a Material Adverse Effect or
(ii) is likely to result in the imposition of a lien on any material asset
owned, directly or indirectly, by such Company. Neither Company nor any
affiliate is subject to any existing, pending or, to the best knowledge of each
Company, threatened investigation or proceeding by any governmental agency or
authority with respect to pursuant to any Environmental law, except any which,
if adversely determined, would not have a Material Adverse Effect. As used
herein, "Environmental Laws" mean all federal, state, local and foreign
environmental, health and safety laws, codes and ordinances and all rules and
regulations promulgated thereunder, including, without limitation laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment (including, without limitation, air, surface water, ground
water, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage disposal,
transport or handling of pollutants, contaminants, chemicals, or industrial,
solid, toxic or hazardous substances or wastes; and "Hazardous Material"
includes, without limitation, (i) all substances which are designated pursuant
to Section 311(b)(2)(A) of the Federal Water Pollution Control Act ("FWPCA"), 33
U.S.C. Section 1251 et seq.; (ii) any element, compound, mixture, solution, or
substance which is designated pursuant to Section 102 of the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
Section 9601 et seq.; (iii) any hazardous waste having the characteristics which
are identified under or listed pursuant to Section 3001 of the Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 6901 et seq.; (iv) any
toxic pollutant listed under Section 307(a) of the FWPCA; (v) any hazardous air
pollutant which is listed under Section 112 of the Clean Air Act, 42 U.S.C.
Section 7401 et seq.; (vi) any imminently hazardous chemical substance or
mixture with respect to which action has been taken pursuant to Section 7 of the
Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; and (vii)
petroleum, petroleum products, petroleum by-products, petroleum decomposition
by-products, and waste oil.
4.22 Solvency. Immediately following (i) the execution of this
Purchase Agreement and the Agreement, (ii) the purchase of the Purchase Shares
pursuant hereto and (iii) the completion of any other transaction contemplated
by this Purchase Agreement and the Agreement, each of the Companies will be
solvent and able to pay its debts as they mature, will have capital sufficient
to carry on its business and all businesses in which it is to engage, and will
have assets which will have a present fair market valuation greater than the
amount of all of its liabilities. This Purchase Agreement and the Agreement have
been executed and delivered by the Companies in good faith and in exchange for
reasonably equivalent value. Neither of the Companies intends to incur debts
beyond its ability to pay them as they become due. Each of the Companies' assets
and capital are now, and are expected in the future to be, sufficient to pay the
Companies' ongoing expenses as they are incurred and to discharge all of the
Companies' liabilities in the event that the business of the Companies is
required to be liquidated. The Companies have not entered into this Purchase
Agreement or the Agreement or any transaction contemplated hereby or thereby
with an intent to hinder, delay or defraud creditors of any persons
<PAGE> 10
or entity.
4.23 Certificate. At or prior to the Closing, each Company
shall deliver an officer's certificate to be dated the Closing Date in form and
substance satisfactory to LBI to the effect that (i) the representations and
warranties of such Company set forth in this Section 4 are true and correct in
all material respects as of the date of this Purchase Agreement and as of the
Closing Date and (ii) such Company has complied in all material respects with
all the covenants and satisfied in all material respects all the conditions on
its respective part to be performed or satisfied pursuant to this Purchase
Agreement or the Agreement on or prior to such Closing Date.
4.24 Financial Statements. The Most Recent Financial
Statements (including the notes thereto) present fairly in all material respects
the financial position of the respective entity or entities presented therein at
the respective dates indicated and the results of their operations for the
respective periods specified, and except as otherwise stated in the Most Recent
Financial Statements, said financial statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis. The
supporting schedules included in the Companies' SEC Filings fairly present in
all material respects the information required to be stated therein. The
financial information and data included in the Companies' SEC Filings present
fairly in all material respects the information included therein and have been
prepared on a basis consistent with that of the financial statements included in
the Companies' SEC Filings and the books and records of the respective entities
presented therein. The pro forma financial information included in the
Companies' SEC Filings has been prepared in accordance with the applicable
requirements of Rules 11-01 and 11-02 of Regulation S-X under the Securities Act
and other 1933 Act Regulations and American Institute of Certified Public
Accountants ("AICPA") guidelines with respect to pro forma financial information
and includes all adjustments necessary to present fairly in all material
respects the pro forma financial position of the respective entity or entities
presented therein at the respective dates indicated and the results of their
operations for the respective periods specified. Other than the historical and
pro forma financial statements (and schedule) included therein, no other
historical or pro forma financial statements (or schedules) are required to be
included in the Companies' SEC Filings. Except as reflected or disclosed in the
financial statements included in the Companies' SEC Filings, none of the
Companies or any of the Subsidiaries is subject to any material indebtedness,
obligation, or liability, contingent or otherwise.
4.25 Labor Disputes. No labor dispute with the employees of
either of the Companies or their respective Subsidiaries exists or, to the
knowledge of the such Company is imminent.
4.26 Regulation M. Each Company, its Subsidiaries and, to such
Company's knowledge, any of their respective trustees, directors, executive
officers or controlling persons, has not taken or will not take, directly or
indirectly, any action resulting in a material violation of Regulation M under
the Exchange Act, or designed to cause or result under the Exchange Act or
otherwise in, or which has constituted or which reasonably might be expected to
constitute, the
<PAGE> 11
unlawful stabilization or manipulation of the price of Paired Shares in
connection with the public sale or distribution of the Shares.
SECTION 5. Representations, Warranties and Covenants of LBI or
LBF.
5.1 Investment. LBI represents and warrants to, and covenants
with each of the Companies that: (i) LBI is knowledgeable, sophisticated and
experienced in making, and is qualified to make, decisions with respect to
investments in shares presenting an investment decision like that involved in
the purchase of the Purchase Shares, including investments in securities issued
by the Companies; (ii) LBI is acquiring the number of Purchase Shares set forth
in Section 2 above in the ordinary course of its business and for its own
account for investment (as defined for purposes of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and the regulations thereunder) only and with
no present intention of distributing any of such Purchase Shares or any
arrangement or understanding with any other persons regarding the distribution
of such Purchase Shares, except pursuant to a registration statement declared
effective under, or an exemption from the registration requirements of, the
Securities Act, (iii) LBI will not, directly or indirectly, sell or otherwise
dispose of (or solicit any offers to purchase or otherwise acquire) any of the
Purchase Shares except in compliance with the Securities Act, the Rules and
Regulations and any applicable state securities or blue sky laws; (iv) LBI has
completed or caused to be completed the Registration Statement Questionnaire and
the Stock Certificate Questionnaire, both attached hereto as Appendix I, for use
in preparation of the Resale Registration Statement and the answers thereto are
true and correct as of the date hereof and will be true and correct as of the
effective date of the Resale Registration Statement; (v) LBI has, in connection
with their decision to purchase the number of Purchase Shares set forth in
Section 2 above, relied solely upon the documents identified in Section 4.17,
the information referred to in Section 7.7 and the representations and
warranties of each of the Companies contained herein; (vi) LBI has had access to
such additional information, if any, concerning the Companies as it has
considered necessary in connection with its investment decision to acquire the
Purchase Shares; (vii) LBI is an "accredited investor" within the meaning of
Rule 501(a)(1), (2), (3) or (7) of Regulation D promulgated under the Securities
Act; and (viii) LBI understands that until the Shares are sold under an
appropriate Resale Registration Statement that has been declared effective by
the Commission, the Shares will contain a legend to the following effect:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THESE SHARES UNDER THE SECURITIES ACT OF 1933 OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANIES
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
5.2 Resale. LBI acknowledges and agrees that in connection
with any transfer
<PAGE> 12
of any Shares it will provide to the transfer agent prompt notice of any Shares
sold pursuant to a Resale Registration Statement or otherwise transferred in
compliance with applicable federal and state securities laws. LBI acknowledges
that there may occasionally be times when, subject to the provisions of Section
7.2(a)(v), the Companies must suspend the right of LBI to effect sales of the
Shares through the use of the Resale Prospectus (as defined below) forming a
part of a Resale Registration Statement until such time as an amendment to such
Resale Registration Statement has been filed by the Companies and declared
effective by the Commission, or until such time as the Companies have filed an
appropriate report with the Commission pursuant to the Exchange Act (each, a
"Black-out Period"); provided that no Black-out Period shall exceed 90
consecutive days. LBI hereby covenants that it will not effect sales of any
Shares pursuant to said Resale Prospectus during the period commencing at the
time at which the Companies give LBI written notice (which such notice shall
have been given by the Companies as promptly as practicable) of the suspension
of the use of said Resale Prospectus and ending at the time the Companies give
LBI written notice that LBI may thereafter effect sales pursuant to said Resale
Prospectus. LBI further covenants to notify the Companies promptly of the sale
of all of the Shares.
5.3 Due Execution, Delivery and Performance of this Purchase
Agreement. Each of LBI and LBF further represents and warrants to, and covenant
with, the Companies that (i) LBI has full right, power, authority and capacity
to enter into this Purchase Agreement and that each of LBI and LBF has full
right, power, authority and capacity to enter into the Agreement, and each has
the full right, power, authority and capacity to perform its respective
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby and has taken all necessary action to authorize
the execution, delivery and performance of this Purchase Agreement and the
Agreement, and (ii) upon the execution and delivery of this Purchase Agreement
and the Agreement, this Purchase Agreement and the Agreement shall constitute
valid and binding obligations of LBI and LBF, respectively, enforceable against
each in accordance with their terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and except that the enforcement of the indemnification agreements in Section 7.5
hereof may be limited by public policy.
5.4 Residence of LBI. LBI is organized in the State of
Delaware and has its principal place of business in the State of New York; LBF
is organized under the laws of Switzerland and has its principal place of
business in Zurich, Switzerland.
5.5 Certain Tax Considerations. LBI represents and warrants
that it is a "corporation" for U.S. federal income tax purposes and for purposes
of any exemptions from information reporting and backup withholding requirements
that may apply to payments by the Companies to LBI under this Purchase
Agreement.
SECTION 6. Survival of Representations, Warranties and
Agreements. Notwithstanding any investigation made by any party to this Purchase
Agreement, all covenants,
<PAGE> 13
agreements, representations and warranties made by each of the Companies and LBI
and LBF herein shall survive the execution of this Purchase Agreement, the
Agreement, the delivery to LBI of the Purchased Shares being purchased and the
payment therefor and the consummation of any other transactions contemplated
hereby or thereby.
SECTION 7. Registration of the Shares; Compliance with the
Securities Act.
7.1 Registration Procedures and Expenses. The Companies shall:
(a) within 45 days after the Closing, prepare and file
with the Commission a Resale Registration Statement (as defined below) covering
the resale by LBI, from time to time, of a number of Shares equal to the number
of Purchase Shares in any of the manners specified in the Agreement (the
"Initial Resale Registration Statement") and use its best efforts to obtain
effectiveness of the Initial Resale Registration Statement within 90 days after
the Closing Date. If the total number of Shares exceeds the number of Shares
covered by the Initial Resale Registration Statement, then the Companies shall
promptly prepare and file with the Commission such additional Resale
Registration Statement or Statements as shall be necessary to cover the resale
by LBI of such excess Shares in the same manner as contemplated by the Initial
Registration Statement for the Shares covered thereby (each, an "Additional
Resale Registration Statement"); provided that, except as provided for in
Section 5 of the Agreement, prior to issuing any such excess Shares to LBI, the
Companies shall cause such Resale Registration Statement to have become
effective. For purposes of this Purchase Agreement, "Resale Registration
Statement" means the Initial Resale Registration Statement, any Additional
Resale Registration Statement or any other registration statement under the
Securities Act on Form S-3 covering the resale by LBI of up to a specified
number of Shares, filed and maintained continuously effective by the Companies
pursuant to the provisions of this Section 7, including the prospectus contained
therein (the "Resale Prospectus"), any amendments and supplements to such
registration statement, including all post-effective amendments thereto, and all
exhibits and all material incorporated by reference into such registration
statement;
(b) use commercially reasonable best efforts to prevent
the issuance of any order suspending the effectiveness of such Resale
Registration Statement or Resale Prospectus or suspending the qualification (or
exemption from qualification) of any of the Shares in any jurisdiction;
(c) prepare and file with the Commission such amendments
and supplements to each Resale Registration Statement and the Resale Prospectus
as may be reasonably requested by LBI in order to accomplish the public resale
or other disposition of any Shares in accordance with the terms of the
Agreement, or as may be necessary to keep such Resale Registration Statement
effective until the date on which either (i) the Shares covered thereby have
been sold by or on behalf of LBI or (ii) LBI has advised the Companies that they
no longer require that such Resale Registration Statement remain effective;
(d) furnish to LBI with respect to the Shares registered
under any
<PAGE> 14
Resale Registration Statement such reasonable number of copies of Resale
Prospectuses, including any supplements and amendments thereto, in order to
facilitate the public sale or other disposition of all or any of the Shares by
LBI;
(e) in order to facilitate the public sale or other
disposition of all or any of the Shares by LBI, furnish to LBI with respect to
the Shares registered under any Resale Registration Statement, in connection
with any such public sale or other disposition, an opinion of counsel to the
Companies covering such matters as are customarily covered by legal opinions
delivered in connection with secondary public offerings of equity securities and
such other documents as LBI may reasonably request (including a comfort letter
from the Companies' independent certified public accountants and a certificate
of bring down of representations and warranties in connection with sale of
Shares under the Resale Registration Statement) (collectively, the "Resale
Closing Documents") (i) upon the effectiveness of the Initial Resale
Registration Statement, (ii) upon the commencement of any continuous offering of
Shares under any Resale Registration Statement and on the last day of every
30-day period thereafter for the duration of such continuous offering, and (iii)
in the event the public sale or other disposition of the Shares is effected
through an underwritten offering or a block trade, as of the date of the closing
of any sale of such Shares or date of pricing with respect to the sale of such
Shares, as applicable upon prior notice from LBI to the Companies as to which
date applies; provided, however, that the Companies shall not be required to
deliver any Resale Closing Documents in the event that the aggregate offering
price of any Shares offered in a public sale or other distribution is less than
$20,000,000, unless as of the date of any such public sale or other
distribution, the Companies have not made any previous delivery of Resale
Closing Documents to LBI in connection with any other public sale or other
disposition of the Shares;
(f) use its reasonable best efforts to prevent the
happening of any event that would cause any such Resale Registration Statement
to contain a material misstatement or omission or to be not effective and
continuously useable for resale of the Shares during the period that such Resale
Registration Statement is required to be effective and useable;
(g) file documents required of the Companies for normal
blue sky clearance in states specified in writing by LBI, provided, however,
that the Companies shall not be required to qualify to do business or consent to
service of process in any jurisdiction in which it is not now so qualified or
has not so consented;
(h) bear all reasonable expenses in connection with the
procedures in paragraphs (a) through (g) of this Section 7.1 and Section 7.2(a)
and the registration of the Shares pursuant to each Resale Registration
Statement, which expenses shall not include brokerage or underwriting
commissions and taxes of any kind (including without limitation, transfer
bonuses) with respect to any disposition, sale or transfer of Shares sold by LBI
and for any legal, accounting and other expenses incurred by LBI which expenses
shall be borne by LBI; and
(i) promptly file any necessary listing applications or
amendments to existing listing applications to cause any Shares registered under
any Resale Registration Statement to be listed or admitted to trading, on or
prior to the effectiveness of any Resale
<PAGE> 15
Registration Statement, on the New York Stock Exchange or any national stock
exchange or automated quotation system on which the Paired Shares are then
listed or traded.
7.2 Covenants in Connection With Registration.
(a) Each of the Companies hereby covenants with LBI that
(i) such Company shall not file any Resale Registration Statement or Resale
Prospectus relating to the resale of the Shares or any amendment or supplement
thereto, unless a copy thereof shall have been first submitted to LBI and LBI
did not object thereto in good faith (provided that if LBI does not object
within two business days of receiving any such material, there shall be deemed
to have been no objection thereto); (ii) such Company shall immediately notify
LBI of the issuance by the Commission of any stop order suspending the
effectiveness of such Resale Registration Statement or the initiation of any
proceedings for such purpose; (iii) such Company shall make every reasonable
effort to promptly obtain the withdrawal of any order suspending the
effectiveness of such Resale Registration Statement at the earliest possible
moment; (iv) such Company shall immediately notify LBI of the receipt of any
notification with respect to the suspension of the qualification of the Shares
for sale under the securities or blue sky laws of any jurisdiction or the
initiation of any proceeding for such purpose; and (v) such Companies shall as
soon as practicable notify LBI in writing of the happening of any event or the
failure of any event to occur or the existence of any fact or otherwise which
results in any Resale Registration Statement, any amendment or post-effective
amendment thereto, the Resale Prospectus, any prospectus supplement, or any
document incorporated therein by reference containing an untrue statement of a
material fact or omitting to state a material fact required to be stated therein
or necessary to make the statements therein not misleading and promptly shall
prepare, file with the Commission and promptly furnish to LBI a reasonable
number of copies of a supplement or post-effective amendment to such Resale
Registration Statement or the Resale Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Shares, the Resale Prospectus will not
contain an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading provided that this
clause (v) shall in no way limit the Companies' right to suspend the right of
LBI to affect sales under the Resale Registration Statement during any Black-out
Period as specified in Section 5.2 above.
(b) LBI shall cooperate with the Companies in connection
with the preparation of the Resale Registration Statement and shall furnish to
the Companies, in a timely manner, all information in their possession or
reasonably obtainable by them and necessary for inclusion in the Resale
Registration Statement (including, without limitation, information relating to
the ownership by each of them of Paired Shares and the plan of distribution).
(c) LBI shall notify the Companies at least two business
days prior to the earlier of the date on which they intend to commence effecting
any resales of Shares under a Resale Registration Statement or the date of
pricing with respect to the public sale or other disposition of any Shares under
a Resale Registration Statement effected through an underwritten offering or
block trade and if the Companies do not, within such two day period, advise LBI
of the existence of any facts of the type referred to in Section 7.2(a) above,
then the Companies
<PAGE> 16
shall be deemed to have certified and represented to LBI that no such facts then
exist and LBI may rely on such certificate and representations in making such
sales. The preceding sentence shall in no way limit the Companies' obligations
under Section 7.2(a) above.
(d) the Companies shall cooperate with LBI to facilitate
the timely preparation and delivery of certificates representing the Shares to
be sold under the Resale Registration Statements and not bearing any restrictive
legends and in such denominations and registered in such names as LBI may
reasonably request at least two business days prior to the closing of any sale
of the Shares.
(e) If the Companies notify LBI that they wish LBI to
effect an underwritten offering or block trade of Shares, (i) LBI shall have the
right to select the managing underwriters or the executing dealer, as the case
may be, who shall be subject to the approval of the Companies, which approval
shall not be unreasonably withheld (it being understood that LBI is, in any
event, reasonably acceptable to the Companies for this purpose) and (ii) the
Companies shall (A) enter into written agreements (including underwriting
agreements) as are customary in underwritten offerings or block trades, as the
case may be; (B) obtain an opinion of counsel to the Companies and other
entities reasonably requested by the underwriters or the executing dealer, as
the case may be, and updates thereof (which may be in the form of a reliance
letter) in form and substance reasonably satisfactory to the managing
underwriters or the executing dealer, as the case may be, and LBI addressed to
the underwriters or the executing dealer, as the case may be, and LBI covering
the matters customarily covered in opinions requested in underwritten offerings
or block trades, as the case may be, and such other matters as may be reasonably
requested by such underwriters or the executing dealer, as the case may be, and
LBI (it being agreed that the matters to be covered by such opinion may be
subject to customary qualifications and exceptions); (C) obtain "cold comfort"
letters and updates thereof in form and substance reasonably satisfactory to the
managing underwriters or the executing dealer, as the case may be, and LBI from
the independent certified public accountants of the Companies (and, if
necessary, other independent certified public accountants of any affiliate or
Subsidiary of either of the Companies or of any business acquired by the
Companies for which financial statements and financial data are, or are required
to be, included in the Resale Registration Statement), addressed to each of the
underwriters or the executing dealer, as the case may be, ad, if permitted by
applicable accounting rules and statements, LBI, such letters to be in customary
form and covering matters of the type customarily covered in "cold comfort"
letters in connection with underwritten offerings or block trades, as the case
may be, and such other matters as may be reasonably requested by such
underwriters or the executing dealer, as the case may be, in accordance with
Statement on Auditing Standards No. 72; (D) ensure that any underwriting
agreement contains indemnification provisions and procedures not less favorable
than that included herein (or such other provisions and procedures acceptable to
LBI and the underwriters) with respect to all parties to be indemnified pursuant
to said section (including, without limitation, the underwriters and LBI); and
(E) deliver such other documents as are customarily delivered in connection with
closing of underwritten offerings or block trades, as the case may be.
(f) The Companies will make reasonably available for
inspection by LBI, any underwriter, agent or broker-dealer participating in any
disposition of Shares such
<PAGE> 17
information and corporate documents as shall be reasonably necessary to enable
them to exercise any applicable due diligence responsibilities for the purposes
of applicable law, and cause the officers of the Companies and their
"significant subsidiaries" (as that term is defined in Regulation S-X) to be
available, upon request at least two business days in advance, to respond to
questions relevant to such due diligence inquiries.
(g) The parties hereby acknowledge and agree that the
Companies may suspend the right of LBI to effect sales of the Paired Shares
through use of the Resale Prospectus forming a part of a Resale Registration
Statement for a period of 90 days (or fewer if LBI are notified to that effect
by the Companies) in connection with a public offering or a sale pursuant to
Rule 144A under the Securities Act (an "Offering") of Paired Shares (or shares
of capital stock convertible into Paired Shares) by the Companies (a "Suspension
Period"); provided that (i) there shall be no more than three Suspension Periods
during any 12-month period, and (ii) the total number of days of all Suspension
Periods during any 12-month period shall not exceed 120. LBI hereby covenants
that it will not sell any Paired Shares pursuant to said Resale Prospectus
during a Suspension Period which shall commence at the time the Companies give
LBI written notice of such Suspension Period; provided further, that no
Suspension Period shall be applicable or in any way restrict LBI after the
occurrence of the Maturity Date or a Price Decline Termination Event. The
ability of the Companies to suspend the right of LBI to effect sales of the
Paired Shares pursuant to this Section 7.2(g) shall not be construed to limit
the Companies' rights under Section 5.2.
7.3 Extension of Required Effectiveness. In the event that the
Companies shall give any notice required by Section 7.2(a)(v) hereof, the period
during which the Companies are required to keep such Resale Registration
Statement effective and useable shall be extended by the number of days during
the period from and included in such Black-out Period.
7.4 Transfer of Shares After Registration. LBI agrees that it
will not effect any disposition of the Shares or its right to purchase the
Shares that would constitute a sale within the meaning of the Securities Act or
pursuant to any applicable state securities or blue sky laws expect as
contemplated in each Resale Registration Statement referred to in Section 7.1 or
except pursuant to any exemption from the registration requirements of the
Securities Act (including, without limitation, Rule 144 promulgated thereunder
and any successor thereto) and that it will promptly notify the Companies of any
changes in the information set forth in any such Resale Registration Statement
regarding LBI or its plan of distribution.
7.5 Indemnification. For the purpose of this Section 7.5 only,
the term "Resale Registration Statement" shall include any final prospectus,
exhibit, supplement or amendment included in or relating to any Resale
Registration Statement referred to in Section 7.1.
(a) Indemnification by the Companies. Each of the
Companies agrees, severally and not jointly, to indemnify and hold harmless LBI
and each person, if any, who controls LBI within the meaning of Section 15 of
the Securities Act, and any director, officer,
<PAGE> 18
employee or affiliate thereof, as follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in any Resale Registration
Statement (or any amendment thereto), including the information deemed to be
part of any Resale Registration Statement pursuant to Rule 430A(b) of the 1933
Act Regulations, if applicable, or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any related Resale
Prospectus or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the Companies shall not be required under this subsection (i) to indemnify
LBI with respect to any loss, liability, claim, damage or expense to the extent
such loss, liability, claim, damage or expense arises out of (A) any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Companies by
LBI specifically for inclusion in any Resale Registration Statement or any
related Resale Prospectus or (B) any statement or omission in any Resale
Prospectus that is corrected in any subsequent Resale Prospectus that was
delivered to LBI prior to the pertinent sale or sales by LBI and not delivered
in connection with such sale, when such delivery was required by the Securities
Act or any state securities law;
(ii) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation or of any investigation or
proceeding by any governmental agency or body, commenced or threatened, or of
any claim whatsoever for which indemnification is provided under subsection (i)
above, only if such settlement is effected with the written consent of the
Companies; and
(iii) against any and all expense whatsoever
(including, without limitation, the fees and other charges of counsel chosen by
you) reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceedings by any governmental agency or
body, commenced or threatened, or any claim whatsoever for which indemnification
is provided under subsection (i) above, to the extent that any such expense is
not paid under subsection (i) (other than expenses not paid pursuant to the
proviso to subsection (i)) or (ii) above (other than any settlement effected
without the written consent of the Companies).
(b) Indemnification by LBI. LBI agrees to indemnify and
hold harmless the Companies, and each person, if any, who controls the Companies
within the meaning of Section 15 of the Securities Act, and any trustee,
director, officer, employee or affiliate thereof, against any and all loss,
liability, claim, damage and expense described in the indemnity contained in
subsection (a) of this Section 7.5, as incurred, but only with respect to (A)
untrue statements or omissions, or alleged untrue statements or omissions, made
in any Resale
<PAGE> 19
Registration Statement (or any amendment thereto) or any related Resale
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Companies by LBI
specifically for inclusion in any Resale Registration Statement or any related
Resale Prospectus or (B) any statement or omission in any Resale Prospectus that
is corrected in any subsequent Resale Prospectus that was delivered to LBI prior
to the pertinent sale or sales by LBI and not delivered in connection with such
sale, when such delivery was required by the Securities Act or any state
securities law.
(c) Proceedings. Each indemnified party shall give notice
as promptly as reasonably practicable to each indemnifying party of any action
commenced against it in respect of which indemnity may be sought hereunder, but
failure to so notify an indemnifying party shall not relieve such indemnifying
party from any liability hereunder to the extent it is not materially prejudiced
as a result thereof and in any event shall not relive it from any liability
which it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of such
action. If it so elects within a reasonable time after receipt of such notice,
an indemnifying party, jointly with any other indemnifying parties receiving
such notice, may assume the defense of such action with counsel chosen by it and
reasonably acceptable to the indemnified parties defendant in such action,
unless such indemnified parties reasonably object to such assumption on the
ground that the named parties to any such action (including any impleaded
parties) include both such indemnified parties and an indemnifying party, and
such indemnified parties reasonably believe that there may be legal defenses
available to them which are different from or in addition to those available to
such indemnifying party. If an indemnifying party assumes the defense of such
action, the indemnifying parties shall not be liable for any fees and expenses
of counsel for the indemnified parties incurred thereafter in connection with
such action. In no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to any local counsel) separate
from their own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances. No indemnifying
party shall, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 7.5 (whether
or not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent (i) includes an unconditional release of
each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 7.5(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance
<PAGE> 20
with such request prior to the date of such settlement.
(d) Contribution. If the indemnification provided for in
this Section 7.5 is required by its terms but is for any reason held to be
unavailable to or otherwise insufficient to hold harmless an indemnified party
under paragraph (a), (b) or (c) of this Section 7.5 in respect of any losses,
claims, damages, liabilities or expenses referred to herein, then each
applicable indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of any losses, claims, damages, liabilities
or expenses referred to herein, (i) in such proportion as is appropriate to
reflect the relative benefits received by the Companies and LBI from the
purchase and sale of the Shares or (ii) if the allocation provided in clause (i)
is not permitted by applicable law, in such proportion or as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Companies and LBI in connection with the statements or
omissions or inaccuracies in the representations and warranties in this Purchase
Agreement which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The respective
relative benefits received by the Companies on the one hand and LBI on the other
shall be deemed to be in the same proportion as the amount paid by LBI to the
Companies pursuant to this Purchase Agreement and the Agreement and the net
proceeds retained or discounts received by LBI from the transactions
contemplated by this Purchase Agreement and the Agreement. The relative fault of
the Companies and LBI shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or the alleged omission to state a material fact or the inaccurate or
the alleged inaccurate representation and/or warranty relates to information
supplied by the Companies or by LBI and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in paragraph (c) of this Section
7.5 any reasonable legal or other fees or expenses incurred by such party in
connection with investigating or defending any action or claim. The provisions
set forth in paragraph (c) of this Section 7.5 with respect to notice of
commencement of any action shall apply if a claim for contribution is to be made
under this paragraph (d); provided, however, that no additional notice shall be
required with respect to any action for which notice has been given under
paragraph (c) for purposes of indemnification. The Companies and LBI agree that
it would not be just and equitable if contribution pursuant to this Section 7.5
were determined solely by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in this paragraph (d). Notwithstanding the provisions of this Section 7.5,
LBI shall not be required to contribute any amount in excess of the amount by
which the aggregate net proceeds retained or discounts received by LBI from the
transactions contemplated hereby and by the Agreement exceeds the amount of any
damages that LBI has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(e) Relationship Between the REIT and OPCO. The
obligations set forth in this Section 7.5 shall in no way limit the ability of
the Companies to allocate liability
<PAGE> 21
between themselves.
7.6 Information Available. So long as any Resale Registration
Statement covering the resale of any shares owned by LBI or LBF is effective,
the Companies will furnish to LBI:
(a) as soon as practicable after available, one copy of
(i) their Joint Annual Report to Shareholders, (ii) their Joint Annual Report on
Form 10-K, (iii) their Joint Quarterly Reports to Shareholders, (iv) their Joint
Quarterly Reports on Form 10-Q, (v) a full copy of the particular Resale
Registration Statement covering the Shares (the foregoing, in each case,
excluding exhibits) and (iv) upon request, any or all other filings made with
the Commission by the Companies; and
(b) upon the reasonable request of LBI, a reasonable
number of copies of the Resale Prospectuses to supply to any other party
requiring such Resale Prospectuses;
and the Companies, upon the reasonable request of LBI, will meet with LBI or a
representative thereof at the Companies' headquarters to discuss all information
relevant for disclosure in such Resale Registration Statement covering the
Shares, subject to appropriate confidentiality limitations.
7.7 Remedies. The Companies and LBI acknowledge that there
would be no adequate remedy at law if the Companies fail to perform any of their
obligations under this Section 7, and accordingly agree that LBI, in addition to
any other remedy to which it may be entitled at law or in equity, shall be
entitled to compel specific performance of the obligations of the Companies
under this Section 7, and the Companies hereby waive the defense that a remedy
at law would be adequate.
7.8 Notice Requirement. The REIT and the OPCO each covenants
and agrees that it will notify LBI at any time it becomes aware that as a result
of a change in the REIT's and the OPCO's capital stock, LBI beneficially holds
more than 4.9% of the REIT's and the OPCO's Paired Shares.
SECTION 8. Broker's Fee. Other than any fees payable under or
in connection with the Agreement, each of the parties hereto represents that, on
the basis of any actions and agreements by it, there are no brokers or finders
entitled to compensation in connection with the sale or issuance of the Shares
to LBI.
SECTION 9. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified airmail, by telegram or telecopy or sent by nationally
recognized overnight express courier postage prepaid, and shall be deemed given
when so mailed or for telecopies, when transmitted and receipt confirmed, and
shall be delivered as addressed as follows:
(a) if to the Companies, to:
<PAGE> 22
Starwood Hotels & Resorts
Starwood Hotels & Resorts Worldwide, Inc.
2231 East Camelback Road
Suite 400 and 410
Phoenix, Arizona 85016
Attention: Ronald C. Brown/Alan M. Schnaid
Telecopier: 602-852-0115
with copies so mailed to:
Sidley & Austin
555 West Fifth Street
Suite 4000
Los Angeles, California 90013
Attention: Sherwin L. Samuels
Telecopier: 213-896-6600
or to such other person at such other place as the Companies shall designate to
LBI in writing; and
(b) if to LBI or LBF, to:
Lehman Brothers Inc.
3 World Financial Center, 6th Floor
New York, New York 10285
Attention: Mr. Mark Sanborn
Telecopier: 212-528-6678
SECTION 10. Changes. This Purchase Agreement may not be
modified or amended except pursuant to an instrument in writing signed by each
of the Companies and By each of LBI and LBF.
SECTION 11. Headings. The headings of the various sections of
this Purchase Agreement have been inserted for convenience of reference only and
shall not be deemed to be part of this Purchase Agreement.
SECTION 12. Severability. In case any provision contained in
this Purchase Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
SECTION 13. Successors and Assigns. The Companies or LBI may
assign any
<PAGE> 23
of their respective rights, or delegate any of their respective duties under
this Purchase Agreement, if the other party first consents to such assignment in
writing. This Purchase Agreement shall inure to the benefit of and be binding
upon (i) the successors of LBI and (ii) any assignee or transferee of rights and
obligations of LBF pursuant to the Agreement and any assignee or transferee of
rights and obligations of LBI pursuant to this Purchase Agreement. A transferee
of LBF pursuant to the Agreement and a transferee of LBI pursuant to this
Purchase Agreement, and, in each case, any successor, assignee, or transferee,
shall be held subject to all of the terms of this Purchase Agreement.
SECTION 14. Governing Law; Jurisdiction. This Purchase
Agreement shall be governed by and construed in accordance with the laws of the
State of New York without regard to the conflicts of law principles thereof.
SECTION 15. Transfer to Affiliate. Notwithstanding anything
herein to the contrary, LBI may transfer the Purchase Shares to any affiliate of
LBI, together with all of LBI's rights hereunder, provided that (i) such
affiliate shall be an "accredited investor" within the meaning of Rule 501
(a)(1), (2), (3) or (7) of Regulation D promulgated under the Securities Act,
and (ii) such transfer shall be consistent with the investment representations
set forth at Section 5.1 hereto. In the event of such an assignment, such
affiliate shall in all respects be substituted for LBI as a party hereto.
SECTION 16. Counterparts. This Purchase Agreement may be
executed in two or more counterparts, each of which shall constitute an
original, but all of which, when taken together, shall constitute but one
instrument, and shall become effective when one or more counterparts have been
signed by each party hereto and delivered to the other parties.
SECTION 17. Recourse. LBI acknowledges and agrees that the
name "Starwood Hotels & Resorts" is a designation of the 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, June 19, 1995, January 2, 1998 and February 23, 1998 and as the same
may be further amended from time to time, and all persons dealing with the REIT
shall look solely to the REIT's assets for the enforcement of any claims against
the REIT, as the Trustees, officers, agents and security holders of the REIT
assume no personal liability for obligations entered into on behalf of the REIT,
and their respective individual assets shall not be subject to the claims of any
person relating to such obligations.
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have caused this Purchase
Agreement to be executed by their duly authorized representatives as of the day
and year first above written.
STARWOOD HOTELS & RESORTS
By:
Name:
Title:
STARWOOD HOTELS & RESORTS
WORLDWIDE, INC.
By:
Name:
Title:
LEHMAN BROTHERS INC.
By:
Name:
Title:
LEHMAN BROTHERS FINANCE S.A., solely
with respect to the covenants, representation and
warranties set forth in Sections 5 and 6, which are
hereby made mutatis mutandis by LBF to the
Companies
By:
Name:
Title:
<PAGE> 25
Appendix I
(one of two)
STOCK CERTIFICATE QUESTIONNAIRE
Pursuant to Section 5 of the Purchase Agreement, please
provide us with the following information:
1. The exact name that your Shares are to be registered
in (this is the name that will appear on your stock
certificate(s)). You may use a nominee name if
appropriate:
2. All relationships between Lehman Brothers and the
Registered Holder listed in response to Item 1 above:
3. The mailing address of the Registered Holder listed
in response to Item 1 above:
4. The Social Security Number or Tax Identification
Number of the Registered Holder listed in response to
Item 1 above:
<PAGE> 26
Appendix I
(two of two)
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration
Statement, please provide us with the following information:
1. Pursuant to the "Selling Shareholders" section of the
Registration Statement, please state your or your organization's name exactly as
it should appear in the Registration Statement:
2. Please provide the number of shares that you or your
organization (including all affiliates) will own immediately after Closing,
including those Shares purchased by you or your organization (including all
affiliates) pursuant to this Purchase Agreement and those shares purchased by
you or your organization (including all affiliates) through other transactions:
3. Have you or your organization had any position, office or
other material relationship within the past three years with the Company or its
affiliates:
_____ Yes _____ No
If yes, please indicate the nature of any such relationships
below:
<PAGE> 27
Appendix II
Attention:
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
The undersigned, [an officer of, or other person duly
authorized by] ________________________________ hereby certifies that he/she
[fill in official name of individual or institution] [said institution] is the
Purchaser of the shares evidenced by the attached certificate, and as such, sold
such shares on [date] in accordance with Registration Statement number [fill in
the number of or otherwise identify Registration Statement], the Securities Act
of 1933, as amended, and any applicable state securities or blue sky laws and
the requirement of delivering a current prospectus by the Company has been
complied with in connection with such sale.
Print or Type:
NAME OF PURCHASER
(Individual or Institution):
NAME OF INDIVIDUAL
representing Purchaser
(if an Institution)
TITLE OF INDIVIDUAL
representing Purchaser
(if an Institution)
Signature by:
Individual Purchaser
or Individual representing
Purchaser:
<PAGE> 28
EXHIBIT A
FORM OF CLOSING OPINION OF COUNSEL TO THE COMPANY
<PAGE> 29
AGREEMENT
THIS AGREEMENT is made as of the 23rd day of February, 1998, by and
between Starwood Hotels & Resorts (the "REIT"), Starwood Hotels & Resorts
Worldwide, Inc. ("OPCO," and together with the REIT, the "Companies") and Lehman
Brothers Finance S.A. ("LBF"), through its agent Lehman Brothers Inc. ("LBI").
The purpose of this Agreement is to confirm the terms and conditions of
the transaction (the "Transaction") entered into between LBF and the Companies.
IN CONSIDERATION of the mutual representations, warranties and covenants
herein contained, and on the terms and subject to the conditions herein set
forth, the Companies and LBF hereby agree as follows:
Section 1. Definitions. As used in this Agreement, the following terms
shall have the meanings set forth below:
(a) Ability to Settle in Paired Shares. As of the date hereof, the
Companies have not, and after the date hereof, the Companies will not, enter
into any obligation that would contractually prohibit the Companies from
delivering Paired Shares pursuant to Sections 3.2, 4.2 or 5 of this Agreement.
(b) Certain Adjustments to Reference Price or Number of Notional
Shares. In the event of:
(i) a subdivision, consolidation or reclassification of the
Paired Shares, or a free distribution or dividend of any Paired Shares to all
existing holders of Paired Shares by way of bonus, capitalization or similar
issue; or
(ii) a distribution or dividend to all existing holders of
Paired Shares of (A) additional Paired Shares or (B) other share capital or
securities granting right to payment of dividends and/or the proceeds of
liquidation of the Companies equally or proportionally with such payments to
holders of Paired Shares,
an adjustment shall thereupon be effected to the Reference Price and/or the
Notional Shares at the time of such event with the intent that following such
adjustment, the value of this Transaction is economically equivalent to the
value immediately prior to the occurrence of the event causing the adjustment.
(c) Block Sale. Any privately negotiated sales of the Paired Shares
involving at least a block of such security (as defined in Rule 10b-18 under the
Exchange Act).
(d) Business Day. Any day other than a Saturday, Sunday, or any
other day on which banking institutions in the States of Delaware or New York
are not open for business.
<PAGE> 30
(e) Calculation Agent. LBF, whose calculations and determinations
shall be made in a reasonable manner.
(f) Closing Price. The last sale price of the Paired Shares on the
Relevant Exchange on the relevant date.
(g) Commission. The Securities and Exchange Commission.
(h) Compounding Period. Means each period commencing on and
including:
(i) in the case of the first Compounding Period, the Initial
Settlement Date and ending on but excluding the first Reset Date, and
(ii) for each period thereafter, a Reset Date and ending on
(but excluding) the next following Reset Date.
(i) Distribution Amount. Means, on each Reset Date, an amount in
U.S. Dollars equal to:
(i) the sum of all cash distributions paid on a single Paired
Share during the relevant Compounding Period; plus
(ii) an amount representing interest that could have been
earned on such distributions at the USD LIBOR rate having a designated maturity
of three months, plus Spread, for the period from the date that such
distributions would have been received by a holder of a single Paired Share
until such Reset Date.
(j) DRIP Distribution. Sales to any Distribution Reinvestment Plan
now or hereafter established by the Companies, or to any agent acting on behalf
of such Plan, for sale to participants in such Plan.
(k) Effective Date. February 24, 1998.
(l) Exchange Act. The Securities Exchange Act of 1934, as amended.
(m) Exchange Trading Day. Each day on which the Relevant Exchange is
open for trading.
(n) Execution Price. The Closing Price on the Effective Date`.
(o) Gradual Market Distribution. An offering of the Paired Shares
into the existing trading market for outstanding shares of the same class at
other than (i) a fixed price on or through the facilities of a national
securities exchange or (ii) to or through a market maker otherwise than on an
exchange.
<PAGE> 31
(p) Initial Price. Means,
(i) for the Compounding Period ending on the first Reset Date,
an amount in U.S. Dollars equal to $53.875, and
(ii) for each subsequent Reset Date, the Reference Price as
calculated on or adjusted as of the prior Reset Date.
(q) Initial Settlement Date. February 24, 1998.
(r) Interim Settlement Amount. With respect to a given Reset Date,
means the amount by which the Reference Amount minus $5,000,000 exceeds the
product of (x) the Closing Price on such Reset Date and (y) the number of
Notional Shares.
(s) Interim Settlement Shares. The Interim Settlement Amount divided
by the Closing Price on such Reset Date.
(t) Maturity Date. March 1, 1999.
(u) Notional Shares. 1,547,000 Paired Shares, as may be adjusted
from time to time pursuant to Section 1(b), reduced by the number of Settlement
Shares that have been settled prior to the date of calculation pursuant to
Section 3.1 or Section 4.1.
(v) Paired Shares. Units consisting of one share of beneficial
interest, $.01 par value per share, in the REIT and one share of common stock,
par value $.01 per share, of OPCO, which shares are paired and traded as a unit.
(w) Pooled Underwritten Secondary Offering. An underwritten fixed
price offering of Paired Shares, in which the Settlement Shares and other Paired
Shares, which may include the Paired Shares of other selling shareholders and
previously unissued Paired Shares.
(x) Pooling Exit Fee. 50 basis points on the Settlement Amount in
connection with the related Pooled Underwritten Secondary Offering.
(y) Purchase Shares. Paired Shares sold to LBF pursuant to the
Purchase Agreement.
(z) Purchase Agreement. The Purchase Agreement, dated as of February
23, 1998 (the "Purchase Agreement"), among the Companies, LBF and LBI
(aa) Reference Amount. On each Reset Date, the Reference Price
multiplied by the Notional Shares or Settlement Shares, as applicable.
(bb) Reference Price. On each Reset Date, the Reference Price shall
be determined by:
<PAGE> 32
(i) compounding the Initial Price for the previous Compounding
Period at USD LIBOR rate plus Spread for a designated maturity of three months
(Actual/360 day count fraction) to such Reset Date and
(ii) subtracting the Distribution Amount at that date.
(cc) Relevant Exchange. Means, with respect to any Exchange Trading
Day, the principal Stock Exchange on which the Paired Shares are traded on that
day.
(dd) Reset Date. Means, through the final Trade Date, (i) the last
day of each three-month period, beginning on May 31, 1998 (provided, that if
such day is not a Business Day then the Reset Date shall be the next Business
Day), (ii) as to any Settlement Shares, but only as to such Settlement Shares,
the related Trade Date and (iii) as to any Gross Settlement Shares, but only as
to such Gross Settlement Shares, the Exchange Trading Day immediately prior to
the date on which the related Gross Settlement Notice is delivered.
(ee) Securities Act. The Securities Act of 1933, as amended.
(ff) Settlement. Has the meaning set forth in Section 3.1 or Section
4.1, as applicable.
(gg) Settlement Amount. Except as set forth in subsection (iv)
below, the net sales proceeds realized by or on behalf of LBF for all sales of
Paired Shares in connection with any Settlement, calculated as follows:
(i) if the manner of Settlement Sale pursuant to Section 3.1
or 4.1 is an Underwritten Secondary Offering, the Settlement Amount will equal
the gross proceeds realized, net of a negotiated underwriting discount;
(ii) if the manner of Settlement Sale pursuant to Section 3.1
or 4.1 is a Block Sale, the Settlement Amount will equal the gross sales
proceeds realized, net of a negotiated underwriting discount;
(iii) if the manner of Settlement Sale pursuant to Section 3.1
or 4.1 is a Gradual Market Distribution, the Settlement Amount will equal the
gross sales proceeds realized from sales to the market over the period of the
distribution, net of a resale spread of 50 basis points;
(iv) with respect to a given Trade Date, if the manner of
Settlement Sale pursuant to Section 3.1 or 4.1 is a VWAP Sale, the Settlement
Amount will equal the product of (a) the volume weighted average price of the
Paired Shares for such Trade Date and (b) the number of Paired Shares determined
by the Company to be sold by LBF on such Trade Date, net of a resale spread of
50 basis points;
<PAGE> 33
(v) if the manner of Settlement Sale pursuant to Section 3.1
or 4.1 is a DRIP Distribution, the Settlement Amount will equal the gross sales
proceeds realized from sales to any Purchase Agent for a Company Distribution
Reinvestment Plan, net of a resale spread of 50 basis points; and
(vi) if the manner of Settlement Sale pursuant to Section 3.1
or 4.1 is a Pooled Underwritten Secondary Offering, the Settlement Amount will
equal a pro rata share of the gross proceeds realized, net of a negotiated
underwriting discount.
(hh) Settlement Date. The date after each Trade Date on which, in
accordance with standard market practice, any Paired Shares are delivered and
the funds received, in respect of any Settlement in accordance with Section 3.2
or Price Decline Termination Event in accordance with Section 4.2.
(ii) Settlement Shares. The number of Notional Shares which will be
settled on a given Settlement Date pursuant to Section 3.2 or Section 4.2, as
applicable.
(jj) Spread. 175 basis points, subject to adjustment pursuant to
Section 6.3.
(kk) Stock Exchange. Means the New York Stock Exchange, the American
Stock Exchange or NASDAQ.
(ll) Trade Date. Any date on which LBF executes a settlement trade
or trades as part of a Settlement in any of the manners of Settlement Sale set
forth in Section 3.1, pursuant to either Section 3.1 or 4.1.
(mm) Underwritten Secondary Offering. An underwritten fixed price
offering of the Paired Shares.
(nn) USD LIBOR. The London Inter Bank Offered Rate in respect of
U.S. Dollars for the designated maturity as quoted on Page 3750 on the Telerate
Service (or such other page as may replace Page 3750 on that service) as of
11:00 a.m., London time, on the date on which it is to be determined.
(oo) VWAP Sale. A sale of the Paired Shares into the existing
trading market for outstanding shares of the same class effected in order to
approximate the volume weighted average price of the Paired Shares on the
Relevant Exchange on the relevant date.
Section 2. Representations and Warranties. The representations and
warranties of the Companies in Section 4 of the Purchase Agreement are hereby
incorporated by reference herein, and each Company hereby so represents and
warrants to LBF, and the representations and warranties of LBI and LBF in
Section 5 of the Purchase Agreement are hereby incorporated by reference, and
the LBF hereby so represents and warrants to each Company. The provisions of
Section 6 of the Purchase Agreement shall also be applicable to any Paired
Shares delivered to
<PAGE> 34
LBF under this Agreement.
Section 3. Settlement.
3.1 Settlement Sale. On any Reset Date of the type referred to in
clause (i) of the definition of Reset Date, on any Exchange Trading Day that is
one month or two months following such a Reset Date or on any other Exchange
Trading Day (in each case, if other than such a Reset Date, the related
Settlement (as defined below) will include standard market interest breakage
fees), up to and including the Maturity Date, the Companies may give telephonic
notice to LBF to settle, and LBF shall settle, in a commercially reasonable
manner (which may require sales over a period of more than 1 day), all or a
portion of the Notional Shares to be settled on the related Settlement Date or
Dates, as specified by the Companies ("Settlement"), through sale of not less
than the number of Paired Shares, the sale of which would result in a Settlement
Amount equal to 100% of the Reference Amount on the Settlement Date, and not
more than the number of Paired Shares, the sale of which would result in a
Settlement Amount equal, to 105% of the Reference Amount on the Settlement Date,
in any of the manners set forth below, as selected by the Companies:
(i) an Underwritten Secondary Offering (for which the
Companies shall provide at least 21 Business Days prior notice to LBF);
(ii) a Block Sale (for which the Companies shall provide at
least 3 Business Days prior notice to LBF);
(iii) a Gradual Market Distribution (for which the Companies
shall provide at least 1 Business Day prior notice to LBF);
(iv) a VWAP Sale (for which the Companies shall provide at
least 1 Business Day prior notice to LBF);
(v) a DRIP Distribution (for which the Companies shall provide
at least 1 Business Day prior notice to LBF); or
(vi) a Pooled Underwritten Secondary Offering (for which the
Companies shall provide at least 21 Business Day prior notice to LBF).
If the Companies do not specify a manner of sale, a Gradual Market Distribution
shall be used. If the Paired Shares delivered by the Companies to LBF pursuant
to the Purchase Agreement and this Agreement are not, on the applicable trade
date, the subject of an Effective Resale Registration Statement (as defined in
Section 6.3), the Companies may not select a VWAP Sale as the manner of
Settlement. The number of shares sold as part of a VWAP Sale on any Trade Date
shall not be less than 20% of the six-month daily average trading volume of the
Paired Shares as calculated by the Calculation Agent and shall not exceed 40% of
the six-month daily average trading volume of the Paired Shares as calculated by
the Calculation Agent, unless both parties agree otherwise prior to the
execution of any trades in connection with such VWAP Sale. In connection with
any Underwritten Secondary Offering or Block Sale, LBI shall be the sole
<PAGE> 35
manager and underwriter. In connection with a Pooled Underwritten Secondary
Offering, LBF and LBI may, in their discretion, elect to (a) participate in such
offering as a first-tier co-manager on the same terms as all other first-tier
co-managers or (b) receive the Pooling Exit Fee; provided, however, that
regardless of the election of LBF and LBI, all of the Notional Shares shall be
included in the Pooled Underwritten Secondary Offering. Settlement procedures
shall begin as soon as commercially practicable, as determined by LBF, after LBF
receives notice from the Companies and no later than the first Exchange Trading
Day after expiration of the notice period unless otherwise agreed by the
Companies and LBF. At such time as the Companies deliver notice pursuant to this
Section 3.1, the Companies may direct LBF to sell not less than the number of
Paired Shares equal to the number of Settlement Shares, and LBF shall comply
with such direction in a commercially reasonable manner. In connection with a
Gradual Market Distribution, there shall be a separate Settlement Date for each
Trade Date. Final Settlement shall occur no later than the Maturity Date.
However, if the Companies have not given LBF notice to settle by the Maturity
Date, then LBF shall settle the Notional Shares using a Gradual Market
Distribution to begin as soon as commercially practicable, as determined by LBF,
on or after the Maturity Date.
3.2 Settlement.
(a) If, on a Settlement Date, the Settlement Amount is greater
than the Reference Amount, LBF, on such Settlement Date, will pay the Companies
an amount in cash or Paired Shares (valued at the Closing Price on the Trade
Date), at the election of the Companies, equal to the difference.
(b) If the number of Paired Shares sold by LBF pursuant to
Section 3.1 is greater than the number of Settlement Shares, the Companies shall
deliver to LBF, on the Settlement Date, a number of Paired Shares equal to the
difference. If the number of Paired Shares sold by LBF pursuant to Section 3.1
is less than the number of Settlement Shares, LBF shall deliver to the
Companies, on the Settlement Date, a number of Paired Shares equal to the
difference.
(c) In all events, LBF will pay to the Companies an amount
equal to all cash distributions payable to LBF but not paid prior to the
Settlement Date, on a number of Paired Shares equal to the Settlement Shares on
the Business Day after the relevant distribution payment date declared by the
Board of Directors of the REIT and OPCO.
(d) If LBF, in connection with any Settlement, receives net
sales proceeds, as calculated pursuant to the definition of Settlement Amount,
from the sale of Paired Shares prior to the applicable Settlement Date, LBF, on
the Settlement Date, shall pay the Companies an amount in cash representing
interest that could have been earned on such net sales proceeds at the USD LIBOR
rate having a designated maturity of three months, plus Spread, for the period
from the date that such net sales proceeds are received by LBF until such
Settlement Date.
3.3 Gross Share Settlement.
<PAGE> 36
(a) The Companies may elect, in their sole discretion, to
settle all or any portion of the then outstanding Notional Shares by delivering
Paired Shares in exchange for such number of Notional Shares (a "Gross Share
Settlement"). The Companies may effect a Gross Share Settlement by delivering a
written notice (the "Gross Settlement Notice") to LBF indicating the date of
such Gross Share Settlement and the number of then outstanding Notional Shares
subject to such Gross Share Settlement; provided that such notice must be
accompanied by a notice pursuant to Section 3.1 to effect settlement of all
Paired Shares delivered pursuant to this Section 3.3(a). To effect a Gross Share
Settlement, LBF Shall deliver to the Companies the number of Notional Shares
subject to such Gross Share Settlement ("Gross Settlement Shares") against
delivery by the Companies to LBF of a number of Paired Shares equal to the
product of (i) the number of Gross Settlement Shares and (ii) the quotient
obtained by dividing (A) the Reference Price by (B) the Closing Price, in each
case, on the Reset Date for such Gross Settlement Shares. The deliveries set
forth in the immediately preceding sentence shall be made on the Exchange
Trading Day immediately following the date on which the Gross Settlement Notice
is delivered. All Paired Shares delivered to the Companies by LBF as part of a
Gross Share Settlement shall be immediately retired and shall cease to be issued
and outstanding Paired Shares.
(b) For purposes of the Settlement of the Paired Shares
delivered to LBF pursuant to Section 3.3(a), the Settlement Shares shall be
deemed to be equal to the Gross Settlement Shares, provided that for purposes of
Section 3.2(b), the Settlement Shares shall be deemed to be equal to the Paired
Shares delivered to LBF pursuant to Section 3.3(a), and provided further that,
for purposes of Section 3.2(c), with respect to any distribution payable to LBF
on the Gross Settlement Shares but not paid prior to the Settlement Date for
which the record date occurs after the date on which the Gross Settlement Notice
is delivered, the Settlement Shares shall be deemed to be equal to the Paired
Shares delivered to LBF pursuant to Section 3.3(a).
(c) The amount of any distribution referred to in clause (i)
of the definition of Distribution Amount for which the record date occurs after
a Gross Share Settlement with respect to the Paired Shares delivered to LBF
pursuant to Section 3.3 shall be multiplied by the quotient obtained in clause
(ii) of Section 3.3(a).
Section 4. Price Decline Termination Event.
4.1 Price Decline Termination Event Sale. If the Closing Price on
any Exchange Trading Day falls below any Termination Price listed in the
following schedule ("Price Decline Termination Event"), LBF will, at its
discretion, in a commercially reasonable manner (which may require sales over a
period of more than 1 day) following notice to the Companies, settle the
percentage of the Notional Shares indicated in the table below ("Settlement")
through sale of not less than the number of Paired Shares, the sale of which
would result in a Settlement Amount equal to 100% of the Reference Amount on the
Settlement Date, and not more than the number of Paired Shares, the sale of
which would result in a Settlement Amount equal to 105% of the Reference Amount
on the Settlement Date, in any of the manners specified in Section 3.1,
<PAGE> 37
as specified by the Companies:
<TABLE>
<CAPTION>
Percentage of Initial Notional Termination Price
Shares to be Settled
- --------------------------- -----------------
<S> <C>
25% $37.7125
50% $35.0188
75% $33.6719
100% $32.3250
</TABLE>
Settlement procedures shall commence on the date specified by LBF.
4.2 Price Decline Termination Event Settlement.
(a) If, on the Settlement Date, the Settlement Amount is
greater than the Reference Amount, LBF, on the Settlement Date, will pay the
Companies an amount in cash or Paired Shares (valued at the Closing Price on the
Trade Date), at the election of the Companies, equal to the difference.
(b) If the number of Paired Shares sold by LBF pursuant to
Section 4.1 is greater than the number of Settlement Shares, the Companies shall
deliver to LBF, on the Settlement Date, a number of Paired Shares equal to the
difference. If the number of Paired Shares sold by LBF pursuant to Section 4.1
is less than the number of Settlement Shares, LBF shall deliver to the
Companies, on the Settlement Date, a number of Paired Shares equal to the
difference.
(c) In all events, LBF will pay to the Companies an amount
equal to all cash distributions payable to LBF but not paid prior to the
Settlement Date, on a number of Paired Shares equal to the Settlement Shares on
the Business Day after the relevant distribution payment date declared by the
Boards of Directors of the REIT and OPCO.
(d) If LBF, in connection with any Settlement, receives net
sales proceeds, as calculated pursuant to the definition of Settlement Amount,
from the sale of Paired Shares prior to the applicable Settlement Date, LBF, on
the Settlement Date, shall pay the Companies an amount in cash representing
interest that could have been earned on such net sales proceeds at the USD LIBOR
rate having a designated maturity of three months, plus Spread, for the period
from the date that such net sales proceeds are received by LBF until such
Settlement Date.
Section 5. Interim Settlements. Within 5 Business Days following each
Reset Date of the type referred to in clause (i) of the definition of Reset
Date, the Companies shall (i) deliver the Interim Settlement Amount, if any, in
Interim Settlement Shares to LBF. Interim Settlement Shares shall be the subject
of a registration statement covering any sale of such Interim
<PAGE> 38
Settlement Shares by LBI that has been declared effective under the Securities
Act by the Commission (an "Effective Registration Statement"). Interim
Settlement Shares shall be registered in the stock register of the Companies as
instructed by LBF and shall be held by LBI or a custodian or depository
designated by LBI. If the Companies are unable to deliver Interim Settlement
Shares in accordance with the preceding sentence, the Companies shall deliver
"restricted" Interim Settlement Shares that are not the subject of an Effective
Registration Statement in an amount equal to the Interim Settlement Amount. If
the Interim Settlement Shares are not the subject of an Effective Registration
Statement, the Companies shall deliver additional Interim Settlement Shares
equal to 20% of the Interim Settlement Shares. At such time as the Interim
Settlement Shares are the subject of an Effective Registration Statement, the
Companies may elect to have returned all additional Interim Settlement Shares
delivered pursuant to the preceding sentence. On any Reset Date, if Interim
Settlement Shares are held by LBF, LBF shall deliver to the Companies within
five (5) Business Days after such Reset Date, the amount in Interim Settlement
Shares by which the amount in Interim Settlement Shares held by LBF (valued at
the Closing Price on such Reset Date) plus any cash amounts in the collateral
account exceeds the Interim Settlement Amount (or 120% of the Interim Settlement
Amount, in the event that LBF holds restricted Interim Settlement Shares that
are not the subject of an Effective Registration Statement). Distributions on
the Interim Settlement Shares will be deposited in a collateral account at LI or
a custodian or depositary designated by LBI. All Interim Settlement Shares will
be, when delivered, duly authorized, validly issued, fully paid and
non-assessable. Interim Settlement Shares shall not be voted by LBF or LBI. All
distributions received in respect of the Interim Settlement Shares shall be held
in the collateral account at LBI or a depositary designated by LBI. The cash
amounts in the collateral account will be immediately returned to the Companies
by LBF, but should LBF fail to return any cash amounts in the collateral
account, such cash amounts will earn interest at the USD LIBOR rate having a
designated maturity of three months. Upon final Settlement, LBF shall
immediately release all claims to cash held in the collateral account, if any
(including interest earned thereon), and Interim Settlement Shares and deliver
such amounts and all Interim Settlement Shares to the Companies.
Section 6. Certain Covenants and Other Provisions.
6.1 Par Value. LBF shall pay to the Companies $.01 par value per
share for each share comprising a Paired Share delivered to LBF pursuant to this
Agreement, including any Interim Settlement Shares.
6.2 Allocation of Payment and Deliveries. As between the REIT and
OPCO, any delivery of, or payments attributable to, the REIT portion of Paired
Shares pursuant to this Agreement shall be made to or by the REIT, and any
delivery of, or payments attributable to, the OPCO portion of Paired Shares
pursuant to this Agreement shall be made to or by OPCO. When making any payment
to the Companies pursuant to this Agreement, LBF shall allocate such payment
between the REIT and OPCO in the manner specified by the Companies.
6.3 Resale Registration Statement. The Companies shall file a resale
registration statement covering any resales of Paired Shares delivered by the
Companies to LBF
<PAGE> 39
pursuant to this Agreement and the Purchase Agreement (a "Resale Registration
Statement") within 45 Business Days of the Closing Date and the Companies shall
use their best efforts to obtain effectiveness of such Resale Registration
Statement within 90 Business Days of the Closing Date. If the Paired Shares
delivered by the Companies to LBF pursuant to the Purchase Agreement are not the
subject of a Resale Registration Statement that has been declared effective
under the Securities Act by the Commission (an "Effective Resale Registration
Statement") within 90 Business Days of the Closing Date, the Spread shall
increase, retroactively effective commencing on the Initial Settlement Date, to
the Spread plus 125 basis points. At such time as the Purchase Shares are the
subject of an Effective Resale Registration Statement, the Spread shall be
reduced, from and after such time, to the Spread. The Companies further agree
that they will cause any Resale Registration Statement to remain in effect until
the earliest of the date on which (i) the Notional Shares plus all of the
Interim Settlement Shares and any other Paired Shares delivered by the Companies
to LBF pursuant this Agreement have been sold by or on behalf of LBF, or (ii)
LBF has advised the Companies that it no longer requires that such registration
be effective. The provisions of Section 5.2 and Section 7.2 of the Purchase
Agreement shall be deemed to apply to any Resale Registration Statement filed by
the Companies pursuant to this Agreement.
6.4 Delivery of Paired Shares. Each Company covenants and agrees
with LBF that Paired Shares delivered by the Companies pursuant to settlement
events in accordance herewith will be duly authorized, validly issued, fully
paid and nonassessable. The issuance of such Paired Shares will not require the
consent, approval, authorization, registration, or qualification of any
government authority, except such as shall have been obtained on or before the
delivery date to LBF in connection with any registration statement filed with
respect to any Paired Shares. Each party agrees that the Companies shall not
deliver Paired Shares to LBF or any other person in connection with an Interim
Settlement or the final Settlement until such time as such delivery would not
cause LBF or any other person to violate the "Ownership Limit" set forth in the
Amended and Restated Declaration of Trust of the REIT or the Articles of
Amendment and Restatement of OPCO, in each case, as in effect on the date
hereof.
6.5 Securities Law Compliance. Each party agrees that it will
comply, in connection with this Transaction and all related or contemporaneous
sales and purchases of the Companies' Paired Shares, with the applicable
provisions of the Securities Act, the Exchange Act and the rules and regulations
thereunder.
6.6 Regulatory Compliance. Each party agrees that if the delivery of
Paired Shares upon settlement is subject to any restriction imposed by a
regulatory authority, it shall not be an event of default, and the parties will
negotiate in good faith a procedure to effect settlement of such Paired Shares
in a manner which complies with any relevant rules of such regulatory authority
and which is satisfactory in form and substance to their respective counsel,
subject to Section 6.2 of this Agreement and Section 7 of the Purchase
Agreement. Each party further agrees that any sale pursuant to Section 3.1 may
be delayed or postponed if, in LBF's reasonable judgement, such delay or
postponement is necessary to comply with the requirements of applicable law or
regulation; provided, however, that LBF will act in good faith to end such delay
or postponement or otherwise effect such sale on a reasonably timely basis in a
manner which
<PAGE> 40
complies with any such applicable law or regulation and which is satisfactory in
form and substance to its respective counsel.
6.7 Settlement Transfer. All settlements shall occur through DTC or
any other mutually acceptable depository.
6.8 Trading Authorization. The following individuals and/or any
individual authorized in writing by the respective officers of the Companies are
authorized by the Companies to provide trading instructions to LBF with regard
to this transaction:
Ronald C. Brown
2231 E. Camelback Road
Suite 410
Phoenix, Arizona 85016
and
Richard Smith
2231 E. Camelback Road
Suite 400
Phoenix, Arizona 85016
6.9 Specific Performance. The parties acknowledge and agree that the
failure of the Companies or LBF to deliver Paired Shares in accordance with the
provisions hereof would result in damage to the other party that could not be
adequately compensated by a monetary award. The parties therefore agree that, if
either party fails to deliver Paired Shares in accordance with the provisions
hereof, the other party may, in addition to all other remedies, seek an order of
specific performance from a court of appropriate jurisdiction.
6.10 Recourse. LBF acknowledges and agrees that the name "Starwood
Hotels & Resorts" is a designation of the 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, June
19, 1995, January 2, 1998 and February 23, 1998 and as the same may be further
amended from time to time, and all persons dealing with the REIT shall look
solely to REIT's assets for the enforcement of any claims against the REIT, as
the Trustees, officers, agents and security holders of the REIT assume no
personal liability for obligations entered into on behalf of the REIT, and their
respective individual assets shall not be subject to the claims of any person
relating to such obligations.
6.11 Successors and Assigns. The Companies or LBF may assign any of
their respective rights, or delegate any of their respective duties under this
Agreement, if the other party first consents to such assignment in writing. This
Agreement shall inure to the benefit of and be binding upon (i) the successors
of LBF and (ii) any assignee or transferee of rights and obligations of LBI
pursuant to the Purchase Agreement and any assignee or transferee of rights
<PAGE> 41
and obligations of LBF pursuant to this Agreement. A transferee of LBI pursuant
to the Purchase Agreement and a transferee of LBF pursuant to this Agreement,
and, in each case, any successor, assignee, or transferee, shall be held subject
to all of the terms of this Agreement.
6.12 Transfer to Affiliate. Notwithstanding anything herein to the
contrary, if LBF transfers the Purchase Shares to any affiliate of LBF, together
with all of LBF's rights under the Purchase Agreement pursuant to Section 15 of
the Purchase Agreement, then LBF's rights and obligations under this Agreement
shall be transferred to such affiliate of LBF. In the event of such an
assignment, such affiliate shall in all respects be substituted for LBF as a
party hereto.
6.13 Governing Law. The Agreement will be governed by and construed
in accordance with the laws of the State of New York without reference to choice
of law doctrine.
6.14 Confidentiality. Subject to the other applicable subsections of
this Section 6, to any contrary requirement of law, including any disclosure
obligations of the Companies under the Securities Act, the Exchange Act and the
rules and regulations thereunder, and to the right of each party to enforce its
rights hereunder in any legal action, each party shall keep strictly
confidential and shall cause its employees and agents to keep strictly
confidential the terms of this Agreement and any information relating to or
concerning the other party which it or any of its agents or employees may
acquire pursuant to, or in the course of performing its obligation under, any
provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized representatives as of the day and year
first above written.
STARWOOD HOTELS & RESORTS
WORLDWIDE, INC.
By:
Name:
Title:
STARWOOD HOTELS & RESORTS
By:
Name:
Title:
LEHMAN BROTHERS FINANCE S.A.
<PAGE> 42
By:
Name:
Title:
LEHMAN BROTHERS INC., as agent
By:
Name:
Title:
<PAGE> 1
Exhibit 10.69
EXECUTION COPY
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT is made as of the 23rd day of
February, 1998, by and among Starwood Hotels & Resorts (the "REIT"), a Maryland
real estate investment trust, Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation (the "OPCO") (the REIT and the OPCO, each a "Company" and
together the "Companies"), NMS Services, Inc. ("NMSSI"), and NationsBanc
Montgomery Securities LLC, on behalf of itself and as agent acting for the
account of NMSSI ("NMS" and, collectively with NMSSI, the "NMS Parties").
IN CONSIDERATION of the mutual covenants contained in this
Purchase Agreement, the Companies and the NMS Parties hereby agree as follows:
SECTION 1. Authorization of Sale of the Shares. Subject to the
terms and conditions of this Purchase Agreement, the REIT has authorized the
sale to the NMS Parties of 1,547,000 shares of beneficial interest, $.01 par
value per share, of the REIT (the "REIT Shares") and the OPCO has authorized the
sale to the NMS Parties of 1,547,000 shares of common stock, $.01 par value per
share, of the OPCO (the "OPCO Shares"), which REIT Shares and OPCO Shares are
paired as a unit consisting of one (1) REIT Share and one (1) OPCO Share
(hereinafter each such paired unit is referred to as a "Paired Share") and the
Paired Shares referred to in this sentence are herein called the "Purchase
Shares"). In addition, the REIT and the OPCO may issue to NMSSI additional
Paired Shares in settlement of certain of their obligations under that certain
Agreement (the "Agreement"), dated as of the date hereof, between the REIT, the
OPCO and NMSSI (the "Additional Shares"). The Paired Shares and the Additional
Shares are hereinafter collectively called the "Shares."
SECTION 2. Agreement to Sell and Purchase the Purchase Shares.
Subject to the terms and conditions of this Purchase Agreement, on the Closing
Date (as defined in Section 3 hereof), the Companies will sell to the NMS
Parties the Purchase Shares for a per Paired Share purchase price equal to
98.00% of the Closing Price. The "Closing Price" shall equal the closing price
reported on the New York Stock Exchange for a Paired Share on February 23, 1998.
SECTION 3. Delivery of the Purchase Shares at the Closing.
3.1. Closing. The completion of the purchase and sale of the
Purchase Shares (the "Closing") shall occur as soon as practicable on or after
the date hereof on a business day to be agreed upon by the Companies and the NMS
Parties, but in no event later than five business days after the execution of
this Purchase Agreement (hereinafter, the "Closing Date").
<PAGE> 2
3.2. Conditions. At Closing, the Companies shall deliver to
the NMS Parties one or more stock certificates registered in the name of NMSSI
representing the number of Purchase Shares set forth in Section 2 above.
The obligation of the Companies to complete the purchase and
sale of the Purchase Shares and deliver such stock certificate(s) to the NMS
Parties at the Closing shall be subject to the following conditions, any one or
more of which may be waived by both of the Companies acting together: (i)
receipt by the Companies of Federal Funds (or other mutually agreed upon form of
payment) in the full amount of the purchase price for the Purchase Shares being
purchased hereunder, (ii) the accuracy in all material respects as of the
Closing Date, of the representations and warranties made by the NMS Parties
herein and the fulfillment, in all material respects, of those undertakings of
the NMS Parties to be fulfilled prior to the Closing, (iii) execution and
delivery of the Agreement by NMSSI, (iv) receipt by the Companies of a
cross-receipt with respect to the Purchase Shares executed by NMSSI and (v)
receipt by the Companies of a certificate by an officer or authorized
representative of each of the NMS Parties to the effect that the representations
and warranties of the NMS Parties set forth in Section 5 hereof are true and
correct as of the date of this Purchase Agreement and as of the Closing Date.
The NMS Parties' obligation to accept delivery of such stock
certificate(s) and to pay for the Purchase Shares evidenced thereby shall be
subject to the following conditions, any one or more of which may be waived by
the NMS Parties: (i) the accuracy in all material respects, as of the Closing
Date, of the representations and warranties made by the Companies herein and the
fulfillment, in all material respects, of those undertakings of the Companies to
be fulfilled prior to the Closing, (ii) receipt by the NMS Parties of all
opinions, letters and certificates to be delivered by the Companies pursuant to
this Purchase Agreement, (iii) execution and delivery of the Agreement by each
of the Companies, and (iv) receipt by the NMS Parties of a cross-receipt with
respect to the purchase price for the Purchase Shares executed by the Companies.
SECTION 4. Representations, Warranties and Covenants of the
Companies. Except as disclosed in the Companies' SEC Filings (as defined below),
each of the REIT and the OPCO, severally and not jointly, hereby represents and
warrants to the NMS Parties, and covenants with the NMS Parties, with respect to
such Company and its Subsidiaries (as defined below) only, as follows:
4.1. Organization and Qualification of the Companies. Each of
the REIT and the OPCO has been duly organized and is validly existing in good
standing under the laws of Maryland with power and authority to own and lease
its properties and to conduct its business as currently conducted. Each of the
REIT and the OPCO is duly qualified to transact business and is in good standing
in each jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing or
<PAGE> 3
managing of property or the conduct of business, except where the failure to so
qualify would not have a material adverse effect on the condition, financial or
otherwise, or the earnings, assets, business affairs or business prospects of
the Companies and the Subsidiaries of the Companies considered as one enterprise
(a "Material Adverse Effect"). Entities in which either of the Companies
directly or indirectly has at least a 50% ownership interest are herein referred
to as the "Subsidiaries," and each individually, as a "Subsidiary."
4.2. Organization and Qualification of Subsidiaries. Each of
the Subsidiaries has been duly organized and is validly existing as a
corporation, limited partnership, or limited liability company, as the case may
be, in good standing under the laws of its respective jurisdiction of
organization, with full power and authority to own, lease and operate its
properties and to conduct the business in which it currently is engaged. Each of
the Subsidiaries is duly qualified as a foreign corporation, limited
partnership, or limited liability company, as the case may be, to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to so qualify
would not have a Material Adverse Effect. All of the issued and outstanding
shares of capital stock of each of the corporate Subsidiaries have been duly
authorized and validly issued and are fully paid and non-assessable. The
ownership by the Companies or the Subsidiaries of the shares of capital stock or
limited partnership or equity interests, as the case may be, of each of the
Subsidiaries is as described in the Companies' SEC Filings.
4.3. Authorized Capital Stock. The REIT has the following
authorized shares:1,000,000,000 REIT shares par value $0.01 per share,
200,000,000 excess shares of beneficial interest, par value $.01 per share,
100,000,000 shares of trust preferred shares, par value $.01 per share, and
50,000,000 shares of excess preferred stock, par value $0.01 per share. The OPCO
has the following authorized shares: 1,000,000,000 OPCO shares, par value $0.01
per share, 200,000,000 shares of preferred stock, par value $0.01 per share,
50,000,000 shares of excess common stock, par value $0.01 per share and
100,000,000 shares of excess preferred shares, par value $0.01 per share. As of
January 20, 1998, there were 55,392,389 Paired Shares, 6,285,765 Class A
Exchangeable Preferred Shares of the Trust and 5,502,711 Class B Exchangeable
Preferred Shares of the Trust outstanding, and 21,292,005 REIT shares and
21,292,005 OPCO shares were reserved for issuance. The issued and outstanding
Paired Shares of the Companies have been duly authorized and validly issued, are
fully paid and nonassessable, have been issued in compliance with all federal
and state securities laws, were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities, and
conform to the description thereof in the Companies' SEC Filings. Other than as
described in the Companies' SEC Filings, the REIT does not have outstanding any
options to purchase, or other rights to subscribe for or purchase, any
securities or obligations convertible into, or any contracts or commitments to
issue or sell, shares of its capital stock or any such options, rights,
convertible securities or obligations. The description of the
<PAGE> 4
Companies' stock, stock bonus and other stock plans or arrangements and the
options or other rights granted and exercised thereunder in the Companies' SEC
Filings accurately and fairly presents the information required to be shown with
respect to such plans, arrangements, options and rights.
4.4. Issuance, Sale and Delivery of the Shares. The Purchase
Shares to be sold by the Companies have been duly authorized for issuance and,
when issued, delivered and paid for in the manner set forth in this Purchase
Agreement, will be validly issued, fully paid and non-assessable. The Additional
Shares, if and when issued pursuant to the Agreement, have been duly authorized
and will be validly issued, fully paid and non-assessable. Upon payment of the
purchase price and delivery of the Shares in accordance with this Purchase
Agreement, NMSSI will receive good, valid and marketable title to the Shares,
free and clear of all security interests, mortgages, pledges, liens,
encumbrances and claims. No approval of or authorization by the respective
shareholders or boards of trustees or directors of the Companies will be
required for the issuance and/or sale of the Shares to be sold by the Companies
as contemplated herein or in the Agreement, except such as shall have been
obtained on or before the Closing Date or the applicable Settlement Date. The
issuance and/or sale of the Shares to the NMS Parties by the Companies pursuant
to this Purchase Agreement or the Agreement (as the case may be), the compliance
by the Companies with the other provisions of this Purchase Agreement or the
Agreement and the consummation of the other transactions contemplated hereby or
thereby do not require the consent, approval, authorization, registration or
qualification of or with any court, governmental authority or agency, except
such as shall have been obtained on or before the Closing Date or in connection
with any Resale Registration Statement filed with respect to any of the Shares.
The Companies meet and will continue to meet the requirements for use of Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), and the
rules and regulations of the U.S. Securities and Exchange Commission (the
"Commission") under the Securities Act (the "1933 Act Regulations"). The
Companies have filed and will file all documents which they are required to file
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
the rules and regulations promulgated thereunder (the "1934 Act Regulations")
within the time periods prescribed by the Exchange Act and the 1934 Act
Regulations since December 31, 1996 and all such documents (collectively,
together with the Companies' registration statements filed under the Securities
Act which have been declared effective since January 1, 1997 and have not been
withdrawn, the "Companies' SEC Filings") comply and will comply in all material
respects with the requirements of the Exchange Act and the 1934 Act Regulations,
as applicable, and none of such documents, when so filed, contained or will
contain any untrue statement of a material fact or omitted or will omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. No Resale Registration Statement filed in respect of any of the
Shares, when so filed, contained or will contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading.
<PAGE> 5
4.5. Due Execution, Delivery and Performance by the Company.
Each of the Companies has full right, power and authority to enter into this
Purchase Agreement and the Agreement and perform the transactions contemplated
hereby and thereby. This Purchase Agreement and the Agreement have been duly
authorized, executed and delivered by each of the Companies. The execution and
delivery of the Purchase Agreement and the Agreement by each of the Companies
and the consummation of the transactions and the performance of the obligations
herein and therein contemplated will not violate any provision of the
declaration of trust, certificate of incorporation, bylaws, or other
organizational documents of either of the Companies, and will not conflict with,
result in the breach or violation of, or constitute, either by itself or upon
notice or the passage of time or both, a default under any material agreement,
mortgage, deed of trust, credit agreement, lease, franchise, license, indenture,
note, permit or other instrument to which either Company is a party or by which
either Company or its respective properties may be bound or affected, any
statute or any authorization, judgment, decree, order, rule or regulation of any
court or any regulatory body, administrative agency or other governmental body
applicable to either Company or any of its respective properties other than
violations, conflicts, breaches or defaults that individually or in the
aggregate would not have a Material Adverse Effect. No consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body is required for the execution and delivery of
this Purchase Agreement, the Agreement or the consummation of the transactions
contemplated hereby or thereby, except in connection with the filing of any
Resale Registration Statements pursuant to Section 7 below or for compliance
with the blue sky laws applicable to the offering of the Shares.
4.6. Accountants. The Companies' independent certified public
accountants, who have expressed their opinion with respect to the Most Recent
Financial Statements (as defined below) are independent accountants as required
by the Securities Act and the 1933 Act Regulations.
4.7. No Defaults. Except as to defaults, violations and
breaches which individually or in the aggregate would not have a Material
Adverse Effect, neither of the Companies nor any of their respective
Subsidiaries is in violation or default of any provision of its declaration of
trust, certificate of incorporation or bylaws, or other organizational
documents, and is not in breach of or default with respect to any provision of
any agreement, judgment, decree, order, mortgage, deed of trust, credit
agreement, lease, franchise, license, indenture, permit or other instrument to
which it is a party or by which it or any of its properties are bound.
4.8. No Actions. There is no action, suit or proceeding before
or by any court or governmental agency or body, domestic or foreign, now
pending, or, to the knowledge of each Company, threatened against or affecting
such Company or any of its Subsidiaries, any real property or improvements
thereon owned or leased by such Company or its Subsidiaries, including any
property underlying indebtedness held by
<PAGE> 6
such Company (each, individually, a "Property" and collectively, the
"Properties"), or any officer of such Company or any of its Subsidiaries that,
if determined adversely to such Company or any Subsidiary, any Property,
including any property underlying indebtedness held by such Company and any of
its Subsidiaries, or any such officer, would reasonably be expected to (A)
result in any Material Adverse Effect or (B) materially and adversely affect the
consummation of the transactions contemplated by this Purchase Agreement or the
Agreement.
4.9. Properties. (A) Each Company and its respective
Subsidiaries, as the case may be, has good and marketable title to all the
properties and assets reflected as owned by such entities in the Most Recent
Financial Statements, subject to no lien, mortgage, pledge, charge or
encumbrance of any kind except (i) those, if any, reflected in the Most Recent
Financial Statements, or (ii) those which would not have a Material Adverse
Effect, (B) the leases of any real property and buildings held under lease by
such Company or any of its Subsidiaries are in full force and effect, and such
entities are not in default in respect of any of the terms or provisions of such
leases and have not received notice of the assertion of any claim by anyone
adverse to such entities' rights as lessee under such leases, or affecting or
questioning such entity's right to the continued possession or use of the real
property and buildings held under such leases or of a default under such leases,
in each case with such exceptions as would not have a Material Adverse Effect;
(C) neither Company nor any of its respective Subsidiaries or any tenant of any
of the Properties is in default under any of the leases pursuant to which such
Company or its Subsidiaries, as lessor, leases its Property (and to the best
knowledge of such Company no event has occurred which, but for the passage of
time or the giving of notice, or both, would constitute a default under any of
such leases) other than such defaults that would not have a Material Adverse
Effect; (D) no person has an option or right of first refusal to purchase all or
part of any Property or any interest therein, other than such options or rights
of first refusal which would not have a Material Adverse Effect; (E) each of the
Properties complies with all applicable codes, laws and regulations (including,
without limitation, building and zoning codes, laws and regulations and laws
relating to access to the Properties), except for such failures to comply that
would not individually or in the aggregate have a Material Adverse Effect; and
(F) neither Company has knowledge of any pending or threatened condemnation
proceedings, zoning change, or other proceeding or action that will in any
manner affect the size of, use of, improvements on, construction on or access to
the Properties, including any property underlying indebtedness held by either
Company or any of its respective Subsidiaries, except such proceedings or
actions that would not have a Material Adverse Effect.
4.10. REIT Qualification. The REIT qualified as a real estate
investment trust under the Internal Revenue Code of 1986, as amended (the
"Code"), with respect to its taxable years ended December 31, 1995, December 31,
1996 and December 31, 1997, and is organized in conformity with the requirements
for qualification as a real estate investment trust, and its manner of operation
has enabled it to meet the requirements for qualification as a real estate
investment trust as of the date hereof,
<PAGE> 7
and its proposed manner of operation will enable it to meet the requirements for
qualification as a real estate investment trust in the future.
4.11. No Material Change. Since the date of the Most Recent
Financial Statements, and except as otherwise disclosed in the Companies' SEC
Filings as of the Closing Date, (i) no material casualty loss or material
condemnation or other material adverse event with respect to any Property or any
of the Subsidiaries, has occurred that would singly or in the aggregate have a
Material Adverse Effect; (ii) neither of the Companies, nor any of their
respective Subsidiaries is in default in the payment of principal or interest on
any outstanding debt obligations; (iii) except as a result of (a) the Companies'
acquisition of Westin Hotels & Resorts Worldwide, Inc. and certain affiliates
and the related financing transactions and (b) the OPCO's acquisition of ITT
Corporation and the related financing transactions, there has not been any
change in the capital stock of either Company or the Subsidiaries (other than
the sale of the Purchase Shares hereunder or those reserved for issuance
pursuant to the Agreement, issuances pursuant to the incentive compensation
plans of the Companies), or any increase in the indebtedness of either Company
or their respective Subsidiaries that is material to such entities, considered
as one enterprise; (iv) and except for regular quarterly distributions on the
REIT Shares, there has been no dividend or distribution of any kind declared,
paid or made by the REIT or the OPCO; and (v) there has not been any material
adverse change in the condition, financial or otherwise, or in the earnings,
assets, business affairs or business prospects of the Companies and the
Subsidiaries, considered as one enterprise, whether or not arising in the
ordinary course of business.
4.12. Intellectual Property. Neither of the Companies nor the
Subsidiaries is required to own or possess trademarks, trade names, patent
rights, copyrights, licenses, approvals and governmental authorizations, which
it does not already own or possess to conduct its businesses as now conducted;
and neither Company has knowledge of any material infringement by it of
trademark, trade name rights, patent rights, copyrights, licenses, trade secrets
or other similar rights of others, and has not received any notice that any
claim has been made against such Company regarding trademark, trade name,
patent, copyright, license, trade secrets or other infringement that would not
singly or in the aggregate have a Material Adverse Effect.
4.13. Compliance. Neither Company has been advised, or has
reason to believe, that it is not conducting business in compliance with all
applicable laws, rules and regulations of the jurisdictions in which it is
conducting business, except where failure to be so in compliance will not have a
Material Adverse Effect.
4.14. Taxes. Each of the Companies and its Subsidiaries have
filed all material federal, state and foreign income and franchise tax returns
which have been required to be filed and has paid or accrued all taxes shown as
due thereon (except for those taxes which are being contested in good faith
through appropriate proceeding, for which adequate reserves have been
established and which are either reflected in the Most Recent Financial
Statements or disclosed by the Companies to the NMS Parties),
<PAGE> 8
and neither Company has any knowledge of any tax deficiency which has been or
might be asserted or threatened against such Company and its Subsidiaries which
would singly or in the aggregate have a Material Adverse Effect.
4.15. Transfer Taxes. On the Closing Date, all stock transfer
or other taxes, if any (other than income taxes) which are required to be paid
in connection with the sale and transfer of the Purchase Shares to be sold to
the NMS Parties hereunder will be, or will have been, fully paid or provided for
by the Companies and all laws imposing such taxes will be or will have been
fully complied with.
4.16. Investment Company. Neither of the Companies nor any of
their Subsidiaries is required to register as an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended.
4.17. Offering Materials. Neither the REIT nor the OPCO has
distributed nor will distribute prior to the Closing Date any offering material
in connection with the offering and sale of the Purchase Shares other than the
documents and information provided to the NMS Parties pursuant to this Section
4.
4.18. Additional Information. Each of the Companies represents
and warrants that the information contained in the following documents, which
the Companies have furnished to the NMS Parties, or will be furnished or made
available upon request prior to the Closing, is true and correct in all material
respects as of their respective filing dates:
(a) Joint Annual Report on Form 10-K for the year ended
December 31, 1996, which Joint Annual Report includes
the Companies' most recently available audited
financial statements together with the report thereon
of the independent certified public accountants (the
"Most Recent Financial Statements"),
(b) Joint Quarterly Reports on Form 10-Q, as amended if
applicable, for the quarters ended March 31, 1997,
June 30, 1997 and September 30, 1997;
(c) the Companies' proxy statements on Form 14A relating
to (i) the most recent Annual Meetings of the REIT's
Shareholders and the OPCO's Shareholders and (ii) the
Special Meetings of the REIT's Shareholders and the
OPCO's Shareholders which occurred during the 12
month period prior to the date hereof or for which a
meeting date has been fixed and a proxy statement
distributed;
(d) all other documents, if any, filed by or with respect
to the REIT and the OPCO with the Commission since
January 1, 1997 pursuant to Section 13, 15(d) or
16(a) of the Exchange Act; and
<PAGE> 9
(e) covenant compliance certificates stating that none of
the REIT, the OPCO or their respective Subsidiaries
are in default under any of their respective credit
agreements or other financing arrangements.
4.19. Legal Opinion. At or prior to the Closing, counsel to
the Companies will deliver their legal opinions dated the Closing Date to the
NMS Parties in substantially the form of Exhibit A hereto.
4.20. ERISA. Each of the Companies and their respective
Subsidiaries are in compliance with all applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended and the rules and regulations
promulgated thereunder ("ERISA"), except for such failures to comply as will not
have a Material Adverse Effect. Neither a Reportable Event (as defined under
ERISA) nor a Prohibited Transaction (as defined under ERISA) has occurred with
respect to any Plan (as defined below) of the Companies and/or their respective
affiliates; no notice of intent to terminate a Plan has been filed nor has any
Plan been terminated within the past five years; to the Companies' knowledge, no
circumstance exists which constitutes grounds under Section 402 of ERISA
entitling the Pension Benefit Guaranty Corporation ("PBGC") to institute
proceedings to terminate, or appoint a trustee to administer, a Plan, nor has
the PBGC instituted any such proceedings; neither Company nor their respective
affiliates has completely or partially withdrawn under Section 4201 or 4202 of
ERISA from any Multiemployer Plan (as defined therein); each of the Companies
and their respective affiliates have met the minimum funding requirements of
Section 412 of the Code and Section 302 of ERISA with respect to each Plan and
there is no unfunded current liability (as defined below) with respect to any
Plan; each of the Companies and their respective affiliates have not incurred
any liability to the PBGC under ERISA (other than for the payment of premiums
under Section 4007 of ERISA); no part of the funds to be used by the Companies
in satisfaction of their respective obligations under this Purchase Agreement or
the Agreement constitute "plan assets" of any "employee benefit plan" within the
meaning of ERISA or of any "plan" within the meaning of Section 4957(e)(I) of
the Code, as interpreted by the Internal Revenue Service and the U.S. Department
of Labor in rules, regulations, releases and bulletins or as interpreted under
applicable case law. As used below, "Plan" means an "employee benefit plan" or
"plan" as described in Section 3(3) of ERISA; and "unfunded current liability"
has the meaning provided in Section 302(d)(8)(A) of ERISA.
4.21. Environmental Protection. Except as otherwise disclosed
in the Companies' SEC Filings and except for such exceptions as would not singly
or in the aggregate have a Material Adverse Effect, none of the REIT's or the
OPCO's or their respective affiliates' properties contain any Hazardous
Materials that, under any Environmental Law, (i) would impose liability on such
Company or any affiliate that is likely to have a Material Adverse Effect or
(ii) is likely to result in the imposition of a lien on any material asset
owned, directly or indirectly, by such Company. Neither Company nor any
affiliate is subject to any existing, pending or, to the best knowledge
<PAGE> 10
of each Company, threatened investigation or proceeding by any governmental
agency or authority with respect to pursuant to any Environmental law, except
any which, if adversely determined, would not have a Material Adverse Effect. As
used herein, "Environmental Laws" mean all federal, state, local and foreign
environmental, health and safety laws, codes and ordinances and all rules and
regulations promulgated thereunder, including, without limitation laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment (including, without limitation, air, surface water, ground
water, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage disposal,
transport or handling of pollutants, contaminants, chemicals, or industrial,
solid, toxic or hazardous substances or wastes; and "Hazardous Material"
includes, without limitation, (i) all substances which are designated pursuant
to Section 311(b)(2)(A) of the Federal Water Pollution Control Act ("FWPCA"), 33
U.S.C. ss.1251 et seq.; (ii) any element, compound, mixture, solution, or
substance which is designated pursuant to Section 102 of the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
ss.9601 et seq.; (iii) any hazardous waste having the characteristics which are
identified under or listed pursuant to Section 3001 of the Resource Conservation
and Recovery Act ("RCRA"), 42 U.S.C. ss.6901 et seq.; (iv) any toxic pollutant
listed under Section 307(a) of the FWPCA; (v) any hazardous air pollutant which
is listed under Section 112 of the Clean Air Act, 42 U.S.C. ss.7401 et seq.;
(vi) any imminently hazardous chemical substance or mixture with respect to
which action has been taken pursuant to Section 7 of the Toxic Substances
Control Act, 15 U.S.C. ss.2601 et seq.; and (vii) petroleum, petroleum products,
petroleum by-products, petroleum decomposition by-products, and waste oil.
4.22. Solvency. Immediately following (i) the execution of
this Purchase Agreement and the Agreement, (ii) the purchase of the Purchase
Shares pursuant hereto and (iii) the completion of any other transaction
contemplated by this Purchase Agreement and the Agreement, each of the Companies
will be solvent and able to pay its debts as they mature, will have capital
sufficient to carry on its business and all businesses in which it is to engage,
and will have assets which will have a present fair market valuation greater
than the amount of all of its liabilities. This Purchase Agreement and the
Agreement have been executed and delivered by the Companies in good faith and in
exchange for reasonably equivalent value. Neither of the Companies intends to
incur debts beyond its ability to pay them as they become due. Each of the
Companies' assets and capital are now, and are expected in the future to be,
sufficient to pay the Companies' ongoing expenses as they are incurred and to
discharge all of the Companies' liabilities in the event that the business of
the Companies is required to be liquidated. The Companies have not entered into
this Purchase Agreement or the Agreement or any transaction contemplated hereby
or thereby with an intent to hinder, delay or defraud creditors of any persons
or entity.
4.23. Certificate. At or prior to the Closing, each Company
shall deliver an officer's certificate to be dated the Closing Date in form and
substance satisfactory to the NMS Parties to the effect that (i) the
representations and warranties of such
<PAGE> 11
Company set forth in this Section 4 are true and correct in all material
respects as of the date of this Purchase Agreement and as of the Closing Date
and (ii) such Company has complied in all material respects with all the
covenants and satisfied in all material respects all the conditions on its
respective part to be performed or satisfied pursuant to this Purchase Agreement
or the Agreement on or prior to such Closing Date.
4.24. Financial Statements. The Most Recent Financial
Statements (including the notes thereto) present fairly in all material respects
the financial position of the respective entity or entities presented therein at
the respective dates indicated and the results of their operations for the
respective periods specified, and except as otherwise stated in the Most Recent
Financial Statements, said financial statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis. The
supporting schedules included in the Companies' SEC Filings fairly present in
all material respects the information required to be stated therein. The
financial information and data included in the Companies' SEC Filings present
fairly in all material respects the information included therein and have been
prepared on a basis consistent with that of the financial statements included in
the Companies' SEC Filings and the books and records of the respective entities
presented therein. The pro forma financial information included in the
Companies' SEC Filings has been prepared in accordance with the applicable
requirements of Rules 11-01 and 11-02 of Regulation S-X under the Securities Act
and other 1933 Act Regulations and American Institute of Certified Public
Accountants ("AICPA") guidelines with respect to pro forma financial information
and includes all adjustments necessary to present fairly in all material
respects the pro forma financial position of the respective entity or entities
presented therein at the respective dates indicated and the results of their
operations for the respective periods specified. Other than the historical and
pro forma financial statements (and schedule) included therein, no other
historical or pro forma financial statements (or schedules) are required to be
included in the Companies' SEC Filings. Except as reflected or disclosed in the
financial statements included in the Companies' SEC Filings, none of the
Companies or any of the Subsidiaries is subject to any material indebtedness,
obligation, or liability, contingent or otherwise.
4.25. Labor Disputes. No labor dispute with the employees of
either of the Companies or their respective Subsidiaries exists or, to the
knowledge of the such Company is imminent.
4.26. Regulation M. Each Company, its Subsidiaries and, to
such Company's knowledge, any of their respective trustees, directors, executive
officers or controlling persons, has not taken or will not take, directly or
indirectly, any action resulting in a material violation of Regulation M under
the Exchange Act, or designed to cause or result under the Exchange Act or
otherwise in, or which has constituted or which reasonably might be expected to
constitute, the unlawful stabilization or manipulation of the price of Paired
Shares in connection with the public sale or distribution of the Shares.
<PAGE> 12
SECTION 5. Representations, Warranties and Covenants of NMS or
NMSSI.
5.1. Investment. The NMS Parties represent and warrant to, and
covenants with each of the Companies that: (i) the NMS Parties are
knowledgeable, sophisticated and experienced in making, and is qualified to
make, decisions with respect to investments in shares presenting an investment
decision like that involved in the purchase of the Purchase Shares, including
investments in securities issued by the Companies; (ii) NMSSI is acquiring the
number of Purchase Shares set forth in Section 2 above in the ordinary course of
its business and for its own account for investment (as defined for purposes of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the regulations
thereunder) only and with no present intention of distributing any of such
Purchase Shares or any arrangement or understanding with any other persons
regarding the distribution of such Purchase Shares, except pursuant to a
registration statement declared effective under, or an exemption from the
registration requirements of, the Securities Act, (iii) neither NMS Party will
directly or indirectly, sell or otherwise dispose of (or solicit any offers to
purchase or otherwise acquire) any of the Purchase Shares except in compliance
with the Securities Act, the Rules and Regulations and any applicable state
securities or blue sky laws; (iv) each NMS Party has completed or caused to be
completed the Registration Statement Questionnaire and the Stock Certificate
Questionnaire, both attached hereto as Appendix I, for use in preparation of the
Resale Registration Statement and the answers thereto are true and correct as of
the date hereof and will be true and correct as of the effective date of the
Resale Registration Statement; (v) the NMS Parties have, in connection with
their decision to purchase the number of Purchase Shares set forth in Section 2
above, relied solely upon the documents identified in Section 4.17, the
information referred to in Section 7.7 and the representations and warranties of
each of the Companies contained herein; (vi) the NMS Parties have had access to
such additional information, if any, concerning the Companies as they have
considered necessary in connection with their investment decision to acquire the
Purchase Shares; (vii) each of the NMS Parties is an "accredited investor"
within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D
promulgated under the Securities Act; and (viii) the NMS Parties understand that
until the Shares are sold under an appropriate Resale Registration Statement
that has been declared effective by the Commission, the Shares will contain a
legend to the following effect:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE
SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES
UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANIES THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
<PAGE> 13
5.2. Resale. The NMS Parties acknowledge and agree that in
connection with any transfer of any Shares they will provide to the transfer
agent prompt notice of any Shares sold pursuant to a Resale Registration
Statement or otherwise transferred in compliance with applicable federal and
state securities laws. The NMS Parties acknowledge that there may occasionally
be times when, subject to the provisions of Section 7.2(a)(v), the Companies
must suspend the right of the NMS Parties to effect sales of the Shares through
the use of the Resale Prospectus (as defined below) forming a part of a Resale
Registration Statement until such time as an amendment to such Resale
Registration Statement has been filed by the Companies and declared effective by
the Commission, or until such time as the Companies have filed an appropriate
report with the Commission pursuant to the Exchange Act (each, a "Black-out
Period"); provided that no Black-out Period shall exceed 90 consecutive days.
The NMS Parties hereby covenant that they will not effect sales of any Shares
pursuant to said Resale Prospectus during the period commencing at the time at
which the Companies give the NMS Parties written notice (which such notice shall
have been given by the Companies as promptly as practicable) of the suspension
of the use of said Resale Prospectus and ending at the time the Companies give
the NMS Parties written notice that the NMS Parties may thereafter effect sales
pursuant to said Resale Prospectus. The NMS Parties further covenant to notify
the Companies promptly of the sale of all of the Shares.
5.3. Due Execution, Delivery and Performance of this Purchase
Agreement. The NMS Parties further represent and warrant to, and covenant with,
the Companies that (i) each NMS Party has full right, power, authority and
capacity to enter into this Purchase Agreement and the Agreement and to perform
its obligations hereunder and thereunder and consummate the transactions
contemplated hereby and thereby and has taken all necessary action to authorize
the execution, delivery and performance of this Purchase Agreement and the
Agreement, and (ii) upon the execution and delivery of this Purchase Agreement
and the Agreement, this Purchase Agreement and the Agreement shall constitute
valid and binding obligations of the NMS Parties enforceable against the NMS
Parties in accordance with their terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and except that the enforcement of the indemnification agreements in Section 7.5
hereof may be limited by public policy.
5.4. Residence of NMSSI. NMSSI is organized in the State of
Delaware and has its principal place of business outside the United States.
5.5. Certain Tax Considerations. NMSSI represents and warrants
that it is a "corporation" for U.S. federal income tax purposes and for purposes
of any exemptions from information reporting and backup withholding requirements
that may apply to payments by the Companies to NMSSI under this Purchase
Agreement.
<PAGE> 14
SECTION 6. Survival of Representations, Warranties and
Agreements. Notwithstanding any investigation made by any party to this Purchase
Agreement, all covenants, agreements, representations and warranties made by
each of the Companies and the NMS Parties herein shall survive the execution of
this Purchase Agreement, the Agreement, the delivery to NMSSI of the Purchased
Shares being purchased and the payment therefor and the consummation of any
other transactions contemplated hereby or thereby.
SECTION 7. Registration of the Shares; Compliance with the
Securities Act.
7.1. Registration Procedures and Expenses. The Companies
shall:
(a) within 45 days after the Closing, prepare and
file with the Commission a Resale Registration Statement (as defined below)
covering the resale by the NMS Parties, from time to time, of a number of Shares
equal to the number of Purchase Shares in any of the manners specified in the
Agreement (the "Initial Resale Registration Statement") and use its best efforts
to obtain effectiveness of the Initial Resale Registration Statement within 90
days after the Closing Date. If the total number of Shares exceeds the number of
Shares covered by the Initial Resale Registration Statement, then the Companies
shall promptly prepare and file with the Commission such additional Resale
Registration Statement or Statements as shall be necessary to cover the resale
by the NMS Parties of such excess Shares in the same manner as contemplated by
the Initial Registration Statement for the Shares covered thereby (each, an
"Additional Resale Registration Statement"); provided that, except as provided
for in Section 5 of the Agreement, prior to issuing any such excess Shares to
the NMS Parties, the Companies shall cause such Resale Registration Statement to
have become effective. For purposes of this Purchase Agreement, "Resale
Registration Statement" means the Initial Resale Registration Statement, any
Additional Resale Registration Statement or any other registration statement
under the Securities Act on Form S-3 covering the resale by the NMS Parties of
up to a specified number of Shares, filed and maintained continuously effective
by the Companies pursuant to the provisions of this Section 7, including the
prospectus contained therein (the "Resale Prospectus"), any amendments and
supplements to such registration statement, including all post-effective
amendments thereto,
<PAGE> 15
and all exhibits and all material incorporated by reference into such
registration statement;
(b) use commercially reasonable best efforts to
prevent the issuance of any order suspending the effectiveness of such Resale
Registration Statement or Resale Prospectus or suspending the qualification (or
exemption from qualification) of any of the Shares in any jurisdiction;
(c) prepare and file with the Commission such
amendments and supplements to each Resale Registration Statement and the Resale
Prospectus as may be reasonably requested by the NMS Parties in order to
accomplish the public resale or other disposition of any Shares in accordance
with the terms of the Agreement, or as may be necessary to keep such Resale
Registration Statement effective until the date on which either (i) the Shares
covered thereby have been sold by or on behalf of the NMS Parties or (ii) the
NMS Parties have advised the Companies that they no longer require that such
Resale Registration Statement remain effective;
(d) furnish to the NMS Parties with respect to the
Shares registered under any Resale Registration Statement such reasonable number
of copies of Resale Prospectuses, including any supplements and amendments
thereto, in order to facilitate the public sale or other disposition of all or
any of the Shares by the NMS Parties;
(e) in order to facilitate the public sale or other
disposition of all or any of the Shares by the NMS Parties, furnish to the NMS
Parties with respect to the Shares registered under any Resale Registration
Statement, in connection with any such public sale or other disposition, an
opinion of counsel to the Companies covering such matters as are customarily
covered by legal opinions delivered in connection with secondary public
offerings of equity securities and such other documents as the NMS Parties may
reasonably request (including a comfort letter from the Companies' independent
certified public accountants and a certificate of bring down of representations
and warranties in connection with sale of Shares under the Resale Registration
Statement) (collectively, the "Resale Closing Documents") (i) upon the
effectiveness of the Initial Resale Registration Statement, (ii) upon the
commencement of any continuous offering of Shares under any Resale Registration
Statement
<PAGE> 16
and on the last day of every 30-day period thereafter for the duration of such
continuous offering, and (iii) in the event the public sale or other disposition
of the Shares is effected through an underwritten offering or a block trade, as
of the date of the closing of any sale of such Shares or date of pricing with
respect to the sale of such Shares, as applicable upon prior notice from the NMS
Parties to the Companies as to which date applies; provided, however, that the
Companies shall not be required to deliver any Resale Closing Documents in the
event that the aggregate offering price of any Shares offered in a public sale
or other distribution is less than $20,000,000, unless as of the date of any
such public sale or other distribution, the Companies have not made any previous
delivery of Resale Closing Documents to the NMS Parties in connection with any
other public sale or other disposition of the Shares;
(f) use its reasonable best efforts to prevent the
happening of any event that would cause any such Resale Registration Statement
to contain a material misstatement or omission or to be not effective and
continuously useable for resale of the Shares during the period that such Resale
Registration Statement is required to be effective and useable;
(g) file documents required of the Companies for
normal blue sky clearance in states specified in writing by the NMS Parties,
provided, however, that the Companies shall not be required to qualify to do
business or consent to service of process in any jurisdiction in which it is not
now so qualified or has not so consented;
(h) bear all reasonable expenses in connection with
the procedures in paragraphs (a) through (g) of this Section 7.1 and Section
7.2(a) and the registration of the Shares pursuant to each Resale Registration
Statement, which expenses shall not include brokerage or underwriting
commissions and taxes of any kind (including without limitation, transfer
bonuses) with respect to any disposition, sale or transfer of Shares sold by the
NMS Parties and for any legal, accounting and other expenses incurred by the NMS
Parties which expenses shall be borne by the NMS Parties; and
(i) promptly file any necessary listing
applications or amendments to existing listing applications to cause any
<PAGE> 17
Shares registered under any Resale Registration Statement to be listed
or admitted to trading, on or prior to the effectiveness of any Resale
Registration Statement, on the New York Stock Exchange or any national
stock exchange or automated quotation system on which the Paired Shares
are then listed or traded.
7.2. Covenants in Connection With Registration.
(a) Each of the Companies hereby covenants with the NMS
Parties that (i) such Company shall not file any Resale Registration Statement
or Resale Prospectus relating to the resale of the Shares or any amendment or
supplement thereto, unless a copy thereof shall have been first submitted to the
NMS Parties and the NMS Parties did not object thereto in good faith (provided
that if the NMS Parties do not object within two business days of receiving any
such material, there shall be deemed to have been no objection thereto); (ii)
such Company shall immediately notify the NMS Parties of the issuance by the
Commission of any stop order suspending the effectiveness of such Resale
Registration Statement or the initiation of any proceedings for such purpose;
(iii) such Company shall make every reasonable effort to promptly obtain the
withdrawal of any order suspending the effectiveness of such Resale Registration
Statement at the earliest possible moment; (iv) such Company shall immediately
notify the NMS Parties of the receipt of any notification with respect to the
suspension of the qualification of the Shares for sale under the securities or
blue sky laws of any jurisdiction or the initiation of any proceeding for such
purpose; and (v) such Companies shall as soon as practicable notify the NMS
Parties in writing of the happening of any event or the failure of any event to
occur or the existence of any fact or otherwise which results in any Resale
Registration Statement, any amendment or post-effective amendment thereto, the
Resale Prospectus, any prospectus supplement, or any document incorporated
therein by reference containing an untrue statement of a material fact or
omitting to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and promptly shall prepare, file with
the Commission and promptly furnish to the NMS Parties a reasonable number of
copies of a supplement or post-effective amendment to such Resale Registration
Statement or the Resale Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchasers of the Shares, the Resale Prospectus will not contain an
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein not misleading provided that this clause (v)
shall in no way limit the Companies' right to suspend the right of the NMS
Parties to affect sales under the Resale Registration Statement during any
Black-out Period as specified in Section 5.2 above.
(b) The NMS Parties shall cooperate with the Companies in
connection with the preparation of the Resale Registration Statement and shall
furnish to the Companies, in a timely manner, all information in their
possession or reasonably obtainable by them and necessary for inclusion in the
Resale Registration Statement
<PAGE> 18
(including, without limitation, information relating to the ownership by each of
them of Paired Shares and the plan of distribution).
(c) The NMS Parties shall notify the Companies at least two
business days prior to the earlier of the date on which they intend to commence
effecting any resales of Shares under a Resale Registration Statement or the
date of pricing with respect to the public sale or other disposition of any
Shares under a Resale Registration Statement effected through an underwritten
offering or block trade and if the Companies do not, within such two day period,
advise the NMS Parties of the existence of any facts of the type referred to in
Section 7.2(a) above, then the Companies shall be deemed to have certified and
represented to the NMS Parties that no such facts then exist and the NMS Parties
may rely on such certificate and representations in making such sales. The
preceding sentence shall in no way limit the Companies' obligations under
Section 7.2(a) above.
(d) the Companies shall cooperate with the NMS Parties to
facilitate the timely preparation and delivery of certificates representing the
Shares to be sold under the Resale Registration Statements and not bearing any
restrictive legends and in such denominations and registered in such names as
the NMS Parties may reasonably request at least two business days prior to the
closing of any sale of the Shares.
(e) If the Companies notify the NMS Parties that they wish the
NMS Parties to effect an underwritten offering or block trade of Shares, (i) the
NMS Parties shall have the right to select the managing underwriters or the
executing dealer, as the case may be, who shall be subject to the approval of
the Companies, which approval shall not be unreasonably withheld (it being
understood that NMS is, in any event, reasonably acceptable to the Companies for
this purpose) and (ii) the Companies shall (A) enter into written agreements
(including underwriting agreements) as are customary in underwritten offerings
or block trades, as the case may be; (B) obtain an opinion of counsel to the
Companies and other entities reasonably requested by the underwriters or the
executing dealer, as the case may be, and updates thereof (which may be in the
form of a reliance letter) in form and substance reasonably satisfactory to the
managing underwriters or the executing dealer, as the case may be, and the NMS
Parties addressed to the underwriters or the executing dealer, as the case may
be, and the NMS Parties covering the matters customarily covered in opinions
requested in underwritten offerings or block trades, as the case may be, and
such other matters as may be reasonably requested by such underwriters or the
executing dealer, as the case may be, and the NMS Parties (it being agreed that
the matters to be covered by such opinion may be subject to customary
qualifications and exceptions); (C) obtain "cold comfort" letters and updates
thereof in form and substance reasonably satisfactory to the managing
underwriters or the executing dealer, as the case may be, and the NMS Parties
from the independent certified public accountants of the Companies (and, if
necessary, other independent certified public accountants of any affiliate or
Subsidiary of either of the Companies or of any business acquired by the
Companies for which financial statements and financial data are, or are required
to be, included in the Resale
<PAGE> 19
Registration Statement), addressed to each of the underwriters or the executing
dealer, as the case may be, and, if permitted by applicable accounting rules and
statements, the NMS Parties, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in connection
with underwritten offerings or block trades, as the case may be, and such other
matters as may be reasonably requested by such underwriters or the executing
dealer, as the case may be, in accordance with Statement on Auditing Standards
No. 72; (D) ensure that any underwriting agreement contains indemnification
provisions and procedures not less favorable than that included herein (or such
other provisions and procedures acceptable to the NMS Parties and the
underwriters) with respect to all parties to be indemnified pursuant to said
section (including, without limitation, the underwriters and the NMS Parties);
and (E) deliver such other documents as are customarily delivered in connection
with closing of underwritten offerings or block trades, as the case may be.
(f) The Companies will make reasonably available for
inspection by the NMS Parties, any underwriter, agent or broker-dealer
participating in any disposition of Shares such information and corporate
documents as shall be reasonably necessary to enable them to exercise any
applicable due diligence responsibilities for the purposes of applicable law,
and cause the officers of the Companies and their "significant subsidiaries" (as
that term is defined in Regulation S-X) to be available, upon request at least
two business days in advance, to respond to questions relevant to such due
diligence inquiries.
(g) The parties hereby acknowledge and agree that the
Companies may suspend the right of the NMS Parties to effect sales of the Paired
Shares through use of the Resale Prospectus forming a part of a Resale
Registration Statement for a period of 90 days (or fewer if the NMS Parties are
notified to that effect by the Companies) in connection with a public offering
or a sale pursuant to Rule 144A under the Securities Act (an "Offering") of
Paired Shares (or shares of capital stock convertible into Paired Shares) by the
Companies (a "Suspension Period"); provided that (i) there shall be no more than
three Suspension Periods during any 12-month period, and (ii) the total number
of days of all Suspension Periods during any 12-month period shall not exceed
120. The NMS Parties hereby covenant that they will not sell any Paired Shares
pursuant to said Resale Prospectus during a Suspension Period which shall
commence at the time the Companies give the NMS Parties written notice of such
Suspension Period; provided further, that no Suspension Period shall be
applicable or in any way restrict the NMS Parties after the occurrence of the
Maturity Date or a Price Decline Termination Event. The ability of the Companies
to suspend the right of the NMS Parties to effect sales of the Paired Shares
pursuant to this Section 7.2(g) shall not be construed to limit the Companies'
rights under Section 5.2.
7.3. Extension of Required Effectiveness. In the event that
the Companies shall give any notice required by Section 7.2(a)(v) hereof, the
period during which the Companies are required to keep such Resale Registration
Statement effective and useable shall be extended by the number of days during
the period from and included in such Black-out Period.
<PAGE> 20
7.4. Transfer of Shares After Registration. The NMS Parties
agree that they will not effect any disposition of the Shares or their right to
purchase the Shares that would constitute a sale within the meaning of the
Securities Act or pursuant to any applicable state securities or blue sky laws
expect as contemplated in each Resale Registration Statement referred to in
Section 7.1 or except pursuant to any exemption from the registration
requirements of the Securities Act (including, without limitation, Rule 144
promulgated thereunder and any successor thereto) and that it will promptly
notify the Companies of any changes in the information set forth in any such
Resale Registration Statement regarding the NMS Parties or their plan of
distribution.
7.5. Indemnification. For the purpose of this Section 7.5
only, the term "Resale Registration Statement" shall include any final
prospectus, exhibit, supplement or amendment included in or relating to any
Resale Registration Statement referred to in Section 7.1.
(a) Indemnification by the Companies. Each of the Companies
agrees, severally and not jointly, to indemnify and hold harmless the NMS
Parties and each person, if any, who controls the NMS Parties within the meaning
of Section 15 of the Securities Act, and any director, officer, employee or
affiliate thereof, as follows:
(i) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, arising out of any untrue statement
or alleged untrue statement of a material fact contained in any Resale
Registration Statement (or any amendment thereto), including the information
deemed to be part of any Resale Registration Statement pursuant to Rule 430A(b)
of the 1933 Act Regulations, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any related Resale
Prospectus or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the Companies shall not be required under this subsection (i) to indemnify
the NMS Parties with respect to any loss, liability, claim, damage or expense to
the extent such loss, liability, claim, damage or expense arises out of (A) any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Companies by the NMS Parties specifically for inclusion in any Resale
Registration Statement or any related Resale Prospectus or (B) any statement or
omission in any Resale Prospectus that is corrected in any subsequent Resale
Prospectus that was delivered to an NMS Party prior to the pertinent sale or
sales by an NMS Party and not delivered in connection with such sale, when such
delivery was required by the Securities Act or any state securities law;
(ii) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation or of any investigation or
proceeding by any governmental
<PAGE> 21
agency or body, commenced or threatened, or of any claim whatsoever for which
indemnification is provided under subsection (i) above, only if such settlement
is effected with the written consent of the Companies; and
(iii) against any and all expense whatsoever
(including, without limitation, the fees and other charges of counsel chosen by
you) reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceedings by any governmental agency or
body, commenced or threatened, or any claim whatsoever for which indemnification
is provided under subsection (i) above, to the extent that any such expense is
not paid under subsection (i) (other than expenses not paid pursuant to the
proviso to subsection (i)) or (ii) above.
(b) Indemnification by the NMS Parties. The NMS Parties agree
to indemnify and hold harmless the Companies, and each person, if any, who
controls the Companies within the meaning of Section 15 of the Securities Act,
and any trustee, director, officer, employee or affiliate thereof, against any
and all loss, liability, claim, damage and expense described in the indemnity
contained in subsection (a) of this Section 7.5, as incurred, but only with
respect to (A) untrue statements or omissions, or alleged untrue statements or
omissions, made in any Resale Registration Statement (or any amendment thereto)
or any related Resale Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Companies by the NMS Parties specifically for inclusion in any Resale
Registration Statement or any related Resale Prospectus or (B) any statement or
omission in any Resale Prospectus that is corrected in any subsequent Resale
Prospectus that was delivered to an NMS Party prior to the pertinent sale or
sales by an NMS Party and not delivered in connection with such sale, when such
delivery was required by the Securities Act or any state securities law.
(c) Proceedings. Each indemnified party shall give notice as
promptly as reasonably practicable to each indemnifying party of any action
commenced against it in respect of which indemnity may be sought hereunder, but
failure to so notify an indemnifying party shall not relieve such indemnifying
party from any liability hereunder to the extent it is not materially prejudiced
as a result thereof and in any event shall not relive it from any liability
which it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of such
action. If it so elects within a reasonable time after receipt of such notice,
an indemnifying party, jointly with any other indemnifying parties receiving
such notice, may assume the defense of such action with counsel chosen by it and
reasonably acceptable to the indemnified parties defendant in such action,
unless such indemnified parties reasonably object to such assumption on the
ground that the named parties to any such action (including any impleaded
parties) include both such indemnified parties and an indemnifying party, and
such indemnified parties reasonably believe that there may be legal defenses
available to them which are different from or in addition to those available to
such indemnifying party. If an indemnifying party assumes the defense of such
action, the indemnifying parties shall not be liable for any fees and expenses
of
<PAGE> 22
counsel for the indemnified parties incurred thereafter in connection with such
action. In no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to any local counsel) separate
from their own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances. No indemnifying
party shall, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 7.5 (whether
or not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent (i) includes an unconditional release of
each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 7.5(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
(d) Contribution. If the indemnification provided for in this
Section 7.5 is required by its terms but is for any reason held to be
unavailable to or otherwise insufficient to hold harmless an indemnified party
under paragraph (a), (b) or (c) of this Section 7.5 in respect of any losses,
claims, damages, liabilities or expenses referred to herein, then each
applicable indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of any losses, claims, damages, liabilities
or expenses referred to herein, (i) in such proportion as is appropriate to
reflect the relative benefits received by the Companies and the NMS Parties from
the purchase and sale of the Shares or (ii) if the allocation provided in clause
(i) is not permitted by applicable law, in such proportion or as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Companies and the NMS Parties in connection with
the statements or omissions or inaccuracies in the representations and
warranties in this Purchase Agreement which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant equitable
considerations. The respective relative benefits received by the Companies on
the one hand and the NMS Parties on the other shall be deemed to be in the same
proportion as the amount paid by the NMS Parties to the Companies pursuant to
this Purchase Agreement and the Agreement and the net proceeds retained or
discounts received by the NMS Parties from the transactions contemplated by this
Purchase Agreement and
<PAGE> 23
the Agreement. The relative fault of the Companies and the NMS Parties shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or the alleged omission to
state a material fact or the inaccurate or the alleged inaccurate representation
and/or warranty relates to information supplied by the Companies or by the NMS
Parties and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include, subject to the
limitations set forth in paragraph (c) of this Section 7.5 any reasonable legal
or other fees or expenses incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
paragraph (c) of this Section 7.5 with respect to notice of commencement of any
action shall apply if a claim for contribution is to be made under this
paragraph (d); provided, however, that no additional notice shall be required
with respect to any action for which notice has been given under paragraph (c)
for purposes of indemnification. The Companies and the NMS Parties agree that it
would not be just and equitable if contribution pursuant to this Section 7.5
were determined solely by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in this paragraph (d). Notwithstanding the provisions of this Section 7.5,
the NMS Parties shall not be required to contribute any amount in excess of the
amount by which the aggregate net proceeds retained or discounts received by the
NMS Parties from the transactions contemplated hereby and by the Agreement
exceeds the amount of any damages that the NMS Parties has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) Relationship Between the REIT and OPCO. The obligations
set forth in this Section 7.5 shall in no way limit the ability of the Companies
to allocate liability between themselves.
7.6. Information Available. So long as any Resale Registration
Statement covering the resale of any shares owned by the NMS Parties is
effective, the Companies will furnish to the NMS Parties:
(a) as soon as practicable after available, one copy of
(i) their Joint Annual Report to Shareholders, (ii) their Joint Annual Report on
Form 10-K, (iii) their Joint Quarterly Reports to Shareholders, (iv) their Joint
Quarterly Reports on Form 10-Q, (v) a full copy of the particular Resale
Registration Statement covering the Shares (the foregoing, in each case,
excluding exhibits) and (iv) upon request, any or all other filings made with
the Commission by the Companies; and
<PAGE> 24
(b) upon the reasonable request of the NMS Parties, a
reasonable number of copies of the Resale
Prospectuses to supply to any other party requiring
such Resale Prospectuses;
and the Companies, upon the reasonable request of the NMS Parties, will meet
with the NMS Parties or a representative thereof at the Companies' headquarters
to discuss all information relevant for disclosure in such Resale Registration
Statement covering the Shares, subject to appropriate confidentiality
limitations.
7.7. Remedies. The Companies and the NMS Parties acknowledge
that there would be no adequate remedy at law if the Companies fail to perform
any of their obligations under this Section 7, and accordingly agree that the
NMS Parties, in addition to any other remedy to which it may be entitled at law
or in equity, shall be entitled to compel specific performance of the
obligations of the Companies under this Section 7, and the Companies hereby
waive the defense that a remedy at law would be adequate.
7.8. Notice Requirement. The REIT and the OPCO each covenants
and agrees that it will notify the NMS Parties at any time it becomes aware that
as a result of a change in the REIT's and the OPCO's capital stock, the NMS
Parties beneficially hold more than 4.9% of the REIT's and the OPCO's Paired
Shares.
SECTION 8. Broker's Fee. Other than any fees payable under or
in connection with the Agreement, each of the parties hereto represents that, on
the basis of any actions and agreements by it, there are no brokers or finders
entitled to compensation in connection with the sale or issuance of the Shares
to NMSSI.
SECTION 9. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified airmail, by telegram or telecopy or sent by nationally
recognized overnight express courier postage prepaid, and shall be deemed given
when so mailed or for telecopies, when transmitted and receipt confirmed, and
shall be delivered as addressed as follows:
(a) if to the Companies, to:
Starwood Hotels & Resorts
Starwood Hotels & Resorts Worldwide, Inc.
2231 East Camelback Road
Suite 400 and 410
Phoenix, Arizona 85016
Attention: Ronald C. Brown/Alan M. Schnaid
Telecopier: 602-852-0115
<PAGE> 25
with copies so mailed to:
Sidley & Austin
555 West Fifth Street
Suite 4000
Los Angeles, California 90013
Attention: Sherwin L. Samuels
Telecopier: 213-896-6600
or to such other person at such other place as the
Companies shall designate to NMS in writing; and
(b) if to NMS or NMSSI, to:
NationsBanc Montgomery Securities LLC
9 West 57th Street
47th Floor
New York, NY 10019
Attention: Christopher J. Innes
Telecopier: (212) 583-8573
SECTION 10. Changes. This Purchase Agreement may not be
modified or amended except pursuant to an instrument in writing signed by each
of the Companies and the NMS Parties.
SECTION 11. Headings. The headings of the various sections of
this Purchase Agreement have been inserted for convenience of reference only and
shall not be deemed to be part of this Purchase Agreement.
SECTION 12. Severability. In case any provision contained in
this Purchase Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
SECTION 13. Successors and Assigns. The Companies or the NMS
Parties may assign any of their respective rights, or delegate any of their
respective duties under this Purchase Agreement, if the other party first
consents to such assignment in writing. This Purchase Agreement shall inure to
the benefit of and be binding upon (i) the successors of the NMS Parties and
(ii) any assignee or transferee of rights and obligations of NMSSI pursuant to
the Agreement and any assignee or transferee of rights and obligations of the
NMS Parties pursuant to this Purchase Agreement. A transferee of NMSSI pursuant
to the Agreement and a transferee of the NMS Parties pursuant to this Purchase
Agreement, and, in each case, any successor, assignee, or transferee, shall be
held subject to all of the terms of this Purchase Agreement.
<PAGE> 26
SECTION 14. Governing Law; Jurisdiction. This Purchase
Agreement shall be governed by and construed in accordance with the laws of the
State of New York without regard to the conflicts of law principles thereof.
SECTION 15. Transfer to Affiliate. Notwithstanding anything
herein to the contrary, NMSSI may transfer the Purchase Shares to any affiliate
of NMSSI, together with all of NMSSI's rights hereunder, provided that (i) such
affiliate shall be an "accredited investor" within the meaning of Rule 501
(a)(1), (2), (3) or (7) of Regulation D promulgated under the Securities Act,
and (ii) such transfer shall be consistent with the investment representations
set forth at Section 5.1 hereto. In the event of such an assignment, such
affiliate shall in all respects be substituted for NMSSI as a party hereto.
SECTION 16. Counterparts. This Purchase Agreement may be
executed in two or more counterparts, each of which shall constitute an
original, but all of which, when taken together, shall constitute but one
instrument, and shall become effective when one or more counterparts have been
signed by each party hereto and delivered to the other parties.
SECTION 17. Recourse. Each NMS Party acknowledges and agrees
that the name "Starwood Hotels & Resorts" is a designation of the 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, June 19, 1995, January 2, 1998 and February 23, 1998 and as
the same may be further amended from time to time, and all persons dealing with
the REIT shall look solely to the REIT's assets for the enforcement of any
claims against the REIT, as the Trustees, officers, agents and security holders
of the REIT assume no personal liability for obligations entered into on behalf
of the REIT, and their respective individual assets shall not be subject to the
claims of any person relating to such obligations.
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have caused this
Purchase Agreement to be executed by their duly authorized representatives as of
the day and year first above written.
STARWOOD HOTELS & RESORTS
By:
Name:
Title:
STARWOOD HOTELS & RESORTS
WORLDWIDE, INC.
By:
Name:
Title:
NATIONSBANC MONTGOMERY SECURITIES LLC
By:
Name:
Title:
NMS SERVICES, INC.
By:
Name:
Title:
<PAGE> 28
Appendix I
(one of two)
STOCK CERTIFICATE QUESTIONNAIRE
Pursuant to Section 5 of the Purchase Agreement, please provide us with
the following information:
1. The exact name that your Shares are to be registered in (this is the
name that will appear on your stock certificate(s)). You may use a
nominee name if appropriate:
_______________________________
2. All relationships between the NMS Parties and the Registered
Holder listed in response to Item 1 above:
_______________________________
_______________________________
3. The mailing address of the Registered Holder listed in response to
Item 1 above:
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
4. The Social Security Number or Tax Identification Number of the
Registered Holder listed in response to Item 1 above:
_______________________________
<PAGE> 29
Appendix I
(two of two)
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement, please
provide us with the following information:
1. Pursuant to the "Selling Shareholders" section of the Registration Statement,
please state your or your organization's name exactly as it should appear in the
Registration Statement:
2. Please provide the number of shares that you or your organization
(including all affiliates) will own immediately after Closing, including those
Shares purchased by you or your organization (including all affiliates) pursuant
to this Purchase Agreement and those shares purchased by you or your
organization (including all affiliates) through other transactions:
3. Have you or your organization had any position, office or other
material relationship within the past three years with the Company or its
affiliates:
_____ Yes _____ No
If yes, please indicate the nature of any such relationships
below:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
<PAGE> 30
Appendix II
Attention:
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
The undersigned, [an officer of, or other person duly authorized by]
hereby certifies that he/she [fill in official name of individual or
institution] [said institution] is the Purchaser of the shares evidenced by the
attached certificate, and as such, sold such shares on [date] in accordance with
Registration Statement number [fill in the number of or otherwise identify
Registration Statement], the Securities Act of 1933, as amended, and any
applicable state securities or blue sky laws and the requirement of delivering a
current prospectus by the Company has been complied with in connection with such
sale.
Print or Type:
<TABLE>
<CAPTION>
<S> <C> <C>
NAME OF PURCHASER (Individual or Institution):
NAME OF INDIVIDUAL
representing Purchaser (if an Institution)
TITLE OF INDIVIDUAL
representing Purchaser (if an Institution)
Signature by:
Individual Purchaser
or Individual representing Purchaser:
</TABLE>
<PAGE> 31
EXHIBIT A
FORM OF CLOSING OPINION OF COUNSEL TO THE COMPANY
<PAGE> 32
AGREEMENT
THIS AGREEMENT is made as of the 23rd day of February, 1998, by and
between Starwood Hotels & Resorts (the "REIT"), Starwood Hotels & Resorts
Worldwide, Inc. ("OPCO," and together with the REIT, the "Companies") and NMS
Services, Inc. ("NMSSI"), through its agent NationsBanc Montgomery Securities
LLC ("NMS" and together with NMSSI, the "NMS Parties").
The purpose of this Agreement is to confirm the terms and conditions of
the transaction (the "Transaction") entered into between NMSSI and the
Companies.
IN CONSIDERATION of the mutual representations, warranties and
covenants herein contained, and on the terms and subject to the conditions
herein set forth, the Companies and NMSSI hereby agree as follows:
Section 1 Definitions.
As used in this Agreement, the following terms shall have the meanings
set forth below:
(a) Ability to Settle in Paired Shares. As of the date hereof,
the Companies have not, and after the date hereof, the Companies will
not, enter into any obligation that would contractually prohibit the
Companies from delivering Paired Shares pursuant to Sections 3.2, 4.2
or 5 of this Agreement.
(b) Certain Adjustments to Reference Price or Number of
Notional Shares. In the event of:
(i) a subdivision, consolidation or reclassification of
the Paired Shares, or a free distribution or dividend of
any Paired Shares to all existing holders of Paired Shares
by way of bonus, capitalization or similar issue; or
(ii) a distribution or dividend to all existing holders of
Paired Shares of (A) additional Paired Shares or (B) other
share capital or securities granting right to payment of
dividends and/or the proceeds of liquidation of the
Companies equally or proportionally with such payments to
holders of Paired Shares,
an adjustment shall thereupon be effected to the Reference
Price and/or the Notional Shares at the time of such event
with the intent that following such adjustment, the value
of this Transaction is economically equivalent to the
value immediately prior to the occurrence of the event
causing the adjustment.
<PAGE> 33
(c) Block Sale. any privately negotiated sales of the Paired
Shares involving at least a block of such security (as defined in Rule
10b-18 under the Exchange Act).
(d) Business Day. Any day other than a Saturday, Sunday, or
any other day on which banking institutions in the States of Delaware
or New York are not open for business.
(e) Calculation Agent. NMSSI, whose calculations and
determinations shall be made in a reasonable manner.
(f) Closing Price. The last sale price of the Paired Shares on
the Relevant Exchange on the relevant date.
(g) Commission. The Securities and Exchange Commission.
(h) Compounding Period. Means each period commencing on and
including:
(i) in the case of the first Compounding Period, the
Initial Settlement Date and ending on but excluding the
first Reset Date, and
(ii) for each period thereafter, a Reset Date and ending
on (but excluding) the next following Reset Date.
(i) Distribution Amount. Means, on each Reset Date, an amount
in U.S. Dollars equal to:
(i) the sum of all cash distributions paid on a single
Paired Share during the relevant Compounding Period; plus
(ii) an amount representing interest that could have been
earned on such distributions at the USD LIBOR rate having
a designated maturity of three months, plus Spread, for
the period from the date that such distributions would
have been received by a holder of a single Paired Share
until such Reset Date.
(j) DRIP Distribution. Sales to any Distribution Reinvestment
Plan now or hereafter established by the Companies, or to any agent
acting on behalf of such Plan, for sale to participants in such Plan.
(k) Effective Date. February 24, 1998.
(l) Exchange Act. The Securities Exchange Act of 1934, as
amended.
<PAGE> 34
(m) Exchange Trading Day. Each day on which the Relevant
Exchange is open for trading.
(n) Execution Price. The Closing Price on the Effective Date`.
(o) Gradual Market Distribution. An offering of the Paired
Shares into the existing trading market for outstanding shares of the
same class at other than (i) a fixed price on or through the facilities
of a national securities exchange or (ii) to or through a market maker
otherwise than on an exchange.
(p) Initial Price. Means,
(i) for the Compounding Period ending on the first Reset
Date, an amount in U.S. Dollars equal to $53.875, and
(ii) for each subsequent Reset Date, the Reference Price
as calculated on or adjusted as of the prior Reset Date.
(q) Initial Settlement Date. February 24, 1998.
(r) Interim Settlement Amount. With respect to a given Reset
Date, means the amount by which the Reference Amount minus $5,000,000
exceeds the product of (x) the Closing Price on such Reset Date and (y)
the number of Notional Shares.
(s) Interim Settlement Shares. The Interim Settlement Amount
divided by the Closing Price on such Reset Date.
(t) Maturity Date. March 1, 1999.
(u) Notional Shares. 1,547,000 Paired Shares, as may be
adjusted from time to time pursuant to Section 1(b), reduced by the
number of Settlement Shares that have been settled prior to the date of
calculation pursuant to Section 3.1 or Section 4.1.
(v) Paired Shares. Units consisting of one share of beneficial
interest, $.01 par value per share, in the REIT and one share of common
stock, par value $.01 per share, of OPCO, which shares are paired and
traded as a unit.
(w) Pooled Underwritten Secondary Offering. An underwritten
fixed price offering of Paired Shares, in which the Settlement Shares
and other Paired Shares, which may include the Paired Shares of other
selling shareholders and previously unissued Paired Shares.
<PAGE> 35
(x) Pooling Exit Fee. 50 basis points on the Settlement Amount
in connection with the related Pooled Underwritten Secondary Offering.
(y) Purchase Shares. Paired Shares sold to NMSSI pursuant to
the Purchase Agreement.
(z) Purchase Agreement. The Purchase Agreement, dated as of
February 23, 1998 (the "Purchase Agreement"), among the Companies,
NMSSI and NMS.
(aa) Reference Amount. On each Reset Date, the Reference Price
multiplied by the Notional Shares or Settlement Shares, as applicable.
(bb) Reference Price. On each Reset Date, the Reference Price
shall be determined by:
(i) compounding the Initial Price for the previous
Compounding Period at USD LIBOR rate plus Spread for a
designated maturity of three months (Actual/360 day count
fraction) to such Reset Date and
(ii) subtracting the Distribution Amount at that date.
(cc) Relevant Exchange. Means, with respect to any Exchange
Trading Day, the principal Stock Exchange on which the Paired Shares
are traded on that day.
(dd) Reset Date. Means, through the final Trade Date, (i) the
last day of each three-month period, beginning on May 31, 1998
(provided, that if such day is not a Business Day then the Reset Date
shall be the next Business Day), (ii) as to any Settlement Shares, but
only as to such Settlement Shares, the related Trade Date and (iii) as
to any Gross Settlement Shares, but only as to such Gross Settlement
Shares, the Exchange Trading Day immediately prior to the date on which
the related Gross Settlement Notice is delivered.
(ee) Securities Act. The Securities Act of 1933, as amended.
(ff) Settlement. Has the meaning set forth in Section 3.1 or
Section 4.1, as applicable.
(gg) Settlement Amount. Except as set forth in subsection (iv)
below, the net sales proceeds realized by or on behalf of NMSSI for all
sales of Paired Shares in connection with any Settlement, calculated as
follows:
<PAGE> 36
(i) if the manner of Settlement Sale pursuant to
Section 3.1 or 4.1 is an Underwritten Secondary Offering,
the Settlement Amount will equal the gross proceeds
realized, net of a negotiated underwriting discount;
(ii) if the manner of Settlement Sale pursuant to
Section 3.1 or 4.1 is a Block Sale, the Settlement Amount
will equal the gross sales proceeds realized, net of a
negotiated underwriting discount;
(iii) if the manner of Settlement Sale pursuant to
Section 3.1 or 4.1 is a Gradual Market Distribution, the
Settlement Amount will equal the gross sales proceeds
realized from sales to the market over the period of the
distribution, net of a resale spread of 50 basis points;
(iv) with respect to a given Trade Date, if the manner
of Settlement Sale pursuant to Section 3.1 or 4.1 is a
VWAP Sale, the Settlement Amount will equal the product
of (a) the volume weighted average price of the Paired
Shares for such Trade Date and (b) the number of Paired
Shares determined by the Company to be sold by NMSSI on
such Trade Date, net of a resale spread of 50 basis
points;
(v) if the manner of Settlement Sale pursuant to
Section 3.1 or 4.1 is a DRIP Distribution, the Settlement
Amount will equal the gross sales proceeds realized from
sales to any Purchase Agent for a Company Distribution
Reinvestment Plan, net of a resale spread of 50 basis
points; and
(vi) if the manner of Settlement Sale pursuant to
Section 3.1 or 4.1 is a Pooled Underwritten Secondary
Offering, the Settlement Amount will equal a pro rata
share of the gross proceeds realized, net of a negotiated
underwriting discount.
(hh) Settlement Date. The date after each Trade Date on which,
in accordance with standard market practice, any Paired Shares are
delivered and the funds received, in respect of any Settlement in
accordance with Section 3.2 or Price Decline Termination Event in
accordance with Section 4.2.
(ii) Settlement Shares. The number of Notional Shares which
will be settled on a given Settlement Date pursuant to Section 3.2 or
Section 4.2, as applicable.
(jj) Spread. 175 basis points, subject to adjustment pursuant
to Section 6.3.
(kk) Stock Exchange. Means the New York Stock Exchange, the
American
<PAGE> 37
Stock Exchange or NASDAQ.
(ll) Trade Date. Any date on which NMSSI executes a settlement
trade or trades as part of a Settlement in any of the manners of
Settlement Sale set forth in Section 3.1, pursuant to either Section
3.1 or 4.1.
(mm) Underwritten Secondary Offering. An underwritten fixed
price offering of the Paired Shares.
(nn) USD LIBOR. The London Inter Bank Offered Rate in respect
of U.S. Dollars for the designated maturity as quoted on Page 3750 on
the Telerate Service (or such other page as may replace Page 3750 on
that service) as of 11:00 a.m., London time, on the date on which it is
to be determined.
(oo) VWAP Sale. A sale of the Paired Shares into the existing
trading market for outstanding shares of the same class effected in
order to approximate the volume weighted average price of the Paired
Shares on the Relevant Exchange on the relevant date.
<PAGE> 38
Section 2 Representations and Warranties.
The representations and warranties of the Companies in Section 4 of the
Purchase Agreement are hereby incorporated by reference herein, and
each Company hereby so represents and warrants to NMSSI, and the
representations and warranties of the NMS Parties in Section 5 of the
Purchase Agreement are hereby incorporated by reference, and NMSSI
hereby so represents and warrants to each Company. The provisions of
Section 6 of the Purchase Agreement shall also be applicable to any
Paired Shares delivered to NMSSI under this Agreement.
Section 3 Settlement.
3.1 Settlement Sale.
On any Reset Date of the type referred to in clause (i) of the
definition of Reset Date, on any Exchange Trading Day that is one month
or two months following such a Reset Date or on any other Exchange
Trading Day (in each case, if other than such a Reset Date, the related
Settlement (as defined below) will include standard market interest
breakage fees), up to and including the Maturity Date, the Companies
may give telephonic notice to NMSSI to settle, and NMSSI shall settle,
in a commercially reasonable manner (which may require sales over a
period of more than 1 day), all or a portion of the Notional Shares to
be settled on the related Settlement Date or Dates, as specified by the
Companies ("Settlement"), through sale of not less than the number of
Paired Shares, the sale of which would result in a Settlement Amount
equal to 100% of the Reference Amount on the Settlement Date, and not
more than the number of Paired Shares, the sale of which would result
in a Settlement Amount equal, to 105% of the Reference Amount on the
Settlement Date, in any of the manners set forth below, as selected by
the Companies:
(i) an Underwritten Secondary Offering (for which the
Companies shall provide at least 21 Business Days prior
notice to NMSSI);
(ii) a Block Sale (for which the Companies shall provide
at least 3 Business Days prior notice to NMSSI);
(iii) a Gradual Market Distribution (for which the
Companies shall provide at least 1 Business Day prior
notice to NMSSI);
(iv) a VWAP Sale (for which the Companies shall provide
at least 1 Business Day prior notice to NMSSI);
(v) a DRIP Distribution (for which the Companies shall
provide at least
<PAGE> 39
1 Business Day prior notice to NMSSI); or
(vi) a Pooled Underwritten Secondary Offering (for which
the Companies shall provide at least 21 Business Day
prior notice to NMSSI).
If the Companies do not specify a manner of sale, a Gradual Market
Distribution shall be used. If the Paired Shares delivered by the
Companies to NMSSI pursuant to the Purchase Agreement and this
Agreement are not, on the applicable trade date, the subject of an
Effective Resale Registration Statement (as defined in Section 6.3),
the Companies may not select a VWAP Sale as the manner of Settlement.
The number of shares sold as part of a VWAP Sale on any Trade Date
shall not be less than 20% of the six-month daily average trading
volume of the Paired Shares as calculated by the Calculation Agent and
shall not exceed 40% of the six-month daily average trading volume of
the Paired Shares as calculated by the Calculation Agent, unless both
parties agree otherwise prior to the execution of any trades in
connection with such VWAP Sale. In connection with any Underwritten
Secondary Offering or Block Sale, NMS shall be the sole manager and
underwriter. In connection with a Pooled Underwritten Secondary
Offering, NMSSI and NMS may, in their discretion, elect to (a)
participate in such offering as a first-tier co-manager on the same
terms as all other first-tier co-managers or (b) receive the Pooling
Exit Fee; provided, however, that regardless of the election of NMSSI
and NMS, all of the Notional Shares shall be included in the Pooled
Underwritten Secondary Offering. Settlement procedures shall begin as
soon as commercially practicable, as determined by NMSSI, after NMSSI
receives notice from the Companies and no later than the first Exchange
Trading Day after expiration of the notice period unless otherwise
agreed by the Companies and NMSSI. At such time as the Companies
deliver notice pursuant to this Section 3.1, the Companies may direct
NMSSI to sell not less than the number of Paired Shares equal to the
number of Settlement Shares, and NMSSI shall comply with such direction
in a commercially reasonable manner. In connection with a Gradual
Market Distribution, there shall be a separate Settlement Date for each
Trade Date. Final Settlement shall occur no later than the Maturity
Date. However, if the Companies have not given NMSSI notice to settle
by the Maturity Date, then NMSSI shall settle the Notional Shares using
a Gradual Market Distribution to begin as soon as commercially
practicable, as determined by NMSSI, on or after the Maturity Date.
3.2 Settlement.
(a) If, on a Settlement Date, the Settlement Amount is greater
than the Reference Amount, NMSSI, on such Settlement Date, will pay the
Companies an amount in cash or Paired Shares (valued at the Closing
Price on the Trade Date), at the election of the Companies, equal to
the difference.
(b) If the number of Paired Shares sold by NMSSI pursuant to
Section 3.1 is
<PAGE> 40
greater than the number of Settlement Shares, the Companies shall
deliver to NMSSI, on the Settlement Date, a number of Paired Shares
equal to the difference. If the number of Paired Shares sold by NMSSI
pursuant to Section 3.1 is less than the number of Settlement Shares,
NMSSI shall deliver to the Companies, on the Settlement Date, a number
of Paired Shares equal to the difference.
(c) In all events, NMSSI will pay to the Companies an amount
equal to all cash distributions payable to NMSSI but not paid prior to
the Settlement Date, on a number of Paired Shares equal to the
Settlement Shares on the Business Day after the relevant distribution
payment date declared by the Board of Directors of the REIT and OPCO.
(d) If NMSSI, in connection with any Settlement, receives net
sales proceeds, as calculated pursuant to the definition of Settlement
Amount, from the sale of Paired Shares prior to the applicable
Settlement Date, NMSSI, on the Settlement Date, shall pay the Companies
an amount in cash representing interest that could have been earned on
such net sales proceeds at the USD LIBOR rate having a designated
maturity of three months, plus Spread, for the period from the date
that such net sales proceeds are received by NMSSI until such
Settlement Date.
3.3 Gross Share Settlement.
(a) The Companies may elect, in their sole discretion, to
settle all or any portion of the then outstanding Notional Shares by
delivering Paired Shares in exchange for such number of Notional Shares
(a "Gross Share Settlement"). The Companies may effect a Gross Share
Settlement by delivering a written notice (the "Gross Settlement
Notice") to NMSSI indicating the date of such Gross Share Settlement
and the number of then outstanding Notional Shares subject to such
Gross Share Settlement; provided that such notice must be accompanied
by a notice pursuant to Section 3.1 to effect settlement of all Paired
Shares delivered pursuant to this Section 3.3(a). To effect a Gross
Share Settlement, NMSSI Shall deliver to the Companies the number of
Notional Shares subject to such Gross Share Settlement ("Gross
Settlement Shares") against delivery by the Companies to NMSSI of a
number of Paired Shares equal to the product of (i) the number of Gross
Settlement Shares and (ii) the quotient obtained by dividing (A) the
Reference Price by (B) the Closing Price, in each case, on the Reset
Date for such Gross Settlement Shares. The deliveries set forth in the
immediately preceding sentence shall be made on the Exchange Trading
Day immediately following the date on which the Gross Settlement Notice
is delivered. All Paired Shares delivered to the Companies by NMSSI as
part of a Gross Share Settlement shall be immediately retired and shall
cease to be issued and outstanding Paired Shares.
(b) For purposes of the Settlement of the Paired Shares
delivered to NMSSI
<PAGE> 41
pursuant to Section 3.3(a), the Settlement Shares shall be deemed to be
equal to the Gross Settlement Shares, provided that for purposes of
Section 3.2(b), the Settlement Shares shall be deemed to be equal to
the Paired Shares so delivered to NMSSI pursuant to Section 3.3(a), and
provided further that, for purposes of Section 3.2(c), with respect to
any distribution payable to NMSSI but not paid prior to the Settlement
Date for which the record date occurs after the date on which the Gross
Settlement Notice is delivered, the Settlement Shares shall be deemed
to be equal to the Paired Shares delivered to NMSSI pursuant to Section
3.3(a).
(c) The amount of any distribution referred to in clause (i)
of the definition of Distribution Amount for which the record date
occurs after a Gross Share Settlement with respect to the Paired Shares
delivered to NMSSI pursuant to Section 3.3 shall be multiplied by the
quotient obtained in clause (ii) of Section 3.3(a).
Section 4 Price Decline Termination Event.
4.1 Price Decline Termination Event Sale.
If the Closing Price on any Exchange Trading Day falls below any
Termination Price listed in the following schedule ("Price Decline
Termination Event"), NMSSI will, at its discretion, in a commercially
reasonable manner (which may require sales over a period of more than 1
day) following notice to the Companies, settle the percentage of the
Notional Shares indicated in the table below ("Settlement") through
sale of not less than the number of Paired Shares, the sale of which
would result in a Settlement Amount equal to 100% of the Reference
Amount on the Settlement Date, and not more than the number of Paired
Shares, the sale of which would result in a Settlement Amount equal to
105% of the Reference Amount on the Settlement Date, in any of the
manners specified in Section 3.1, as specified by the Companies:
Percentage of Initial
Notional Shares to be
Settled Termination Price
--------------------- -----------------
25% $37.7125
50% $35.0188
75% $33.6719
100% $32.3250
<PAGE> 42
Settlement procedures shall commence on the date specified by NMSSI.
4.2 Price Decline Termination Event Settlement.
(a) If, on the Settlement Date, the Settlement Amount is
greater than the Reference Amount, NMSSI, on the Settlement Date, will
pay the Companies an amount in cash or Paired Shares (valued at the
Closing Price on the Trade Date), at the election of the Companies,
equal to the difference.
(b) If the number of Paired Shares sold by NMSSI pursuant to
Section 4.1 is greater than the number of Settlement Shares, the
Companies shall deliver to NMSSI, on the Settlement Date, a number of
Paired Shares equal to the difference. If the number of Paired Shares
sold by NMSSI pursuant to Section 4.1 is less than the number of
Settlement Shares, NMSSI shall deliver to the Companies, on the
Settlement Date, a number of Paired Shares equal to the difference.
(c) In all events, NMSSI will pay to the Companies an amount
equal to all cash distributions payable to NMSSI but not paid prior to
the Settlement Date, on a number of Paired Shares equal to the
Settlement Shares on the Business Day after the relevant distribution
payment date declared by the Boards of Directors of the REIT and OPCO.
(d) If NMSSI, in connection with any Settlement, receives net
sales proceeds, as calculated pursuant to the definition of Settlement
Amount, from the sale of Paired Shares prior to the applicable
Settlement Date, NMSSI, on the Settlement Date, shall pay the Companies
an amount in cash representing interest that could have been earned on
such net sales proceeds at the USD LIBOR rate having a designated
maturity of three months, plus Spread, for the period from the date
that such net sales proceeds are received by NMSSI until such
Settlement Date.
Section 5 Interim Settlements.
Within 5 Business Days following each Reset Date of the type referred
to in clause (i) of the definition of Reset Date, the Companies shall
(i) deliver the Interim Settlement Amount, if any, in Interim
Settlement Shares to NMSSI. Interim Settlement Shares shall be the
subject of a registration statement covering any sale of such Interim
Settlement Shares by NMSSI that has been declared effective under the
Securities Act by the Commission (an "Effective Registration
Statement"). Interim Settlement Shares shall be registered in the stock
register of the Companies as instructed by NMSSI and shall be held by
NMS or a custodian or depository designated by NMS. If the Companies
are unable to deliver Interim Settlement Shares in accordance with the
preceding sentence, the Companies shall deliver "restricted" Interim
Settlement Shares that are not the subject
<PAGE> 43
of an Effective Registration Statement in an amount equal to the
Interim Settlement Amount. If the Interim Settlement Shares are not the
subject of an Effective Registration Statement, the Companies shall
deliver additional Interim Settlement Shares equal to 20% of the
Interim Settlement Shares. At such time as the Interim Settlement
Shares are the subject of an Effective Registration Statement, the
Companies may elect to have returned all additional Interim Settlement
Shares delivered pursuant to the preceding sentence. On any Reset Date,
if Interim Settlement Shares are held by NMSSI, NMSSI shall deliver to
the Companies within five (5) Business Days after such Reset Date, the
amount in Interim Settlement Shares by which the amount in Interim
Settlement Shares held by NMSSI (valued at the Closing Price on such
Reset Date) plus any cash amounts in the collateral account exceeds the
Interim Settlement Amount (or 120% of the Interim Settlement Amount, in
the event that NMSSI holds restricted Interim Settlement Shares that
are not the subject of an Effective Registration Statement).
Distributions on the Interim Settlement Shares will be deposited in a
collateral account at NMS or a custodian or depositary designated by
NMS. All Interim Settlement Shares will be, when delivered, duly
authorized, validly issued, fully paid and non-assessable. Interim
Settlement Shares shall not be voted by NMSSI or NMS. All distributions
received in respect of the Interim Settlement Shares shall be held in
the collateral account at NMS or a depositary designated by NMS. The
cash amounts in the collateral account will be immediately returned to
the Companies by NMSSI, but should NMSSI fail to return any cash
amounts in the collateral account, such cash amounts will earn interest
at the USD LIBOR rate having a designated maturity of three months.
Upon final Settlement, NMSSI shall immediately release all claims to
cash held in the collateral account, if any (including interest earned
thereon), and Interim Settlement Shares and deliver such amounts and
all Interim Settlement Shares to the Companies.
Section 6 Certain Covenants and Other Provisions.
6.1 Par Value.
NMSSI shall pay to the Companies $.01 par value per share for each
share comprising a Paired Share delivered to NMSSI pursuant to this
Agreement, including any Interim Settlement Shares.
<PAGE> 44
6.2 Allocation of Payment and Deliveries
As between the REIT and OPCO, any delivery of, or payments
attributable to, the REIT portion of Paired Shares pursuant to this
Agreement shall be made to or by the REIT, and any delivery of, or
payments attributable to, the OPCO portion of Paired Shares pursuant to
this Agreement shall be made to or by OPCO. When making any payment to
the Companies pursuant to this Agreement, NMSSI shall allocate such
payment between the REIT and OPCO in the manner specified by the
Companies.
6.3 Resale Registration Statement.
The Companies shall file a resale registration statement covering any
resales of Paired Shares delivered by the Companies to NMSSI pursuant
to this Agreement and the Purchase Agreement (a "Resale Registration
Statement") within 45 Business Days of the Closing Date and the
Companies shall use their best efforts to obtain effectiveness of such
Resale Registration Statement within 90 Business Days of the Closing
Date. If the Paired Shares delivered by the Companies to NMSSI pursuant
to the Purchase Agreement are not the subject of a Resale Registration
Statement that has been declared effective under the Securities Act by
the Commission (an "Effective Resale Registration Statement") within 90
Business Days of the Closing Date, the Spread shall increase,
retroactively effective commencing on the Initial Settlement Date, to
the Spread plus 125 basis points. At such time as the Purchase Shares
are the subject of an Effective Resale Registration Statement, the
Spread shall be reduced, from and after such time, to the Spread. The
Companies further agree that they will cause any Resale Registration
Statement to remain in effect until the earliest of the date on which
(i) the Notional Shares plus all of the Interim Settlement Shares and
any other Paired Shares delivered by the Companies to NMSSI pursuant
this Agreement have been sold by or on behalf of NMSSI, or (ii) NMSSI
has advised the Companies that it no longer requires that such
registration be effective. The provisions of Section 5.2 and Section
7.2 of the Purchase Agreement shall be deemed to apply to any Resale
Registration Statement filed by the Companies pursuant to this
Agreement.
6.4 Delivery of Paired Shares.
Each Company covenants and agrees with NMSSI that Paired Shares
delivered by the Companies pursuant to settlement events in accordance
herewith will be duly authorized, validly issued, fully paid and
nonassessable. The issuance of such Paired Shares will not require the
consent, approval, authorization, registration, or qualification of any
government authority, except such as shall have been obtained on or
before the delivery date to NMSSI in connection with any registration
statement filed with respect to any Paired Shares. Each party agrees
that the Companies shall not deliver Paired Shares to NMSSI or any
other person in connection with an Interim Settlement or the final
<PAGE> 45
Settlement until such time as such delivery would not cause NMSSI or
any other person to violate the "Ownership Limit" set forth in the
Amended and Restated Declaration of Trust of the REIT or the Articles
of Amendment and Restatement of OPCO, in each case, as in effect on the
date hereof.
6.5 Securities Law Compliance.
Each party agrees that it will comply, in connection with this
Transaction and all related or contemporaneous sales and purchases of
the Companies' Paired Shares, with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations
thereunder.
6.6 Regulatory Compliance.
Each party agrees that if the delivery of Paired Shares upon settlement
is subject to any restriction imposed by a regulatory authority, it
shall not be an event of default, and the parties will negotiate in
good faith a procedure to effect settlement of such Paired Shares in a
manner which complies with any relevant rules of such regulatory
authority and which is satisfactory in form and substance to their
respective counsel, subject to Section 6.2 of this Agreement and
Section 7 of the Purchase Agreement. Each party further agrees that any
sale pursuant to Section 3.1 may be delayed or postponed if, in NMSSI's
reasonable judgement, such delay or postponement is necessary to comply
with the requirements of applicable law or regulation; provided,
however, that NMSSI will act in good faith to end such delay or
postponement or otherwise effect such sale on a reasonably timely basis
in a manner which complies with any such applicable law or regulation
and which is satisfactory in form and substance to its respective
counsel.
6.7 Settlement Transfer.
All settlements shall occur through DTC or any other mutually
acceptable depository.
6.8 Trading Authorization.
The following individuals and/or any individual authorized in writing
by the respective officers of the Companies are authorized by the
Companies to provide trading instructions to NMSSI with regard to this
transaction:
<PAGE> 46
Ronald C. Brown
2231 E. Camelback Road
Suite 410
Phoenix, Arizona 85016
and
Richard Smith
2231 E. Camelback Road
Suite 400
Phoenix, Arizona 85016
6.9 Specific Performance.
The parties acknowledge and agree that the failure of the Companies or
NMSSI to deliver Paired Shares in accordance with the provisions hereof
would result in damage to the other party that could not be adequately
compensated by a monetary award. The parties therefore agree that, if
either party fails to deliver Paired Shares in accordance with the
provisions hereof, the other party may, in addition to all other
remedies, seek an order of specific performance from a court of
appropriate jurisdiction.
6.10 Recourse. NMSSI acknowledges and agrees that the name
"Starwood Hotels & Resorts" is a designation of the 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, on June 19, 1995, January 2, 1998
and February 23, 1998 and as the same may be further amended from time
to time, and all persons dealing with the REIT shall look solely to
REIT's assets for the enforcement of any claims against the REIT, as
the Trustees, officers, agents and security holders of the REIT assume
no personal liability for obligations entered into on behalf of the
REIT, and their respective individual assets shall not be subject to
the claims of any person relating to such obligations.
6.11 Successors and Assigns. The Companies or NMSSI may assign
any of their respective rights, or delegate any of their respective
duties under this Agreement, if the other party first consents to such
assignment in writing. This Agreement shall inure to the benefit of and
be binding upon (i) the successors of NMSSI and (ii) any assignee or
transferee of rights and obligations of the NMS Parties pursuant to the
Purchase Agreement and any assignee or transferee of rights and
obligations of NMSSI pursuant to this Agreement. A transferee of the
NMS Parties pursuant to the Purchase Agreement and a transferee of
NMSSI pursuant to this Agreement, and, in each case, any successor,
assignee, or transferee, shall be held subject to all of the terms of
this Agreement.
<PAGE> 47
6.12 Transfer to Affiliate. Notwithstanding anything herein to
the contrary, if NMSSI transfers the Purchase Shares to any affiliate
of NMSSI, together with all of NMSSI's rights under the Purchase
Agreement pursuant to Section 15 of the Purchase Agreement, then
NMSSI's rights and obligations under this Agreement shall be
transferred to such affiliate of NMSSI. In the event of such an
assignment, such affiliate shall in all respects be substituted for
NMSSI as a party hereto.
6.13 Governing Law.
The Agreement will be governed by and construed in accordance with the
laws of the State of New York without reference to choice of law
doctrine.
6.14 Confidentiality.
Subject to the other applicable subsections of this Section 6, to any
contrary requirement of law, including any disclosure obligations of
the Companies under the Securities Act, the Exchange Act and the rules
and regulations thereunder, and to the right of each party to enforce
its rights hereunder in any legal action, each party shall keep
strictly confidential and shall cause its employees and agents to keep
strictly confidential the terms of this Agreement and any information
relating to or concerning the other party which it or any of its agents
or employees may acquire pursuant to, or in the course of performing
its obligation under, any provision of this Agreement.
<PAGE> 48
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
STARWOOD HOTELS & RESORTS
WORLDWIDE, INC.
By:__________________________________
Name:
Title:
STARWOOD HOTELS & RESORTS
By:__________________________________
Name:
Title:
NMS SERVICES, INC.
By:__________________________________
Name:
Title:
NATIONSBANC MONTGOMERY SECURITIES LLC
By:__________________________________
Name:
Title:
<PAGE> 1
Exhibit 10.70
EXECUTION COPY
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT is made as of the 23rd day of February,
1998, by and among Starwood Hotels & Resorts (the "REIT"), a Maryland real
estate investment trust, Starwood Hotels & Resorts Worldwide, Inc., a Maryland
corporation (the "OPCO") (the REIT and the OPCO, each a "Company" and together
the "Companies"), Merrill Lynch International ("MLI"), and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, on behalf of itself and as agent acting for
the account of MLI ("Merrill Lynch" and, collectively with MLI, the "Merrill
Lynch Parties").
IN CONSIDERATION of the mutual covenants contained in this Purchase
Agreement, the Companies and the Merrill Lynch Parties hereby agree as follows:
SECTION 1. Authorization of Sale of the Shares. Subject to the terms
and conditions of this Purchase Agreement, the REIT has authorized the sale to
the Merrill Lynch Parties of 1,547,000 shares of beneficial interest, $.01 par
value per share, of the REIT (the "REIT Shares") and the OPCO has authorized the
sale to the Merrill Lynch Parties of 1,547,000 shares of common stock, $.01 par
value per share, of the OPCO (the "OPCO Shares"), which REIT Shares and OPCO
Shares are paired as a unit consisting of one (1) REIT Share and one (1) OPCO
Share (hereinafter each such paired unit is referred to as a "Paired Share") and
the Paired Shares referred to in this sentence are herein called the "Purchase
Shares"). In addition, the REIT and the OPCO may issue to MLI additional Paired
Shares in settlement of certain of their obligations under that certain
Agreement (the "Agreement"), dated as of the date hereof, between the REIT, the
OPCO and MLI (the "Additional Shares"). The Paired Shares and the Additional
Shares are hereinafter collectively called the "Shares."
SECTION 2. Agreement to Sell and Purchase the Purchase Shares.
Subject to the terms and conditions of this Purchase Agreement, on the Closing
Date (as defined in Section 3 hereof), the Companies will sell to the Merrill
Lynch Parties the Purchase Shares for a per Paired Share purchase price equal to
98.00% of the Closing Price. The "Closing Price" shall equal the closing price
reported on the New York Stock Exchange for a Paired Share on February 23, 1998.
SECTION 3. Delivery of the Purchase Shares at the Closing.
3.1. Closing. The completion of the purchase and sale of the
Purchase Shares (the "Closing") shall occur as soon as practicable on or after
the date hereof on a business day to be agreed upon by the Companies and the
Merrill Lynch Parties, but in no event later than five business days after the
execution of this Purchase Agreement (hereinafter, the "Closing Date").
<PAGE> 2
3.2. Conditions. At Closing, the Companies shall deliver to the
Merrill Lynch Parties one or more stock certificates registered in the name of
MLI representing the number of Purchase Shares set forth in Section 2 above.
The obligation of the Companies to complete the purchase and sale of
the Purchase Shares and deliver such stock certificate(s) to the Merrill Lynch
Parties at the Closing shall be subject to the following conditions, any one or
more of which may be waived by both of the Companies acting together: (i)
receipt by the Companies of Federal Funds (or other mutually agreed upon form of
payment) in the full amount of the purchase price for the Purchase Shares being
purchased hereunder, (ii) the accuracy in all material respects as of the
Closing Date, of the representations and warranties made by the Merrill Lynch
Parties herein and the fulfillment, in all material respects, of those
undertakings of the Merrill Lynch Parties to be fulfilled prior to the Closing,
(iii) execution and delivery of the Agreement by MLI, (iv) receipt by the
Companies of a cross-receipt with respect to the Purchase Shares executed by
Merrill Lynch and (v) receipt by the Companies of a certificate by an officer or
authorized representative of Merrill Lynch to the effect that the
representations and warranties of the Merrill Lynch Parties set forth in Section
5 hereof are true and correct as of the date of this Purchase Agreement and as
of the Closing Date.
The Merrill Lynch Parties' obligation to accept delivery of such
stock certificate(s) and to pay for the Purchase Shares evidenced thereby shall
be subject to the following conditions, any one or more of which may be waived
by the Merrill Lynch Parties: (i) the accuracy in all material respects, as of
the Closing Date, of the representations and warranties made by the Companies
herein and the fulfillment, in all material respects, of those undertakings of
the Companies to be fulfilled prior to the Closing, (ii) receipt by the Merrill
Lynch Parties of all opinions, letters and certificates to be delivered by the
Companies pursuant to this Purchase Agreement, (iii) execution and delivery of
the Agreement by each of the Companies, and (iv) receipt by the Merrill Lynch
Parties of a cross-receipt with respect to the purchase price for the Purchase
Shares executed by the Companies.
SECTION 4. Representations, Warranties and Covenants of the
Companies. Except as disclosed in the Companies' SEC Filings (as defined below),
each of the REIT and the OPCO, severally and not jointly, hereby represents and
warrants to the Merrill Lynch Parties, and covenants with the Merrill Lynch
Parties, with respect to such Company and its Subsidiaries (as defined below)
only, as follows:
4.1. Organization and Qualification of the Companies. Each of the
REIT and the OPCO has been duly organized and is validly existing in good
standing under the laws of Maryland with power and authority to own and lease
its properties and to conduct its business as currently conducted. Each of the
REIT and the OPCO is duly qualified to transact business and is in good standing
in each jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing or
<PAGE> 3
managing of property or the conduct of business, except where the failure to so
qualify would not have a material adverse effect on the condition, financial or
otherwise, or the earnings, assets, business affairs or business prospects of
the Companies and the Subsidiaries of the Companies considered as one enterprise
(a "Material Adverse Effect"). Entities in which either of the Companies
directly or indirectly has at least a 50% ownership interest are herein referred
to as the "Subsidiaries," and each individually, as a "Subsidiary."
4.2. Organization and Qualification of Subsidiaries. Each of the
Subsidiaries has been duly organized and is validly existing as a corporation,
limited partnership, or limited liability company, as the case may be, in good
standing under the laws of its respective jurisdiction of organization, with
full power and authority to own, lease and operate its properties and to conduct
the business in which it currently is engaged. Each of the Subsidiaries is duly
qualified as a foreign corporation, limited partnership, or limited liability
company, as the case may be, to transact business and is in good standing in
each jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except where
the failure to so qualify would not have a Material Adverse Effect. All of the
issued and outstanding shares of capital stock of each of the corporate
Subsidiaries have been duly authorized and validly issued and are fully paid and
non-assessable. The ownership by the Companies or the Subsidiaries of the shares
of capital stock or limited partnership or equity interests, as the case may be,
of each of the Subsidiaries is as described in the Companies' SEC Filings.
4.3. Authorized Capital Stock. The REIT has the following authorized
shares:1,000,000,000 REIT shares par value $0.01 per share, 200,000,000 excess
shares of beneficial interest, par value $.01 per share, 100,000,000 shares of
trust preferred shares, par value $.01 per share, and 50,000,000 shares of
excess preferred stock, par value $0.01 per share. The OPCO has the following
authorized shares: 1,000,000,000 OPCO shares, par value $0.01 per share,
200,000,000 shares of preferred stock, par value $0.01 per share, 50,000,000
shares of excess common stock, par value $0.01 per share and 100,000,000 shares
of excess preferred shares, par value $0.01 per share. As of January 20, 1998,
there were 55,392,389 Paired Shares, 6,285,765 Class A Exchangeable Preferred
Shares of the Trust and 5,502,711 Class B Exchangeable Preferred Shares of the
Trust outstanding, and 21,292,005 REIT shares and 21,292,005 OPCO shares were
reserved for issuance. The issued and outstanding Paired Shares of the Companies
have been duly authorized and validly issued, are fully paid and nonassessable,
have been issued in compliance with all federal and state securities laws, were
not issued in violation of or subject to any preemptive rights or other rights
to subscribe for or purchase securities, and conform to the description thereof
in the Companies' SEC Filings. Other than as described in the Companies' SEC
Filings, the REIT does not have outstanding any options to purchase, or other
rights to subscribe for or purchase, any securities or obligations convertible
into, or any contracts or commitments to issue or sell, shares of its capital
stock or any such options, rights, convertible securities or obligations. The
description of the
<PAGE> 4
Companies' stock, stock bonus and other stock plans or arrangements and the
options or other rights granted and exercised thereunder in the Companies' SEC
Filings accurately and fairly presents the information required to be shown with
respect to such plans, arrangements, options and rights.
4.4. Issuance, Sale and Delivery of the Shares. The Purchase Shares
to be sold by the Companies have been duly authorized for issuance and, when
issued, delivered and paid for in the manner set forth in this Purchase
Agreement, will be validly issued, fully paid and non-assessable. The Additional
Shares, if and when issued pursuant to the Agreement, have been duly authorized
and will be validly issued, fully paid and non-assessable. Upon payment of the
purchase price and delivery of the Shares in accordance with this Purchase
Agreement, MLI will receive good, valid and marketable title to the Shares, free
and clear of all security interests, mortgages, pledges, liens, encumbrances and
claims. No approval of or authorization by the respective shareholders or boards
of trustees or directors of the Companies will be required for the issuance
and/or sale of the Shares to be sold by the Companies as contemplated herein or
in the Agreement, except such as shall have been obtained on or before the
Closing Date or the applicable Settlement Date. The issuance and/or sale of the
Shares to the Merrill Lynch Parties by the Companies pursuant to this Purchase
Agreement or the Agreement (as the case may be), the compliance by the Companies
with the other provisions of this Purchase Agreement or the Agreement and the
consummation of the other transactions contemplated hereby or thereby do not
require the consent, approval, authorization, registration or qualification of
or with any court, governmental authority or agency, except such as shall have
been obtained on or before the Closing Date or in connection with any Resale
Registration Statement filed with respect to any of the Shares. The Companies
meet and will continue to meet the requirements for use of Form S-3 under the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations of the U.S. Securities and Exchange Commission (the "Commission")
under the Securities Act (the "1933 Act Regulations"). The Companies have filed
and will file all documents which they are required to file under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the rules and
regulations promulgated thereunder (the "1934 Act Regulations") within the time
periods prescribed by the Exchange Act and the 1934 Act Regulations since
December 31, 1996 and all such documents (collectively, together with the
Companies' registration statements filed under the Securities Act which have
been declared effective since January 1, 1997 and have not been withdrawn, the
"Companies' SEC Filings") comply and will comply in all material respects with
the requirements of the Exchange Act and the 1934 Act Regulations, as
applicable, and none of such documents, when so filed, contained or will contain
any untrue statement of a material fact or omitted or will omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. No Resale Registration Statement filed in respect of any of the
Shares, when so filed, contained or will contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading.
<PAGE> 5
4.5. Due Execution, Delivery and Performance by the Company. Each of
the Companies has full right, power and authority to enter into this Purchase
Agreement and the Agreement and perform the transactions contemplated hereby and
thereby. This Purchase Agreement and the Agreement have been duly authorized,
executed and delivered by each of the Companies. The execution and delivery of
the Purchase Agreement and the Agreement by each of the Companies and the
consummation of the transactions and the performance of the obligations herein
and therein contemplated will not violate any provision of the declaration of
trust, certificate of incorporation, bylaws, or other organizational documents
of either of the Companies, and will not conflict with, result in the breach or
violation of, or constitute, either by itself or upon notice or the passage of
time or both, a default under any material agreement, mortgage, deed of trust,
credit agreement, lease, franchise, license, indenture, note, permit or other
instrument to which either Company is a party or by which either Company or its
respective properties may be bound or affected, any statute or any
authorization, judgment, decree, order, rule or regulation of any court or any
regulatory body, administrative agency or other governmental body applicable to
either Company or any of its respective properties other than violations,
conflicts, breaches or defaults that individually or in the aggregate would not
have a Material Adverse Effect. No consent, approval, authorization or other
order of any court, regulatory body, administrative agency or other governmental
body is required for the execution and delivery of this Purchase Agreement, the
Agreement or the consummation of the transactions contemplated hereby or
thereby, except in connection with the filing of any Resale Registration
Statements pursuant to Section 7 below or for compliance with the blue sky laws
applicable to the offering of the Shares.
4.6. Accountants. The Companies' independent certified public
accountants, who have expressed their opinion with respect to the Most Recent
Financial Statements (as defined below) are independent accountants as required
by the Securities Act and the 1933 Act Regulations.
4.7. No Defaults. Except as to defaults, violations and breaches
which individually or in the aggregate would not have a Material Adverse Effect,
neither of the Companies nor any of their respective Subsidiaries is in
violation or default of any provision of its declaration of trust, certificate
of incorporation or bylaws, or other organizational documents, and is not in
breach of or default with respect to any provision of any agreement, judgment,
decree, order, mortgage, deed of trust, credit agreement, lease, franchise,
license, indenture, permit or other instrument to which it is a party or by
which it or any of its properties are bound.
4.8. No Actions. There is no action, suit or proceeding before or by
any court or governmental agency or body, domestic or foreign, now pending, or,
to the knowledge of each Company, threatened against or affecting such Company
or any of its Subsidiaries, any real property or improvements thereon owned or
leased by such Company or its Subsidiaries, including any property underlying
indebtedness held by
<PAGE> 6
such Company (each, individually, a "Property" and collectively, the
"Properties"), or any officer of such Company or any of its Subsidiaries that,
if determined adversely to such Company or any Subsidiary, any Property,
including any property underlying indebtedness held by such Company and any of
its Subsidiaries, or any such officer, would reasonably be expected to (A)
result in any Material Adverse Effect or (B) materially and adversely affect the
consummation of the transactions contemplated by this Purchase Agreement or the
Agreement.
4.9. Properties. (A) Each Company and its respective Subsidiaries,
as the case may be, has good and marketable title to all the properties and
assets reflected as owned by such entities in the Most Recent Financial
Statements, subject to no lien, mortgage, pledge, charge or encumbrance of any
kind except (i) those, if any, reflected in the Most Recent Financial
Statements, or (ii) those which would not have a Material Adverse Effect, (B)
the leases of any real property and buildings held under lease by such Company
or any of its Subsidiaries are in full force and effect, and such entities are
not in default in respect of any of the terms or provisions of such leases and
have not received notice of the assertion of any claim by anyone adverse to such
entities' rights as lessee under such leases, or affecting or questioning such
entity's right to the continued possession or use of the real property and
buildings held under such leases or of a default under such leases, in each case
with such exceptions as would not have a Material Adverse Effect; (C) neither
Company nor any of its respective Subsidiaries or any tenant of any of the
Properties is in default under any of the leases pursuant to which such Company
or its Subsidiaries, as lessor, leases its Property (and to the best knowledge
of such Company no event has occurred which, but for the passage of time or the
giving of notice, or both, would constitute a default under any of such leases)
other than such defaults that would not have a Material Adverse Effect; (D) no
person has an option or right of first refusal to purchase all or part of any
Property or any interest therein, other than such options or rights of first
refusal which would not have a Material Adverse Effect; (E) each of the
Properties complies with all applicable codes, laws and regulations (including,
without limitation, building and zoning codes, laws and regulations and laws
relating to access to the Properties), except for such failures to comply that
would not individually or in the aggregate have a Material Adverse Effect; and
(F) neither Company has knowledge of any pending or threatened condemnation
proceedings, zoning change, or other proceeding or action that will in any
manner affect the size of, use of, improvements on, construction on or access to
the Properties, including any property underlying indebtedness held by either
Company or any of its respective Subsidiaries, except such proceedings or
actions that would not have a Material Adverse Effect.
4.10. REIT Qualification. The REIT qualified as a real estate
investment trust under the Internal Revenue Code of 1986, as amended (the
"Code"), with respect to its taxable years ended December 31, 1995, December 31,
1996 and December 31, 1997, and is organized in conformity with the requirements
for qualification as a real estate investment trust, and its manner of operation
has enabled it to meet the requirements for qualification as a real estate
investment trust as of the date hereof,
<PAGE> 7
and its proposed manner of operation will enable it to meet the requirements for
qualification as a real estate investment trust in the future.
4.11. No Material Change. Since the date of the Most Recent
Financial Statements, and except as otherwise disclosed in the Companies' SEC
Filings as of the Closing Date, (i) no material casualty loss or material
condemnation or other material adverse event with respect to any Property or any
of the Subsidiaries, has occurred that would singly or in the aggregate have a
Material Adverse Effect; (ii) neither of the Companies, nor any of their
respective Subsidiaries is in default in the payment of principal or interest on
any outstanding debt obligations; (iii) except as a result of (a) the Companies'
acquisition of Westin Hotels & Resorts Worldwide, Inc. and certain affiliates
and the related financing transactions and (b) the OPCO's acquisition of ITT
Corporation and the related financing transactions, there has not been any
change in the capital stock of either Company or the Subsidiaries (other than
the sale of the Purchase Shares hereunder or those reserved for issuance
pursuant to the Agreement, issuances pursuant to the incentive compensation
plans of the Companies), or any increase in the indebtedness of either Company
or their respective Subsidiaries that is material to such entities, considered
as one enterprise; (iv) and except for regular quarterly distributions on the
REIT Shares, there has been no dividend or distribution of any kind declared,
paid or made by the REIT or the OPCO; and (v) there has not been any material
adverse change in the condition, financial or otherwise, or in the earnings,
assets, business affairs or business prospects of the Companies and the
Subsidiaries, considered as one enterprise, whether or not arising in the
ordinary course of business.
4.12. Intellectual Property. Neither of the Companies nor the
Subsidiaries is required to own or possess trademarks, trade names, patent
rights, copyrights, licenses, approvals and governmental authorizations, which
it does not already own or possess to conduct its businesses as now conducted;
and neither Company has knowledge of any material infringement by it of
trademark, trade name rights, patent rights, copyrights, licenses, trade secrets
or other similar rights of others, and has not received any notice that any
claim has been made against such Company regarding trademark, trade name,
patent, copyright, license, trade secrets or other infringement that would not
singly or in the aggregate have a Material Adverse Effect.
4.13. Compliance. Neither Company has been advised, or has reason to
believe, that it is not conducting business in compliance with all applicable
laws, rules and regulations of the jurisdictions in which it is conducting
business, except where failure to be so in compliance will not have a Material
Adverse Effect.
4.14. Taxes. Each of the Companies and its Subsidiaries have filed
all material federal, state and foreign income and franchise tax returns which
have been required to be filed and has paid or accrued all taxes shown as due
thereon (except for those taxes which are being contested in good faith through
appropriate proceeding, for which adequate reserves have been established and
which are either reflected in the Most Recent Financial Statements or disclosed
by the Companies to the Merrill Lynch
<PAGE> 8
Parties), and neither Company has any knowledge of any tax deficiency which has
been or might be asserted or threatened against such Company and its
Subsidiaries which would singly or in the aggregate have a Material Adverse
Effect.
4.15. Transfer Taxes. On the Closing Date, all stock transfer or
other taxes, if any (other than income taxes) which are required to be paid in
connection with the sale and transfer of the Purchase Shares to be sold to the
Merrill Lynch Parties hereunder will be, or will have been, fully paid or
provided for by the Companies and all laws imposing such taxes will be or will
have been fully complied with.
4.16. Investment Company. Neither of the Companies nor any of their
Subsidiaries is required to register as an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
4.17. Offering Materials. Neither the REIT nor the OPCO has
distributed nor will distribute prior to the Closing Date any offering material
in connection with the offering and sale of the Purchase Shares other than the
documents and information provided to the Merrill Lynch Parties pursuant to this
Section 4.
4.18. Additional Information. Each of the Companies represents and
warrants that the information contained in the following documents, which the
Companies have furnished to the Merrill Lynch Parties, or will be furnished or
made available upon request prior to the Closing, is true and correct in all
material respects as of their respective filing dates:
(a) Joint Annual Report on Form 10-K for the year ended December
31, 1996, which Joint Annual Report includes the Companies'
most recently available audited financial statements together
with the report thereon of the independent certified public
accountants (the "Most Recent Financial Statements"),
(b) Joint Quarterly Reports on Form 10-Q, as amended if
applicable, for the quarters ended March 31, 1997, June 30,
1997 and September 30, 1997;
(c) the Companies' proxy statements on Form 14A relating to (i)
the most recent Annual Meetings of the REIT's Shareholders and
the OPCO's Shareholders and (ii) the Special Meetings of the
REIT's Shareholders and the OPCO's Shareholders which occurred
during the 12 month period prior to the date hereof or for
which a meeting date has been fixed and a proxy statement
distributed;
(d) all other documents, if any, filed by or with respect to the
REIT and the OPCO with the Commission since January 1, 1997
pursuant to Section 13, 15(d) or 16(a) of the Exchange Act;
and
<PAGE> 9
(e) covenant compliance certificates stating that none of the
REIT, the OPCO or their respective Subsidiaries are in default
under any of their respective credit agreements or other
financing arrangements.
4.19. Legal Opinion. At or prior to the Closing, counsel to the
Companies will deliver their legal opinions dated the Closing Date to the
Merrill Lynch Parties in substantially the form of Exhibit A hereto.
4.20. ERISA. Each of the Companies and their respective Subsidiaries
are in compliance with all applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended and the rules and regulations
promulgated thereunder ("ERISA"), except for such failures to comply as will not
have a Material Adverse Effect. Neither a Reportable Event (as defined under
ERISA) nor a Prohibited Transaction (as defined under ERISA) has occurred with
respect to any Plan (as defined below) of the Companies and/or their respective
affiliates; no notice of intent to terminate a Plan has been filed nor has any
Plan been terminated within the past five years; to the Companies' knowledge, no
circumstance exists which constitutes grounds under Section 402 of ERISA
entitling the Pension Benefit Guaranty Corporation ("PBGC") to institute
proceedings to terminate, or appoint a trustee to administer, a Plan, nor has
the PBGC instituted any such proceedings; neither Company nor their respective
affiliates has completely or partially withdrawn under Section 4201 or 4202 of
ERISA from any Multiemployer Plan (as defined therein); each of the Companies
and their respective affiliates have met the minimum funding requirements of
Section 412 of the Code and Section 302 of ERISA with respect to each Plan and
there is no unfunded current liability (as defined below) with respect to any
Plan; each of the Companies and their respective affiliates have not incurred
any liability to the PBGC under ERISA (other than for the payment of premiums
under Section 4007 of ERISA); no part of the funds to be used by the Companies
in satisfaction of their respective obligations under this Purchase Agreement or
the Agreement constitute "plan assets" of any "employee benefit plan" within the
meaning of ERISA or of any "plan" within the meaning of Section 4957(e)(I) of
the Code, as interpreted by the Internal Revenue Service and the U.S. Department
of Labor in rules, regulations, releases and bulletins or as interpreted under
applicable case law. As used below, "Plan" means an "employee benefit plan" or
"plan" as described in Section 3(3) of ERISA; and "unfunded current liability"
has the meaning provided in Section 302(d)(8)(A) of ERISA.
4.21. Environmental Protection. Except as otherwise disclosed in the
Companies' SEC Filings and except for such exceptions as would not singly or in
the aggregate have a Material Adverse Effect, none of the REIT's or the OPCO's
or their respective affiliates' properties contain any Hazardous Materials that,
under any Environmental Law, (i) would impose liability on such Company or any
affiliate that is likely to have a Material Adverse Effect or (ii) is likely to
result in the imposition of a lien on any material asset owned, directly or
indirectly, by such Company. Neither Company nor any affiliate is subject to any
existing, pending or, to the best knowledge
<PAGE> 10
of each Company, threatened investigation or proceeding by any governmental
agency or authority with respect to pursuant to any Environmental law, except
any which, if adversely determined, would not have a Material Adverse Effect. As
used herein, "Environmental Laws" mean all federal, state, local and foreign
environmental, health and safety laws, codes and ordinances and all rules and
regulations promulgated thereunder, including, without limitation laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment (including, without limitation, air, surface water, ground
water, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage disposal,
transport or handling of pollutants, contaminants, chemicals, or industrial,
solid, toxic or hazardous substances or wastes; and "Hazardous Material"
includes, without limitation, (i) all substances which are designated pursuant
to Section 311(b)(2)(A) of the Federal Water Pollution Control Act ("FWPCA"), 33
U.S.C. Section 1251 et seq.; (ii) any element, compound, mixture, solution, or
substance which is designated pursuant to Section 102 of the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
Section 9601 et seq.; (iii) any hazardous waste having the characteristics which
are identified under or listed pursuant to Section 3001 of the Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 6901 et seq.; (iv) any
toxic pollutant listed under Section 307(a) of the FWPCA; (v) any hazardous air
pollutant which is listed under Section 112 of the Clean Air Act, 42 U.S.C.
Section 7401 et seq.; (vi) any imminently hazardous chemical substance or
mixture with respect to which action has been taken pursuant to Section 7 of the
Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; and (vii)
petroleum, petroleum products, petroleum by-products, petroleum decomposition
by-products, and waste oil.
4.22. Solvency. Immediately following (i) the execution of this
Purchase Agreement and the Agreement, (ii) the purchase of the Purchase Shares
pursuant hereto and (iii) the completion of any other transaction contemplated
by this Purchase Agreement and the Agreement, each of the Companies will be
solvent and able to pay its debts as they mature, will have capital sufficient
to carry on its business and all businesses in which it is to engage, and will
have assets which will have a present fair market valuation greater than the
amount of all of its liabilities. This Purchase Agreement and the Agreement have
been executed and delivered by the Companies in good faith and in exchange for
reasonably equivalent value. Neither of the Companies intends to incur debts
beyond its ability to pay them as they become due. Each of the Companies' assets
and capital are now, and are expected in the future to be, sufficient to pay the
Companies' ongoing expenses as they are incurred and to discharge all of the
Companies' liabilities in the event that the business of the Companies is
required to be liquidated. The Companies have not entered into this Purchase
Agreement or the Agreement or any transaction contemplated hereby or thereby
with an intent to hinder, delay or defraud creditors of any persons or entity.
4.23. Certificate. At or prior to the Closing, each Company shall
deliver an officer's certificate to be dated the Closing Date in form and
substance satisfactory
<PAGE> 11
to the Merrill Lynch Parties to the effect that (i) the representations and
warranties of such Company set forth in this Section 4 are true and correct in
all material respects as of the date of this Purchase Agreement and as of the
Closing Date and (ii) such Company has complied in all material respects with
all the covenants and satisfied in all material respects all the conditions on
its respective part to be performed or satisfied pursuant to this Purchase
Agreement or the Agreement on or prior to such Closing Date.
4.24. Financial Statements. The Most Recent Financial Statements
(including the notes thereto) present fairly in all material respects the
financial position of the respective entity or entities presented therein at the
respective dates indicated and the results of their operations for the
respective periods specified, and except as otherwise stated in the Most Recent
Financial Statements, said financial statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis. The
supporting schedules included in the Companies' SEC Filings fairly present in
all material respects the information required to be stated therein. The
financial information and data included in the Companies' SEC Filings present
fairly in all material respects the information included therein and have been
prepared on a basis consistent with that of the financial statements included in
the Companies' SEC Filings and the books and records of the respective entities
presented therein. The pro forma financial information included in the
Companies' SEC Filings has been prepared in accordance with the applicable
requirements of Rules 11-01 and 11-02 of Regulation S-X under the Securities Act
and other 1933 Act Regulations and American Institute of Certified Public
Accountants ("AICPA") guidelines with respect to pro forma financial information
and includes all adjustments necessary to present fairly in all material
respects the pro forma financial position of the respective entity or entities
presented therein at the respective dates indicated and the results of their
operations for the respective periods specified. Other than the historical and
pro forma financial statements (and schedule) included therein, no other
historical or pro forma financial statements (or schedules) are required to be
included in the Companies' SEC Filings. Except as reflected or disclosed in the
financial statements included in the Companies' SEC Filings, none of the
Companies or any of the Subsidiaries is subject to any material indebtedness,
obligation, or liability, contingent or otherwise.
4.25. Labor Disputes. No labor dispute with the employees of either
of the Companies or their respective Subsidiaries exists or, to the knowledge of
the such Company is imminent.
4.26. Regulation M. Each Company, its Subsidiaries and, to such
Company's knowledge, any of their respective trustees, directors, executive
officers or controlling persons, has not taken or will not take, directly or
indirectly, any action resulting in a material violation of Regulation M under
the Exchange Act, or designed to cause or result under the Exchange Act or
otherwise in, or which has constituted or which reasonably might be expected to
constitute, the unlawful stabilization or manipulation of the price of Paired
Shares in connection with the public sale or
<PAGE> 12
distribution of the Shares.
SECTION 5. Representations, Warranties and Covenants of Merrill
Lynch or MLI.
5.1. Investment. The Merrill Lynch Parties represent and warrant to,
and covenants with each of the Companies that: (i) the Merrill Lynch Parties are
knowledgeable, sophisticated and experienced in making, and is qualified to
make, decisions with respect to investments in shares presenting an investment
decision like that involved in the purchase of the Purchase Shares, including
investments in securities issued by the Companies; (ii) MLI is acquiring the
number of Purchase Shares set forth in Section 2 above in the ordinary course of
its business and for its own account for investment (as defined for purposes of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the regulations
thereunder) only and with no present intention of distributing any of such
Purchase Shares or any arrangement or understanding with any other persons
regarding the distribution of such Purchase Shares, except pursuant to a
registration statement declared effective under, or an exemption from the
registration requirements of, the Securities Act, (iii) neither Merrill Lynch
Party will directly or indirectly, sell or otherwise dispose of (or solicit any
offers to purchase or otherwise acquire) any of the Purchase Shares except in
compliance with the Securities Act, the Rules and Regulations and any applicable
state securities or blue sky laws; (iv) each Merrill Lynch Party has completed
or caused to be completed the Registration Statement Questionnaire and the Stock
Certificate Questionnaire, both attached hereto as Appendix I, for use in
preparation of the Resale Registration Statement and the answers thereto are
true and correct as of the date hereof and will be true and correct as of the
effective date of the Resale Registration Statement; (v) the Merrill Lynch
Parties have, in connection with their decision to purchase the number of
Purchase Shares set forth in Section 2 above, relied solely upon the documents
identified in Section 4.17, the information referred to in Section 7.7 and the
representations and warranties of each of the Companies contained herein; (vi)
the Merrill Lynch Parties have had access to such additional information, if
any, concerning the Companies as they have considered necessary in connection
with their investment decision to acquire the Purchase Shares; (vii) each of the
Merrill Lynch Parties is an "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) of Regulation D promulgated under the Securities Act;
and (viii) the Merrill Lynch Parties understand that until the Shares are sold
under an appropriate Resale Registration Statement that has been declared
effective by the Commission, the Shares will contain a legend to the following
effect:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THESE SHARES UNDER THE SECURITIES ACT OF 1933 OR
AN OPINION OF COUNSEL
<PAGE> 13
REASONABLY SATISFACTORY TO THE COMPANIES THAT REGISTRATION IS
NOT REQUIRED UNDER SAID ACT.
5.2. Resale. The Merrill Lynch Parties acknowledge and agree that in
connection with any transfer of any Shares they will provide to the transfer
agent prompt notice of any Shares sold pursuant to a Resale Registration
Statement or otherwise transferred in compliance with applicable federal and
state securities laws. The Merrill Lynch Parties acknowledge that there may
occasionally be times when, subject to the provisions of Section 7.2(a)(v), the
Companies must suspend the right of the Merrill Lynch Parties to effect sales of
the Shares through the use of the Resale Prospectus (as defined below) forming a
part of a Resale Registration Statement until such time as an amendment to such
Resale Registration Statement has been filed by the Companies and declared
effective by the Commission, or until such time as the Companies have filed an
appropriate report with the Commission pursuant to the Exchange Act (each, a
"Black-out Period"); provided that no Black-out Period shall exceed 90
consecutive days. The Merrill Lynch Parties hereby covenant that they will not
effect sales of any Shares pursuant to said Resale Prospectus during the period
commencing at the time at which the Companies give the Merrill Lynch Parties
written notice (which such notice shall have been given by the Companies as
promptly as practicable) of the suspension of the use of said Resale Prospectus
and ending at the time the Companies give the Merrill Lynch Parties written
notice that the Merrill Lynch Parties may thereafter effect sales pursuant to
said Resale Prospectus. The Merrill Lynch Parties further covenant to notify the
Companies promptly of the sale of all of the Shares.
5.3. Due Execution, Delivery and Performance of this Purchase
Agreement. The Merrill Lynch Parties further represent and warrant to, and
covenant with, the Companies that (i) each Merrill Lynch Party has full right,
power, authority and capacity to enter into this Purchase Agreement and the
Agreement and to perform its obligations hereunder and thereunder and consummate
the transactions contemplated hereby and thereby and has taken all necessary
action to authorize the execution, delivery and performance of this Purchase
Agreement and the Agreement, and (ii) upon the execution and delivery of this
Purchase Agreement and the Agreement, this Purchase Agreement and the Agreement
shall constitute valid and binding obligations of the Merrill Lynch Parties
enforceable against the Merrill Lynch Parties in accordance with their terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except that the enforcement of the
indemnification agreements in Section 7.5 hereof may be limited by public
policy.
5.4. Residence of Merrill Lynch. Merrill Lynch is organized in the
State of Delaware and has its principal place of business in the State of New
York.
<PAGE> 14
5.5. Certain Tax Considerations. MLI represents and warrants that it
is fully eligible for the benefits of the "Business Profits" or "Industrial and
Commercial Profits" provision, as the case may be, the "Interest" provision or
the "Other Income" provision (if any) of the 1975 United States-United Kingdom
Income Tax Treaty with respect to any payment described in such provisions and
received or to be received by it in connection with this Purchase Agreement and
no such payment is attributable to a trade or business carried on by it through
a permanent establishment in the United States.
SECTION 6. Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Purchase Agreement,
all covenants, agreements, representations and warranties made by each of the
Companies and the Merrill Lynch Parties herein shall survive the execution of
this Purchase Agreement, the
Agreement, the delivery to Merrill Lynch of the Purchased Shares being purchased
and the payment therefor and the consummation of any other transactions
contemplated hereby or thereby.
SECTION 7. Registration of the Shares; Compliance with the
Securities Act.
7.1. Registration Procedures and Expenses. The Companies shall:
(a) within 45 days after the Closing, prepare and file with
the Commission a Resale Registration Statement (as defined below) covering the
resale by the Merrill Lynch Parties, from time to time, of a number of Shares
equal to the number of Purchase Shares in any of the manners specified in the
Agreement (the "Initial Resale Registration Statement") and use its best efforts
to obtain effectiveness of the Initial Resale Registration Statement within 90
days after the Closing Date. If the total number of Shares exceeds the number of
Shares covered by the Initial Resale Registration Statement, then the Companies
shall promptly prepare and file with the Commission such additional Resale
Registration Statement or Statements as shall be necessary to cover the resale
by the Merrill Lynch Parties of such excess Shares in the same manner as
contemplated by the Initial Registration Statement for the Shares covered
thereby (each, an "Additional Resale Registration Statement"); provided that,
except as provided for in Section 5 of the Agreement, prior to issuing any such
excess Shares to the Merrill Lynch Parties, the Companies shall cause such
Resale Registration Statement to have become effective. For purposes of this
Purchase Agreement, "Resale Registration Statement" means the Initial Resale
Registration Statement,
<PAGE> 15
any Additional Resale Registration Statement or any other registration statement
under the Securities Act on Form S-3 covering the resale by the Merrill Lynch
Parties of up to a specified number of Shares, filed and maintained continuously
effective by the Companies pursuant to the provisions of this Section 7,
including the prospectus contained therein (the "Resale Prospectus"), any
amendments and supplements to such registration statement, including all post-
effective amendments thereto, and all exhibits and all material incorporated by
reference into such registration statement;
(b) use commercially reasonable best efforts to prevent the
issuance of any order suspending the effectiveness of such Resale Registration
Statement or Resale Prospectus or suspending the qualification (or exemption
from qualification) of any of the Shares in any jurisdiction;
(c) prepare and file with the Commission such amendments and
supplements to each Resale Registration Statement and the Resale Prospectus as
may be reasonably requested by the Merrill Lynch Parties in order to accomplish
the public resale or other disposition of any Shares in accordance with the
terms of the Agreement, or as may be necessary to keep such Resale Registration
Statement effective until the date on which either (i) the Shares covered
thereby have been sold by or on behalf of the Merrill Lynch Parties or (ii) the
Merrill Lynch Parties have advised the Companies that they no longer require
that such Resale Registration Statement remain effective;
(d) furnish to the Merrill Lynch Parties with respect to the
Shares registered under any Resale Registration Statement such reasonable number
of copies of Resale Prospectuses, including any supplements and amendments
thereto, in order to facilitate the public sale or other disposition of all or
any of the Shares by the Merrill Lynch Parties;
(e) in order to facilitate the public sale or other
disposition of all or any of the Shares by the Merrill Lynch Parties, furnish to
the Merrill Lynch Parties with respect to the Shares registered under any Resale
Registration Statement, in connection with any such public sale or other
disposition, an opinion of counsel to the Companies covering such matters as are
customarily covered by legal opinions delivered in connection with secondary
public offerings of equity
<PAGE> 16
securities and such other documents as the Merrill Lynch Parties may reasonably
request (including a comfort letter from the Companies' independent certified
public accountants and a certificate of bring down of representations and
warranties in connection with sale of Shares under the Resale Registration
Statement) (collectively, the "Resale Closing Documents") (i) upon the
effectiveness of the Initial Resale Registration Statement, (ii) upon the
commencement of any continuous offering of Shares under any Resale Registration
Statement and on the last day of every 30-day period thereafter for the duration
of such continuous offering, and (iii) in the event the public sale or other
disposition of the Shares is effected through an underwritten offering or a
block trade, as of the date of the closing of any sale of such Shares or date of
pricing with respect to the sale of such Shares, as applicable upon prior notice
from the Merrill Lynch Parties to the Companies as to which date applies;
provided, however, that the Companies shall not be required to deliver any
Resale Closing Documents in the event that the aggregate offering price of any
Shares offered in a public sale or other distribution is less than $20,000,000,
unless as of the date of any such public sale or other distribution, the
Companies have not made any previous delivery of Resale Closing Documents to the
Merrill Lynch Parties in connection with any other public sale or other
disposition of the Shares;
(f) use its reasonable best efforts to prevent the happening
of any event that would cause any such Resale Registration Statement to contain
a material misstatement or omission or to be not effective and continuously
useable for resale of the Shares during the period that such Resale Registration
Statement is required to be effective and useable;
(g) file documents required of the Companies for normal blue
sky clearance in states specified in writing by the Merrill Lynch Parties,
provided, however, that the Companies shall not be required to qualify to do
business or consent to service of process in any jurisdiction in which it is not
now so qualified or has not so consented;
(h) bear all reasonable expenses in connection with the
procedures in paragraphs (a) through (g) of this Section 7.1 and Section 7.2(a)
and the registration of the Shares pursuant to each Resale Registration
Statement, which
<PAGE> 17
expenses shall not include brokerage or underwriting commissions and taxes of
any kind (including without limitation, transfer bonuses) with respect to any
disposition, sale or transfer of Shares sold by the Merrill Lynch Parties and
for any legal, accounting and other expenses incurred by the Merrill Lynch
Parties which expenses shall be borne by the Merrill Lynch Parties; and
(i) promptly file any necessary listing applications or
amendments to existing listing applications to cause any Shares registered under
any Resale Registration Statement to be listed or admitted to trading, on or
prior to the effectiveness of any Resale Registration Statement, on the New York
Stock Exchange or any national stock exchange or automated quotation system on
which the Paired Shares are then listed or traded.
7.2. Covenants in Connection With Registration.
(a) Each of the Companies hereby covenants with the Merrill Lynch
Parties that (i) such Company shall not file any Resale Registration Statement
or Resale Prospectus relating to the resale of the Shares or any amendment or
supplement thereto, unless a copy thereof shall have been first submitted to the
Merrill Lynch Parties and the Merrill Lynch Parties did not object thereto in
good faith (provided that if the Merrill Lynch Parties do not object within two
business days of receiving any such material, there shall be deemed to have been
no objection thereto); (ii) such Company shall immediately notify the Merrill
Lynch Parties of the issuance by the Commission of any stop order suspending the
effectiveness of such Resale Registration Statement or the initiation of any
proceedings for such purpose; (iii) such Company shall make every reasonable
effort to promptly obtain the withdrawal of any order suspending the
effectiveness of such Resale Registration Statement at the earliest possible
moment; (iv) such Company shall immediately notify the Merrill Lynch Parties of
the receipt of any notification with respect to the suspension of the
qualification of the Shares for sale under the securities or blue sky laws of
any jurisdiction or the initiation of any proceeding for such purpose; and (v)
such Companies shall as soon as practicable notify the Merrill Lynch Parties in
writing of the happening of any event or the failure of any event to occur or
the existence of any fact or otherwise which results in any Resale Registration
Statement, any amendment or post-effective amendment thereto, the Resale
Prospectus, any prospectus supplement, or any document incorporated therein
<PAGE> 18
by reference containing an untrue statement of a material fact or omitting to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading and promptly shall prepare, file with the
Commission and promptly furnish to the Merrill Lynch Parties a reasonable number
of copies of a supplement or post-effective amendment to such Resale
Registration Statement or the Resale Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Shares, the Resale Prospectus will not
contain an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading provided that this
clause (v) shall in no way limit the Companies' right to suspend the right of
the Merrill Lynch Parties to affect sales under the Resale Registration
Statement during any Black-out Period as specified in Section 5.2 above.
(b) The Merrill Lynch Parties shall cooperate with the Companies in
connection with the preparation of the Resale Registration Statement and shall
furnish to the Companies, in a timely manner, all information in their
possession or reasonably obtainable by them and necessary for inclusion in the
Resale Registration Statement (including, without limitation, information
relating to the ownership by each of them of Paired Shares and the plan of
distribution).
(c) The Merrill Lynch Parties shall notify the Companies at least
two business days prior to the earlier of the date on which they intend to
commence effecting any resales of Shares under a Resale Registration Statement
or the date of pricing with respect to the public sale or other disposition of
any Shares under a Resale Registration Statement effected through an
underwritten offering or block trade and if the Companies do not, within such
two day period, advise the Merrill Lynch Parties of the existence of any facts
of the type referred to in Section 7.2(a) above, then the Companies shall be
deemed to have certified and represented to the Merrill Lynch Parties that no
such facts then exist and the Merrill Lynch Parties may rely on such certificate
and representations in making such sales. The preceding sentence shall in no way
limit the Companies' obligations under Section 7.2(a) above.
(d) the Companies shall cooperate with the Merrill Lynch Parties to
facilitate the timely preparation and delivery of certificates representing the
Shares to be sold under the Resale Registration Statements and not bearing any
restrictive legends and in such denominations and registered in such names as
the Merrill Lynch Parties may reasonably request at least two business days
prior to the closing of any sale of the Shares.
(e) If the Companies notify the Merrill Lynch Parties that they wish
the Merrill Lynch Parties to effect an underwritten offering or block trade of
Shares, (i) the Merrill Lynch Parties shall have the right to select the
managing underwriters or the executing dealer, as the case may be, who shall be
subject to the approval of the Companies, which approval shall not be
unreasonably withheld (it being understood that Merrill Lynch is, in any event,
reasonably acceptable to the Companies for this purpose) and (ii) the Companies
shall (A) enter into written agreements (including underwriting agreements) as
are customary in underwritten offerings or block trades, as the case may be; (B)
obtain an opinion of counsel to the Companies and other entities reasonably
requested by the underwriters or the executing dealer, as the case may be, and
updates thereof (which may be in the form of a reliance letter) in form and
substance reasonably satisfactory to the managing underwriters or the executing
<PAGE> 19
dealer, as the case may be, and the Merrill Lynch Parties addressed to the
underwriters or the executing dealer, as the case may be, and the Merrill Lynch
Parties covering the matters customarily covered in opinions requested in
underwritten offerings or block trades, as the case may be, and such other
matters as may be reasonably requested by such underwriters or the executing
dealer, as the case may be, and the Merrill Lynch Parties (it being agreed that
the matters to be covered by such opinion may be subject to customary
qualifications and exceptions); (C) obtain "cold comfort" letters and updates
thereof in form and substance reasonably satisfactory to the managing
underwriters or the executing dealer, as the case may be, and the Merrill Lynch
Parties from the independent certified public accountants of the Companies (and,
if necessary, other independent certified public accountants of any affiliate or
Subsidiary of either of the Companies or of any business acquired by the
Companies for which financial statements and financial data are, or are required
to be, included in the Resale Registration Statement), addressed to each of the
underwriters or the executing dealer, as the case may be, and, if permitted by
applicable accounting rules and statements, the Merrill Lynch Parties, such
letters to be in customary form and covering matters of the type customarily
covered in "cold comfort" letters in connection with underwritten offerings or
block trades, as the case may be, and such other matters as may be reasonably
requested by such underwriters or the executing dealer, as the case may be, in
accordance with Statement on Auditing Standards No. 72; (D) ensure that any
underwriting agreement contains indemnification provisions and procedures not
less favorable than that included herein (or such other provisions and
procedures acceptable to the Merrill Lynch Parties and the underwriters) with
respect to all parties to be indemnified pursuant to said section (including,
without limitation, the underwriters and the Merrill Lynch Parties); and (E)
deliver such other documents as are customarily delivered in connection with
closing of underwritten offerings or block trades, as the case may be.
(f) The Companies will make reasonably available for inspection by
the Merrill Lynch Parties, any underwriter, agent or broker-dealer participating
in any disposition of Shares such information and corporate documents as shall
be reasonably necessary to enable them to exercise any applicable due diligence
responsibilities for the purposes of applicable law, and cause the officers of
the Companies and their "significant subsidiaries" (as that term is defined in
Regulation S-X) to be available, upon request at least two business days in
advance, to respond to questions relevant to such due diligence inquiries.
(g) The parties hereby acknowledge and agree that the Companies may
suspend the right of the Merrill Lynch Parties to effect sales of the Paired
Shares through use of the Resale Prospectus forming a part of a Resale
Registration Statement for a period of 90 days (or fewer if the Merrill Lynch
Parties are notified to that effect by the Companies) in connection with a
public offering or a sale pursuant to Rule 144A under the Securities Act (an
"Offering") of Paired Shares (or shares of capital stock convertible into Paired
Shares) by the Companies (a "Suspension Period"); provided that (i) there shall
be no more than three Suspension Periods during any 12-month period, and (ii)
the total number of days of all Suspension Periods during
<PAGE> 20
any 12-month period shall not exceed 120. The Merrill Lynch Parties hereby
covenant that they will not sell any Paired Shares pursuant to said Resale
Prospectus during a Suspension Period which shall commence at the time the
Companies give the Merrill Lynch Parties written notice of such Suspension
Period; provided further, that no Suspension Period shall be applicable or in
any way restrict the Merrill Lynch Parties after the occurrence of the Maturity
Date or a Price Decline Termination Event. The ability of the Companies to
suspend the right of the Merrill Lynch Parties to effect sales of the Paired
Shares pursuant to this Section 7.2(g) shall not be construed to limit the
Companies' rights under Section 5.2.
7.3. Extension of Required Effectiveness. In the event that the
Companies shall give any notice required by Section 7.2(a)(v) hereof, the period
during which the Companies are required to keep such Resale Registration
Statement effective and useable shall be extended by the number of days during
the period from and included in such Black-out Period.
7.4. Transfer of Shares After Registration. The Merrill Lynch
Parties agree that they will not effect any disposition of the Shares or their
right to purchase the Shares that would constitute a sale within the meaning of
the Securities Act or pursuant to any applicable state securities or blue sky
laws expect as contemplated in each Resale Registration Statement referred to in
Section 7.1 or except pursuant to any exemption from the registration
requirements of the Securities Act (including, without limitation, Rule 144
promulgated thereunder and any successor thereto) and that it will promptly
notify the Companies of any changes in the information set forth in any such
Resale Registration Statement regarding the Merrill Lynch Parties or their plan
of distribution.
7.5. Indemnification. For the purpose of this Section 7.5 only, the
term "Resale Registration Statement" shall include any final prospectus,
exhibit, supplement or amendment included in or relating to any Resale
Registration Statement referred to in Section 7.1.
(a) Indemnification by the Companies. Each of the Companies agrees,
severally and not jointly, to indemnify and hold harmless the Merrill Lynch
Parties and each person, if any, who controls the Merrill Lynch Parties within
the meaning of Section 15 of the Securities Act, and any director, officer,
employee or affiliate thereof, as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in any Resale Registration
Statement (or any amendment thereto), including the information deemed to be
part of any Resale Registration Statement pursuant to Rule 430A(b) of the 1933
Act Regulations, if applicable, or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the
statements therein not misleading or arising
<PAGE> 21
out of any untrue statement or alleged untrue statement of a material fact
contained in any related Resale Prospectus or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
provided, however, that the Companies shall not be required under this
subsection (i) to indemnify the Merrill Lynch Parties with respect to any loss,
liability, claim, damage or expense to the extent such loss, liability, claim,
damage or expense arises out of (A) any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
written information furnished to the Companies by the Merrill Lynch Parties
specifically for inclusion in any Resale Registration Statement or any related
Resale Prospectus or (B) any statement or omission in any Resale Prospectus that
is corrected in any subsequent Resale Prospectus that was delivered to a Merrill
Lynch Party prior to the pertinent sale or sales by a Merrill Lynch Party and
not delivered in connection with such sale, when such delivery was required by
the Securities Act or any state securities law;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation or of any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim whatsoever
for which indemnification is provided under subsection (i) above, only if such
settlement is effected with the written consent of the Companies; and
(iii) against any and all expense whatsoever (including,
without limitation, the fees and other charges of counsel chosen by you)
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceedings by any governmental agency or
body, commenced or threatened, or any claim whatsoever for which indemnification
is provided under subsection (i) above, to the extent that any such expense is
not paid under subsection (i) (other than expenses not paid pursuant to the
proviso to subsection (i)) or (ii) above.
(b) Indemnification by the Merrill Lynch Parties. The Merrill Lynch
Parties agree to indemnify and hold harmless the Companies, and each person, if
any, who controls the Companies within the meaning of Section 15 of the
Securities Act, and any trustee, director, officer, employee or affiliate
thereof, against any and all loss, liability, claim, damage and expense
described in the indemnity contained in subsection (a) of this Section 7.5, as
incurred, but only with respect to (A) untrue statements or omissions, or
alleged untrue statements or omissions, made in any Resale Registration
Statement (or any amendment thereto) or any related Resale Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with written
information furnished to the Companies by the Merrill Lynch Parties specifically
for inclusion in any Resale Registration Statement or any related Resale
Prospectus or (B) any statement or omission in any Resale Prospectus that is
corrected in any subsequent Resale Prospectus that was delivered to a Merrill
Lynch Party prior to the pertinent sale or sales by a Merrill Lynch Party and
not delivered in connection with
<PAGE> 22
such sale, when such delivery was required by the Securities Act or any state
securities law.
(c) Proceedings. Each indemnified party shall give notice as
promptly as reasonably practicable to each indemnifying party of any action
commenced against it in respect of which indemnity may be sought hereunder, but
failure to so notify an indemnifying party shall not relieve such indemnifying
party from any liability hereunder to the extent it is not materially prejudiced
as a result thereof and in any event shall not relive it from any liability
which it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of such
action. If it so elects within a reasonable time after receipt of such notice,
an indemnifying party, jointly with any other indemnifying parties receiving
such notice, may assume the defense of such action with counsel chosen by it and
reasonably acceptable to the indemnified parties defendant in such action,
unless such indemnified parties reasonably object to such assumption on the
ground that the named parties to any such action (including any impleaded
parties) include both such indemnified parties and an indemnifying party, and
such indemnified parties reasonably believe that there may be legal defenses
available to them which are different from or in addition to those available to
such indemnifying party. If an indemnifying party assumes the defense of such
action, the indemnifying parties shall not be liable for any fees and expenses
of counsel for the indemnified parties incurred thereafter in connection with
such action. In no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to any local counsel) separate
from their own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances. No indemnifying
party shall, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 7.5 (whether
or not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent (i) includes an unconditional release of
each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 7.5(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
<PAGE> 23
(d) Contribution. If the indemnification provided for in this
Section 7.5 is required by its terms but is for any reason held to be
unavailable to or otherwise insufficient to hold harmless an indemnified party
under paragraph (a), (b) or (c) of this Section 7.5 in respect of any losses,
claims, damages, liabilities or expenses referred to herein, then each
applicable indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of any losses, claims, damages, liabilities
or expenses referred to herein, (i) in such proportion as is appropriate to
reflect the relative benefits received by the Companies and the Merrill Lynch
Parties from the purchase and sale of the Shares or (ii) if the allocation
provided in clause (i) is not permitted by applicable law, in such proportion or
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Companies and the Merrill
Lynch Parties in connection with the statements or omissions or inaccuracies in
the representations and warranties in this Purchase Agreement which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The respective relative benefits received by
the Companies on the one hand and the Merrill Lynch Parties on the other shall
be deemed to be in the same proportion as the amount paid by the Merrill Lynch
Parties to the Companies pursuant to this Purchase Agreement and the Agreement
and the net proceeds retained or discounts received by the Merrill Lynch Parties
from the transactions contemplated by this Purchase Agreement and the Agreement.
The relative fault of the Companies and the Merrill Lynch Parties shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or the alleged omission to
state a material fact or the inaccurate or the alleged inaccurate representation
and/or warranty relates to information supplied by the Companies or by the
Merrill Lynch Parties and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in paragraph (c) of this Section 7.5 any
reasonable legal or other fees or expenses incurred by such party in connection
with investigating or defending any action or claim. The provisions set forth in
paragraph (c) of this Section 7.5 with respect to notice of commencement of any
action shall apply if a claim for contribution is to be made under this
paragraph (d); provided, however, that no additional notice shall be required
with respect to any action for which notice has been given under paragraph (c)
for purposes of indemnification. The Companies and the Merrill Lynch Parties
agree that it would not be just and equitable if contribution pursuant to this
Section 7.5 were determined solely by pro rata allocation or by any other method
of allocation which does not take account of the equitable considerations
referred to in this paragraph (d). Notwithstanding the provisions of this
Section 7.5, the Merrill Lynch Parties shall not be required to contribute any
amount in excess of the amount by which the aggregate net proceeds retained or
discounts received by the Merrill Lynch Parties from the transactions
contemplated hereby and by the Agreement exceeds the amount of any damages that
the Merrill Lynch Parties has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or
<PAGE> 24
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) Relationship Between the REIT and OPCO. The obligations set
forth in this Section 7.5 shall in no way limit the ability of the Companies to
allocate liability between themselves.
7.6. Information Available. So long as any Resale Registration
Statement covering the resale of any shares owned by the Merrill Lynch Parties
is effective, the Companies will furnish to the Merrill Lynch Parties:
(a) as soon as practicable after available, one copy of (i) their
Joint Annual Report to Shareholders, (ii) their Joint Annual Report on Form
10-K, (iii) their Joint Quarterly Reports to Shareholders, (iv) their Joint
Quarterly Reports on Form 10-Q, (v) a full copy of the particular Resale
Registration Statement covering the Shares (the foregoing, in each case,
excluding exhibits) and (iv) upon request, any or all other filings made with
the Commission by the Companies; and
(b) upon the reasonable request of the Merrill Lynch Parties, a
reasonable number of copies of the Resale Prospectuses to supply to any other
party requiring such Resale Prospectuses;
and the Companies, upon the reasonable request of the Merrill Lynch Parties,
will meet with the Merrill Lynch Parties or a representative thereof at the
Companies' headquarters to discuss all information relevant for disclosure in
such Resale Registration Statement covering the Shares, subject to appropriate
confidentiality limitations.
7.7. Remedies. The Companies and the Merrill Lynch Parties
acknowledge that there would be no adequate remedy at law if the Companies fail
to perform any of their obligations under this Section 7, and accordingly agree
that the Merrill Lynch Parties, in addition to any other remedy to which it may
be entitled at law or in equity, shall be entitled to compel specific
performance of the obligations of the Companies under this Section 7, and the
Companies hereby waive the defense that a remedy at law would be adequate.
7.8. Notice Requirement. The REIT and the OPCO each covenants and
agrees that it will notify the Merrill Lynch Parties at any time it becomes
aware that as a result of a change in the REIT's and the OPCO's capital stock,
the Merrill Lynch Parties beneficially hold more than 4.9% of the REIT's and the
OPCO's Paired Shares.
SECTION 8. Broker's Fee. Other than any fees payable under or in
<PAGE> 25
connection with the Agreement, each of the parties hereto represents that, on
the basis of any actions and agreements by it, there are no brokers or finders
entitled to compensation in connection with the sale or issuance of the Shares
to Merrill Lynch.
SECTION 9. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified airmail, by telegram or telecopy or sent by nationally
recognized overnight express courier postage prepaid, and shall be deemed given
when so mailed or for telecopies, when transmitted and receipt confirmed, and
shall be delivered as addressed as follows:
(a) if to the Companies, to:
Starwood Hotels & Resorts
Starwood Hotels & Resorts Worldwide, Inc.
2231 East Camelback Road
Suite 400 and 410
Phoenix, Arizona 85016
Attention: Ronald C. Brown/Alan M. Schnaid
Telecopier: 602-852-0115
with copies so mailed to:
Sidley & Austin
555 West Fifth Street
Suite 4000
Los Angeles, California 90013
Attention: Sherwin L. Samuels
Telecopier: 213-896-6600
or to such other person at such other place as the Companies
shall designate to Merrill Lynch in writing; and
(b) if to Merrill Lynch or MLI, to:
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1305
Attention: David Moran
SECTION 10. Changes. This Purchase Agreement may not be modified or
amended except pursuant to an instrument in writing signed by each of the
<PAGE> 26
Companies and the Merrill Lynch Parties.
SECTION 11. Headings. The headings of the various sections of this
Purchase Agreement have been inserted for convenience of reference only and
shall not be deemed to be part of this Purchase Agreement.
SECTION 12. Severability. In case any provision contained in this
Purchase Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
SECTION 13. Successors and Assigns. The Companies or the Merrill
Lynch Parties may assign any of their respective rights, or delegate any of
their respective duties under this Purchase Agreement, if the other party first
consents to such assignment in writing. This Purchase Agreement shall inure to
the benefit of and be binding upon (i) the successors of the Merrill Lynch
Parties and (ii) any assignee or transferee of rights and obligations of MLI
pursuant to the Agreement and any assignee or transferee of rights and
obligations of the Merrill Lynch Parties pursuant to this Purchase Agreement. A
transferee of MLI pursuant to the Agreement and a transferee of the Merrill
Lynch Parties pursuant to this Purchase Agreement, and, in each case, any
successor, assignee, or transferee, shall be held subject to all of the terms of
this Purchase Agreement.
SECTION 14. Governing Law; Jurisdiction. This Purchase Agreement
shall be governed by and construed in accordance with the laws of the State of
New York without regard to the conflicts of law principles thereof.
SECTION 15. Transfer to Affiliate. Notwithstanding anything herein
to the contrary, MLI may transfer the Purchase Shares to any affiliate of MLI,
together with all of MLI's rights hereunder, provided that (i) such affiliate
shall be an "accredited investor" within the meaning of Rule 501 (a)(1), (2),
(3) or (7) of Regulation D promulgated under the Securities Act, and (ii) such
transfer shall be consistent with the investment representations set forth at
Section 5.1 hereto. In the event of such an assignment, such affiliate shall in
all respects be substituted for MLI as a party hereto.
SECTION 16. Counterparts. This Purchase Agreement may be executed in
two or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other parties.
SECTION 17. Recourse. Each Merrill Lynch Party acknowledges and
agrees that the name "Starwood Hotels & Resorts" is a designation of the 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,
<PAGE> 27
1995, June 19, 1995, January 2, 1998 and February 23, 1998 and as the same may
be further amended from time to time, and all persons dealing with the REIT
shall look solely to the REIT's assets for the enforcement of any claims against
the REIT, as the Trustees, officers, agents and security holders of the REIT
assume no personal liability for obligations entered into on behalf of the REIT,
and their respective individual assets shall not be subject to the claims of any
person relating to such obligations.
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have caused this Purchase
Agreement to be executed by their duly authorized representatives as of the day
and year first above written.
STARWOOD HOTELS & RESORTS
By:
Name:
Title:
STARWOOD HOTELS & RESORTS
WORLDWIDE, INC.
By:
Name:
Title:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:
Name:
Title:
MERRILL LYNCH INTERNATIONAL
By:
Name:
Title:
<PAGE> 29
Appendix I
(one of two)
STOCK CERTIFICATE QUESTIONNAIRE
Pursuant to Section 5 of the Purchase Agreement, please provide us with
the following information:
1. The exact name that your Shares are to be registered in (this is the
name that will appear on your stock certificate(s)). You may use a
nominee name if appropriate:
____________________________________
2. All relationships between the Merrill Lynch Parties and the
Registered Holder listed in response to Item 1 above:
____________________________________
____________________________________
3. The mailing address of the Registered Holder listed in response to
Item 1 above:
____________________________________
____________________________________
____________________________________
____________________________________
____________________________________
____________________________________
4. The Social Security Number or Tax Identification Number of the
Registered Holder listed in response to Item 1 above:
____________________________________
<PAGE> 30
Appendix I
(two of two)
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement, please
provide us with the following information:
1. Pursuant to the "Selling Shareholders" section of the Registration
Statement, please state your or your organization's name exactly as it should
appear in the Registration Statement:
2. Please provide the number of shares that you or your organization
(including all affiliates) will own immediately after Closing, including those
Shares purchased by you or your organization (including all affiliates) pursuant
to this Purchase Agreement and those shares purchased by you or your
organization (including all affiliates) through other transactions:
3. Have you or your organization had any position, office or other
material relationship within the past three years with the Company or its
affiliates:
_____ Yes _____ No
If yes, please indicate the nature of any such relationships below:
__________________________________________________________________
__________________________________________________________________
__________________________________________________________________
<PAGE> 31
Appendix II
Attention:
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
The undersigned, [an officer of, or other person duly authorized by]
______________________________ hereby certifies that he/she [fill in official
name of individual or institution] [said institution] is the Purchaser of the
shares evidenced by the attached certificate, and as such, sold such shares on
[date] in accordance with Registration Statement number [fill in the number of
or otherwise identify Registration Statement], the Securities Act of 1933, as
amended, and any applicable state securities or blue sky laws and the
requirement of delivering a current prospectus by the Company has been complied
with in connection with such sale.
Print or Type:
NAME OF PURCHASER
(Individual or Institution):
NAME OF INDIVIDUAL
representing Purchaser
(if an Institution)
TITLE OF INDIVIDUAL
representing Purchaser
(if an Institution)
Signature by:
Individual Purchaser
or Individual representing
Purchaser:
<PAGE> 32
EXHIBIT A
FORM OF CLOSING OPINION OF COUNSEL TO THE COMPANY
<PAGE> 33
AGREEMENT
THIS AGREEMENT is made as of the 23rd day of February, 1998, by and
between Starwood Hotels & Resorts (the "REIT"), Starwood Hotels & Resorts
Worldwide, Inc. ("OPCO," and together with the REIT, the "Companies") and
Merrill Lynch International ("MLI"), through its agent Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S").
The purpose of this Agreement is to confirm the terms and conditions of
the transaction (the "Transaction") entered into between MLI and the Companies.
IN CONSIDERATION of the mutual representations, warranties and
covenants herein contained, and on the terms and subject to the conditions
herein set forth, the Companies and MLI hereby agree as follows:
Section 1 Definitions.
As used in this Agreement, the following terms shall have the meanings
set forth below:
(a) Ability to Settle in Paired Shares. As of the date hereof,
the Companies have not, and after the date hereof, the Companies will
not, enter into any obligation that would contractually prohibit the
Companies from delivering Paired Shares pursuant to Sections 3.2, 4.2
or 5 of this Agreement.
(b) Certain Adjustments to Reference Price or Number of
Notional Shares. In the event of:
(i) a subdivision, consolidation or reclassification
of the Paired Shares, or a free distribution or
dividend of any Paired Shares to all existing holders
of Paired Shares by way of bonus, capitalization or
similar issue; or
(ii) a distribution or dividend to all existing
holders of Paired Shares of (A) additional Paired
Shares or (B) other share capital or securities
granting right to payment of dividends and/or the
proceeds of liquidation of the Companies equally or
proportionally with such payments to holders of
Paired Shares,
an adjustment shall thereupon be effected to the
Reference Price and/or the Notional Shares at the
time of such event with the intent that following
such adjustment, the value of this Transaction is
economically equivalent to the value immediately
prior to the occurrence of the event causing the
adjustment.
<PAGE> 34
(c) Block Sale. any privately negotiated sales of the Paired
Shares involving at least a block of such security (as defined in Rule
10b-18 under the Exchange Act).
(d) Business Day. Any day other than a Saturday, Sunday, or
any other day on which banking institutions in the States of Delaware
or New York are not open for business.
(e) Calculation Agent. MLI, whose calculations and
determinations shall be made in a reasonable manner.
(f) Closing Price. The last sale price of the Paired Shares on
the Relevant Exchange on the relevant date.
(g) Commission. The Securities and Exchange Commission.
(h) Compounding Period. Means each period commencing on and
including:
(i) in the case of the first Compounding Period, the
Initial Settlement Date and ending on but excluding
the first Reset Date, and
(ii) for each period thereafter, a Reset Date and
ending on (but excluding) the next following Reset
Date.
(i) Distribution Amount. Means, on each Reset Date, an amount
in U.S. Dollars equal to:
(i) the sum of all cash distributions paid on a
single Paired Share during the relevant Compounding
Period; plus
(ii) an amount representing interest that could have
been earned on such distributions at the USD LIBOR
rate having a designated maturity of three months,
plus Spread, for the period from the date that such
distributions would have been received by a holder of
a single Paired Share until such Reset Date.
(j) DRIP Distribution. Sales to any Distribution Reinvestment
Plan now or hereafter established by the Companies, or to any agent
acting on behalf of such Plan, for sale to participants in such Plan.
(k) Effective Date. February 24, 1998.
<PAGE> 35
(l) Exchange Act. The Securities Exchange Act of 1934, as
amended.
(m) Exchange Trading Day. Each day on which the Relevant
Exchange is open for trading.
(n) Execution Price. The Closing Price on the Effective Date`.
(o) Gradual Market Distribution. An offering of the Paired
Shares into the existing trading market for outstanding shares of the
same class at other than (i) a fixed price on or through the facilities
of a national securities exchange or (ii) to or through a market maker
otherwise than on an exchange.
(p) Initial Price. Means,
(i) for the Compounding Period ending on the first
Reset Date, an amount in U.S. Dollars equal to
$53.875, and
(ii) for each subsequent Reset Date, the Reference
Price as calculated on or adjusted as of the prior
Reset Date.
(q) Initial Settlement Date. February 24, 1998.
(r) Interim Settlement Amount. With respect to a given Reset
Date, means the amount by which the Reference Amount minus $5,000,000
exceeds the product of (x) the Closing Price on such Reset Date and (y)
the number of Notional Shares.
(s) Interim Settlement Shares. The Interim Settlement Amount
divided by the Closing Price on such Reset Date.
(t) Maturity Date. March 1, 1999.
(u) Notional Shares. 1,547,000 Paired Shares, as may be
adjusted from time to time pursuant to Section 1(b), reduced by the
number of Settlement Shares that have been settled prior to the date of
calculation pursuant to Section 3.1 or Section 4.1.
(v) Paired Shares. Units consisting of one share of beneficial
interest, $.01 par value per share, in the REIT and one share of common
stock, par value $.01 per share, of OPCO, which shares are paired and
traded as a unit.
(w) Pooled Underwritten Secondary Offering. An underwritten
fixed price offering of Paired Shares, in which the Settlement Shares
and other Paired Shares, which may include the Paired Shares of other
selling shareholders and previously unissued Paired Shares.
<PAGE> 36
(x) Pooling Exit Fee. 50 basis points on the Settlement Amount
in connection with the related Pooled Underwritten Secondary Offering.
(y) Purchase Shares. Paired Shares sold to MLI pursuant to the
Purchase Agreement.
(z) Purchase Agreement. The Purchase Agreement, dated as of
February 23, 1998 (the "Purchase Agreement"), among the Companies, MLI
and MLPF&S
(aa) Reference Amount. On each Reset Date, the Reference Price
multiplied by the Notional Shares or Settlement Shares, as applicable.
(bb) Reference Price. On each Reset Date, the Reference Price
shall be determined by:
(i) compounding the Initial Price for the previous
Compounding Period at USD LIBOR rate plus Spread for
a designated maturity of three months (Actual/360 day
count fraction) to such Reset Date and
(ii) subtracting the Distribution Amount at that
date.
(cc) Relevant Exchange. Means, with respect to any Exchange
Trading Day, the principal Stock Exchange on which the Paired Shares
are traded on that day.
(dd) Reset Date. Means, through the final Trade Date, (i) the
last day of each three-month period, beginning on May 31, 1998
(provided, that if such day is not a Business Day then the Reset Date
shall be the next Business Day), (ii) as to any Settlement Shares, but
only as to such Settlement Shares, the related Trade Date and (iii) as
to any Gross Settlement Shares, but only as to such Gross Settlement
Shares, the Exchange Trading Day immediately prior to the date on which
the related Gross Settlement Notice is delivered.
(ee) Securities Act. The Securities Act of 1933, as amended.
(ff) Settlement. Has the meaning set forth in Section 3.1 or
Section 4.1, as applicable.
(gg) Settlement Amount. Except as set forth in subsection (iv)
below, the net sales proceeds realized by or on behalf of MLI for all
sales of Paired Shares in connection with any Settlement, calculated as
follows:
(i) if the manner of Settlement Sale pursuant to
Section 3.1 or
<PAGE> 37
4.1 is an Underwritten Secondary Offering, the
Settlement Amount will equal the gross proceeds
realized, net of a negotiated underwriting discount;
(ii) if the manner of Settlement Sale pursuant to
Section 3.1 or 4.1 is a Block Sale, the Settlement
Amount will equal the gross sales proceeds realized,
net of a negotiated underwriting discount;
(iii) if the manner of Settlement Sale pursuant to
Section 3.1 or 4.1 is a Gradual Market Distribution,
the Settlement Amount will equal the gross sales
proceeds realized from sales to the market over the
period of the distribution, net of a resale spread of
50 basis points;
(iv) with respect to a given Trade Date, if the
manner of Settlement Sale pursuant to Section 3.1 or
4.1 is a VWAP Sale, the Settlement Amount will equal
the product of (a) the volume weighted average price
of the Paired Shares for such Trade Date and (b) the
number of Paired Shares determined by the Company to
be sold by MLI on such Trade Date, net of a resale
spread of 50 basis points;
(v) if the manner of Settlement Sale pursuant to
Section 3.1 or 4.1 is a DRIP Distribution, the
Settlement Amount will equal the gross sales proceeds
realized from sales to any Purchase Agent for a
Company Distribution Reinvestment Plan, net of a
resale spread of 50 basis points; and
(vi) if the manner of Settlement Sale pursuant to
Section 3.1 or 4.1 is a Pooled Underwritten Secondary
Offering, the Settlement Amount will equal a pro rata
share of the gross proceeds realized, net of a
negotiated
underwriting discount.
(hh) Settlement Date. The date after each Trade Date on which,
in accordance with standard market practice, any Paired Shares are
delivered and the funds received, in respect of any Settlement in
accordance with Section 3.2 or Price Decline Termination Event in
accordance with Section 4.2.
(ii) Settlement Shares. The number of Notional Shares which
will be settled on a given Settlement Date pursuant to Section 3.2 or
Section 4.2, as applicable.
(jj) Spread. 175 basis points, subject to adjustment pursuant
to Section 6.3.
<PAGE> 38
(kk) Stock Exchange. Means the New York Stock Exchange, the
American Stock Exchange or NASDAQ.
(ll) Trade Date. Any date on which MLI executes a settlement
trade or trades as part of a Settlement in any of the manners of
Settlement Sale set forth in Section 3.1, pursuant to either Section
3.1 or 4.1.
(mm) Underwritten Secondary Offering. An underwritten fixed
price offering of the Paired Shares.
(nn) USD LIBOR. The London Inter Bank Offered Rate in respect
of U.S. Dollars for the designated maturity as quoted on Page 3750 on
the Telerate Service (or such other page as may replace Page 3750 on
that service) as of 11:00 a.m., London time, on the date on which it is
to be determined.
(oo) VWAP Sale. A sale of the Paired Shares into the existing
trading market for outstanding shares of the same class effected in
order to approximate the volume weighted average price of the Paired
Shares on the Relevant Exchange on the relevant date.
<PAGE> 39
Section 2 Representations and Warranties.
The representations and warranties of the Companies in Section 4 of the
Purchase Agreement are hereby incorporated by reference herein, and
each Company hereby so represents and warrants to MLI, and the
representations and warranties of the Merrill Lynch Parties in Section
5 of the Purchase Agreement are hereby incorporated by reference, and
the MLI hereby so represents and warrants to each Company. The
provisions of Section 6 of the Purchase Agreement shall also be
applicable to any Paired Shares delivered to MLI under this Agreement.
Section 3 Settlement.
3.1 Settlement Sale.
On any Reset Date of the type referred to in clause (i) of the
definition of Reset Date, on any Exchange Trading Day that is one month
or two months following such a Reset Date or on any other Exchange
Trading Day (in each case, if other than such a Reset Date, the related
Settlement (as defined below) will include standard market interest
breakage fees), up to and including the Maturity Date, the Companies
may give telephonic notice to MLI to settle, and MLI shall settle, in a
commercially reasonable manner (which may require sales over a period
of more than 1 day), all or a portion of the Notional Shares to be
settled on the related Settlement Date or Dates, as specified by the
Companies ("Settlement"), through sale of not less than the number of
Paired Shares, the sale of which would result in a Settlement Amount
equal to 100% of the Reference Amount on the Settlement Date, and not
more than the number of Paired Shares, the sale of which would result
in a Settlement Amount equal, to 105% of the Reference Amount on the
Settlement Date, in any of the manners set forth below, as selected by
the Companies:
(i) an Underwritten Secondary Offering (for which the
Companies shall provide at least 21 Business Days
prior notice to MLI);
(ii) a Block Sale (for which the Companies shall
provide at least 3 Business Days prior notice to
MLI);
(iii) a Gradual Market Distribution (for which the
Companies shall provide at least 1 Business Day prior
notice to MLI);
(iv) a VWAP Sale (for which the Companies shall
provide at least 1 Business Day prior notice to MLI);
(v) a DRIP Distribution (for which the Companies
shall provide at
<PAGE> 40
least 1 Business Day prior notice to MLI); or
(vi) a Pooled Underwritten Secondary Offering (for
which the Companies shall provide at least 21
Business Day prior notice to MLI).
If the Companies do not specify a manner of sale, a Gradual Market
Distribution shall be used. If the Paired Shares delivered by the
Companies to MLI pursuant to the Purchase Agreement and this Agreement
are not, on the applicable trade date, the subject of an Effective
Resale Registration Statement (as defined in Section 6.3), the
Companies may not select a VWAP Sale as the manner of Settlement. The
number of shares sold as part of a VWAP Sale on any Trade Date shall
not be less than 20% of the six-month daily average trading volume of
the Paired Shares as calculated by the Calculation Agent and shall not
exceed 40% of the six-month daily average trading volume of the Paired
Shares as calculated by the Calculation Agent, unless both parties
agree otherwise prior to the execution of any trades in connection with
such VWAP Sale. In connection with any Underwritten Secondary Offering
or Block Sale, MLPF&S shall be the sole manager and underwriter. In
connection with a Pooled Underwritten Secondary Offering, MLI and
MLPF&S may, in their discretion, elect to (a) participate in such
offering as a first-tier co-manager on the same terms as all other
first-tier co-managers or (b) receive the Pooling Exit Fee; provided,
however, that regardless of the election of MLI and MLPF&S, all of the
Notional Shares shall be included in the Pooled Underwritten Secondary
Offering. Settlement procedures shall begin as soon as commercially
practicable, as determined by MLI, after MLI receives notice from the
Companies and no later than the first Exchange Trading Day after
expiration of the notice period unless otherwise agreed by the
Companies and MLI. At such time as the Companies deliver notice
pursuant to this Section 3.1, the Companies may direct MLI to sell not
less than the number of Paired Shares equal to the number of Settlement
Shares, and MLI shall comply with such direction in a commercially
reasonable manner. In connection with a Gradual Market Distribution,
there shall be a separate Settlement Date for each Trade Date. Final
Settlement shall occur no later than the Maturity Date. However, if the
Companies have not given MLI notice to settle by the Maturity Date,
then MLI shall settle the Notional Shares using a Gradual Market
Distribution to begin as soon as commercially practicable, as
determined by MLI, on or after the Maturity Date.
3.2 Settlement.
(a) If, on a Settlement Date, the Settlement Amount is greater
than the Reference Amount, MLI, on such Settlement Date, will pay the
Companies an amount in cash or Paired Shares (valued at the Closing
Price on the Trade Date), at the election of the Companies, equal to
the difference.
(b) If the number of Paired Shares sold by MLI pursuant to
Section 3.1
<PAGE> 41
is greater than the number of Settlement Shares, the Companies shall
deliver to MLI, on the Settlement Date, a number of Paired Shares equal
to the difference. If the number of Paired Shares sold by MLI pursuant
to Section 3.1 is less than the number of Settlement Shares, MLI shall
deliver to the Companies, on the Settlement Date, a number of Paired
Shares equal to the difference.
(c) In all events, MLI will pay to the Companies an amount
equal to all cash distributions payable to MLI but not paid prior to
the Settlement Date, on a number of Paired Shares equal to the
Settlement Shares on the Business Day after the relevant distribution
payment date declared by the Board of Directors of the REIT and OPCO.
(d) If MLI, in connection with any Settlement, receives net
sales proceeds, as calculated pursuant to the definition of Settlement
Amount, from the sale of Paired Shares prior to the applicable
Settlement Date, MLI, on the Settlement Date, shall pay the Companies
an amount in cash representing interest that could have been earned on
such net sales proceeds at the USD LIBOR rate having a designated
maturity of three months, plus Spread, for the period from the date
that such net sales proceeds are received by MLI until such Settlement
Date.
3.3 Gross Share Settlement.
(a) The Companies may elect, in their sole discretion, to
settle all or any portion of the then outstanding Notional Shares by
delivering Paired Shares in exchange for such number of Notional Shares
(a "Gross Share Settlement"). The Companies may effect a Gross Share
Settlement by delivering a written notice (the "Gross Settlement
Notice") to MLI indicating the date of such Gross Share Settlement and
the number of then outstanding Notional Shares subject to such Gross
Share Settlement; provided that such notice must be accompanied by a
notice pursuant to Section 3.1 to effect settlement of all Paired
Shares delivered pursuant to this Section 3.3(a). To effect a Gross
Share Settlement, MLI Shall deliver to the Companies the number of
Notional Shares subject to such Gross Share Settlement ("Gross
Settlement Shares") against delivery by the Companies to MLI of a
number of Paired Shares equal to the product of (i) the number of Gross
Settlement Shares and (ii) the quotient obtained by dividing (A) the
Reference Price by (B) the Closing Price, in each case, on the Reset
Date for such Gross Settlement Shares. The deliveries set forth in the
immediately preceding sentence shall be made on the Exchange Trading
Day immediately following the date on which the Gross Settlement Notice
is delivered. All Paired Shares delivered to the Companies by MLI as
part of a Gross Share Settlement shall be immediately retired and shall
cease to be issued and outstanding Paired Shares.
(b) For purposes of the Settlement of the Paired Shares
delivered to
<PAGE> 42
MLI pursuant to Section 3.3(a), the Settlement Shares shall be deemed
to be equal to the Gross Settlement Shares, provided that for purposes
of Section 3.2(b), the Settlement Shares shall be deemed to be equal to
the Paired Shares so delivered to MLI pursuant to Section 3.3(a), and
provided further that, for purposes of Section 3.2(c), with respect to
any distribution payable to MLI but not paid prior to the Settlement
Date for which the record date occurs after the date on which the Gross
Settlement Notice is delivered, the Settlement Shares shall be deemed
to be equal to the Paired Shares delivered to MLI pursuant to Section
3.3(a).
(c) The amount of any distribution referred to in clause (i)
of the definition of Distribution Amount for which the record date
occurs after a Gross Share Settlement with respect to the Paired Shares
delivered to MLI pursuant to Section 3.3 shall be multiplied by the
quotient obtained in clause (ii) of Section 3.3(a).
Section 4 Price Decline Termination Event.
4.1 Price Decline Termination Event Sale.
If the Closing Price on any Exchange Trading Day falls below any
Termination Price listed in the following schedule ("Price Decline
Termination Event"), MLI will, at its discretion, in a commercially
reasonable manner (which may require sales over a period of more than 1
day) following notice to the Companies, settle the percentage of the
Notional Shares indicated in the table below ("Settlement") through
sale of not less than the number of Paired Shares, the sale of which
would result in a Settlement Amount equal to 100% of the Reference
Amount on the Settlement Date, and not more than the number of Paired
Shares, the sale of which would result in a Settlement Amount equal to
105% of the Reference Amount on the Settlement Date, in any of the
manners specified in Section 3.1, as specified by the Companies:
<TABLE>
<CAPTION>
Percentage of Initial
Notional Shares to be
Settled Termination Price
------- -----------------
<S> <C>
25% $37.7125
50% $35.0188
75% $33.6719
100% $32.3250
</TABLE>
Settlement procedures shall commence on the date specified by MLI.
4.2 Price Decline Termination Event Settlement.
<PAGE> 43
(a) If, on the Settlement Date, the Settlement Amount is
greater than the Reference Amount, MLI, on the Settlement Date, will
pay the Companies an amount in cash or Paired Shares (valued at the
Closing Price on the Trade Date), at the election of the Companies,
equal to the difference.
(b) If the number of Paired Shares sold by MLI pursuant to
Section 4.1 is greater than the number of Settlement Shares, the
Companies shall deliver to MLI, on the Settlement Date, a number of
Paired Shares equal to the difference. If the number of Paired Shares
sold by MLI pursuant to Section 4.1 is less than the number of
Settlement Shares, MLI shall deliver to the Companies, on the
Settlement Date, a number of Paired Shares equal to the difference.
(c) In all events, MLI will pay to the Companies an amount
equal to all cash distributions payable to MLI but not paid prior to
the Settlement Date, on a number of Paired Shares equal to the
Settlement Shares on the Business Day after the relevant distribution
payment date declared by the Boards of Directors of the REIT and OPCO.
(d) If MLI, in connection with any Settlement, receives net
sales proceeds, as calculated pursuant to the definition of Settlement
Amount, from the sale of Paired Shares prior to the applicable
Settlement Date, MLI, on the Settlement Date, shall pay the Companies
an amount in cash representing interest that could have been earned on
such net sales proceeds at the USD LIBOR rate having a designated
maturity of three months, plus Spread, for the period from the date
that such net sales proceeds are received by MLI until such Settlement
Date.
Section 5 Interim Settlements.
Within 5 Business Days following each Reset Date of the type referred
to in clause (i) of the definition of Reset Date, the Companies shall
(i) deliver the Interim Settlement Amount, if any, in Interim
Settlement Shares to MLI. Interim Settlement Shares shall be the
subject of a registration statement covering any sale of such Interim
Settlement Shares by MLPF&S that has been declared effective under the
Securities Act by the Commission (an "Effective Registration
Statement"). Interim Settlement Shares shall be registered in the stock
register of the Companies as instructed by MLI and shall be held by
MLPF&S or a custodian or depository designated by MLPF&S. If the
Companies are unable to deliver Interim Settlement Shares in accordance
with the preceding sentence, the Companies shall deliver "restricted"
Interim Settlement Shares that are not the subject of an Effective
Registration Statement in an amount equal to the Interim Settlement
Amount. If the Interim Settlement Shares are not the subject of an
Effective Registration Statement, the Companies shall deliver
additional Interim Settlement Shares equal to 20% of the Interim
Settlement Shares. At
<PAGE> 44
such time as the Interim Settlement Shares are the subject of an
Effective Registration Statement, the Companies may elect to have
returned all additional Interim Settlement Shares - delivered pursuant
to the preceding sentence. On any Reset Date, if Interim Settlement
Shares are held by MLI, MLI shall deliver to the Companies within five
(5) Business Days after such Reset Date, the amount in Interim
Settlement Shares by which the amount in Interim Settlement Shares held
by MLI (valued at the Closing Price on such Reset Date) plus any cash
amounts in the collateral account exceeds the Interim Settlement Amount
(or 120% of the Interim Settlement Amount, in the event that MLI holds
restricted Interim Settlement Shares that are not the subject of an
Effective Registration Statement). Distributions on the Interim
Settlement Shares will be deposited in a collateral account at MLPF&S
or a custodian or depositary designated by MLPF&S. All Interim
Settlement Shares will be, when delivered, duly authorized, validly
issued, fully paid and non-assessable. Interim Settlement Shares shall
not be voted by MLI or MLPF&S. All distributions received in respect of
the Interim Settlement Shares shall be held in the collateral account
at MLPF&S or a depositary designated by MLPF&S. The cash amounts in the
collateral account will be immediately returned to the Companies by
MLI, but should MLI fail to return any cash amounts in the collateral
account, such cash amounts will earn interest at the USD LIBOR rate
having a designated maturity of three months. Upon final Settlement,
MLI shall immediately release all claims to cash held in the collateral
account, if any (including interest earned thereon), and Interim
Settlement Shares and deliver such amounts and all Interim Settlement
Shares to the Companies.
Section 6 Certain Covenants and Other Provisions.
6.1 Par Value.
MLI shall pay to the Companies $.01 par value per share for each share
comprising a Paired Share delivered to MLI pursuant to this Agreement,
including any Interim Settlement Shares.
6.2 Allocation of Payment and Deliveries
As between the REIT and OPCO, any delivery of, or payments
attributable to, the REIT portion of Paired Shares pursuant to this
Agreement shall be made to or by the REIT, and any delivery of, or
payments attributable to, the OPCO portion of Paired Shares pursuant to
this Agreement shall be made to or by OPCO. When making any payment to
the Companies pursuant to this Agreement, MLI shall allocate such
payment between the REIT and OPCO in the manner specified by the
Companies.
6.3 Resale Registration Statement.
<PAGE> 45
The Companies shall file a resale registration statement covering any
resales of Paired Shares delivered by the Companies to MLI pursuant to
this Agreement and the Purchase Agreement (a "Resale Registration
Statement") within 45 Business Days of the Closing Date and the
Companies shall use their best efforts to obtain effectiveness of such
Resale Registration Statement within 90 Business Days of the Closing
Date. If the Paired Shares delivered by the Companies to MLI pursuant
to the Purchase Agreement are not the subject of a Resale Registration
Statement that has been declared effective under the Securities Act by
the Commission (an "Effective Resale Registration Statement") within 90
Business Days of the Closing Date, the Spread shall increase,
retroactively effective commencing on the Initial Settlement Date, to
the Spread plus 125 basis points. At such time as the Purchase Shares
are the subject of an Effective Resale Registration Statement, the
Spread shall be reduced, from and after such time, to the Spread. The
Companies further agree that they will cause any Resale Registration
Statement to remain in effect until the earliest of the date on which
(i) the Notional Shares plus all of the Interim Settlement Shares and
any other Paired Shares delivered by the Companies to MLI pursuant this
Agreement have been sold by or on behalf of MLI, or (ii) MLI has
advised the Companies that it no longer requires that such registration
be effective. The provisions of Section 5.2 and Section 7.2 of the
Purchase Agreement shall be deemed to apply to any Resale Registration
Statement filed by the Companies pursuant to this Agreement.
6.4 Delivery of Paired Shares.
Each Company covenants and agrees with MLI that Paired Shares delivered
by the Companies pursuant to settlement events in accordance herewith
will be duly authorized, validly issued, fully paid and nonassessable.
The issuance of such Paired Shares will not require the consent,
approval, authorization, registration, or qualification of any
government authority, except such as shall have been obtained on or
before the delivery date to MLI in connection with any registration
statement filed with respect to any Paired Shares. Each party agrees
that the Companies shall not deliver Paired Shares to MLI or any other
person in connection with an Interim Settlement or the final Settlement
until such time as such delivery would not cause MLI or any other
person to violate the "Ownership Limit" set forth in the Amended and
Restated Declaration of Trust of the REIT or the Articles of Amendment
and Restatement of OPCO, in each case, as in effect on the date hereof.
6.5 Securities Law Compliance.
Each party agrees that it will comply, in connection with this
Transaction and all related or contemporaneous sales and purchases of
the Companies' Paired Shares, with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations
thereunder.
<PAGE> 46
6.6 Regulatory Compliance.
Each party agrees that if the delivery of Paired Shares upon settlement
is subject to any restriction imposed by a regulatory authority, it
shall not be an event of default, and the parties will negotiate in
good faith a procedure to effect settlement of such Paired Shares in a
manner which complies with any relevant rules of such regulatory
authority and which is satisfactory in form and substance to their
respective counsel, subject to Section 6.2 of this Agreement and
Section 7 of the Purchase Agreement. Each party further agrees that any
sale pursuant to Section 3.1 may be delayed or postponed if, in MLI's
reasonable judgement, such delay or postponement is necessary to comply
with the requirements of applicable law or regulation; provided,
however, that MLI will act in good faith to end such delay or
postponement or otherwise effect such sale on a reasonably timely basis
in a manner which complies with any such applicable law or regulation
and which is satisfactory in form and substance to its respective
counsel.
6.7 Settlement Transfer.
All settlements shall occur through DTC or any other mutually
acceptable depository.
6.8 Trading Authorization.
The following individuals and/or any individual authorized in writing
by the respective officers of the Companies are authorized by the
Companies to provide trading instructions to MLI with regard to this
transaction:
Ronald C. Brown
2231 E. Camelback Road
Suite 410
Phoenix, Arizona 85016
and
Richard Smith
2231 E. Camelback Road
Suite 400
Phoenix, Arizona 85016
<PAGE> 47
6.9 Specific Performance.
The parties acknowledge and agree that the failure of the Companies or
MLI to deliver Paired Shares in accordance with the provisions hereof
would result in damage to the other party that could not be adequately
compensated by a monetary award. The parties therefore agree that, if
either party fails to deliver Paired Shares in accordance with the
provisions hereof, the other party may, in addition to all other
remedies, seek an order of specific performance from a court of
appropriate jurisdiction.
6.10 Recourse. MLI acknowledges and agrees that the name
"Starwood Hotels & Resorts" is a designation of the 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, on June 19, 1995, January 2, 1998
and February 23, 1998 and as the same may be further amended from time
to time, and all persons dealing with the REIT shall look solely to
REIT's assets for the enforcement of any claims against the REIT, as
the Trustees, officers, agents and security holders of the REIT assume
no personal liability for obligations entered into on behalf of the
REIT, and their respective individual assets shall not be subject to
the claims of any person relating to such obligations.
6.11 Successors and Assigns. The Companies or MLI may assign
any of their respective rights, or delegate any of their respective
duties under this Agreement, if the other party first consents to such
assignment in writing. This Agreement shall inure to the benefit of and
be binding upon (i) the successors of MLI and (ii) any assignee or
transferee of rights and obligations of the Merrill Lynch Parties
pursuant to the Purchase Agreement and any assignee or transferee of
rights and obligations of MLI pursuant to this Agreement. A transferee
of the Merrill Lynch Parties pursuant to the Purchase Agreement and a
transferee of MLI pursuant to this Agreement, and, in each case, any
successor, assignee, or transferee, shall be held subject to all of the
terms of this Agreement.
6.12 Transfer to Affiliate. Notwithstanding anything herein to
the contrary, if MLI transfers the Purchase Shares to any affiliate of
MLI, together with all of MLI's rights under the Purchase Agreement
pursuant to Section 15 of the Purchase Agreement, then MLI's rights and
obligations under this Agreement shall be transferred to such affiliate
of MLI. In the event of such an assignment, such affiliate shall in all
respects be substituted for MLI as a party hereto.
6.13 Governing Law.
The Agreement will be governed by and construed in accordance with the
laws of the State of New York without reference to choice of law
doctrine.
<PAGE> 48
6.14 Confidentiality.
Subject to the other applicable subsections of this Section 6, to any
contrary requirement of law, including any disclosure obligations of
the Companies under the Securities Act, the Exchange Act and the rules
and regulations thereunder, and to the right of each party to enforce
its rights hereunder in any legal action, each party shall keep
strictly confidential and shall cause its employees and agents to keep
strictly confidential the terms of this Agreement and any information
relating to or concerning the other party which it or any of its agents
or employees may acquire pursuant to, or in the course of performing
its obligation under, any provision of this Agreement.
<PAGE> 49
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
STARWOOD HOTELS & RESORTS
WORLDWIDE, INC.
By:________________________________
Name:
Title:
STARWOOD HOTELS & RESORTS
By:________________________________
Name:
Title:
MERRILL LYNCH INTERNATIONAL
By:________________________________
Name:
Title:
<PAGE> 1
Exhibit 21.1
Subsidiaries of the Trust
ENTITY PLACE OF ORGANIZATION
------ ---------------------
Alstar Realty LLC New York
Benjamin Franklin Hotel, Inc. Washington
BW Hotel Realty, LP Maryland
Charleston Hotel Associates, LLC New Jersey
Cincinnati Plaza Company Delaware
CP Hotel Realty LP Maryland
Crystal City Hotel Associates, LLC New Jersey
Edison Hotel Associates, LP New Jersey
Emstar Realty LLC Delaware
Lauderdale Hotel Company Delaware
Long Beach Hotel Associates, LLC New Jersey
Novi Hotel Associates, LP Delaware
Park Ridge Hotel Associates, LP Delaware
Post Oak Westin Hotel Company Delaware
Prudential HEI Joint Venture Georgia
Santa Rosa Hotel Associates, LLC New Jersey
Saunstar Land Co. LLC Delaware
Sea-Tac Hotel Venture LLC Washington
SLT Allentown LLC Delaware
SLT Arlington LLC Delaware
SLT Aspen Dean Street, LLC Delaware
SLT Bloomington LLC Delaware
SLT Cabo San Lucas S. de R.L. de C.V. Mexico
SLT Cancun S. de R.L. de C.V. Mexico
SLT Central Park South, LLC Delaware
SLT CMBS I Holding LLC Delaware
SLT CMBS I, Inc. Delaware
SLT CMBS I LLC Delaware
SLT Dania LLC Delaware
SLT DC Massachusetts Avenue, LLC Delaware
SLT Financing Partnership Delaware
SLT Houston Briar Oaks, LP Delaware
SLT Indianapolis LLC Delaware
SLT Kansas City LLC Delaware
SLT Los Angeles LLC Delaware
SLT Mexico S. de R.L. de C.V. Mexico
SLT Minneapolis LLC Delaware
SLT Palm Desert LLC Delaware
SLT Philadelphia LLC Delaware
SLT Puerto Vallarta S. de R.L. de C.V. Mexico
SLT Realty Company, LLC Delaware
SLT Realty Limited Partnership Delaware
SLT San Diego LLC Delaware
SLT Southfield LLC Delaware
SLT St. Louis LLC Delaware
SLT Tucson LLC Delaware
SLT Westwood Realty LLC Delaware
South Coast Westin Hotel Company Delaware
Starlex LLC New York
Starwood Atlanta II LLC Delaware
Starwood Atlanta LLC Delaware
Starwood Mission Hills, L.L.C. Delaware
Starwood Needham LLC Delaware
Starwood Waltham LLC Delaware
Townhouse Management, Inc. Delaware
Virginia Hotel Associates, LP Delaware
W&S Denver Corp. Delaware
W&S Lauderdale Corp. Delaware
W&S Realty Corp. of Arizona Arizona
W&S Realty Corporation of Delaware Delaware
W&S Seattle Corp. Delaware
Westin 200 LLC Delaware
Westin Bay Hotel Company Delaware
Westin Denver Hotel Company Delaware
Westin Denver LLC Delaware
Westin Indianapolis Hotel Company Delaware
Westin Indianapolis LLC Delaware
Westin MV Sport LLC Delaware
Westin New York Hotel Company Delaware
Westin Philadelphia Downtown Hotel Company Delaware
Westin Philadelphia Hotel Company Delaware
Westin Portland Hotel Company Delaware
Westin San Antonio Resort Company Delaware
Westin Sea-Tac Hotel Company Delaware
Westin Seattle Hotel Company Washington
Westin WC Sport LLC Delaware
<PAGE> 1
Exhibit 21.2
Subsidiaries of the Corporation (other than ITT Corporation and its
subsidiaries)
ENTITY PLACE OF ORGANIZATION
------ ---------------------
909 North Michigan Avenue Corp. Delaware
Alstar Operating LLC New York
Belvedere Hospitality Corp Texas
Columbus Operators, Inc. Ohio
Consort Corp. Texas
Emstar Operating LLC New York
Galleria Hotel Venture Texas
Georgia Westin Hotel Company Delaware
Great Cruz Villas Partnership U.S. Virgin Islands
HEI Hotels, L.L.C. Delaware
Hotel Investors of Arizona Arizona
Hotel Investors of Michigan Michigan
Hotel Investors of Nebraska Nebraska
Hotel Investors of Virginia Virginia
Hotel Los Angeles (Westin) Company Delaware
LAX Payroll Company Delaware
LCWW Partners
Lihue Service Company Delaware
Midland Building Corporation Illinois
Midland Holding Corporation Illinois
Midland Hotel Corporation Illinois
Milwaukee Brookfield LP Wisconsin
Moorland Hotel LP Wisconsin
North Dallas Holding Co. Delaware
North Dallas Hotel Company Delaware
Operating Philadelphia LLC Delaware
Sabrina Operators Wisconsin
Santa Clara Payroll Company Delaware
Saunstar Operating Co. LLC Delaware
Savannah Harbor Resorts Developers, LLC Delaware
Savannah Harbor Venture Partners, LLC Delaware
Scoops, Inc. Kansas
Sixth Virginia Properties Washington
SLC Allentown LLC Delaware
SLC Arlington LLC Delaware
SLC Aspen Dean Street, LLC Delaware
SLC Atlanta II LLC Delaware
SLC Atlanta LLC Delaware
SLC Bloomington LLC Delaware
SLC Central Park South, LLC Delaware
SLC CMBS I, Inc. Delaware
SLC CMBS I, LLC Delaware
SLC Dania LLC Delaware
SLC DC Massachusetts Avenue, LLC Delaware
SLC Houston Briar Oaks, LP Delaware
SLC Indianapolis LLC Delaware
SLC Kansas City LLC Delaware
SLC Los Angeles LLC Delaware
SLC Minneapolis LLC Delaware
<PAGE> 2
SLC Needham LLC Delaware
SLC Operating Limited Partnership Delaware
SLC Palm Desert LLC Delaware
SLC San Diego LLC Delaware
SLC Southfield LLC Delaware
SLC St. Louis LLC Delaware
SLC Tucson LLC Delaware
SLC Waltham LLC Delaware
SLC Westwood Operating LLC Delaware
SLC-Calverton LP Delaware
St. Francis Hotel Corp. Delaware
Starwood Management Company, LLC Delaware
Vine Hotel (London) Inc. Canada
W&S Atlanta Corp. Delaware
Waltham Payroll Company Delaware
Weena Tower Exploitatie Maatschapp* BV Netherlands
Westel Insurance Company Vermont
Westin Asia Management Company Delaware
Westin Asia Management Holding Company Delaware
Westin Asia Pacific Management PTE, Ltd Singapore
Westin Asia Pacific Marketing PTE, Ltd. Singapore
Westin Asset Management Company Delaware
Westin Atlanta LLC Delaware
Westin Boston Management Company Delaware
Westin Boston Management Holding Company Delaware
Westin Building Company Washington
Westin Call Centre Europe Ireland
Westin Canada Management Company Delaware
Westin Century City Management Company Delaware
Westin Century City Management Holding Company Delaware
Westin Charlotte Management Company Delaware
Westin Charlotte Payroll Company Delaware
Westin Chicago at North River Payroll Company Delaware
Westin Chicago Limited Partnership Delaware
Westin Crowne Plaza Hotel Company Delaware
Westin Dallas Management Company Delaware
Westin France Management Company Delaware
Westin Franchise Company Delaware
Westin Hilton Head Management Company Delaware
Westin Host, Inc. California
Westin Hotel Company Delaware
Westin Hotel Company Fiji Ltd. Fiji
Westin Hotels Australia Pty, Ltd. Australia
Westin Hotels France SARL France
Westin Hotels Germany GmbH Germany
<PAGE> 3
Westin Hotels Guam Guam
Westin Hotels Ireland Ireland
Westin Hotels Japan Company Japan
Westin Hotels L.P. Delaware
Westin Hotels Morocco SARL Morocco
Westin Innisbrook Management Company Delaware
Westin International (Canada) Ltd Canada
Westin International (Malta) Ltd. Malta
Westin International (U.K.) Ltd United Kingdom
Westin International Europe B.V. Netherlands
Westin International Management Company Delaware
Westin International Services Company Delaware
Westin Kansas City Management Company Delaware
Westin License Company Delaware
Westin License Company East Delaware
Westin License Company North Delaware
Westin License Company South Delaware
Westin License Company West Delaware
Westin London Hotel Company Nova Scotia
Westin Los Angeles Payroll Company Delaware
Westin Maui Management Company Delaware
Westin Mexico Management Company Delaware
Westin Mexico S.A. de C.V. Mexico
Westin Mission Hills Payroll Company Delaware
Westin New Orleans Management Company Delaware
Westin New Orleans Payroll Company Delaware
Westin O'Hare Hotel Venture Illinois
Westin Omaha Payroll Company Delaware
Westin Ontario (London) Hotel Company Canada
Westin Orlando Hotel Company Delaware
Westin Orlando Management Company Delaware
Westin Ottawa Management Company Delaware
Westin O'Hare Hotel Company Delaware
Westin Payroll Company Nevada
Westin Peachtree I, Inc. Delaware
Westin Peachtree II, Inc. Delaware
Westin Peachtree Management Company Delaware
Westin Pittsburgh Management Company Delaware
Westin Pittsburgh Management Holding Company Delaware
Westin Portman Peachtree I, LLC Delaware
Westin Portman Peachtree II, LLC Delaware
Westin Premier, Inc. Delaware
Westin Realty Corp. Colorado
Westin Renaissance Company Delaware
Westin Representation Company Delaware
Westin River North Management Company Delaware
Westin Riverwalk Management Company Delaware
Westin San Antonio Payroll Company Delaware
Westin Santa Clara Management Company Delaware
Westin Savannah Hotel Company Delaware
Westin Sport LLC Delaware
Westin St. Francis, Limited Partnership Delaware
Westin St. John Hotel Company, Inc. U.S. Virgin Islands
Westin Tucker Hotel Venture Delaware
Westin Tucson Management Company Delaware
Westin Vacation Exchange Company Delaware
Westin Vacation Management Corporation Delaware
WHC Payroll Company Delaware
WHR Colorado Beverage Company Delaware
WVC Rancho Mirage, Inc. Delaware
WVC St. John, Inc. U.S. Virgin Islands
<PAGE> 1
Exhibit 21.3
Subsidiaries of ITT Corporation
ENTITY PLACE OF ORGANIZATION
------ ---------------------
2660 Woodley Road Joint Venture Delaware
357, Inc. Nevada
47 Redevelopment
520 Canal Street Louisiana
Aegean Management Corporation Nevada
Aerhotel SPA Italy
Alexandria Suites Investment Limited Partnership Virginia
Alphaventure Music Publishing Corp.
Amar Hotel Investment Corporation, N.V. Netherlands Antilles
Aronimink Corporation Nevada
Asian Financial Syndicate, Inc. New Jersey
Atlantic HMO, Inc. New Jersey
Barton, Ltd. Fiji
Baumgartner Company Nevada
Betaventure Music Publishing Corp.
Blue Marble Company
Boardwalk Regency Corporation New Jersey
Brookdale Resorts, Inc. Pennsylvania
Caesars New Jersey, Inc. New Jersey
Caesars Palace Corporation Nevada
Caesars Palace, Inc. Nevada
Caesars Palace, Ltd. Nevada
Caesars Palace Realty Corporation Nevada
Caesars Palace Sports Promotions, Inc. Nevada
Caesars World Business Services Corporation Nevada
Caesars World Entertainment, Inc. California
Caesars World Finance Corporation Delaware
Caesars World Gaming Development Corporation Nevada
Caesars World, Inc. Nevada
Caesars World, Inc. Delaware
Caesars World Marketing Corporation New Jersey
Caesars World Merchandising, Inc. Nevada
California Clearing Corporation California
Centre City International Hotel Pty. Ltd.
Chicago Sheraton Corporation Illinois
Ciga S.P.A. Holding Italy
Companhia Palmares Hotels E. Turismo Brazil
Concord International Mauritius Limited
Consolidated Hotel Limited Hong Kong
Cove Haven, Inc. Pennsylvania
CS&M Associates Louisiana
CWI Terminal Corporation Nevada
Desert Inn Improvement Company Nevada
Desert Palace, Inc. Nevada
Destination Services of Scottsdale, Inc. Delaware
Dubbo, Ltd. Fiji
El Conquistador Hotel Associates Arizona
Elk Grove Suites, Inc. Delaware
Florida M. Corporation Nevada
General Fiduciary Corporation Massachusetts
Global Connections, Inc. Delaware
Granton Inter-Heritage SDN BHD British Virgin Island
Granton International, Ltd. British Virgin Islands
Harbor-Cal S.C. California
Hartford Center Hotel Partnership Connecticut
Hotel Atlantis A.G. Greece
Hoteles Sheraton de Argentina S.A.C. Argentina
Hoteles Sheraton del Peru S.A. Peru
Hoteles Sheraton S.A. de C.V. Mexico
Hotels Sheraton de Portugal, SARL Portugal
Hudson Sheraton LLC Delaware
Indo-Pacific Sheraton Ltd. Hong Kong
ITT Broadcasting Corp. Delaware
ITT Eden Corporation
(owned by ITT Sheraton Corporation)
ITT Educational Services, Inc. Delaware
ITT Flight Operations, Inc. Pennsylvania
ITT Industries Belgium, S.A. Belgium
ITT Information Services, Inc. Delaware
<PAGE> 2
<TABLE>
<S> <C>
ITT MSG, Inc. Delaware
ITT Sheraton Canada Ltd. Canada
ITT Sheraton Corporation Delaware
ITT Sheraton International Ltd. Hong Kong
ITT Sheraton Reservations Corporation Delaware
ITT Sheraton Singapore Pte. Ltd. Singapore
Keiyo Resort Development Co. Ltd. Japan
Key West Beach Suites L.P. Delaware
LA Airport Hotel Venture
Leisure Themes Corporation New Jersey
Manhattan Sheraton Corporation New York
Marceau Investissement France
Martial Development Corp. New Jersey
MH Limited United Kingdom
ML Hotel Investors LP Hawaii
Operadora Interamericana de Hoteles S.A. de C.V. Mexico
Operadora Sheraton S.A. de C.V. Mexico
Paradise Stream, Inc. Pennsylvania
Pocono Palace, Inc. Pennsylvania
Port de Plaisance Hotel Management N.V. Netherlands Antilles
Radio Corporation of Cuba Cuba
Rimtech Corporation Nevada
Roman Entertainment Corporation of Indiana Indiana
Roman Entertainment Corporation of Texas Texas
Roman Holding Corporation of Indiana Indiana
Romantic Advertising, Inc. Pennsylvania
Romantic Tours, Inc. Pennsylvania
San Diego Sheraton Corporation Delaware
San Fernando Sheraton Corporation Delaware
Seattle Union Street Associates Washington
Sheraton (Bermuda) Limited Bermuda
Sheraton 45 Park Corporation Delaware
Sheraton Acceptance Trust
Sheraton Arizona Corporation Delaware
Sheraton Asia-Pacific Corporation Delaware
Sheraton Bal Harbour Associates Joint Venture Florida
Sheraton Bal Harbour Associates Ltd. Florida
Sheraton Beijing Corp. Delaware
Sheraton Blackstone Corporation Delaware
Sheraton Boston Corporation Massachusetts
Sheraton Building Corporation
Sheraton California Corporation Delaware
Sheraton Camelback Corporation Delaware
Sheraton Caribbean Corporation (Netherlands Antilles) N.V.
Sheraton Carson Corporation
</TABLE>
<PAGE> 3
Sheraton Colorado Corporation
Sheraton Copenhagen Corporation Delaware
Sheraton Corner Enterprises Corporation Nevada
Sheraton Crescent Corporation Delaware
Sheraton Dallas Corporation Delaware
Sheraton de Venezuela C.A. Venezuela
Sheraton Desert Inn Corporation Nevada
Sheraton Employees Public Interest Corporation
Sheraton Florida Corporation Delaware
Sheraton Gaming (Peru) Inc. Delaware
Sheraton Gaming Corporation Nevada
Sheraton Gateway Suites Investment, L.P. Delaware
Sheraton Gateway Suites O'Hare, Investment LP
Sheraton Harbor Island Corporation Delaware
Sheraton Hartford Corporation Connecticut
Sheraton Hawaii Hotels Corporation Hawaii
Sheraton Hawaii Management Corporation Delaware
Sheraton Hellas E.P.E.
Sheraton Hotel (Namibia) (Proprietary) Limited
Sheraton Hotels (Ireland) Ltd.
Sheraton Hotels (Italia) SRL Italy
Sheraton Hotels (Proprietary) Limited
Sheraton Hotels (UK) Plc United Kingdom
Sheraton Hotels and Inns Limited
Sheraton Houston Corporation Delaware
Sheraton Inter-Americas, Ltd. Delaware
Sheraton Intercontinental Limited Bahamas
Sheraton International (Jamaica) Limited
Sheraton International de Paraguay S.A.
Sheraton International De Mexico, Inc. Delaware
Sheraton International Gesellschaft cmbH Austria
Sheraton International, Inc. Delaware
Sheraton Key West, Inc. Delaware
Sheraton Management Company Limited Bahamas
Sheraton Management Corporation Delaware
Sheraton Management GMBh Germany
Sheraton Marketing Corporation Delaware
Sheraton Miami Corporation Delaware
Sheraton Middle East Management Corporation Delaware
Sheraton New Jersey Corporation New Jersey
Sheraton New York Corporation New York
Sheraton O'Hare Corporation Delaware
Sheraton On the Park, Pty. Ltd. Australia
Sheraton Operating Corporation Delaware
Sheraton Orlando Corporation Delaware
<PAGE> 4
Sheraton Overseas Company, Ltd. Bahamas
Sheraton Overseas Management Corporation Delaware
Sheraton Overseas Technical Services Corporation Delaware
Sheraton Pacific Hotels Pty. Ltd. Australia
Sheraton Paris, Inc. Delaware
Sheraton Paris Investment Limited Partnership Bermuda
Sheraton Peachtree Corporation Delaware
Sheraton Phillippines Corporation Phillippines
Sheraton Phillippines, Inc.
Sheraton Phoenician Corporation Delaware
Sheraton Pittsburgh Corporation Delaware
Sheraton Roissy SA France
Sheraton Rosemont Corporation
Sheraton Royal Orchid Co. Ltd. Thailand
Sheraton Savannah Corporation Delaware
Sheraton Services Corporation Delaware
Sheraton Steamboat Corporation Delaware
Sheraton Suites, Inc. Delaware
Sheraton Suites Investment LP Delaware
Sheraton Texas Corporation Delaware
Sheraton Tunica Corporation Delaware
Sheraton Vermont Corporation Vermont
Sheraton Warsaw Corporation Delaware
Sheraton Warsaw Hotel S.P.Z.O.O. Poland
Ski Time Square Enterprises Colorado
Sociedad Immobiliara San Cristobal S.A. Chile
South Carolina Sheraton Corporation Delaware
St. Regis Hotel Joint Venture New York
St. Regis Sheraton Corporation New York
Suites Management, Inc. Delaware
Tegelbacken Investment, A.B. Sweden
Tele-Info, Inc. Nevada
Telemontage, Inc.
The Hotel Clearing Corporation
The Hotel Source Asia-Pacific Ltd.
Torrey Pines Hotel Associates California
Tulsa Hotel Management Corporation
Turistica Tabasco S.A. de C.V.
Washington Sheraton Corp. Delaware
WD Investments LLC Delaware
WD Parent Corporation Delaware
Westwood Hotel Venture Florida
Wharfside One Partnership California
Worldwide Franchise Systems, Inc. Delaware
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of Starwood Hotels & Resorts and Starwood Hotels & Resorts Worldwide, Inc. (the
"Company") on Forms S-3 (File No. 333-13411 and 333-13325) of our report dated
February 27, 1998 on our audits of the separate and combined financial
statements of the Company as of December 31, 1997 and 1996 and for each of the
three years in the period ended December 31, 1997, which report is included in
the Company's Annual Report on Form 10-K.
Coopers & Lybrand, L.L.P.
Phoenix, Arizona
March 31, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATIONEXTRACTED FROM THE RELATED
BALANCE SHEETS AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH ON THE JOINT ANNUAL REPORT ON FORM 10K.
</LEGEND>
<CIK> 0000316206
<NAME> STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 13,644,000
<SECURITIES> 0
<RECEIVABLES> 73,085,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 153,597,000
<PP&E> 318,325,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 558,651,000
<CURRENT-LIABILITIES> 508,483,000
<BONDS> 0
0
0
<COMMON> 513,000
<OTHER-SE> 49,655,000
<TOTAL-LIABILITY-AND-EQUITY> 558,651,000
<SALES> 909,824,000
<TOTAL-REVENUES> 913,688,000
<CGS> 0
<TOTAL-COSTS> 630,653,000
<OTHER-EXPENSES> 274,861,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,499,000
<INCOME-PRETAX> (9,223,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,223,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,223,000)
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE RELATED
BALANCE SHEETS AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH ON THE JOINT ANNUAL REPORT ON FORM 10K.
</LEGEND>
<CIK> 0000048595
<NAME> STARWOOD HOTELS & RESORTS
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 9,818,000
<SECURITIES> 0
<RECEIVABLES> 413,265,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 38,802,000
<PP&E> 2,310,538,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,772,423,000
<CURRENT-LIABILITIES> 1,313,112,000
<BONDS> 217,567,000
0
0
<COMMON> 513,000
<OTHER-SE> 1,241,231,000
<TOTAL-LIABILITY-AND-EQUITY> 2,772,423,000
<SALES> 0
<TOTAL-REVENUES> 270,768,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 137,363,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 64,872,000
<INCOME-PRETAX> 50,747,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 50,747,000
<DISCONTINUED> 0
<EXTRAORDINARY> (3,452,000)
<CHANGES> 0
<NET-INCOME> 47,295,000
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 0.97
</TABLE>
