<PAGE>
SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF
1934
Filed by the Registrant / X /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ X / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Under Rule 14a-12
WESTIN HOTELS LIMITED PARTNERSHIP.
----------------------------------
(Name of Registrant as Specified in Charter)
N/A
---
(Name of Persons Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ X / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
N/A
2) Aggregate number of securities to which transaction applies:
N/A
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
N/A
4) Proposed maximum aggregate value of transaction:
N/A
5) Total fee paid:
N/A
/ / Fee paid previously with preliminary materials
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
N/A
2) Form, Schedule or Registration Statement No.:
N/A
3) Filing Party:
N/A
4) Date Filed:
N/A
<PAGE>
WESTIN HOTELS LIMITED PARTNERSHIP
777 WESTCHESTER AVENUE
WHITE PLAINS, NEW YORK 10604
March 15, 2000
Dear Limited Partners:
WESTIN REALTY CORP., AS THE GENERAL PARTNER (THE "GENERAL PARTNER") OF
WESTIN HOTELS LIMITED PARTNERSHIP, A DELAWARE LIMITED PARTNERSHIP (THE
"PARTNERSHIP"), REQUESTS YOUR WRITTEN CONSENT ON MATTERS DESCRIBED IN THE
ENCLOSED CONSENT SOLICITATION STATEMENT. PLEASE REVIEW THE CONSENT SOLICITATION
STATEMENT CAREFULLY. YOUR CONSENT IS IMPORTANT. THE GENERAL PARTNER BELIEVES
THAT THE TRANSACTION DESCRIBED IN THE CONSENT SOLICITATION STATEMENT SHOULD BE
COMPLETED BY MAY 31, 2000 IN ORDER TO POTENTIALLY MAXIMIZE DISTRIBUTIONS TO ALL
LIMITED PARTNERS. CONSEQUENTLY, WE URGE YOU TO COMPLETE, SIGN, DATE AND RETURN
THE ENCLOSED CONSENT CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS SOON AS
POSSIBLE, AND, IN ANY CASE, BEFORE APRIL 26, 2000.
The Partnership, in its capacity as the sole limited partner of The Westin
St. Francis Limited Partnership (the "Hotel Partnership"), has been asked by the
general partner of the Hotel Partnership to consent to the sale by the Hotel
Partnership of The Westin St. Francis Hotel (the "St. Francis") to BRE/St.
Francis L.L.C. for $243 million in cash, subject to certain adjustments and
prorations under the Purchase and Sale Agreement. The proposed sale is fully
described in the accompanying Consent Solicitation Statement. After consummation
of the proposed sale, the General Partner estimates that proceeds ultimately
available for distribution to Limited Partners will be approximately
$85 million, or $627 per Unit, assuming that the sale is completed by May 31,
2000.
THE GENERAL PARTNER HAS ACTIVELY REVIEWED OPPORTUNITIES TO SELL OR REFINANCE
THE PARTNERSHIP'S HOTEL PROPERTIES, INCLUDING THE ST. FRANCIS, AND HAS
DETERMINED THAT THE PROPOSED SALE OF THE ST. FRANCIS IS IN THE BEST INTERESTS OF
THE PARTNERSHIP AND THE LIMITED PARTNERS AT THIS TIME. ACCORDINGLY, THE GENERAL
PARTNER IS PREPARED TO CAUSE THE PARTNERSHIP TO CONSENT TO THE PROPOSED SALE.
THE AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF THE PARTNERSHIP
REQUIRES THE WRITTEN CONSENT OF LIMITED PARTNERS HOLDING A MAJORITY OF THE
OUTSTANDING UNITS TO AUTHORIZE THE GENERAL PARTNER'S GRANT OF CONSENT TO THE
PROPOSED SALE ON BEHALF OF THE PARTNERSHIP (THE "PROPOSED AUTHORIZATION"). IF
THE REQUISITE PERCENTAGE OF LIMITED PARTNERS DO NOT CONSENT TO THE PROPOSED
AUTHORIZATION, THEN THE PROPOSED SALE OF THE ST. FRANCIS CANNOT OCCUR. THE
GENERAL PARTNER RECOMMENDS THAT THE LIMITED PARTNERS USE THE ENCLOSED CONSENT
CARD TO VOTE FOR THE PROPOSED AUTHORIZATION.
Not voting on the Proposed Authorization will have the same effect as voting
against it. We therefore urge you to complete, sign and date the enclosed
consent card and return it in the enclosed postage-paid envelope at your
earliest convenience. If you have any questions, or require assistance in voting
your Units, please call D.F. King & Co., Inc., who is assisting us, at
1-888-246-5358.
Sincerely,
WESTIN REALTY CORP.
General Partner
[LOGO]
Alan M. Schnaid
Vice President
YOUR PARTICIPATION IN THE ACTION TO BE TAKEN BY WRITTEN CONSENT IS
IMPORTANT. PLEASE PROMPTLY COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED CONSENT
CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
<PAGE>
WESTIN HOTELS LIMITED PARTNERSHIP
777 WESTCHESTER AVENUE
WHITE PLAINS, NEW YORK 10604
NOTICE
FOR ACTION BY WRITTEN CONSENT
To the Limited Partners:
Attached to this notice is a Consent Solicitation Statement which solicits
the written consent of the Limited Partners of Westin Hotels Limited
Partnership, a Delaware limited partnership ("the Partnership"), to approve the
transactions described in the Consent Solicitation Statement. To summarize such
matters, the Partnership, in its capacity as the sole limited partner of The
Westin St. Francis Limited Partnership (the "Hotel Partnership"), has been asked
by the general partner of the Hotel Partnership to consent to the sale by the
Hotel Partnership of The Westin St. Francis Hotel (the "St. Francis") pursuant
to a Purchase and Sale Agreement dated as of January 18, 2000. The Purchase and
Sale Agreement provides for the sale of the St. Francis for $243 million in
cash, subject to certain adjustments and prorations. The Amended and Restated
Agreement of Limited Partnership of the Partnership requires the prior written
consent of Limited Partners holding a majority of the outstanding Units to
authorize the General Partner's grant of consent to the proposed sale on behalf
of the Partnership. Westin Realty Corp., as the general partner of the
Partnership (the "General Partner"), recommends that the Partnership consent to
the proposed sale. If the requisite percentage of Limited Partners do not
consent to the proposed authorization, then the proposed sale of the St. Francis
cannot occur.
Only Limited Partners of record at the close of business on February 15,
2000, shall be entitled to give the above-referenced consent. The Limited
Partners will not be entitled to dissenters' rights of appraisal under Delaware
law or the Amended and Restated Agreement of Limited Partnership of the
Partnership in connection with the proposed sale.
Information regarding the proposed sale and related matters is contained in
the attached Consent Solicitation Statement and the annexes thereto, which is
incorporated by reference herein and forms a part of this notice.
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED CONSENT CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE. IT IS
IMPORTANT THAT YOUR INTERESTS BE REPRESENTED AND THAT YOUR CONSENT BE RECEIVED.
By Order of the General Partner,
WESTIN REALTY CORP.
General Partner
[LOGO]
Alan M. Schnaid
Vice President
White Plains, New York
March 15, 2000
<PAGE>
WESTIN HOTELS LIMITED PARTNERSHIP
CONSENT SOLICITATION STATEMENT
FOR LIMITED PARTNER ACTION BY WRITTEN CONSENT
This Consent Solicitation Statement and the accompanying documents are being
mailed to each limited partner (each, a "Limited Partner") of record as of
February 15, 2000, holding limited partnership interests (each 1/135,600 of the
total limited partnership interests, a "Unit") in Westin Hotels Limited
Partnership, a Delaware limited partnership (the "Partnership"), in connection
with the solicitation by Westin Realty Corp., a Delaware corporation and the
general partner of the Partnership (the "General Partner"), of written consents
of the Limited Partners.
The written consents of the Limited Partners are being sought because the
Partnership, as the sole limited partner of The Westin St. Francis Limited
Partnership (the "Hotel Partnership"), has been asked by the general partner of
the Hotel Partnership (the "Hotel General Partner") to consent to the sale by
the Hotel Partnership of the Westin St. Francis Hotel (the "St. Francis")
pursuant to a Purchase and Sale Agreement dated as of January 18, 2000. The
Purchase and Sale Agreement provides for the sale of the St. Francis for
$243 million in cash, subject to certain adjustments and prorations (the
"Proposed Sale"). The Amended and Restated Agreement of Limited Partnership of
the Partnership (the "Partnership Agreement") requires the written consent of
Limited Partners holding a majority of the outstanding Units to authorize the
General Partner's consent to the Proposed Sale on behalf of the Partnership (the
"Proposed Authorization"). If the requisite percentage of Limited Partners do
not consent to the Proposed Authorization, then the Proposed Sale cannot occur.
After actively marketing the St. Francis, the Hotel Partnership
conditionally accepted a bid for $245 million in cash from Blackstone Real
Estate Acquisitions III L.L.C. ("Blackstone"), an affiliate of The Blackstone
Group. Blackstone's due diligence concerning the St. Francis identified a
shortfall in forecasted cash flow for 1999. The parties subsequently negotiated
a definitive sale agreement for $243 million and the Hotel Partnership entered
into the Purchase and Sale Agreement with Blackstone's affiliate, BRE/St.
Francis L.L.C., a Delaware limited liability company (the "Purchaser"). The
Partnership had the St. Francis appraised in March 1999 for $229.9 million, and
has received a fairness opinion stating that the Proposed Sale is fair, from a
financial point of view, to the Limited Partners.
If the requisite percentage of Limited Partners consent to the Proposed
Authorization and the Proposed Sale is consummated, the General Partner
estimates that proceeds ultimately available for distribution to the Limited
Partners following the completion of the sale will be approximately
$85 million, or $627 per Unit, assuming that the sale is completed by May 31,
2000. See "THE PROPOSED SALE-Distributions." Certain Limited Partners that are
non-residents of the State of California will be subject to California
withholding, which will reduce the cash distribution paid to such Limited
Partners. See "THE PROPOSED SALE-Certain Federal Income Tax Consequences." The
actual amount of net proceeds to be derived from the Proposed Sale and
distributable to the Limited Partners will not be known until after closing of
the sale and liquidation of the Hotel Partnership, and no assurance may be given
that the Partnership's or Hotel Partnership's obligations, or any reserves
against future obligations, will not exceed current expectations or that the
total amount of distributions will be equal to the estimates specified herein.
Enclosed with this Consent Solicitation Statement is a Notice For Action by
Written Consent together with a written consent card for your signature. Failure
to return a properly executed and dated consent card will have the same effect
as a vote against the Proposed Authorization. Any person who has given consent
pursuant to this solicitation may revoke it by delivering to the General Partner
a written notice stating that the consent is revoked. In order to be effective,
the revocation must be delivered prior to the date that the General Partner,
acting for and on behalf of the Partnership, grants to the Hotel General Partner
the consent of the Partnership to the Proposed Sale. If no instructions are
indicated on a properly executed and dated consent card, it will be deemed a
vote "FOR" the Proposed Authorization. As of February 15, 2000, there were
approximately 7,643 Limited Partners of record with 135,600 Units issued and
outstanding. In order for the Proposed Authorization to be approved, Limited
Partners holding a majority of the outstanding Units must consent to the
Proposed Authorization. In determining whether the General Partner has received
the requisite number of affirmative votes for the Proposed Authorization,
abstentions will have the same effect as a vote against the Proposed
Authorization.
This Consent Solicitation Statement is first being mailed to Limited
Partners on or about March 15, 2000.
The date of this Consent Solicitation Statement is March 15, 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
SUMMARY..................................................... 1
The Partnerships........................................ 1
The St. Francis......................................... 1
The Proposed Sale....................................... 3
Recommendation of the General Partner................... 3
Summary of Tax Consequences............................. 3
Forward-Looking Statements.............................. 4
THE WRITTEN CONSENTS........................................ 5
General................................................. 5
Record Date and Outstanding Units; Voting Rights; No
Market................................................. 5
Majority Vote Required.................................. 5
Voting and Revocation of Consents....................... 6
Absence of Dissenters'Rights of Appraisal; Effect of
Vote For Proposed Sale................................. 6
Solicitation of Consents................................ 6
UNAUDITED PRO FORMA FINANCIAL DATA.......................... 7
SELECTED FINANCIAL DATA..................................... 12
THE PROPOSED SALE........................................... 13
Overview................................................ 13
Background of and Reasons for the Proposed Sale......... 13
Recommendation of the General Partner................... 14
Fairness Opinion........................................ 16
Distributions........................................... 21
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................... 23
Gain on Sale............................................ 23
Cash Distributions...................................... 23
Passive Activity Losses................................. 24
California Income Taxes................................. 24
Tax-Exempt Limited Partners............................. 24
Estimated Taxable Gain and Income....................... 24
Accounting Treatment.................................... 25
THE PURCHASE AND SALE AGREEMENT............................. 26
The Purchase and Sale................................... 26
Representations and Warranties.......................... 26
Covenants............................................... 27
Conditions Precedent.................................... 27
Prorations and Apportionments........................... 28
Termination............................................. 28
Casualty And Condemnation............................... 29
INTERESTS OF CERTAIN PERSONS IN THE PROPOSED SALE........... 30
General Partner......................................... 30
D.F. King & Co., Inc.................................... 30
WHERE YOU CAN FIND ADDITIONAL INFORMATION................... 31
ANNEX A: PURCHASE AND SALE AGREEMENT
ANNEX B: FAIRNESS OPINION
</TABLE>
i
<PAGE>
SUMMARY
THE PARTNERSHIPS
Westin Hotels Limited Partnership (the "Partnership") and its subsidiary
limited partnerships, The Westin St. Francis Limited Partnership (the "Hotel
Partnership") and The Westin Chicago Limited Partnership, each a Delaware
limited partnership, were formed on April 25, 1986 for the purpose of acquiring
two hotels, The Westin St. Francis in San Francisco, California and The Westin
Michigan Avenue, Chicago in downtown Chicago, Illinois.
The Westin St. Francis and The Westin Michigan Avenue, Chicago have been
managed as part of Westin's international hotel system since 1945 and 1964,
respectively. Westin Realty Corp. (the "General Partner") is the sole general
partner of the Partnership, St. Francis Hotel Corporation is the sole general
partner (the "Hotel General Partner") of the Hotel Partnership, and 909 North
Michigan Avenue Corporation is the sole general partner of The Westin Chicago
Limited Partnership. Each general partner is a subsidiary of Starwood Hotels &
Resorts Worldwide, Inc. ("Starwood").
THE ST. FRANCIS
The Hotel Partnership's property consists solely of The Westin St. Francis
in San Francisco, California (the "St. Francis"). The St. Francis is a
first-class hotel located in a premier central urban location, providing guests
with convenient access to business districts, shopping areas and convention
facilities.
DESCRIPTION. The St. Francis has 1,192 guest rooms (including 77 suites),
with 613 rooms in the main building and 579 rooms in the 32-story tower, and 33
meeting and banquet rooms. The St. Francis has a full-service restaurant, The
St. Francis Cafe; a lounge, the Compass Rose; and a pub, Dewey's. The St.
Francis offers concierge services and has a business center and a health and
fitness center. Jewelry and gift boutiques, clothing shops, specialty stores, an
art gallery and a florist are all available within the St. Francis, as well as
an underground valet parking garage with 217 spaces.
LOCATION. The St. Francis is located on historic Union Square, a premier
shopping district in downtown San Francisco, approximately 12 miles north of the
San Francisco International Airport and within easy walking distance of the
George R. Moscone Convention Center, Chinatown, numerous theaters and
restaurants, and the central business and financial district of San Francisco.
The world-famous San Francisco cable cars stop directly in front of the St.
Francis.
LOANS. On August 21, 1986, Teacher Retirement System of Texas ("TRST")
refinanced a mortgage loan in the amount of $83.3 million with respect to the
St. Francis. The St. Francis was acquired subject to this mortgage loan. On
June 2, 1994, the General Partner, on behalf of the Partnership, successfully
completed a restructuring of the mortgage loan and entered into a restructuring
agreement with the lender. On May 27, 1997, a second restructuring agreement
modifying the existing mortgage loan on the St. Francis was completed. The
modifications to the mortgage loan consisted primarily of (1) a reduction of the
effective annual interest rates from 10.00% and 10.25% to 8.85%, (2) an
extension of the loan maturity date from August 26, 2001 to November 30, 2006
and (3) revisions of prepayment penalties from 1.25% of the principal amount
repaid to an amount (for any sale of the hotel to an unaffiliated party before
August 31, 2001) based on a formula for calculating the present value of the
remaining principal and interest payments scheduled to have been made. Under the
terms of the mortgage loan, if the loan is repaid in May 2000 a prepayment
penalty of approximately $6.2 million will be payable, along with the
outstanding principal and accrued interest, upon closing of the sale of the St.
Francis. The General Partner is attempting to negotiate with the lender a
reduced prepayment penalty amount, but there is no assurance that the General
Partner will be successful.
1
<PAGE>
In conjunction with the restructuring of the mortgage loan in 1994, the
General Partner loaned the Partnership $25 million to fund capital improvements
to the St. Francis and The Westin Michigan Avenue, Chicago, of which
$20 million was contributed to the Hotel Partnership for capital improvements
for the St. Francis. The loan is subordinate to the loan with TRST. The annual
interest rate on the subordinated loan is the prime rate quoted from time to
time by the Bank of America, plus 1%. At December 31, 1999, the subordinated
loan from the General Partner to the Partnership totaled $40.1 million. Of that
amount $32.0 million represents the portion of the loan attributable to the St.
Francis, which includes $12.0 million of accrued interest. Upon sale of the St.
Francis, the portion of the loan attributable to the St. Francis will be payable
in full. See "THE PROPOSED SALE--Estimated Use of Proceeds from the Proposed
Sale," and "INTERESTS OF CERTAIN PERSONS IN THE PROPOSED SALE--General Partner."
MANAGEMENT AGREEMENT. The St. Francis is currently operated as part of the
Westin international system of hotels pursuant to a management agreement
initially entered into on August 21, 1986 between the General Partner, the
Partnership, the Hotel General Partner, and the Hotel Partnership, as the owners
of the St. Francis, and the Westin Hotel Company, as hotel manager. When
Starwood acquired the Westin Hotel Company in 1998, the Westin Hotel Company was
merged into one of Starwood's affiliates and the Westin Hotel Company assigned
the management agreement to the Hotel General Partner. The management agreement
does not terminate until 2026 without the consent of all parties, absent a
breach or default by a party or other extraordinary event specified in the
agreement.
The management agreement provides for a base management fee equal to 3.5% of
annual gross revenues of the St. Francis payable by the Hotel Partnership to the
hotel manager out of cash flow from the operations of the hotel. This fee is
payable prior to the distribution of cash to the partners of the Hotel
Partnership, including the Partnership as the sole limited partner of the Hotel
Partnership.
The management agreement also provides for an incentive management fee,
which is currently equal to 20% of the net operating cash flow (as defined in
the management agreement) of the Partnership. The incentive management fee is
payable by the Hotel Partnership in proportion to the positive amount of the
Hotel Partnership's contribution to the Partnership's net operating cash flow.
Payment of the incentive management fee in any year depends on the amount of
distributable net cash flow of the Partnership and is subordinated to the
payment to the Limited Partners of a preferred distribution of such cash flow.
Unpaid incentive management fees are deferred. All current and deferred
incentive management fees attributable to the Hotel Partnership are due and
payable to the hotel manager from the proceeds received by the Partnership from
the sale of the St. Francis and before any distribution of such proceeds to the
Limited Partners. See "THE PROPOSED SALE--Distributions." At December 31, 1999
the amount of all current and deferred incentive management fees attributable to
the Hotel Partnership was $24.9 million.
The General Partner has been actively reviewing opportunities to sell the
Partnership's hotel properties, including the St. Francis, as required by the
Amended and Restated Agreement of Limited Partnership of the Partnership (the
"Partnership Agreement"). In connection therewith, the management agreement was
amended in September 1999 to clarify certain ambiguities regarding the payment
of the incentive management fees subsequent to a sale of one or both of the
Partnership's hotel properties. The amendment provides a formula for payment of
the incentive management fee following the sale of one or both of the hotels
that is based on the individual net operating cash flows of the hotels rather
than on a pooled basis.
The proposed sale of the St. Francis described below includes the assignment
of the current management agreement to the purchaser. See "INTERESTS OF CERTAIN
PERSONS IN THE PROPOSED SALE--General Partner."
2
<PAGE>
THE PROPOSED SALE
After actively marketing the St. Francis, the Hotel Partnership
conditionally accepted a bid for $245 million in cash from Blackstone Real
Estate Acquisitions III L.L.C. During due diligence, Blackstone identified a
shortfall of projected cash flow for 1999, and the Hotel Partnership
subsequently entered into a Purchase and Sale Agreement (the "Purchase and Sale
Agreement") dated as of January 18, 2000 with BRE/St. Francis L.L.C. ("the
Purchaser"), an affiliate of Blackstone, for the sale of the St. Francis for
$243 million in cash, subject to certain adjustments and prorations (the
"Proposed Sale"). The Purchaser will assume all of the obligations of the Hotel
Partnership under the management agreement from and after completion of the
Proposed Sale. The General Partner estimates that proceeds ultimately available
for distribution to the Limited Partners after payment of loans, accrued
incentive management fees and costs and expenses will be approximately
$85 million, or $627 per Unit, assuming that the Proposed Sale is completed by
May 31, 2000. See "THE PROPOSED SALE--Distributions." Certain Limited Partners
that are non-residents of the State of California will be subject to California
withholding, which will reduce the cash distributions paid to such Limited
Partners. See "THE PROPOSED SALE--Certain Federal Income Tax Consequences." The
net proceeds ultimately derived from the Proposed Sale and distributable to the
Limited Partners will not be known until some time after closing of the Proposed
Sale and liquidation of the Hotel Partnership, and no assurance may be given
that either the Partnership's or Hotel Partnership's obligations, or reserves
against future obligations, will not exceed current expectations or that the
total amount of distributions will be equal to the estimates specified herein.
RECOMMENDATION OF THE GENERAL PARTNER
As required by the Partnership Agreement, the General Partner has actively
reviewed opportunities to sell or refinance the hotel properties, including the
St. Francis, and has determined that the proposed sale of the St. Francis is in
the best interests of the Partnership and the Limited Partners at this time. The
Partnership Agreement requires the written consent of Limited Partners holding a
majority of the outstanding Units to authorize the General Partner's consent to
the Proposed Sale on behalf of the Partnership (the "Proposed Authorization").
If the requisite percentage of Limited Partners do not consent to the Proposed
Authorization, then the Proposed Sale cannot occur. THE GENERAL PARTNER
RECOMMENDS THAT THE LIMITED PARTNERS USE THE ENCLOSED CONSENT CARD TO VOTE "FOR"
THE PROPOSED AUTHORIZATION.
SUMMARY OF TAX CONSEQUENCES
The Proposed Sale will constitute a taxable event and will result in the
Limited Partners recognizing a gain, a portion of which may be ordinary income
from the recapture of depreciation.
Based upon the description of the Proposed Sale contained in this Consent
Solicitation Statement and assuming the Proposed Sale is completed by May 31,
2000, the estimated gain in 2000 for federal income tax purposes is
approximately $810 per Unit, a portion of which may be characterized as ordinary
income as a result of the recapture of prior depreciation deductions. See "THE
PROPOSED SALE--Certain Federal Income Tax Consequences."
THE ESTIMATES OF TAXABLE INCOME AND GAIN PROVIDED HEREIN ARE HYPOTHETICAL
AMOUNTS BASED UPON A NUMBER OF ASSUMPTIONS THAT MAY NOT BE CORRECT FOR ANY GIVEN
LIMITED PARTNER AND ARE PRELIMINARY AND FOR ILLUSTRATIVE PURPOSES ONLY. THESE
ASSUMPTIONS INCLUDE THE SALE DATE, ESTIMATED CLOSING AND HOTEL PARTNERSHIP
LIQUIDATION COSTS, AND ACTUAL OPERATING RESULTS THROUGH SALE. THE COMPUTATION
ASSUMES SELLING COSTS AT 1.2% OF THE SALES PRICE, AND OPERATIONS COMPARABLE TO
1999. THUS, THE ACTUAL INCOME AND GAIN RECOGNIZED BY ANY LIMITED PARTNER CANNOT
BE DETERMINED WITH CERTAINTY, IS LIKELY TO VARY FOR ANY SPECIFIC LIMITED
PARTNER, AND MAY BE SIGNIFICANTLY GREATER OR LESS THAN THAT DESCRIBED HEREIN.
RULINGS AND OPINIONS HAVE NOT AND WILL NOT BE REQUESTED FROM THE INTERNAL
REVENUE SERVICE OR
3
<PAGE>
PROVIDED BY COUNSEL TO THE PARTNERSHIP WITH RESPECT TO THE MATTERS DISCUSSED
HEREIN. CONSEQUENTLY, LIMITED PARTNERS ARE STRONGLY URGED TO CONSULT THEIR TAX
ADVISORS REGARDING THE TAX CONSEQUENCES OF THE PROPOSED SALE IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATION. SEE "THE PROPOSED
SALE--CERTAIN FEDERAL INCOME TAX CONSEQUENCES."
FORWARD-LOOKING STATEMENTS
Forward-looking statements contained in this Consent Solicitation Statement
include, but are not limited to, statements relating to the Partnership's
objectives, strategies and plans, and all statements (other than statements of
historical fact) that address actions, events or circumstances that the
Partnership or its management expects, believes or intends will occur in the
future. Forward-looking statements are not guarantees of future performance and
involve risks and uncertainties that could cause actual results to differ
materially from historical results or those anticipated at the time the
forward-looking statements are made, including, without limitation, risks and
uncertainties associated with the following:
- delay in the Proposed Sale beyond May 31, 2000;
- actual costs associated with the Proposed Sale, including Hotel
Partnership liquidation costs;
- actual results of the St. Francis hotel operations since December 31, 1999
through the sale;
- the availability of capital for renovations;
- competition within the lodging industry;
- the cyclicality of the hotel business;
- general real estate and economic conditions; and
- the other risks and uncertainties set forth in the annual, quarterly and
current reports of the Partnership.
The Partnership undertakes no obligation to publicly update or revise any
forward-looking statement to reflect current or future events.
4
<PAGE>
THE WRITTEN CONSENTS
GENERAL
The purpose of soliciting the written consents is to authorize the General
Partner to grant the Hotel General Partner the consent of the Partnership to the
Proposed Sale.
RECORD DATE AND OUTSTANDING UNITS; VOTING RIGHTS; NO MARKET
Only Limited Partners of record at the close of business on February 15,
2000, shall be entitled to notice of and to give consent to the Proposed
Authorization. As of the record date, there were approximately 7,643 Limited
Partners of record with 135,600 Units issued and outstanding. Neither the
General Partner nor any of its affiliates are the beneficial owners of any
Units. To the General Partner's knowledge, no officer or director of the General
Partner owned any Units. Each Limited Partner shall be entitled to cast one vote
per Unit owned by such Limited Partner. Neither the General Partner nor any of
its affiliates shall be permitted to direct the vote of any Units, but any
individual officer, director or stockholder of the General Partner or its
affiliates who holds any Units in an individual capacity shall be entitled to
vote the Units held in such individual capacity. No established trading market
exists for the Units.
As of February 15, 2000, no person or group of related persons was known by
the Partnership to be the beneficial owner of more than 5% of the Units, except
as listed below:
<TABLE>
<CAPTION>
NUMBER OF UNITS PERCENTAGE OF
BENEFICIALLY OUTSTANDING
NAME OWNED UNITS
- ---- --------------- -------------
<S> <C> <C>
Kalmia Investors, LLC....................... 12,030(1) 8.87%
</TABLE>
()
- ------------------------
(1) Based on information reported in a Schedule 13D/A filed by the beneficial
owner and its affiliate with the Securities and Exchange Commission on
April 23, 1999.
MAJORITY VOTE REQUIRED
The General Partner may not consent to the Proposed Sale on behalf of the
Partnership without the affirmative vote of Limited Partners who collectively
hold more than 50% of the outstanding Units. In accordance with the Partnership
Agreement, any consent to the Proposed Authorization may be given in writing by
the consenting Limited Partner and received by the General Partner at or prior
to the date that the General Partner, acting for and on behalf of the
Partnership, grants to the Hotel General Partner the consent of the Partnership
to the Proposed Sale (the "Granting Date"). Any consent to the Proposed
Authorization given by a consenting Limited Partner may be revoked by such
Limited Partner at any time prior to the Granting Date by delivering written
notice of such revocation to the General Partner stating that the consent is
revoked.
The Proposed Authorization will be deemed to have been approved at the
earliest time after the date of this Consent Solicitation Statement at which the
General Partner has received consents that have not previously been revoked
representing the approval of Limited Partners holding a majority of the Units
outstanding on the record date, provided that such approval is received on or
prior to April 26, 2000 (the "Termination Date"). If sufficient written consents
have not been received by the Termination Date, the General Partner reserves the
right to extend the solicitation of written consents made hereby, except that
such solicitation shall not be extended beyond the date 60 days after the
earliest dated consent is received by the General Partner. Any election to
extend this consent solicitation will be made by the General Partner by news
release or other similar public announcement.
5
<PAGE>
VOTING AND REVOCATION OF CONSENTS
The Limited Partners are being requested to indicate approval of and consent
to the Proposed Authorization by checking the appropriate boxes on the enclosed
consent card and by dating and executing the consent card. A complete
description of the Proposed Sale has not been set forth on the consent card
itself due to space limitations. Nevertheless, signing and indicating approval
and consent on the consent card will be deemed to be approval of and written
consent to the Proposed Authorization. IN DETERMINING WHETHER THE PROPOSED
AUTHORIZATION HAS RECEIVED THE REQUISITE NUMBER OF AFFIRMATIVE VOTES,
ABSTENTIONS WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE PROPOSED
AUTHORIZATION. A Limited Partner who has executed and returned a consent card
may revoke it at any time prior to the Granting Date by delivering to the
General Partner a written notice stating that the consent is revoked.
ABSENCE OF DISSENTERS' RIGHTS OF APPRAISAL; EFFECT OF VOTE FOR PROPOSED SALE
The Limited Partners are not entitled to dissenters' rights of appraisal
under the Delaware Revised Uniform Limited Partnership Act or the Partnership
Agreement in connection with the matters to be voted on in this request for
written consents. A vote for the Proposed Authorization may preclude a Limited
Partner from subsequently bringing suit against the Partnership or the General
Partner in connection with the Proposed Sale.
SOLICITATION OF CONSENTS
Consents are being solicited hereby by the General Partner on behalf of the
Partnership. The Partnership will bear the cost of the solicitation of consents
from the Limited Partners. In addition to solicitation by mail, directors,
officers, employees and agents of the General Partner may solicit consents from
Limited Partners in person, by telephone or facsimile, or by other means of
communication. Such directors, officers, employees and agents will not be
additionally compensated for such solicitation but may be reimbursed for the
reasonable out-of-pocket expenses incurred in connection therewith. The
Partnership has retained D.F. King & Co., Inc. to assist in the solicitation of
consents, for which D.F. King & Co., Inc. will receive a fee of $6,500, plus
out-of-pocket expenses.
6
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial information is intended to give
the Limited Partners a view of what the Partnership's business might have looked
like had the St. Francis been sold and the net proceeds distributed to the
Limited Partners (i) on December 31, 1999 for purposes of the pro forma
condensed consolidated balance sheet items, and (ii) on January 1, 1998 for
purposes of the pro forma condensed consolidated statements of income.
The information is presented for illustrative purposes only, and therefore,
is not necessarily indicative of the operating results and financial position
that might have been achieved had the Proposed Sale occurred as of an earlier
date, nor are they necessarily indicative of operating results and financial
position that may occur in the future. In particular, the estimated net proceeds
from the sale and related pro forma adjustments are based on and subject to a
number of assumptions and uncertainties. For further discussion of the factors
which may affect the net sale proceeds and future operating results of the
Partnership generally, see "SUMMARY--Forward-Looking Statements" and "THE
PROPOSED SALE--Distributions." The unaudited pro forma financial information
should be read in conjunction with the historical financial statements and notes
thereto of the Partnership incorporated by reference herein.
<TABLE>
<CAPTION>
CONTENTS PAGE NO.
- -------- --------
<S> <C>
Pro Forma Condensed Consolidated Balance Sheet as of
December 31, 1999......................................... 8
Pro Forma Condensed Consolidated Statement of Income for the
Year Ended December 31, 1999.............................. 9
Pro Forma Condensed Consolidated Statement of Income for the
Year Ended December 31, 1998.............................. 10
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements...................................... 11
</TABLE>
7
<PAGE>
WESTIN HOTELS LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT UNIT DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ST. FRANCIS PRO FORMA
YEAR ENDED PRO FORMA YEAR ENDED
DECEMBER 31, 1999 ADJUSTMENTS DECEMBER 31, 1999
----------------- ----------- -----------------
(AUDITED)
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents........................ $ 39,625 $ 240,000 (a) $ 39,625
(97,754) (b)
(32,025) (c)
(24,939) (d)
(85,282) (e)
Net receivables.................................. 8,840 (6,537) (a) 2,303
Other current assets............................. 2,719 (2,176) (a) 543
-------- --------- --------
Total current assets........................... 51,184 (8,713) 42,471
Property & equipment, net........................ 64,229 -- 64,229
Assets held for sale............................. 174,431 (174,431) (a) --
Other assets..................................... 5,990 (293) (a) 5,533
(164) (f)
-------- --------- --------
$295,834 $(183,601) $112,233
======== ========= ========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Current maturities of long-term obligations...... $ 2,218 $ (220) (a) $ 507
(1,491) (b)
Accounts payable and accrued expenses............ 13,159 (6,492) (a) 6,667
Payable to General Partner and affiliates........ 4,845 (672) (a) 1,375
(2,798) (d)
Other current liabilities........................ 1,623 (996) (a) 627
-------- --------- --------
Total current liabilities...................... 21,845 (12,669) 9,176
Long-term obligations............................ 125,904 (502) (a) 31,772
(93,630) (b)
Long-term obligation to General Partner.......... 40,145 (32,025) (c) 8,120
Deferred incentive management fees payable to (d)
General Partner................................ 29,532 (22,141) 7,391
-------- --------- --------
Total liabilities................................ 217,426 (160,967) 56,459
Minority interests............................... 4,218 654 (a) 4,844
(26) (b)
(2) (f)
Partners' capital (deficit)
General Partner................................ (2,926) 648 (a) (2,306)
(26) (b)
(2) (f)
Limited Partners (135,600 Units issued and (a)
outstanding)................................... 77,116 64,143 53,236
(2,581) (b)
(85,282) (e)
(160) (f)
-------- --------- --------
Total Partners' capital.......................... 74,190 (23,260) 50,930
-------- --------- --------
$295,834 $(183,601) $112,233
======== ========= ========
</TABLE>
The accompanying notes are an integral part of this unaudited
pro forma condensed consolidated financial statement.
8
<PAGE>
WESTIN HOTELS LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ST. FRANCIS PRO FORMA
YEAR ENDED PRO FORMA YEAR ENDED
DECEMBER 31, 1999 ADJUSTMENTS DECEMBER 31, 1999
----------------- ----------- -----------------
<S> <C> <C> <C> <C>
Operating revenues.......................... $156,297 $(110,760) (g) $45,537
Operating expenses.......................... 127,100 (87,769) (g) 39,331
-------- --------- -------
Operating profit.......................... 29,197 (22,991) 6,206
Other expenses, net......................... 12,129 (10,375) (h) 1,754
-------- --------- -------
Income before minority interests.......... 17,068 (12,616) 4,452
Minority interests.......................... 237 (176) (i) 61
-------- --------- -------
Net income................................ $ 16,831 $ (12,440) $ 4,391
======== ========= =======
Net income per Unit......................... $ 124.12 $ 32.38
======== =======
Units outstanding........................... 135,600 135,600
======== =======
</TABLE>
The accompanying notes are an integral part of this unaudited
pro forma condensed consolidated financial statement.
9
<PAGE>
WESTIN HOTELS LIMITED PARTNERSHIP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ST. FRANCIS PRO FORMA
YEAR ENDED PRO FORMA YEAR ENDED
DECEMBER 31, 1998 ADJUSTMENTS DECEMBER 31, 1998
----------------- ----------- -----------------
<S> <C> <C> <C> <C>
Operating revenues.......................... $144,236 $(100,015) (g) $ 44,221
Operating expenses.......................... 113,862 (78,916) (g) 34,946
-------- --------- --------
Operating profit.......................... 30,374 (21,099) 9,275
Other expenses, net......................... 12,193 (10,295) (h) 1,898
-------- --------- --------
Income before minority interests.......... 18,181 (10,804) 7,377
Minority interests.......................... 248 (134) (i) 114
-------- --------- --------
Net income................................ $ 17,933 $ (10,670) $ 7,263
======== ========= ========
Net income per Unit......................... $ 132.25 $ 53.56
======== ========
Units outstanding........................... 135,600 135,600
======== ========
</TABLE>
The accompanying notes are an integral part of this unaudited
pro forma condensed consolidated financial statement.
10
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(1) Basis of Accounting
The unaudited pro forma financial statements give effect to the Proposed Sale
for an aggregate sale price of $243 million in cash. The costs to sell the St.
Francis are anticipated to be approximately $3 million. The pro forma condensed
consolidated financial information should be read in conjunction with the
audited historical consolidated financial statements and the related notes
thereto of the Partnership.
(2) Pro Forma Condensed Consolidated Balance Sheet and Pro Forma Condensed
Consolidated Statements of Income (in thousands)
The accompanying pro forma adjustments reflect adjustments for the following
items:
(a) To record the sale of the St. Francis reflecting the removal of the net
assets, the receipt of the net sale proceeds, and the allocation of the
gain to the minority interests, General Partner and Limited Partners as
follows:
<TABLE>
<S> <C>
Sales Price................................................. $243,000
Closing Costs............................................... (3,000)
--------
Net Cash Proceeds......................................... 240,000
Net Assets of St. Francis................................... (174,555)
--------
Gain on Sale.............................................. $ 65,445
========
Allocated as follows:
Minority interests........................................ $ 654
General Partner........................................... 648
Limited Partners.......................................... 64,143
--------
$ 65,445
========
</TABLE>
(b) To reflect the retirement of a mortgage loan in favor of TRST, of
$97,754, including principal, accrued interest, unamortized discount and
the prepayment penalty, calculated in accordance with Section 1.6 of the
Second Amendment to Promissory Note between TRST and the Partnership.
(c) To reflect the payment of $32,025 of principal and accrued interest
under the subordinated loan made by the General Partner to fund the
capital improvements to the St. Francis.
(d) To reflect payment of $24,939 of deferred incentive management fees
related to the St. Francis due to the St. Francis Hotel Corporation, as
hotel manager.
(e) Distribution of remaining cash proceeds of $85,282 to the Limited
Partners.
(f) To reflect the write-off of deferred charges associated with the
mortgage loan totaling $164 and related allocation of $2, $2 and $160 to
minority interests, General Partner and Limited Partners, respectively.
(g) To reflect the exclusion of the St. Francis' operating revenues and
operating expenses for the periods presented.
(h) To reflect the elimination of interest expense for the St. Francis for
the periods presented as if the St. Francis portion of the mortgage loan
and the subordinated notes payable to the General Partner were paid off
at the beginning of each period presented.
(i) To reflect the exclusion of minority interests in net income associated
with the St. Francis.
11
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial information at December 31, 1999 and 1998
and for each of the three years in the period ended December 31, 1999 has been
derived from the consolidated financial statements included in the Partnership's
Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated
by reference in this Consent Solicitation Statement, which have been audited by
Arthur Andersen LLP, independent auditors. The selected financial information as
of December 31, 1997, 1996 and 1995 and for each of the two years in the period
ended December 31, 1996 are derived from the Partnership's audited financial
statements not incorporated by reference in this Consent Solicitation Statement.
The following selected financial information set forth below is qualified by
reference to, and should be read in conjunction with, the financial statements,
the related notes and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" incorporated by reference.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C>
Operating revenues:
Rooms................................... $ 97,973 $ 94,724 $ 83,600 $ 73,375 $ 60,963
Food and beverage....................... 45,277 37,354 32,793 27,477 27,124
Other operating departments............. 13,047 12,158 10,660 10,098 9,157
-------- -------- -------- -------- --------
Total operating revenues.................. 156,297 144,236 127,053 110,950 97,244
-------- -------- -------- -------- --------
Operating expenses:
Rooms................................... 25,417 25,493 22,162 19,631 17,931
Food and beverage....................... 35,189 26,946 24,866 21,963 22,842
Administrative, general and marketing... 18,886 19,857 18,022 16,265 15,079
Management fees......................... 13,300 9,949 8,554 5,672 2,188
Other................................... 34,308 31,617 30,990 27,520 25,210
-------- -------- -------- -------- --------
Total operating expenses.................. 127,100 113,862 104,594 91,051 83,250
-------- -------- -------- -------- --------
Operating profit.......................... $ 29,197 $ 30,374 $ 22,459 $ 19,899 $ 13,994
======== ======== ======== ======== ========
Net income................................ $ 16,831 $ 17,933 $ 9,691 $ 6,978 $ 1,713
Net income per Unit....................... $ 124.12 $ 132.25 $ 71.47 $ 51.46 $ 12.63
Total assets.............................. $295,834 $285,661 $269,785 $263,148 $246,698
Long-term obligations..................... $166,049 $165,050 $162,989 $157,880 $153,760
Deferred incentive management fees........ $ 29,532 $ 25,618 $ 22,281 $ 19,425 $ 16,249
Distributions paid per Unit............... $ 95.00 $ 95.00 $ 95.00 $ -- $ --
</TABLE>
12
<PAGE>
THE PROPOSED SALE
OVERVIEW
If the requisite percentage of Limited Partners consent to the Proposed
Authorization, the Hotel Partnership will sell the St. Francis to the Purchaser
for a purchase price in cash of $243 million. In connection with the Proposed
Sale, the Purchaser will assume all of the obligations of the Hotel Partnership
and the Partnership arising under the management agreement on or after the date
of the closing of the Proposed Sale (the "Closing Date"). Closing is required to
occur no later than June 26, 2000. See "THE PURCHASE AND SALE AGREEMENT" and
"INTERESTS OF CERTAIN PERSONS IN THE PROPOSED SALE--General Partner."
Upon completion of the Proposed Sale, the General Partner estimates that
after repayment of the outstanding St. Francis mortgage loan and payment of
selling and Hotel Partnership liquidation expenses, proceeds available for
distributions to the Partnership will be approximately $143 million. The General
Partner estimates that the Limited Partners will receive approximately
$85 million, or $627 per Unit, after prior payments in accordance with the
Partnership Agreement of (1) accrued interest and outstanding principal of the
subordinated loan attributable to the St. Francis and payable to the General
Partner (estimated to be $33.1 million); and (2) current and deferred incentive
management fees payable to the hotel manager (estimated to be $24.5 million).
See "--Distributions."
BACKGROUND OF AND REASONS FOR THE PROPOSED SALE
The Partnership along with the Hotel Partnership and The Westin Chicago
Partnership (collectively, the "Hotel Partnerships") were formed in 1986 for the
purpose of acquiring the St. Francis and The Michigan Avenue, Chicago (the
"Westin Chicago" and collectively with the St. Francis, the "Hotels"). As
provided in the Partnership Agreement, the General Partner was required
commencing in 1994 to actively review opportunities to sell or refinance the
Hotels to the extent the General Partner determined that to do so would be in
the best interests of the Hotel Partnerships.
The latter part of the 1990s marked a period of rapidly improving conditions
in the United States hotel industry. The strong national economy led to
significant improvements in occupancy rates and room rates resulting in
substantial increases in hotel industry profitability. The substantial increases
in hotel valuations observed during this period and the recent completion of
significant renovations to the St. Francis, which has produced increased
revenues and profits that ultimately translate into higher property value,
caused the General Partner to conclude, in late 1998, that efforts to market the
Hotels for sale should be initiated.
In March 1999 the General Partner obtained appraisals of each of the Hotels
from Hospitality Valuation Services, Inc. ("HVS"), a leading hotel appraisal
firm. The appraisals indicated a value for the Westin Chicago of $100.9 million
and for the St. Francis of $229.9 million. On the basis of the appraised values
of the Hotels indicated by HVS in the appraisals and the General Partner's
continuing analysis of the St. Francis' financial performance, the General
Partner concluded that it was in the best interest of the Partnership and the
Hotel Partnerships to seek to sell the St. Francis and to continue to hold the
Westin Chicago to provide time to complete a planned rooms renovation. The
Westin Chicago will be marketed for sale following completion of the renovation
program. The General Partner anticipates that this program will contribute to a
higher property value for the hotel, as well as permit the Partnership to
capture the benefits of anticipated improvements in the financial performance of
the Westin Chicago resulting from the renovations.
In early 1999, the General Partner initiated a process for selection of a
broker to assist with the marketing of the St. Francis. A number of leading
hotel brokerage firms were considered over a period of two months and culminated
in the selection of Sonnenblick-Goldman Company, a broker well known
13
<PAGE>
for the disposition of high quality hotel properties ("Sonnenblick"), with whom
a listing agreement was signed on March 30, 1999.
During the following 90 days, a marketing strategy for the St. Francis was
developed, marketing materials were prepared and prospective bidders were
informally contacted. In connection therewith, customary due diligence materials
were prepared and assembled to expedite the marketing process. Sonnenblick
compiled a list of more than 75 potential buyers, contacting each and following
up with preliminary marketing materials. Of these potential buyers, 42 executed
confidentiality agreements with the Hotel Partnership and received and reviewed
the confidential investment memorandum prepared by Sonnenblick. Tours of the
St. Francis were conducted for interested bidders and an initial bid date of
October 22, 1999 was established. Of the 42 parties receiving investment
memoranda, seven investors submitted bids.
In anticipation of the sale of the St. Francis, the General Partner
negotiated an amendment to the management agreement, which was required to
facilitate the sale of the Hotels to separate owners and to clarify the
operation of the management agreement following such a sale by the Hotel
Partnerships. See "SUMMARY--The St. Francis-Management Agreement."
Each of these bidders was invited to bid in a second round of bidding and
provided with additional due diligence materials to assist them in their
evaluations of the St. Francis. The General Partner established a second round
bid date of November 11, 1999 and six of the original seven bidders submitted
second bids, of which five reflected increases from their original bids.
Negotiations ensued with each of the five bidders presenting increased bids.
Bids were evaluated based upon the price, deposit amount, length of required due
diligence period and other requested contingencies, and the financial capacity
and acquisition performance of the bidders. One bid was substantially higher
than the other five bidders, but lacked credibility due to, among other things,
the bidder's lack of prior real estate investment experience, its failure to
conduct any due diligence investigation of the St. Francis, and its financing
contingency. By comparison, Blackstone's bid was the second highest bid, was not
contingent upon financing and was secured by a $20 million deposit. In addition,
Blackstone is an experienced real estate investor and owner of internationally
recognized hotel properties, which gave the General Partner more confidence in
Blackstone's ability to complete the proposed transaction successfully. Based on
these considerations and the advice of Sonnenblick, Blackstone was selected as
the successful bidder. A non-binding letter of intent was executed with
Blackstone on December 6, 1999 providing Blackstone with the exclusive right to
complete its due diligence on the St. Francis and negotiate a definitive
Purchase and Sale Agreement. The period of exclusivity granted under the letter
of intent expired on January 7, 2000, but was extended to January 18, 2000 to
permit Blackstone to complete its due diligence and the negotiation of the
definitive Purchase and Sale Agreement. After Blackstone completed its due
diligence and identified a shortfall in the forecasted cash flow for 1999 (for
which reason Blackstone reduced its bid to $243 million), the Purchase and Sale
Agreement was executed on January 18, 2000 with the Purchaser, an affiliate of
Blackstone.
In furtherance of its fiduciary duties, the General Partner and Hotel
General Partner engaged the investment banking firm of Houlihan Lokey Howard &
Zukin Financial Advisors, Inc. ("Houlihan Lokey") on behalf of the Partnership
and Hotel Partnership to provide an opinion regarding the fairness of the
Proposed Sale to the Limited Partners from a financial point of view. See
"--Fairness Opinion" below.
RECOMMENDATION OF THE GENERAL PARTNER
The General Partner has determined that the Proposed Sale is in the best
interests of the Partnership and Limited Partners. The Partnership Agreement
requires the written consent of Limited Partners holding a majority of the
outstanding Units to authorize the General Partner's consent to the Proposed
Sale on behalf of the Partnership. If the requisite percentage of Limited
Partners do not
14
<PAGE>
consent to the Proposed Authorization, then the Proposed Sale of the
St. Francis cannot occur. IN THIS REGARD, THE GENERAL PARTNER RECOMMENDS THAT
THE LIMITED PARTNERS USE THE ENCLOSED CONSENT CARD TO VOTE "FOR" THE PROPOSED
AUTHORIZATION.
In the course of reaching its determination to make the above
recommendation, the General Partner consulted with its legal and financial
advisors, and considered the following factors in choosing to pursue the sale of
the St. Francis and enter into the Purchase and Sale Agreement:
(1) the provisions of the Partnership Agreement requiring the General
Partner to actively consider the disposition of the St. Francis within
the investment horizon contemplated at the time of the offering of the
Units;
(2) the strength of the market for the sale of full service hotels and the
excess represented by the purchase price over the appraised value of the
St. Francis;
(3) the San Francisco hotel market and the possible detrimental impact on
the St. Francis' financial performance in connection with additions to
the supply of hotel rooms in San Francisco from new hotel projects
presently under construction;
(4) the projected slow-down in the improvement in the St. Francis' financial
performance;
(5) projected future distributions to the Limited Partners from the
operations of the St. Francis;
(6) payment of the mortgage loan prepayment penalty (described under
"SUMMARY--The St. Francis--Loans") and the market risks of waiting to
sell the St. Francis until after August 31, 2001, when such prepayment
penalty terminates;
(7) the all cash price offered for the St. Francis and other favorable terms
of the Purchase and Sale Agreement;
(8) the lack of credibility of the highest bid, which was contingent upon
financing and otherwise substantially less certain of completion;
(9) Blackstone's financial capacity and ability to finance the purchase
price;
(10) Blackstone's track record of completing acquisitions in the hotel
industry; and
(11) the completeness of the marketing effort and the unlikeliness of
obtaining a superior offer from a comparably qualified buyer with a
comparable probability of completing the Proposed Sale.
The General Partner has carefully considered the factors for and against the
Proposed Sale in consultation with its advisors and its obligation to actively
pursue opportunities for a sale of the St. Francis. The foregoing discussion
reflects all material factors considered by the General Partner and, given the
variety of these factors, the General Partner did not attempt to rank these
factors by importance. The General Partner concluded that the factors favoring
the Proposed Sale far outweigh the factors against the Proposed Sale. The
General Partner's recommendation is based on the totality of the information
presented to and considered by it.
In considering the above recommendation of the General Partner, the Limited
Partners should be aware that the General Partner and certain of its affiliates
have interests in addition to and divergent from the interests of the Limited
Partners. The General Partner does not believe that these interests affected its
decision to make the above recommendation. See "INTERESTS OF CERTAIN PERSONS IN
THE PROPOSED SALE."
15
<PAGE>
FAIRNESS OPINION
SCOPE OF OPINION. The General Partner and the Hotel General Partner
(together, the "General Partners"), on behalf of the Partnership and the Hotel
Partnership (together the "Partnerships"), retained Houlihan Lokey to render an
opinion regarding the fairness of the Proposed Sale to the Limited Partners from
a financial point of view.
The General Partners retained Houlihan Lokey based upon Houlihan Lokey's
experience in the valuation of businesses and their securities in connection
with recapitalizations and similar transactions, especially with respect to
REITs and other real estate companies. Houlihan Lokey is a nationally recognized
investment banking firm that is continually engaged in providing financial
advisory services in connection with mergers and acquisitions, leveraged
buyouts, business valuations for a variety of regulatory and planning purposes,
recapitalizations, financial restructurings, and private placements of debt and
equity securities.
On January 20, 2000, Houlihan Lokey delivered its written opinion to the
Partnerships (the "Houlihan Lokey Opinion"), to the effect that, as of the date
of such opinion, on the basis of its analysis summarized below and subject to
the limitations described below, the Proposed Sale is fair to the Limited
Partners from a financial point of view. The Houlihan Lokey Opinion does not
constitute a recommendation to any Limited Partner as to how any such Limited
Partner should vote on the Proposed Sale. Houlihan Lokey has no obligation to
update the Houlihan Lokey Opinion.
THE FULL TEXT OF THE HOULIHAN LOKEY OPINION, WHICH SETS FORTH, AMONG OTHER
THINGS, ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW
UNDERTAKEN, IS ATTACHED AS ANNEX B TO THIS CONSENT SOLICITATION STATEMENT. THE
LIMITED PARTNERS ARE URGED TO READ THE OPINION IN ITS ENTIRETY.
As compensation to Houlihan Lokey for its services in connection with the
Proposed Sale, the Partnerships have agreed to pay Houlihan Lokey an aggregate
fee of $200,000 in addition to Houlihan Lokey's expenses in connection
therewith. No portion of Houlihan Lokey's fee is contingent upon the successful
completion of the Proposed Sale. The General Partners and the Partnerships have
also agreed to indemnify Houlihan Lokey and related persons against certain
liabilities, including liabilities under federal securities laws, arising out of
the engagement of Houlihan Lokey, and to reimburse Houlihan Lokey for certain
expenses. Houlihan Lokey has performed financial advisory services for
affiliates of the General Partners and the Partnerships. Additionally, Houlihan
Lokey has in the past rendered various financial opinions to Starwood Hotels &
Resorts Worldwide, Inc. None of the aforementioned advisory services or opinions
constitute a material portion of Houlihan Lokey's business.
The Houlihan Lokey Opinion does not address the Partnerships' or the General
Partners' underlying business decision to effect the Proposed Sale. Houlihan
Lokey did not, and was not requested by the General Partners or any other person
to, solicit third party indications of interest in acquiring all or any part of
the St. Francis or to make any recommendations as to the form or amount of
consideration to be received by the Partnerships, the Limited Partners, the
General Partners or any other person in connection with the Proposed Sale, which
consideration was determined through negotiations between Blackstone and the
General Partners. Houlihan Lokey was not asked to opine on and did not express
any opinion as to (1) tax or legal consequences of the Proposed Sale, including
but not limited to tax or legal consequences to the Limited Partners, the
General Partners or the Partnerships; (2) the fairness, advisability or
desirability of alternatives to the Proposed Sale; (3) the fair market value of
the St. Francis; or (4) the fairness of any aspect of the Proposed Sale not
expressly addressed in the Houlihan Lokey Opinion, including the fairness of the
Proposed Sale as a whole. Houlihan Lokey did not perform an independent
appraisal of the St. Francis or any other assets and
16
<PAGE>
liabilities of the Partnerships. Furthermore, Houlihan Lokey did not negotiate
the Proposed Sale or advise the General Partners or Partnerships with respect to
alternatives to it.
In arriving at its opinion, Houlihan Lokey:
1. held discussions with the Partnerships' senior management to discuss the
Proposed Sale, the operations, financial condition, future prospects and
performance of the St. Francis;
2. reviewed the Partnership's financial statements as filed on Form 10-K
for the two years ended December 31, 1998 and December 31, 1997,
respectively;
3. held discussions with Sonnenblick to discuss the Proposed Sale,
specifically the process undertaken in selling the St. Francis;
4. reviewed the Purchase and Sale Agreement dated January 18, 2000 by and
between the Hotel Partnership and the Purchaser, which details the terms
of the Proposed Sale;
5. reviewed the Partnership's financial statements as filed on Form 10-Q
for the quarterly period ended September 30, 1999;
6. reviewed Hotel Partnership-prepared St. Francis financial statements for
the year ended December 31, 1998;
7. reviewed Hotel Partnership-prepared St. Francis financial statements for
the year ended December 31, 1999, which the Partnership's management has
identified as being the most current financial statements available;
8. reviewed a Hotel Partnership-prepared Distribution of Assumed Sales
Proceeds schedule as of December 31, 1999;
9. reviewed the forecasted business plan for the year ended December 31,
2000 of the St. Francis;
10. reviewed the March 8, 1999 appraisal report of the St. Francis as
prepared by HVS;
11. visited the St. Francis;
12. reviewed the offering memorandum on the St. Francis, as prepared by
Sonnenblick;
13. reviewed the Best and Final Offer Matrix as prepared by Sonnenblick;
14. reviewed copies of the following agreements:
-- the First Amendment to Amended and Restated Agreement of Limited
Partnership of The Westin St. Francis Limited Partnership, as of
June 2, 1994;
-- the Amended and Restated Agreement of Limited Partnership of The
Westin St. Francis Limited Partnership, as of December 31, 1986;
-- the Amended and Restated Agreement of Limited Partnership of Westin
Hotels Limited Partnership, as of December 31, 1986;
-- the Second Amendment to Amended and Restated Management Agreement, as
of September 1, 1999;
-- the First Amendment to Amended and Restated Management Agreement of
The Westin St. Francis Limited Partnership, as of June 2, 1994;
-- the Amended and Restated Management Agreement among Westin Hotel
Company and St. Francis Hotel Corporation, The Westin St. Francis
Limited Partnership, and Westin Hotels Limited Partnership, as of
August 21, 1986;
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-- Promissory Note dated August 21, 1986;
-- Deed of Trust, Financing Statement, Security Agreement and Fixture
Filing (with Assignment of Rents and Leases) dated August 21, 1986
and amendments; and
-- Assignment of Management Agreement among Teacher Retirement System of
Texas and St. Francis Hotel Corporation, The Westin St. Francis
Limited Partnership, and Westin Hotels Limited Partnership, as of
August 21, 1986; and
15. conducted such other analyses, studies and investigations as deemed
appropriate under the circumstances for rendering the Houlihan Lokey
Opinion.
VALUATION ANALYSES. The following is a summary of the material financial
analyses used by Houlihan Lokey in connection with providing its fairness
opinion. This summary is qualified in its entirety by reference to the full text
of such opinion, which is attached as Annex B to this Consent Solicitation
Statement. Limited Partners are urged to read the full text of Houlihan Lokey's
opinion carefully and in its entirety.
In order to determine the fairness of the Proposed Sale, from a financial
point of view, to the Limited Partners, Houlihan Lokey determined the value of
the Hotel Partnership, which was based upon its valuation of the St. Francis as
the St. Francis is the primary and only material asset of the Hotel Partnership.
In order to determine the estimated enterprise value of the St. Francis,
Houlihan Lokey primarily used the following methodologies: (1) an appraised
value approach, (2) a net asset value approach based on various capitalization
rates, (3) a public market pricing approach, and (4) a comparable transaction
approach based on relevant financial information, ratios and public market
multiples relating to selected acquisitions of companies in the lodging
industry. The analyses required studies of the overall market, economic and
industry conditions in which the St. Francis operates and the historical and
projected operating results of the St. Francis.
Houlihan Lokey performed the following analyses to determine the estimated
enterprise value of the Hotel Partnership and the St. Francis:
(1) APPRAISED VALUE APPROACH. Houlihan Lokey reviewed the March 8, 1999
appraisal report on the St. Francis as prepared by HVS, which concluded that, as
of February 1, 1999, the appraised value of the St. Francis was $229.9 million.
The St. Francis is the primary and only material asset of the Hotel Partnership.
Accordingly, Houlihan Lokey concluded that the appraised value of the
St. Francis served as a proxy for the value of the securities of the Hotel
Partnership.
(2) NET ASSET VALUE APPROACH. Houlihan Lokey derived an indication of the
range of enterprise value for the Hotel Partnership by: (a) applying
capitalization rates to the Hotel Partnership's representative net operating
income and adjusted net operating income as of December 31, 1998 (the "FYE
Capitalization Rate Approach"), (b) applying capitalization rates to the Hotel
Partnership's representative net operating income and adjusted net operating
income for the fiscal year ended December 31, 1999 (the "LTM Capitalization Rate
Approach"), and (c) applying capitalization rates to the Hotel Partnership's
representative net operating income and adjusted net operating income as of
December 31, 2000 (the "NFY Capitalization Rate Approach").
Based upon the lowest and highest capitalization rates determined under the
FYE Capitalization Rate Approach, the LTM Capitalization Rate Approach, and the
NFY Capitalization Rate Approach, Houlihan Lokey calculated an indicated range
for the enterprise value of the Hotel Partnership to be $212.0 to
$260.0 million.
(3) MARKET CAPITALIZATION APPROACH. Houlihan Lokey reviewed certain
financial information of comparable publicly traded companies in the lodging
industry (the "Public Comparables") selected
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solely by Houlihan Lokey. The Public Comparables included the following eight
publicly traded companies: Boykin Lodging Company, Four Seasons Hotels, Inc.,
Hilton Hotels Corporation, Host Marriott Corporation, Innkeepers USA Trust,
LaSalle Hotel Properties, Prime Hospitality Corp., and RFS Hotel
Investors, Inc. Houlihan Lokey calculated certain financial ratios of the Public
Comparables based on the most recent publicly available information.
The analysis showed that the ratio of enterprise value ("EV") to "EBITDA"
(I.E., earnings before interest, taxes, depreciation and amortization) selected
for the Hotel Partnership to apply to the Hotel Partnership's fiscal year end
EBITDA ranged from a low of 7.0x to a high of 9.0x (the "FYE EBITDA Multiples")
which compares to an EV/EBITDA ratio of a low of 6.7x to a high of 38.5x
exhibited by the Public Comparables.
The analysis showed that the ratio of EV/EBITDA selected for the Hotel
Partnership to apply to the Hotel Partnership's latest twelve month EBITDA
ranged from a low of 6.0x to a high of 8.0x (the "LTM EBITDA Multiples") which
compares to an EV/EBITDA ratio of a low of 6.0x to a high of 34.5x exhibited by
the Public Comparables.
The analysis showed that the ratio of EV/EBITDA selected for the Hotel
Partnership to apply to the Hotel Partnership's next fiscal year end EBITDA
ranged from a low of 5.0x to a high of 7.0x (the "NFY EBITDA Multiples") which
compares to a EV/EBITDA ratio of a low of 5.0x to a high of 13.4x exhibited by
the Public Comparables.
Houlihan Lokey derived an indication of the range of enterprise value for
the Hotel Partnership by: (a) applying the FYE EBITDA Multiples to the Hotel
Partnership's representative EBITDA as of December 31, 1998 (the "FYE
Approach"), (b) applying the LTM EBITDA Multiples to the Hotel Partnership's
representative EBITDA as of December 31, 1999 (the "LTM Approach"), and
(c) applying the NFY EBITDA Multiples to the Hotel Partnership's representative
EBITDA as of December 31, 2000 (the "NFY Approach").
Based upon the lowest and highest multiples of EBITDA determined under the
FYE Approach, the LTM Approach, and the NFY Approach, Houlihan Lokey calculated
an indicated range for the enterprise value of the Hotel Partnership to be
$201.5 to $267.5 million.
(4) COMPARABLE TRANSACTION ANALYSIS. Houlihan Lokey reviewed the
consideration paid in certain change of control acquisitions of selected
publicly traded lodging companies. Such analysis yielded median multiples of
3.0x revenue and 10.6x EBITDA. In performing its analysis, Houlihan Lokey
considered that the merger and acquisition transaction environment varies over
time because of, among other things, interest rate and equity market
fluctuations and industry results and growth expectations.
No company or transaction used in the analysis described above was directly
comparable to the St. Francis. Accordingly, Houlihan Lokey reviewed the
foregoing transactions to understand the range of multiples of revenue and
EBITDA paid for companies in the lodging industry. Based upon the Hotel
Partnership's representative EBITDA as of December 31, 1999 and based upon the
lowest and highest multiples of revenue and EBITDA determined under the
comparable transaction analysis, Houlihan Lokey calculated an indicated range
for the enterprise value of the Hotel Partnership to be $216.0 to
$302.0 million.
ENTERPRISE VALUE RANGE DETERMINATION. Based on the analyses and factors
described in the foregoing, Houlihan Lokey determined the enterprise value of
the Hotel Partnership to be in the range of $215.0 million to $265.0 million
(the "Enterprise Value Range"). Subtracting transaction expenses, interest
bearing debt as of December 31, 1999, which included the TRST note (the "TRST
Debt"), prepayment penalties associated with the TRST Debt, subordinated loans
made by the General Partner, and accrued incentive management fees as of
December 31, 1999 from the Enterprise Value Range, resulted in indications of
equity which would be available to be allocated to the Limited Partners ranging
from $55.9 to $105.3 million. This compares to the approximately $85.0 million
of proceeds
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estimated to be distributable by the Partnership to the Limited Partners as a
result of the Proposed Sale.
TERMINATION FEE ANALYSIS. Houlihan Lokey reviewed fees paid in connection
with terminated transactions. The analysis included a review of 285 publicly
announced transactions in 1998 in which there was a disclosed termination fee
and which involved a U.S. publicly traded target company with an aggregate total
amount of consideration payable in a transaction, excluding transaction fees and
expenses, (the "Transaction Value"), of at least $50.0 million. Based on the
transactions analyzed, termination fees as a percentage of Transaction Value
ranged from a low of 0.2 percent to a high of 9.9 percent. Based on the
termination fee in the amount of $6.25 million established in the Purchase and
Sale Agreement (the "Break-up Fee"), the Break-up Fee as a percentage of the
$243.0 million purchase price established in the Purchase and Sale Agreement is
approximately 2.6%.
FAIRNESS OF CONSIDERATION. Based on the foregoing analysis Houlihan Lokey
concluded that the Proposed Sale is fair to the Limited Partners from a
financial point of view.
CONDITIONS AND LIMITATIONS. Although the General Partners advised Houlihan
Lokey that certain assumptions were appropriate in their view, no restrictions
or limitations were imposed by the General Partners upon Houlihan Lokey with
respect to its investigation or the procedures followed by Houlihan Lokey in
rendering its opinion. Houlihan Lokey's opinion is not intended to be and does
not constitute a recommendation to any Limited Partner as to whether to accept
the consideration to be received by such Limited Partner in connection with the
Proposed Sale or vote in favor of the Proposed Authorization. The aforementioned
analyses required studies of the overall market, economic and industry
conditions in which the St. Francis, the Partnerships and the General Partners
operate or are expected to operate and the operating results of the
St. Francis. Research into, and consideration of, these conditions were
incorporated into the analyses.
The Houlihan Lokey Opinion is based on the business, economic, market and
other conditions as they existed as of January 20, 2000. In rendering its
opinion, Houlihan Lokey relied upon and assumed, without independent
verification, the accuracy and completeness of the financial and other
information, including the financial forecasts and projections, provided to
Houlihan Lokey by the General Partners and that such information was reasonably
prepared and reflect the best current available estimates of the current and
future financial results and condition of the St. Francis, and that there has
been no material change in the assets, financial condition or prospects of the
St. Francis since the date of the most recent financial statement made available
to Houlihan Lokey. Specifically, Houlihan Lokey, without independent
investigation, relied upon the General Partners' interpretation of the
Partnerships' partnership agreements, particularly the distribution and
allocation provisions thereof. Houlihan Lokey also relied on the assurance of
the General Partners that any financial projections or pro forma statements or
adjustments provided to Houlihan Lokey were reasonably prepared or adjusted on
bases consistent with actual historical experience or reflecting the best
currently available estimates and good faith judgments; that no material changes
have occurred in the information reviewed between the date the information was
provided and the date of the Houlihan Lokey Opinion or in the assets, financial
condition, business or prospects of the St. Francis; and that the General
Partners are not aware of any information or facts regarding the St. Francis or
the Partnerships that would cause the information supplied to Houlihan Lokey to
be incomplete or misleading in any material respect. Houlihan Lokey did not
independently verify the accuracy or completeness of the information supplied to
it with respect to the St. Francis, the Partnerships or the General Partners and
does not assume responsibility for the accuracy or completeness of such
information. Houlihan Lokey did not make any independent appraisal of the
St. Francis or the properties or assets of the Partnerships or the General
Partners.
The summary set forth above describes the material points of more detailed
analyses performed by Houlihan Lokey rendering at its fairness opinion. The
preparation of a fairness opinion is a complex analytical process involving
various determinations as to the most appropriate and relevant methods of
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financial analysis and application of those methods to the particular
circumstances and is, therefore, not readily susceptible to summary description.
In rendering its opinion, Houlihan Lokey did not attribute any particular weight
to any analysis or factor considered by it but rather made the available
judgments as to the significance and relevance of each analysis and factor.
Accordingly, Houlihan Lokey believes that its analyses and the summary set forth
herein must be considered as a whole and that selecting portions of its
analyses, without considering all analyses and factors, or portions of this
summary, could create an incomplete view of the processes underlying the
analyses set forth in the Houlihan Lokey Opinion. In its analysis, Houlihan
Lokey made numerous assumptions with respect to the St. Francis, the
Partnerships, the General Partners, general real estate industry performance,
general business, economic, market and financial conditions and other matters,
many of which are beyond its control and beyond the control of the parties to
the Proposed Sale. The estimates contained in such analyses are not necessarily
indicative of actual values or predictive of future results or values, which may
be more or less favorable than suggested by such analyses. Additionally,
analyses relating to the value of businesses or securities are not appraisals.
Accordingly, such analyses and estimates are inherently subject to substantial
uncertainty.
DISTRIBUTIONS
The General Partner estimates that amounts ultimately available for
distribution to the Limited Partners after payment of loans, accrued incentive
management fees and costs and expenses will be approximately $85 million, or
$627 per Unit, assuming that the Proposed Sale is completed by May 31, 2000.
Proceeds from the sale of the St. Francis will be first used to pay selling
costs and to repay in full the mortgage loan owed to TRST, including the
prepayment penalty. Thereafter, the Hotel Partnership will dissolve and
liquidate in accordance with the terms of its Amended and Restated Agreement of
Limited Partnership and the Delaware Revised Uniform Limited Partnership Act.
In connection with this process, the Hotel Partnership will pay all of its
creditors (other than the Hotel General Partner with respect to any incentive
management fees), establish reserves as it deems necessary and distribute the
remaining proceeds to the Partnership as its sole limited partner. The
Partnership will then, in accordance with the terms of the Partnership
Agreement, distribute those proceeds to the Limited Partners after (1) payment
of any additional costs related to the Proposed Sale, (2) payment of other
expenses or establishment of any additional reserves deemed reasonably
necessary, (3) repayment to the General Partner of that portion of the principal
and accrued interest of the subordinated loan attributable to the St. Francis
and (4) payment to the Hotel General Partner, as hotel manager, of current and
deferred incentive management fees attributable to the St. Francis.
The estimates of distributable amounts set forth in this Consent
Solicitation Statement are based upon the estimates and assumptions set forth
below, including the assumption that the Proposed Sale will be completed on
May 31, 2000. THERE CAN BE NO ASSURANCES AS TO THE ACTUAL AMOUNTS DISTRIBUTED OR
AS TO THE AMOUNTS SET FORTH BELOW. ACTUAL AMOUNTS WILL DIFFER BASED ON THE
ACTUAL DATE OF CLOSING OF THE PROPOSED SALE AND OTHER FACTORS, AND MAY DIFFER
MATERIALLY FROM THOSE SET FORTH BELOW. For further discussion of factors which
may impact the distributions, see "SUMMARY--Forward-Looking Statements."
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ESTIMATED USE OF PROCEEDS FROM THE PROPOSED SALE
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<S> <C>
Purchase Price.............................................. $243,000(1)
========
Repayment in full of the TRST mortgage including prepayment
penalty................................................... $ 97,404(2)
Repayment in full of subordinated loan to the General
Partner................................................... 33,139(3)
Repayment in full of current and deferred incentive
management fees........................................... 24,475(4)
Estimated costs and expenses of the Proposed Sale........... 3,000(5)
--------
Total uses.................................................. $158,018
========
Estimated net distributable amount.......................... $ 84,982(6)
Estimated distribution to the Limited Partners.............. $ 84,982
Estimated total distribution per Unit....................... $ 627(7)
</TABLE>
- ------------------------
(1) Assumes that the adjustments to the purchase price provided for in the
Purchase and Sale Agreement do not result in a net increase or decrease in
the purchase price, and no reserves are required.
(2) Reflects the approximate outstanding balance (principal, accrued interest
and prepayment penalty) as of May 31, 2000.
(3) Reflects the approximate outstanding balance (principal and accrued
interest) as of May 31, 2000 and assumes an effective annual interest rate
of 9.5%.
(4) Assumes incentive management fees incurred in the first five months of 2000
are consistent with those incurred in 1999.
(5) Reflects the General Partner's current estimate of closing costs of the
Proposed Sale, together with anticipated selling and Hotel Partnership
liquidation expenses.
(6) The actual amount of cash available for distribution will vary substantially
depending upon, among other things, the timing of the sale and the
dissolution of the Hotel Partnership.
(7) Based on 135,600 Units issued and outstanding.
Following the consummation of the Proposed Sale, the Hotel Partnership will
be dissolved, liquidated and terminated. In connection with the dissolution and
liquidation, the Partnership will assume the Hotel Partnership's liabilities,
including its indemnification obligations and other contingencies under the
Purchase and Sale Agreement. The Partnership also will establish reserves it
deems adequate to meet those obligations and the obligations pertaining to the
Westin Chicago.
Any liquidating distribution to the Partnership and subsequent distribution
to the Limited Partners will be subject to various laws for the protection of
the creditors of the Hotel Partnership and the Partnership and could be subject
to claims made by them after the liquidation and the subsequent distribution, as
applicable. Any known creditors of the Hotel Partnership will be satisfied prior
to any liquidating distribution to the Partnership, and the Partnership will be
prohibited by law from making a distribution to a Limited Partner to the extent
that at the time of the distribution, after giving effect to the distribution,
all liabilities of the Partnership (other than liabilities to partners of the
Partnership on account of the partnership interests and liabilities for which
the recourse of creditors is limited to specific property of the Partnership)
exceed the fair value of the assets of the Partnership (except that the fair
value of property that is subject to a liability for which recourse of creditors
is limited shall be included in the assets of the Partnership only to the extent
that the fair value of that property exceeds that liability).
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material federal income tax consequences
of the Proposed Sale to individual Limited Partners, but it is not intended as
personal tax advice. This summary is based on the federal income tax law
currently in effect, which is subject to change, possibly with retroactive
effect. Except to the limited extent described below, this summary does not
discuss all aspects of federal income taxation that may be important to
particular Limited Partners in light of their individual investment
circumstances, including certain types of holders subject to special tax rules
(e.g., corporations, financial institutions, broker-dealers, insurance
companies, partnerships, tax-exempt organizations and foreign taxpayers). In
addition, except to the limited extent described below, this summary does not
address state, local or foreign tax consequences of the Proposed Sale. No
rulings have been or will be requested from the Internal Revenue Service, and no
opinions have been or will be provided by counsel to the Partnership, with
respect to any of the matters discussed herein. Moreover, because the tax
treatment of certain aspects of the Proposed Sale is unclear under current law,
there can be no assurance that the Internal Revenue Service would not take
positions contrary to those described below and that a court would not sustain
the Internal Revenue Service's position, in which case a Limited Partner may
realize different tax consequences. LIMITED PARTNERS ARE URGED TO CONSULT THEIR
TAX ADVISORS REGARDING THE SPECIFIC FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND
OTHER TAX CONSEQUENCES OF THE PROPOSED SALE.
GAIN ON SALE
The Proposed Sale will constitute a taxable event and will result in the
Limited Partners recognizing gain, a portion of which may be ordinary income
from the recapture of depreciation, as described below. The aggregate amount of
the Hotel Partnership's gain realized from the Proposed Sale will be equal to
the excess of (1) the amount of cash received by the Hotel Partnership from the
Proposed Sale over (2) the Hotel Partnership's adjusted tax basis in the St.
Francis at the time of the Proposed Sale. The Limited Partners will recognize
gain in accordance with Section 7.03(a) of the Partnership Agreement.
DEPRECIATION RECAPTURE. A taxpayer must generally recapture as ordinary
income the gain on the sale of personal property to the extent of depreciation
deductions claimed on such personal property.
SECTION 1231 GAIN. Except with respect to the portions of the gain that are
treated as ordinary income, as discussed herein, the gain recognized by the
Partnership is expected to constitute a "Section 1231" gain. Each Limited
Partner will aggregate its "Section 1231" gains from all sources and its
"Section 1231" losses from all sources, including its allocable share of such
gains and losses recognized by the Partnership. To the extent that a Limited
Partner's "Section 1231" gains exceed its "Section 1231" losses in a taxable
year, the net amount of such gains and losses generally will be treated as
long-term capital gains. To the extent that a Limited Partner's "Section 1231"
gains do not exceed its "Section 1231" losses, the net amount of such gains and
losses will be treated as an ordinary loss.
CASH DISTRIBUTIONS
The gain realized by the Hotel Partnership as a result of the Proposed Sale
will be allocated to the Limited Partners as described above. Although income
and gain will be allocated to the Limited Partners as a result of the Proposed
Sale, a Limited Partner may also recognize taxable gain as a result of the
distribution of proceeds of the Proposed Sale to the extent that the amount of
cash distributed exceeds a Limited Partner's adjusted tax basis in his Units
immediately before the distribution.
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PASSIVE ACTIVITY LOSSES
Upon the consummation of the Proposed Sale, a Limited Partner may generally
use all current and previously suspended losses from the Partnership, along with
any other current or suspended passive losses, to offset income and gain
recognized as a result of the Proposed Sale, provided that the St. Francis was
treated as a separate activity by the Limited Partner. In the event that the St.
Francis was not treated as a separate passive activity, suspended losses will be
subject to limitation.
CALIFORNIA INCOME TAXES
The Limited Partners may also be subject to state or local taxes with
respect to the gain from the Proposed Sale, and should consult their tax
advisors regarding the applicability of any such taxes. The State of California
generally requires partnerships to withhold California state income taxes at the
rate of 7% from distributions to nonresident partners (including nonresident
individuals, estates and trusts, and partnerships and corporations that do not
have a permanent place of business in California) that are attributable to such
partners' California source income. Based on projections, the Partnership has
determined that withholding generally will be required on the portion of the
distributions arising from the Proposed Sale and operations that are
attributable to the St. Francis. Any amount withheld from distributions made to
a nonresident Limited Partner may be claimed as a credit against, or refunded if
in excess of, such Limited Partner's California income tax liability. The
California nonresident withholding requirement does not apply to partners who
are insurance companies, IRAs, Keoghs, other tax-exempt entities or deemed to be
California residents. Limited Partners who are not residents of California
should consult their tax advisors regarding the filing of nonresident tax
returns in the State of California and any applicable tax credit that may be
available in their state.
TAX-EXEMPT LIMITED PARTNERS
Tax-exempt organizations, including employee benefit plans, although not
generally subject to federal income tax, are subject to tax on certain income
derived from a trade or business carried on by the organization that is
unrelated to its exempt activities. Such "unrelated business taxable income"
generally includes gain from the sale of "debt-financed properties" (as defined
under Section 514 of the Internal Revenue Code of 1986, as amended). Because the
St. Francis, as held by the Hotel Partnership, is considered to be debt-financed
property for federal income tax purposes, gain from the sale thereof generally
will constitute "unrelated business taxable income" to tax-exempt Limited
Partners. Accordingly, tax-exempt Limited Partners should consult their tax
advisors regarding the application of the "unrelated business taxable income"
rules in connection with the Proposed Sale.
ESTIMATED TAXABLE GAIN AND INCOME
Based upon the description of the Proposed Sale contained in this Consent
Solicitation Statement and assuming the Proposed Sale is completed by May 31,
2000, the estimated gain for federal income tax purposes in 2000 is
approximately $810 per Unit, a portion of which may be characterized as ordinary
income as a result of the recapture of prior depreciation deductions.
THE ESTIMATES OF TAXABLE INCOME AND GAIN PROVIDED HEREIN ARE HYPOTHETICAL
AMOUNTS BASED UPON A NUMBER OF ASSUMPTIONS THAT MAY NOT BE CORRECT FOR ANY GIVEN
LIMITED PARTNER AND ARE PRELIMINARY AND FOR ILLUSTRATIVE PURPOSES ONLY. THESE
ASSUMPTIONS INCLUDE THE SALE DATE, ESTIMATED CLOSING AND HOTEL PARTNERSHIP
LIQUIDATION COSTS AND ACTUAL OPERATING RESULTS THROUGH SALE. THE COMPUTATION
ASSUMES SELLING COSTS AT 1.2% OF THE SALES PRICE AND OPERATIONS COMPARABLE TO
1999. THUS, THE ACTUAL INCOME AND GAIN RECOGNIZED BY ANY LIMITED PARTNER CANNOT
BE DETERMINED WITH CERTAINTY, IS LIKELY TO VARY MATERIALLY FOR ANY SPECIFIC
LIMITED PARTNER AND MAY BE SIGNIFICANTLY GREATER OR LESS THAN THAT DESCRIBED
HEREIN. RULINGS AND OPINIONS HAVE NOT AND WILL NOT BE REQUESTED FROM THE
INTERNAL REVENUE SERVICE OR PROVIDED BY COUNSEL TO THE PARTNERSHIP WITH RESPECT
TO THE MATTERS DISCUSSED HEREIN.
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CONSEQUENTLY, THE LIMITED PARTNERS ARE STRONGLY URGED TO CONSULT THEIR TAX
ADVISORS REGARDING THE TAX CONSEQUENCES OF THE PROPOSED SALE IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATION.
ACCOUNTING TREATMENT
Under accounting principles generally accepted in the United States, the
Proposed Sale will result in a gain for the Hotel Partnership as determined by
the net sales proceeds, less the book basis of the St. Francis. Net sales
proceeds are derived by subtracting direct costs to dispose of the St. Francis
from the agreed upon gross sales price. The agreed upon gross sales price for
the St. Francis has been determined to be $243 million in cash.
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THE PURCHASE AND SALE AGREEMENT
The following is a summary of material provisions of the Purchase and Sale
Agreement, a copy of which is attached hereto as Annex A and incorporated herein
by reference. This summary is qualified in its entirety by reference to the
Purchase and Sale Agreement, and Limited Partners should read that agreement
carefully in its entirety. Capitalized terms used but not defined in this
Consent Solicitation Statement shall have the meanings set forth in the Purchase
and Sale Agreement and are used herein with the same meanings. References to the
Purchaser mean BRE/St. Francis L.L.C., an affiliate of Blackstone, located at
345 Park Avenue, New York, New York 10154.
THE PURCHASE AND SALE
The Purchase and Sale Agreement provides that for a total purchase price of
$243 million, subject to certain adjustments and prorations, (1) the Hotel
Partnership will sell to the Purchaser all of its right, title and interest in
and to the real property on which the St. Francis is situated (including the
St. Francis) and the personal property of the Hotel Partnership used in
connection with the Hotel Partnership's operation and maintenance of the St.
Francis, excluding Starwood Proprietary Property, cash on hand, and any
third-party property, and (2) the Purchaser will assume from and after the date
of sale (a) all of the Hotel Partnership's right, title and interest in
intangibles owned by the Hotel Partnership, (b) the management agreement, and
(c) all leases and contracts to which the Hotel Partnership is a party.
The Purchaser has placed an irrevocable standby letter of credit in the
amount of $20 million in favor of the Hotel Partnership in escrow as a deposit,
refundable only under certain circumstances described below. The balance of the
purchase price, subject to certain adjustments and prorations in the Purchase
and Sale Agreement, will be paid by the Purchaser to the Hotel Partnership upon
closing of the Proposed Sale. The Hotel Partnership will pay the cost of
removing all unpermitted exceptions which may be removed by payment of a
liquidated amount which in the aggregate does not exceed $1 million. The Hotel
Partnership will pay for (1) transfers and sales taxes, (2) title insurance
premiums for the title policy, (3) the fees and expenses for the survey,
(4) the commission due to the broker, (5) one-half of the fees and expenses of
the escrow agreement (but excluding any fee for the investment of the earnest
money), and (6) any fees and expenses of its own attorneys and accountants. The
Purchaser will pay for (1) the fees and expenses of its own attorneys and
accountants, (2) the fees and expenses incurred by the Purchaser for the
Purchaser's inspectors or otherwise in connection with the inspectors, (3) any
recording charges payable in connection with the conveyance of the real
property, (4) any mortgage tax, additional title insurance fees and expenses for
any loan title insurance policies, recording charges or other amounts payable in
connection with any financing obtained by the Purchaser, (5) one-half of the
fees and expenses for the escrow agent, and (6) any fees for the investment of
the Earnest Money. Except as noted, and subject to certain specified exceptions,
all other fees, costs and expenses of the Proposed Sale, shall be allocated
between the Hotel Partnership and the Purchaser in accordance with local custom
for similar transactions. Should the Hotel Partnership terminate the Purchase
and Sale Agreement in accordance with its terms due to a default by the
Purchaser, the Hotel Partnership may retain the Earnest Money as liquidated
damages.
REPRESENTATIONS AND WARRANTIES
The Purchase and Sale Agreement provides that the Purchaser is purchasing
the St. Francis from the Hotel Partnership with limited representations and
warranties on an "as is, where is" basis, "with all faults." The Hotel
Partnership and the Purchaser are making customary representations and
warranties regarding their organization and authority to execute and deliver all
necessary documents and the enforceability thereof. In addition, the Hotel
Partnership is making certain additional customary representations and
warranties regarding contracts relating to the St. Francis, violations of law,
legal proceedings, condemnation actions, and permits and licenses.
26
<PAGE>
The Hotel Partnership has the right to amend and supplement the schedules to
the Purchase and Sale Agreement prior to closing to the extent the Hotel
Partnership did not have knowledge as of the date of the Purchase and Sale
Agreement of the matter being disclosed in such amendment or supplement. Any
amendment or supplement to the schedules to the Purchase and Sale Agreement made
after the expiration of the due diligence period, however, shall have no effect
for the purposes of determining whether the Purchaser's Closing Conditions have
been satisfied, but shall have effect only for the purposes of limiting the
post-closing defense and indemnification obligations of the Hotel Partnership
for the inaccuracy or untruth of the representation or warranty qualified by
such amendment or supplement. In addition, if the Purchaser has knowledge prior
to closing of a breach of any representation or warranty made by the Hotel
Partnership in the Purchase and Sale Agreement and the Purchaser nevertheless
elects to close this transaction, such representation or warranty by the Hotel
Partnership with respect to such matter shall be deemed to be modified to
reflect the Purchaser's knowledge.
The Hotel Partnership's representations and warranties shall survive for a
period of 360 days after the closing date. The Purchaser shall not have any
right to pursue remedies against the Hotel Partnership for any losses unless and
until the Purchaser's losses exceed $500,000 (this amount being a threshold for
enforcement and a deductible from liability) and shall not be entitled to
indemnification for any losses in excess of the aggregate amount of
$6.25 million.
COVENANTS
In addition to certain customary covenants regarding confidentiality, the
operation of the St. Francis until the closing date, communicating with
employees located at the St. Francis, contesting taxes and honoring bookings,
the Purchase and Sale Agreement provides that the Purchaser shall assume all
liabilities and obligations of the Hotel Partnership arising or accruing under
labor union contracts on or after the closing date, and the Purchaser shall
cause the manager to comply with the terms of the labor union contracts,
including, without limitation, hiring or continuing the employment of the labor
union employees upon closing to the extent required thereunder.
The Purchase and Sale Agreement also provides that the General Partner shall
solicit from and recommend to the Limited Partners their approval for the
Proposed Sale and that neither the Hotel Partnership nor the General Partner (or
their affiliates) will solicit or knowingly encourage any other proposals or
offers to sell or otherwise dispose of the St. Francis. This will not prohibit
the Hotel Partnership from furnishing information to or entering into
discussions or negotiations with any person that makes a bona fide, written,
unsolicited competing proposal after the date of the Purchase and Sale
Agreement, if each of the Hotel Partnership and the General Partner believe that
the competing proposal is reasonably likely to be a Superior Acquisition
Proposal. If the General Partner determines in good faith that the competing
proposal is a Superior Acquisition Proposal, the Hotel Partnership and the
General Partner may terminate the Purchase and Sale Agreement upon payment of
the Break-Up Fee and certain fees and expenses. The Purchaser, however, will
have the opportunity to amend the Purchase and Sale Agreement to reflect terms
at least as favorable as the Superior Acquisition Proposal. See "--Termination."
CONDITIONS PRECEDENT
In addition to customary conditions precedent to closing, the Purchase and
Sale Agreement is subject to the General Partner obtaining the consent of the
Limited Partners for the Proposed Sale, and providing the Purchaser with notice
of obtaining such approval no later than June 16, 2000.
27
<PAGE>
PRORATIONS AND APPORTIONMENTS
Taxes, rent under tenant leases, amounts prepaid, accrued or due and payable
under any contracts or permits, payments for utilities, employee compensation,
deposits for bookings, trade payables, cash on hand or on deposit in any house
bank at the St. Francis, and all fees and expenses under the management
agreement shall be prorated between the Hotel Partnership and the Purchaser as
of the Cut-Off-Time (I.E., 11:59 p.m. on the day before closing occurs). The
Hotel Partnership shall be responsible for paying the cost of all capital
expenditures incurred prior to closing but the Purchaser (or the Hotel
Partnership) shall receive a credit at closing in the amount of the shortfall
(or excess) between (1) the pro rata portion of the aggregate capital
expenditures set forth in the 2000 Cap Ex Budget, and (2) the actual capital
expenditures paid by the Hotel Partnership during the calendar year 2000. In
addition, at closing the Purchaser shall receive a credit for up to $500,000 for
hedging fees and costs incurred by the Purchaser to provide interest rate
protection in connection with the Purchaser's contemplated debt financing and
financing commitment fees.
TERMINATION
The Hotel Partnership may terminate the Purchase and Sale Agreement
(1) upon the acceptance of a Superior Acquisition Proposal and the payment of
the Break-Up Fee and any out-of-pocket expenses described below, (2) if any of
the Mutual Closing Conditions has not been satisfied on or before the closing
date, (3) if any of the Seller Closing Conditions has not been satisfied on or
before the closing date, (4) upon a Purchaser Default, or (5) if the General
Partner is unable to obtain the required consent of the Limited Partners for the
Proposed Sale no later than June 16, 2000.
The Purchaser may terminate the Purchase and Sale Agreement (1) in
accordance with the customary termination provisions, including uncured
unpermitted title exceptions, a material casualty or material condemnation,
(2) if any of the Mutual Closing Conditions has not been satisfied on or before
the closing date, (3) if any of the Closing Conditions has not been satisfied on
or before the closing date, (4) upon a Seller Default, (5) if the General
Partner has withdrawn, amended or modified its recommendation or approved or
recommended any Superior Acquisition Proposal, or (6) if the General Partner is
unable to obtain the consent of the Limited Partners to the Proposed Sale, on or
before June 16, 2000.
The Hotel Partnership will be required to pay to the Purchaser a
Break-Up-Fee in the amount of $6.25 million if the Purchase and Sale Agreement
is terminated under the following circumstances: (1) the General Partner has
withdrawn its recommendation (except as a result of a Purchaser Default);
(2) the Hotel Partnership, the General Partner or the Partnership shall have
terminated or caused to be terminated the Purchase and Sale Agreement based on a
Superior Acquisition Proposal; or (3) (a) the Purchase and Sale Agreement is
terminated as a result of the General Partner's failure or inability to obtain
the approval of the Limited Partners on or before June 16, 2000, (b) within six
months after such termination the Hotel Partnership, the General Partner or the
Partnership shall have executed an agreement relating to a transaction
contemplated by any Acquisition Proposal made by any person or affiliate thereof
who had disclosed to the Hotel Partnership, the Partnership or the General
Partner any Acquisition Proposal made after the date of the Letter of Intent
(I.E., December 6, 1999) but prior to the termination of the Purchase and Sale
Agreement, and (c) the Hotel Partnership, the General Partner or the Partnership
shall have entered into a binding definitive agreement with the other party with
respect to such Acquisition Proposal as to which agreement all contingencies
shall have been satisfied or waived (other than customary closing conditions
relating to the Hotel Partnership's performance) within twelve months after such
termination.
Additionally, if the Hotel Partnership or the Purchaser terminates the
Purchase and Sale Agreement under any of the circumstances described in clauses
(1), (2) or (3) (a) of the preceding paragraph, the Hotel Partnership shall
reimburse the Purchaser for the reasonable out-of-pocket
28
<PAGE>
expenses incurred by the Purchaser in connection with the transactions
contemplated by the Purchase and Sale Agreement up to an amount not to exceed
$4 million. In no event, however, shall the sum of the Break-Up Fee and the
out-of-pocket expenses reimbursed to the Purchaser exceed an aggregate amount of
$8.25 million.
Upon termination of the Purchase and Sale Agreement by the Hotel Partnership
as a result of a Purchaser Default, the Purchaser shall cause the Escrow Agent
to disburse the Earnest Money to the Hotel Partnership.
If the Purchaser terminates the Purchase and Sale Agreement as a result of a
Seller Default, the escrow agent shall refund the Earnest Money to the
Purchaser, and the Hotel Partnership and the Purchaser shall have no further
rights or obligations under the Purchase and Sale Agreement, except those which
(1) expressly survive such termination or (2) arise in connection with the
Break-Up Fee and/or out-of-pocket expenses which may be payable to the Purchaser
as set forth above. Upon a Seller Default, the Purchaser's sole and exclusive
remedies shall be to terminate the Purchase and Sale Agreement as provided
above, to proceed to closing without any reduction in or setoff against the
Purchase Price or to obtain an injunction for specific performance; provided,
however, that in the event of an Intentional Seller Default, the Purchaser may
sue for damages but shall not be entitled to damages in excess of
$6.25 million.
CASUALTY AND CONDEMNATION
If the amount of the repair, restoration or replacement required by a
casualty equals or exceeds $1 million and the casualty was not caused by the
Purchaser or its respective employees or agents, then the Purchaser shall have
the right to terminate the Purchase and Sale Agreement and receive a refund of
the Earnest Money or proceed to closing and receive a credit in the amount of
the applicable insurance deductible and all proceeds from all casualty and lost
profits insurance policies maintained by the Hotel Partnership. In the event the
amount of the repair, restoration or replacement required by a casualty does not
equal or exceed $1 million or the casualty is caused by the Purchaser or its
respective employees or agents, then the Purchaser shall not have the right to
terminate the Purchase and Sale Agreement, but shall proceed to closing and
receive a credit for the amount of the applicable insurance deductible against
the Purchase Price, and all of the Hotel Partnership's right, title and interest
in and to all proceeds from all casualty and lost profits insurance policies
maintained by the Hotel Partnership.
In the event of a condemnation that would result in the loss of more than
10% of the land or improvements related to the St. Francis, result in any
material reduction or restriction in access to the land or improvements, have a
materially adverse effect on the operation of the St. Francis or that would
reduce the value of the land or improvement by more than $1 million (a "Material
Condemnation"), then the Purchaser shall have the right to terminate the
Purchase and Sale Agreement and receive a refund of the Earnest Money or proceed
to closing and receive all the Hotel Partnership's right, title and interest in
all proceeds and awards from such condemnation. In the event of any condemnation
of any real property other than a Material Condemnation, the Purchaser shall not
have the right to terminate the Purchase and Sale Agreement, but shall proceed
to closing and receive all the Hotel Partnership's right, title and interest in
all proceeds and awards from such condemnation.
29
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE PROPOSED SALE
In considering the recommendation of the General Partner with respect to the
consent of the Limited Partners to the Proposed Authorization, the Limited
Partners should be aware that the General Partner and certain of its affiliates
have certain interests in the Proposed Sale that are in addition to or
potentially different from the interests of the Limited Partners.
GENERAL PARTNER
Pursuant to the Partnership Agreement, the General Partner holds a 1%
interest in each item of Partnership taxable income and taxable loss. In
addition, the St. Francis Hotel Corporation, the Hotel General Partner and an
affiliate of the General Partner, holds a 1% interest in each item of Hotel
Partnership taxable income and taxable loss. Upon completion of the Proposed
Sale, however, neither of the General Partner nor the St. Francis Hotel
Corporation will receive any distribution as a partner of the Partnership or the
Hotel Partnership. See "THE PROPOSED SALE--Distributions."
In 1994, the General Partner made a loan to the Partnership for the purpose
of making capital improvements to the hotel properties through capital
contributions to the Partnership's subsidiary limited partnerships, the direct
owners of the hotel properties. This loan included $20 million in principal to
fund capital improvements to the St. Francis. Interest has accrued at the annual
rate equal to the prime rate quoted by Bank of America plus 1%. The principal
and accrued interest is payable in full upon sale of the St. Francis. See
"SUMMARY--The St. Francis--Loans." Consequently, assuming the sale is completed
in May 2000, approximately $33.1 million of such loan (including accrued
interest) would be payable to the General Partner upon the sale of the
St. Francis.
St. Francis Hotel Corporation, as assignee of Westin Hotel Company of the
management agreement for the St. Francis, earns an incentive management fee of
20% of annual net operating cash flow of the Partnership. As defined in the
management agreement, net operating cash flow of the Partnership, means net
income (loss) from operations of the Partnership and the Hotel Partnership in
the aggregate as determined in accordance with generally accepted accounting
principles subject to the following adjustments: (1) the addition of any amounts
related to interest expense, depreciation and amortization or other expense
items of an extraordinary and nonrecurring nature to the extent they were
deducted in determining net income (loss), and (2) the deduction of any amount
related to capital improvements or renovations funded by sources other than
external borrowings or the restricted account. Incentive management fee payments
are payable from the Partnership's net cash flow after payment to the Limited
Partners of certain preferential returns. Net cash flow, as defined in the
Partnership Agreement, means, generally, all cash received by the Partnership
from hotel operations less debt service payments (other than those related to
the General Partner's subordinate loans), normal cash expenses (other than
incentive management fees), capital expenditures and necessary reserves. As a
result, as of December 31, 1999 approximately $24.9 million of incentive
management fees relating to the management of the St. Francis have been deferred
for payment. Such deferred incentive management fees bear no interest and are
payable from the proceeds received by the Hotel Partnership in connection with
the Proposed Sale before distributions are made to the Limited Partners. In
addition, the St. Francis Hotel Corporation shall continue to manage the St.
Francis under the management agreement after the Proposed Sale. See
"SUMMARY--The St. Francis--Management Agreements."
D.F. KING & CO., INC.
The Partnership has retained D.F. King & Co., Inc. to assist in the
solicitation of proxies, for which D.F. King & Co., Inc. will receive a fee of
$6,500, plus out-of-pocket expenses.
30
<PAGE>
WHERE YOU CAN FIND ADDITIONAL INFORMATION
The Partnership is required to file periodic reports and other information
with the Securities and Exchange Commission (the "SEC") under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Accordingly, the
Partnership files reports and other information with the SEC. You may read and
copy any reports, statements or other information that we file, at the SEC's
public reference room at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549-1004, and at the SEC's Midwest Regional Office located at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and its
Northeast Regional Office located at 7 World Trade Center, Suite 1300, New York,
New York 10048. You can request copies of these documents, upon payment of a
duplicating fee, by writing to the SEC at its principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549-1004. Please call the SEC at 1-800-SEC-0330
for further information on the operation of the public reference rooms. Our SEC
filings are also available to the public on the SEC's Internet site
(http://www.sec.gov).
The SEC allows the Partnership to "incorporate by reference" the information
it files with them, which means that the Partnership can disclose important
information to you by referring you to those documents. These incorporated
documents contain important business and financial information about the
Partnership that is not included in or delivered with this Consent Solicitation
Statement. The information incorporated by reference is considered to be part of
this Consent Solicitation Statement. Any statement contained herein, or in a
document incorporated or deemed to be incorporated by reference herein, shall be
deemed to be modified or superseded for purposes of this Consent Solicitation
Statement to the extent that a statement herein, or in any other subsequently
filed document which also is or is deemed to be incorporated by reference
herein, modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Consent Solicitation Statement.
The following documents which the Partnership has filed with the SEC, and
all other documents filed by it pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Consent Solicitation
Statement and prior to the termination of the consent solicitation made hereby,
are incorporated by reference into this Consent Solicitation Statement:
(1) The Partnership's Annual Report on Form 10-K for the year ended
December 31, 1999; and
(2) The Partnership's Current Report on Form 8-K filed February 2, 2000.
These filings are available at the SEC's offices and internet site described
above. They are also available to any person to whom a copy of this Consent
Solicitation Statement is delivered, without charge, directly from us. To obtain
such materials, please contact Resource Phoenix, 2401 Kerner Blvd., San Rafael,
California 94901, or by telephone at 1-800-323-5888.
By Order of the Board of Directors of
Westin Realty Corp., as General
Partner of the Partnership
[LOGO]
Matthew J. Coe
Assistant Secretary
31
<PAGE>
ANNEX A
PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
THE WESTIN ST. FRANCIS LIMITED PARTNERSHIP,
A DELAWARE LIMITED PARTNERSHIP
AND
BRE/ST. FRANCIS L.L.C.
A DELAWARE LIMITED LIABILITY COMPANY
DATED AS OF JANUARY 18, 2000
THE WESTIN ST. FRANCIS HOTEL
SAN FRANCISCO, CALIFORNIA
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
ARTICLE I DEFINITIONS................................................. 1
Section 1.1. Definitions................................................. 1
ARTICLE II DESCRIPTION OF THE PROPERTY; EXCLUDED PROPERTY.............. 8
Section 2.1 Description of the Property................................. 8
Section 2.2 Excluded Property........................................... 10
ARTICLE III PURCHASE PRICE; EARNEST MONEY............................... 10
Section 3.1 Purchase Price.............................................. 10
Section 3.2 Allocation of Purchase Price................................ 10
Section 3.3 Earnest Money............................................... 10
Section 3.4 Payment of Purchase Price................................... 11
ARTICLE IV DUE DILIGENCE; TITLE AND SURVEY............................. 11
Section 4.1 Due Diligence............................................... 11
Section 4.2 Title and Survey............................................ 12
Section 4.3 Starwood Board Approval..................................... 14
ARTICLE V SELLER'S REPRESENTATIONS AND WARRANTIES..................... 14
Section 5.1 Representations and Warranties.............................. 14
Section 5.2 Limitation on Seller's Representations and Warranties....... 18
Section 5.3 Amendment to Schedules...................................... 18
Section 5.4 Effect of Purchaser's Knowledge............................. 19
ARTICLE VI PURCHASER'S REPRESENTATIONS AND WARRANTIES.................. 19
Section 6.1 Representations and Warranties.............................. 19
Section 6.2 Effect of Seller's Knowledge................................ 19
ARTICLE VII COVENANTS................................................... 20
Section 7.1 Confidentiality............................................. 20
Section 7.2 Operation of the Hotel Prior to Closing..................... 20
Section 7.3 Licenses and Permits........................................ 21
Section 7.4 Employee Matters............................................ 21
Section 7.5 Bookings.................................................... 22
Section 7.6 Tax Contests................................................ 22
Section 7.7 Notices and Filings......................................... 22
Section 7.8 Access to Information....................................... 23
Section 7.9 Further Assurances.......................................... 23
Section 7.10 Seller Approval............................................. 23
Section 7.11 Non-Solicitation............................................ 24
ARTICLE VIII CONDITIONS PRECEDENT........................................ 26
Section 8.1 Conditions Precedent to the Obligations of Both Seller and
Purchaser................................................. 26
Section 8.2 Additional Conditions to Purchaser's Obligations............ 26
Section 8.3 Additional Conditions to Seller's Obligations............... 27
Section 8.4 Frustration of Closing Conditions........................... 27
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
ARTICLE IX CLOSING..................................................... 27
Section 9.1 Closing Date................................................ 27
Section 9.2 Closing Escrow.............................................. 27
Section 9.3 Seller's Deliveries......................................... 28
Section 9.4 Purchaser's Deliveries...................................... 28
Section 9.5 Possession.................................................. 29
ARTICLE X PRORATIONS; ACCOUNTS RECEIVABLE; TRANSACTION COSTS.......... 29
Section 10.1 Prorations.................................................. 29
Section 10.2 Accounts Receivable......................................... 31
Section 10.3 Transaction Costs........................................... 32
ARTICLE XI TRANSITION PROCEDURES....................................... 32
Section 11.1 Settlement Statement........................................ 32
ARTICLE XII TERMINATION; EFFECT OF TERMINATION.......................... 32
Section 12.1 Seller's Right of Termination............................... 32
Section 12.2 Purchaser's Right of Termination............................ 32
Section 12.3 Effect of Termination....................................... 33
ARTICLE XIII CASUALTY; CONDEMNATION...................................... 34
Section 13.1 Casualty.................................................... 34
Section 13.2 Condemnation................................................ 35
ARTICLE XIV INDEMNIFICATION............................................. 35
Section 14.1 Indemnification by Seller................................... 35
Section 14.2 Indemnification by Purchaser................................ 35
Section 14.3 Limitations on Indemnification Obligations.................. 36
Section 14.4 Indemnification Procedure................................... 36
Section 14.5 Exclusive Remedy............................................ 37
Section 14.6 Indemnification Obligations................................. 37
Section 14.7 Release of Seller for Environmental Liabilities............. 37
ARTICLE XV MISCELLANEOUS PROVISIONS.................................... 37
Section 15.1 Notices..................................................... 37
Section 15.2 Time is of the Essence...................................... 38
Section 15.3 Assignment.................................................. 38
Section 15.4 Successors and Assigns; Third Party Beneficiaries........... 39
Section 15.5 Prevailing Party............................................ 39
Section 15.6 No Recordation.............................................. 39
Section 15.7 Rules of Construction....................................... 39
Section 15.8 Governing Law; Severability................................. 40
Section 15.9 Recitals, Exhibits and Schedules............................ 40
Section 15.10 Entire Agreement; Amendments to Agreement................... 40
Section 15.11 Facsimile; Counterparts..................................... 40
</TABLE>
iii
<PAGE>
LIST OF EXHIBITS
<TABLE>
<S> <C>
Exhibit A Earnest Money Escrow Agreement
Exhibit B Interim Lease Agreement
Exhibit C Management Agreement Subodination, Non-Disturbance and
Attornment Agreement
Exhibit D Trademark License Agreement
Exhibit E Closing Certificate (Seller)
Exhibit F Grant Deed
Exhibit G Assignment and Assumption of Management Agreement
Exhibit H Bill of Sale
Exhibit I Assignment and Assumption of Leases and Contracts
Exhibit J Assignment and Assumption of Union Contracts
Exhibit K General Assignment and Assumption Agreement
Exhibit L Closing Certificate (Purchaser)
</TABLE>
iv
<PAGE>
LIST OF SCHEDULES
<TABLE>
<S> <C>
Schedule 2.1(a) Legal Description of the Land
Schedule 5.1(c) Consents and Approvals; No Conflicts
Schedule 5.1(d) Title to Personal Property
Schedule 5.1(f) Compliance with Applicable Law
Schedule 5.1(g) Litigation
Schedule 5.1(h) Employment Claims
Schedule 5.1(h)(iii) Employee Plans
Schedule 5.1(i) Taxes
Schedule 5.1(j) Environmental Matters
Schedule 5.1(k) Licenses and Permits
Schedule 5.1(l) Tenant Leases
Schedule 5.1(m) Contracts
Schedule 5.1(o) Bookings
Schedule 5.1(p) Insurance
Schedule 5.1(t) Equipment Leases
Schedule 5.1(v) Construction Disputes
Schedule 5.1(x) Prepaid Fees
Schedule 5.1(y) Trade Associations
Schedule 10.1(m) 2000 Cap Ex Budget
</TABLE>
v
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "AGREEMENT") is made and entered into
as of this 18(th) day of January, 2000, by and between THE WESTIN ST. FRANCIS
LIMITED PARTNERSHIP, a Delaware limited partnership ("SELLER"), and BRE/ST.
FRANCIS L.L.C., a Delaware limited liability company ("PURCHASER"). (Seller and
Purchaser are sometimes referred to herein individually as a "PARTY", and
collectively as the "PARTIES").
RECITALS
WHEREAS, Seller is the owner of the Property (as defined herein) relating to
the hotel facility located at 335 Powell Street, San Francisco, California, and
commonly known as The Westin St. Francis (the "HOTEL").
WHEREAS, Seller desires to sell the Property to Purchaser, and Purchaser
desires to purchase the Property from Seller, on the terms set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants set forth in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Seller and Purchaser hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. In addition to the terms defined above in the
introduction and recitals to this Agreement, the following terms when used in
this Agreement shall have the meanings set forth in this Section 1.1.
"ACCOUNTS RECEIVABLE" means all amounts which Seller is entitled to receive
from the operation of the Hotel, but are not paid as of the Closing, including,
without limitation, charges for the use or occupancy of any guest, conference,
meeting or banquet rooms or other facilities at the Hotel, any restaurant, bar
or banquet services, or any other goods or services provided by or on behalf of
Seller at the Hotel, but expressly excluding any credit card charges and checks
which Seller has submitted for payment as of the Closing.
"ACCRUED BENEFITS" means those items set forth in clauses (ii), (iii) and
(iv) of the definition of Compensation.
"ACQUISITION PROPOSAL" has the meaning set forth in Section 7.11 of this
Agreement.
"ADDITIONAL DEPOSIT" has the meaning set forth in Section 3.3(a) of this
Agreement
"AFFILIATE" means, with respect to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common control
with, the Person in question. For the purposes of this definition, the term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of the Person in question,
whether by the ownership of voting securities, contract or otherwise.
"APPLICABLE LAW" means all statutes, laws, common law, rules, regulations,
ordinances, codes or other legal requirements of any Governmental Authority, the
New York Stock Exchange, Board of Fire Underwriters and similar
quasi-governmental agencies or entities, and any judgment, injunction, order,
directive, decree or other judicial or regulatory requirement of any court or
Governmental Authority of competent jurisdiction affecting or relating to the
Person or property in question.
"BOOKINGS" has the meaning set forth in Section 2.1(n) of this Agreement.
"BOOKS AND RECORDS" has the meaning set forth in Section 2.1(m) of this
Agreement.
"BREAK-UP FEE" has the meaning set forth in Section 12.3 of this Agreement.
<PAGE>
"BROKER" shall mean Sonnenblick-Goldman Company.
"BUSINESS DAY" means any day other than Saturday, Sunday or any federal
legal holiday.
"CASUALTY" has the meaning set forth in Section 13.1(a) of this Agreement.
"CLOSING" has the meaning set forth in Section 9.1 of this Agreement.
"CLOSING DATE" has the meaning set forth in Section 9.1 of this Agreement.
"CLOSING ESCROW" has the meaning set forth in Section 9.2 of this Agreement.
"CLOSING ESCROW AGREEMENT" has the meaning set forth in Section 9.2 of this
Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and any regulations, rulings and guidance issued by the Internal Revenue
Service.
"COMPENSATION" means all (i) salaries and wages which the Employees are
entitled to receive at the time in question, together with all employment taxes
with respect thereto, including, without limitation, any withholding or employer
contributions under the Federal Insurance Contribution Act and Federal
Unemployment Taxes Act; (ii) bonus and incentive compensation; (iii) accrued
vacation days, sick days and personal days; and (iv) any health, welfare and
other benefits provided to the Employees, and employer contributions to, and
amounts paid or accrued under, any employee plans for the benefit of the
Employees.
"COMPETING PROPOSAL" has the meaning set forth in Section 7.11 of this
Agreement.
"CONDEMNATION" has the meaning set forth in Section 13.2(a) of this
Agreement.
"CONFIDENTIAL INFORMATION" has the meaning set forth in Section 7.1(a) of
this Agreement.
"CONSENT SOLICITATION" has the meaning set forth in Section 7.10 of this
Agreement.
"CONTRACTS" means, collectively, the Equipment Leases and Operating
Agreements.
"CURRENT ACCOUNTS RECEIVABLE" has the meaning set forth in Section 10.2(b)
of this Agreement.
"CUT-OFF TIME" has the meaning set forth in Section 10.1 of this Agreement.
"DEFINITION AGREEMENT" has the meaning set forth in Section 12.3(a) of this
Agreement.
"DEED" has the meaning set forth in Section 9.3(a) of this Agreement.
"DELINQUENT ACCOUNTS RECEIVABLES" has the meaning set forth in
Section 10.2(b) of this Agreement.
"DUE DILIGENCE CONTINGENCY" has the meaning set forth in Section 4.1(a) of
this Agreement.
"DUE DILIGENCE PERIOD" has the meaning set forth in Section 4.1(a) of this
Agreement.
"EARNEST MONEY" has the meaning set forth in Section 3.3(a) of this
Agreement.
"EARNEST MONEY ESCROW" has the meaning set forth in Section 3.3(a) of this
Agreement.
"EARNEST MONEY ESCROW AGREEMENT" has the meaning set forth in
Section 3.3(a) of this Agreement.
"EMPLOYEE PLAN" means any employment, severance or similar contract or
arrangement (whether or not written) or any plan, policy, fund, program or
contract or arrangement (whether or not written) providing for compensation,
bonus, profit-sharing, stock option, or other stock related rights or other
forms of incentive or deferred compensation, vacation benefits, insurance
coverage (including any self-insured arrangements) health or medical benefits,
disability benefits, worker's compensation, supplemental unemployment benefits,
workers' compensation, supplemental unemployment benefits, severance benefits
and post-employment or retirement benefits (including compensation, pension,
health, medical or life insurance or other benefits) that (i) is entered into,
maintained, administered or
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directly or indirectly contributed to, as the case may be, by Seller, any of its
Affiliates and (ii) covers any current Employee, or any former or current
Employee under the Union Contracts.
"EMPLOYEES" means all individuals who are employed full-time or part-time
at, or otherwise perform services with respect to, the Hotel at the time in
question (other than employees of tenants).
"ENVIRONMENTAL CLAIMS" means any claim for reimbursement or remediation
expense, contribution, personal injury, property damage or damage to natural
resources made by any Governmental Authority or other Person arising from or in
connection with the presence or release of any Hazardous Substances over, on, in
or under the Real Property, or the violation of any Environmental Laws with
respect to the Hotel.
"ENVIRONMENTAL LAWS" means any Applicable Laws which regulate or control
(i) Hazardous Substances, pollution, contamination, noise, radiation, water,
soil, sediment, air or other environmental media, or (ii) an actual or potential
spill, leak, emission, discharge, release or disposal of any Hazardous
Substances or other materials, substances or waste into water, soil, sediment,
air or any other environmental media, including, without limitation, (A) the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq. ("CERCLA"), (B) the Resource Conservation and Recovery Act,
42 U.S.C. Section 6901 et seq. ("RCRA"), (C) the Federal Water Pollution Control
Act, 33 U.S.C. Section 2601 et seq., (D) the Toxic Substances Control Act, 15
U.S.C. Section 2601 et seq., (E) the Clean Water Act, 33 U.S.C. Section 1251 et
seq., (F) the Clean Air Act, 42 U.S.C. Section 7401 et seq., (G) the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801 et seq., (H) the
Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq. and similar
state and local Applicable Law, as amended from time to time, and all
regulations, rules and guidance issued pursuant thereto.
"ENVIRONMENTAL LIABILITIES" means any liabilities or obligations of any kind
or nature imposed on the Person in question pursuant to any Environmental Laws,
including, without limitation, any (i) obligations to manage, control, contain,
remove, remedy, respond to, clean up or abate any actual or potential release of
Hazardous Substances or other pollution or contamination of any water, soil,
sediment, air or other environmental media, whether or not located on the Real
Property and whether or not arising from the operations or activities with
respect to the Hotel, and (ii) liabilities or obligations with respect to the
manufacture, generation, formulation, processing, use, treatment, handling,
storage, disposal, distribution or transportation of any Hazardous Substances.
"ENVIRONMENTAL REPORTS" has the meaning set forth in Section 5.1(j) of this
Agreement.
"EQUIPMENT LEASES" has the meaning set forth in Section 2.1(h) of this
Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and the rules and regulations promulgated thereunder.
"ERISA AFFILIATE" of any entity means any other entity which, together with
such entity, would be treated as a single employer under Section 414 of the
Code.
"ESCROW AGENT" shall mean Fidelity National Title Insurance Company, through
its offices at Two Park Avenue, Suite 300, New York, NY 10016.
"EXCHANGE ACT" has the meaning set forth in Section 7.10 of this Agreement.
"EXCLUDED PROPERTY" has the meaning set forth in Section 2.2 of this
Agreement.
"F&B" has the meaning set forth in Section 2.1(e) of this Agreement.
"FAILURE TO CURE NOTICE" has the meaning set forth in Section 4.2(d) of this
Agreement.
"FF&E" has the meaning set forth in Section 2.1(c) of this Agreement.
"GENERAL PARTNER" means the general partner of WHLP.
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"GOVERNMENTAL AUTHORITY" means any federal, state or local government or
other political subdivision thereof, including, without limitation, any agency
or entity exercising executive, legislative, judicial, regulatory or
administrative governmental powers or functions, in each case to the extent the
same has jurisdiction over the Person or property in question.
"GP RECOMMENDATION" has the meaning set forth in Section 7.10 of this
Agreement.
"GUEST LEDGER" means any all charges accrued to the open accounts of any
guests or customers at the Hotel as of the Cut-Off Time for the use and
occupancy of any guest, conference, meeting or banquet rooms or other similar
facilities at the Hotel, any restaurant, bar or banquet services, or any other
goods or services provided in the Ordinary Course of Business by or on behalf of
Seller.
"HAZARDOUS SUBSTANCES" means any hazardous or toxic substances, materials or
waste, whether solid, semisolid, liquid or gaseous, including, without
limitation, asbestos, polychlorinated biphenyls, petroleum or petroleum
by-products, radioactive materials, radon gas and any other material or
substance which is defined as or included in the definition of a "hazardous
substance", "hazardous waste", "toxic waste" "hazardous material", "toxic
pollutant", "contaminant", "pollutant" or "toxic substance", or words of similar
import, under any Environmental Laws or that could result in the imposition of
liability under any Environmental Laws.
"HOTEL GP" means St. Francis Hotel Corporation, a Delaware Corporation, in
its capacity as the sole general partner of Seller.
"IMPROVEMENTS" has the meaning set forth in Section 2.1(b) of this
Agreement.
"INDEMNIFICATION CAP" has the meaning set forth in Section 14.3(b) of this
Agreement.
"INDEMNIFICATION CLAIM" has the meaning set forth in Section 14.4(a) of this
Agreement.
"INDEMNIFICATION DEDUCTIBLE" has the meaning set forth in Section 14.3(b) of
this Agreement.
"INDEMNITEE" has the meaning set forth in Section 14.4(a) of this Agreement.
"INDEMNITOR" has the meaning set forth in Section 14.4(a) of this Agreement.
"INITIAL DEPOSIT" has the meaning set forth in Section 3.3(a) of this
Agreement.
"INSPECTIONS" has the meaning set forth in Section 4.1(b) of this Agreement.
"INTANGIBLE PROPERTY" has the meaning set forth in Section 2.1(1) of this
Agreement.
"INTENTIONAL SELLER DEFAULT" means an act or failure to act by Seller with
the intent to, and resulting in, (I) a material breach or default by Seller in
any of its covenants and obligations under this Agreement, (ii) the frustration
of one or more Purchaser Closing Conditions, and (iii) the termination of this
Agreement, which breach, default or failure is not cured within ten
(10) Business Days after Seller's receipt of written notice of such default from
Purchaser.
"KNOWLEDGE" means (i) with respect to Seller, the actual knowledge of Joseph
D. Long, William Reis or Michael Cassidy and expressly excluding the knowledge
of any other shareholder, trustee, partner, member, director, officer, manager,
employee, agent or representative of Seller or any of its Affiliates, and
(ii) with respect to Purchaser, (A) the actual knowledge of Jonathan D. Gray or
Andrew Farbman and expressly excluding the knowledge of any other shareholder,
trustee, partner, member, director, officer, manager, employee, agent or
representative of Purchaser or any of its Affiliates, (B) any matter disclosed
in any exhibits or schedules to this Agreement, and (C) any matter disclosed in
any Seller Due Diligence Materials or any other documents or materials provided
by Seller to Purchaser prior to Closing, and (D) any matter disclosed in the
Purchaser Due Diligence Reports.
"LAND" has the meaning set forth in Section 2.1(a) of this Agreement.
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"LETTER OF INTENT" means that certain letter, dated December 6, 1999,
between Seller and an affiliate of Purchaser outlining the general terms of the
transaction contemplated in this Agreement.
"LICENSES AND PERMITS" has the meaning set forth in Section 2.1(k) of this
Agreement.
"LIMITED PARTNERS" means the limited partners of WHLP.
"LIMITED PARTNERS APPROVAL" has the meaning set forth in Section 7.10 of
this Agreement.
"LIQUOR LICENSE" has the meaning set forth in Section 7.3 of this Agreement.
"LOSSES" means any liability, damage, loss, cost or expense, including,
without limitation, reasonable attorneys' fees and expenses and court costs,
incurred by the Person in question.
"MANAGEMENT AGREEMENT" has the meaning set forth in Section 2.1(p) of this
Agreement.
"MANAGER" means St. Francis Hotel Corporation, a Delaware corporation, in
its capacity as manager under the Management Agreement.
"MATERIAL CASUALTY" has the meaning set forth in Section 13.1(a) of this
Agreement.
"MATERIAL CONDEMNATION" has the meaning set forth in Section 13.2(a) of this
Agreement.
"MATERIAL CONTRACT" means any Contract requiring aggregate annual payments
in excess of Fifty Thousand Dollars ($50,000) for any year during the term of
such Contract.
"MULTIEMPLOYER PLAN" means each Employee Plan that is a multiemployer plan,
as defined in Section 3(37) of ERISA.
"MUTUAL CLOSING CONDITIONS" has the meaning set forth in Section 8.1 of this
Agreement.
"NEW TRANSACTION AGREEMENT" has the meaning set forth in Section 12.3(a) of
this Agreement.
"NOTICE" has the meaning set forth in Section 15.1(a) of this Agreement.
"OPERATING AGREEMENTS" has the meaning set forth in Section 2.1(i) of this
Agreement.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with Seller's past custom and practices for the operation,
maintenance and repair of the Hotel.
"OUT-OF-POCKET EXPENSES" has the meaning set forth in Section 12.3 of this
Agreement.
"PERMITTED EXCEPTIONS" has the meaning set forth in Section 4.2(c) of this
Agreement.
"PERSON" means any natural person, corporation, general or limited
partnership, limited liability company, association, joint venture, trust,
estate, Governmental Authority or other legal entity in its own or a
representative capacity.
"PERSONAL PROPERTY" means the Property other than the Real Property.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PROPERTY" has the meaning set forth in Section 2.1 of this Agreement.
"PRORATIONS" has the meaning set forth in Section 10.1 of this Agreement.
"PURCHASE PRICE" has the meaning set forth in Section 3.1 of this Agreement.
"PURCHASER CLOSING CONDITIONS" has the meaning set forth in Section 8.2 of
this Agreement.
"PURCHASER DEFAULT" means: (i) Purchaser's failure to deposit the Earnest
Money within the time period provided in Section 3.3(a); or (ii) a material
breach or default by Purchaser in any of its representations, warranties,
covenants or obligations under this Agreement which breach or default is
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not caused by a Seller Default and which breach or default causes Purchaser to
fail to purchase the Property in accordance with the terms of this Agreement.
"PURCHASER DUE DILIGENCE REPORTS" has the meaning set forth in
Section 4.1(d) of this Agreement.
"PURCHASER INDEMNITEES" means Purchaser and its Affiliates, and each of
their respective shareholders, directors, officers, members, partners, trustees,
employees and agents, and the successors, assigns, heirs and legal
representatives of each of the foregoing.
"PURCHASER'S INSPECTORS" has the meaning set forth in Section 4.1(b) of this
Agreement.
"REAL PROPERTY" has the meaning set forth in Section 2.1(b) of this
Agreement.
"RESPONSE PERIOD" has the meaning set forth in Section 7.11 of this
Agreement.
"RETAIL MERCHANDISE" has the meaning set forth in Section 2.1(f) of this
Agreement.
"SAP NOTICE" has the meaning set forth in Section 7.11 of this Agreement.
"SEC" has the meaning set forth in Section 7.10 of this Agreement.
"SELLER ACCESS" has the meaning set forth in Section 7.8 of this Agreement.
"SELLER APPROVAL" has the meaning set forth in Section 7.10 of this
Agreement.
"SELLER APPROVAL DATE" has the meaning set forth in Section 7.10 of this
Agreement.
"SELLER APPROVAL NOTICE" has the meaning set forth in Section 7.10 of this
Agreement.
"SELLER CLOSING CONDITIONS" has the meaning set forth in Section 8.3 of this
Agreement.
"SELLER DEFAULT" means a material breach or default by Seller in any of its
representations, warranties, covenants or obligations under this Agreement,
which default is not caused by a Purchaser Default and which default is not
cured within ten (10) Business Days after Seller's receipt of written notice of
such default from Purchaser.
"SELLER DUE DILIGENCE MATERIALS" has the meaning set forth in
Section 4.1(c) of this Agreement.
"SELLER INDEMNITEES" means Seller, Starwood, Manager, and their respective
Affiliates, and each of their respective shareholders, directors, officers,
members, partners, trustees, employees and agents, and the successors, assigns,
heirs and legal representatives of each of the foregoing.
"SELLER'S POSSESSION" means in the actual possession of any officer or
employee of Seller or any of its Affiliates who has direct or supervisory
responsibility for the operation of the Hotel.
"SETTLEMENT STATEMENT" has the meaning set forth in Section 11.1 of this
Agreement.
"STARWOOD" means Starwood Hotels & Resorts Worldwide, Inc., a Maryland
corporation.
"STARWOOD BOARD APPROVAL NOTICE" has the meaning set forth in
Section 4.3(a) of this Agreement.
"STARWOOD BOARD APPROVAL PERIOD" has the meaning set forth in
Section 4.3(a) of this Agreement.
"STARWOOD BOARD APPROVAL" has the meaning set forth in Section 4.3(a) of
this Agreement.
"STARWOOD PROPRIETARY MARKS" has the meaning set forth in Section 2.2(b) of
this Agreement.
"SUPPLIES" has the meaning set forth in Section 2.1(d) of this Agreement.
"SURVEY" has the meaning set forth in Section 4.2(b) of this Agreement.
"SURVEY DEFECTS" has the meaning set forth in Section 4.2(c) of this
Agreement.
"SURVIVAL PERIOD" has the meaning set forth in Section 14.3(a) of this
Agreement.
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"TAXES" means any federal, state, local or foreign, real property, personal
property, sales, use, room, occupancy, excise, severance, stamp, payroll,
employment, withholding, social security, unemployment, disability, vault, ad
valorem, assessments, value added or other tax, assessments, levies, charges or
fees of any kind whatsoever imposed on Seller or the Property or any portion
thereof by any Governmental Authority, including, without limitation, any
interest, penalty, or addition thereto, but expressly excluding any
(i) federal, state, local or foreign income, capital gain, capital stock,
franchise, profits, estate or gift tax, or (ii) transfer or similar taxes
incurred with respect to the transaction contemplated in this Agreement.
"TENANT LEASES" has the meaning set forth in Section 2.1(g) of this
Agreement.
"TITLE COMMITMENT" has the meaning set forth in Section 4.2(a) of this
Agreement.
"TITLE COMPANY" means Fidelity National Title Insurance Company, through its
offices at Two Park Avenue, Suite 300, New York, NY 10016.
"TITLE EXCEPTIONS" has the meaning set forth in Section 4.2(c) of this
Agreement.
"TITLE OBJECTION LETTER" has the meaning set forth in Section 4.2(c) of this
Agreement.
"TITLE POLICY" has the meaning set forth in Section 8.2(d) of this
Agreement.
"TITLE IV PLAN" means an Employee Plan subject to Title IV of ERISA other
than any Multiemployer Plan.
"TRADE PAYABLES" has the meaning set forth in Section 10.1(j) of this
Agreement.
"2000 CAP EX BUDGET" has the meaning set forth in Section 10.1(m) of this
Agreement.
"UNION CONTRACTS" has the meaning set forth in Section 2.1(j) of this
Agreement.
"UNION EMPLOYEES" means any Employees whose employment is subject to the
terms of the Union Contracts.
"UNPERMITTED EXCEPTIONS" has the meaning set forth in Section 4.2(c) of this
Agreement.
"WHLP" means Westin Hotels Limited Partnership, a Delaware limited
partnership, the sole limited partner of Seller.
"WHLP APPROVAL" has the meaning given in Section 7.10 of this Agreement.
"WHLP PARTNERSHIP AGREEMENT" means the Amended and Restated Agreement of
Limited Partnership of WHLP.
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ARTICLE II
DESCRIPTION OF THE PROPERTY; EXCLUDED PROPERTY
Section 2.1 DESCRIPTION OF THE PROPERTY. Subject to the terms set forth in
this Agreement, at the Closing, Seller shall sell, convey, transfer, assign and
deliver to Purchaser, and Purchaser shall purchase and accept from Seller, the
property and assets set forth in this Section 2.1, but expressly excluding the
Excluded Property (collectively, the "PROPERTY"):
(a) LAND. Fee simple title to the land described in SCHEDULE 2.1(a),
together with (i) all appurtenant easements, rights of way, privileges, licenses
and any other rights and interests appurtenant thereto, (ii) Seller's right,
title and interest, if any, in any land in the bed of any streets or other
public ways adjacent to the land described in Schedule 2.1(a) to the center line
thereof, and (iii) Seller's right, title and interest in (A) any condemnation
award made with respect to such real property and (B) any award for damages to
such real property by reason of change of grade of any street or public way
adjoining such real property (the "LAND");
(b) IMPROVEMENTS. All buildings, structures and improvements located on or
affixed to the Land and all fixtures on the Land which constitute real property
under Applicable Law including, without limitation, those certain buildings,
structures, improvements and fixtures presently situated on, in, under or
hereafter erected, installed or used on, in or under the Land (the
"IMPROVEMENTS" the Land and the Improvements are referred to collectively herein
as the "REAL PROPERTY");
(c) FF&E. All fixtures (other than those which constitute Improvements),
furniture, furnishings, equipment, machinery, vehicles, appliances, computer
hardware, art work and other items of tangible personal property owned by Seller
which are located at the Hotel and used in the operation of the Hotel (and all
replacements thereof purchased prior to the Closing), or ordered for future use
at the Hotel as of the Closing, other than the Supplies, F&B and Retail
Merchandise (the "FF&E");
(d) SUPPLIES. All china, glassware, silverware; linens; uniforms;
engineering, maintenance, cleaning and housekeeping supplies; matches and
ashtrays; soap and other toiletries; stationery, menus and other printed
materials; and all other similar materials and supplies, which are located at
the Hotel or ordered for future use at the Hotel as of the Closing (the
"SUPPLIES");
(e) FOOD AND BEVERAGE. All food and beverages (alcoholic and
non-alcoholic) which are located at the Hotel (whether opened or unopened), or
ordered for future use at the Hotel as of the Closing, but expressly excluding
any alcoholic beverages to the extent the sale or transfer of the same is not
permitted under Applicable Law (the "F&B");
(f) RETAIL MERCHANDISE. All merchandise located at the Hotel, including,
without limitation, the gift shop, pro shop or newsstand maintained by Seller,
and held for sale to guests and customers of the Hotel, or ordered for future
sale at the Hotel as of the Closing (the "RETAIL MERCHANDISE");
(g) TENANT LEASES. All leases, subleases, licenses, concessions and
similar agreements granting a real property interest to any other Person for the
use or occupancy of any portion of the Real Property, other than the Management
Agreement and Bookings (the "TENANT LEASES"), together with all security
deposits held by Seller thereunder;
(h) EQUIPMENT LEASES. All leases and purchase money security agreements
for any equipment, machinery, vehicles, furniture or other personal property
located at the Hotel and used in the operation of the Hotel which are held by or
on behalf of Seller (the "EQUIPMENT LEASES"), together with all deposits made
thereunder, to the extent such Equipment Leases and deposits are transferable;
(i) OPERATING AGREEMENTS. All maintenance, service and supply contracts,
credit card service agreements, booking and reservation agreements, and all
other contracts and agreements which are held by Seller in connection with the
operation of the Hotel, other than the Tenant Leases, Equipment
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Leases, Licenses and Permits (the "OPERATING AGREEMENTS"), together with all
deposits made or held by Seller thereunder, to the extent such Operating
Agreements and deposits are transferable;
(j) UNION CONTRACTS. The following union contracts: 1) Garage and Parking
Lot Agreement by and between Westin St. Francis Hotel and Teamster Automotive
Employees Local Union No. 665, effective December 1, 1995 to November 30, 2000;
2) Collective Bargaining agreement by and between Operating Engineers Local 39
and San Francisco Hotels Multiemployer Group through The Westin St. Francis
Hotel, effective August 1, 1997 to July 31, 2000; 3) Agreement by and between
the International Union of Security Officers and The Westin St. Francis,
effective July 1, 1997 to June 30, 2000; 4) Collective Bargaining Agreement by
and between The Westin St. Francis Hotel and Bay Counties District Counties
District Council of Painters No. 8 and Painters Local Union No. 4., Effective
August 1, 1998 to July 31, 2003; 5) Agreement by and between The Westin
St. Francis and the Textile Processors, Service Trades, Health Care,
Professional and Technical Employees' International Union, Local #75, effective
December 1, 1997 to November 30, 2000; 6) Clerical Agreement by and between the
San Francisco Hotels Multiemployer Group through The Westin St. Francis and the
Professional and Clerical Employees Division of Freight Checkers, Clerical
Employees and Helpers, Local No. 856, International Brotherhood of Teamsters,
effective January 1, 1996 to December 31, 1999 and 7) Collective Bargaining
Agreement between Hotels Employees and Restaurant Employees Union Local 2 and
the San Francisco Hotels Multiemployer Group comprised of the Westin
St. Francis Hotels, effective from August 14, 1994 to August 2004, as amended by
the Memorandum of Understanding, dated September 17, 1999 (the "UNION
CONTRACTS");
(k) LICENSES AND PERMITS. All licenses, permits, consents, authorizations,
approvals, registrations and certificates of any Governmental Authority held by
Seller and used in connection with the construction, ownership, occupancy or
operation of the Hotel, to the extent transferable (the "LICENSES AND PERMITS"),
together with any deposits made by Seller thereunder, to the extent such
Licenses and Permits and deposits are transferable;
(l) INTANGIBLE PROPERTY. All of the following (A) owned by Seller or
(B) exclusively issued or licensed to Seller and used in connection with the
operation of the Hotel to the extent Seller's rights and interests therein are
transferable: (i) trademarks, trade names, service marks and other intellectual
property rights; (ii) warranties and guaranties held by Seller pursuant to any
Contracts or with respect to any Improvements or Personal Property;
(iii) computer software used in connection with any computer systems located at
the Hotel; (iv) direct dial telephone numbers for the Hotel; and (v) all
goodwill in connection with the ownership, operation and maintenance of the
Hotel, but excluding any name, trademark, servicemark or logo relating to
Starwood Proprietary Marks (as hereinafter defined) (the "INTANGIBLE PROPERTY");
(m) BOOKS AND RECORDS. All books and records in Seller's Possession which
relate to the Hotel, other than any legally privileged materials and attorney
work product (the "BOOKS AND RECORDS");
(n) BOOKINGS. All bookings and reservations for guest, conference, meeting
and banquet rooms or other facilities at the Hotel (the "BOOKINGS"), together
with all deposits held by Seller with respect thereto;
(o) ACCOUNTS RECEIVABLE. All Current Accounts Receivable (including the
Guest Ledger) as set forth in Section 10.2; and
(p) MANAGEMENT AGREEMENT. That certain Amended and Restated Management
Agreement, dated August 21, 1986, by and among Seller, Hotel GP and WHLP,
collectively as owner, and Westin Hotel Company, predecessor in interest to
Manager, as manager, as amended by that certain First Amendment to Amended and
Restated Management Agreement dated as of June 2, 1994, as further amended by
that certain Second Amendment to Amended and Restated Management Agreement dated
as of September 1, 1999, as assigned to Manager pursuant to that certain
Assignment of
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Management Agreement dated as of August 21, 1986 (as so amended and assigned,
the "MANAGEMENT AGREEMENT"), which shall be assumed by Purchaser at Closing.
Section 2.2 EXCLUDED PROPERTY. Notwithstanding anything to the contrary in
Section 2.1, the property, assets, rights and interests set forth in this
Section 2.2 (the "EXCLUDED PROPERTY") are excluded from the Property:
(a) CASH. Except for deposits expressly included in Section 2.1, all cash
on hand or on deposit in any house bank, operating account or other account
maintained in connection with the ownership or operation of the Hotel;
(b) STARWOOD PROPRIETARY PROPERTY. All: (i) trademarks, trade names,
service marks, symbols, logos and other intellectual property rights held by
Starwood, Manager or any of its Affiliates (other than Seller), (the "STARWOOD
PROPRIETARY MARKS"); (ii) Manager's or Starwood's internal employee, operational
and similar manuals; and, (iii) computer hardware and software pertaining
specifically to, and all other rights and interests in, (a) any Starwood
centralized system, including, without limitation, the Starwood reservation
system, property management system and e-mail, internet and internal computer
network systems, and (b) the Starwood Preferred Guest program and other
marketing and advertising programs, except, in each case, for such rights to use
Starwood Proprietary Property as may be granted under the Management Agreement;
and
(c) THIRD-PARTY PROPERTY. Any fixtures or personal property owned by
(i) the lessor under any Equipment Leases, (ii) the supplier or vendor under any
other Contracts, (iii) the tenant under any Tenant Leases, (iv) any Employees,
or (v) any guests or customers of the Hotel.
ARTICLE III
PURCHASE PRICE; EARNEST MONEY; LIKE-KIND EXCHANGE
Section 3.1 PURCHASE PRICE. The purchase price for the Property is Two
Hundred Forty-Three Million and no/100 Dollars ($243,000,000.00) (the "PURCHASE
PRICE"), which shall be adjusted at Closing for the Prorations and the Accounts
Receivable pursuant to Sections 10.1 and 10.2, respectively.
Section 3.2 ALLOCATION OF PURCHASE PRICE. Seller and Purchaser will agree
to an allocation of the Purchase Price among the Land, Improvements and Personal
Property at Closing for federal, state and local tax purposes. Seller and
Purchaser acknowledge and agree that the allocation at Closing shall represent
an arm's length agreement based on the Parties' good faith judgment as to the
fair market value of the Property. Seller and Purchaser shall file all federal,
state and local tax returns, in accordance with such allocation, as the same may
be adjusted pursuant to Sections 10.1 and 10.2 and in accordance with
Section 1060 and the regulations promulgated thereunder. This Section 3.2 shall
survive the Closing.
Section 3.3 EARNEST MONEY.
(a) EARNEST MONEY. Purchaser has deposited with Escrow Agent the amount of
Two Million and no/100 Dollars ($2,000,000.00) (the "INITIAL DEPOSIT"). If
Purchaser does not terminate this Agreement pursuant to the Due Diligence
Contingency, Purchaser shall deposit with Escrow Agent the additional amount of
Eighteen Million and no/100 Dollars ($18,000,000.00) within two (2) days of the
date hereof (the "ADDITIONAL DEPOSIT"; the term "EARNEST MONEY" shall refer to
the Initial Deposit from the date of this Agreement until the date on which the
Additional Deposit is made or required to have been made by Purchaser, and
thereafter shall refer to the Initial Deposit and Additional Deposit,
collectively. The Earnest Money shall be non-refundable to Purchaser, except as
otherwise expressly provided in this Agreement. The Earnest Money shall be held
by Escrow Agent in an escrow (the "EARNEST MONEY ESCROW") established pursuant
to an escrow agreement in the form attached hereto as Exhibit A, (the
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"EARNEST MONEY ESCROW AGREEMENT") entered into among Seller and Purchaser (or
their respective counsel) and Escrow Agent, and delivered to Escrow Agent
concurrently with the Initial Deposit.
(b) INVESTMENT OF EARNEST MONEY. The Earnest Money shall be invested in a
federally insured interest-bearing account pursuant to the Earnest Money Escrow
Agreement, and all interest earned on the Earnest Money shall be deemed
additional Earnest Money. All fees, costs and expenses of the Earnest Money
Escrow shall be shared equally between Seller and Purchaser, except that
Purchaser shall pay any fees, costs or expenses with respect to the investment
of the Earnest Money and Purchaser shall bear the risk of loss of the Earnest
Money.
(c) DISBURSEMENT OF EARNEST MONEY. At Closing, Purchaser shall cause
Escrow Agent to disburse the Earnest Money to Seller, and Purchaser shall
receive a credit against the Purchase Price in the amount of the Earnest Money
disbursed to Seller, or if this Agreement is terminated, the Earnest Money shall
be disbursed by Escrow Agent to Seller or Purchaser in accordance with the terms
of this Agreement.
(d) LETTER OF CREDIT. Notwithstanding the foregoing, the Earnest Money
may, at Purchaser's option, be in the form of an irrevocable standby letter of
credit having an expiration date of not earlier than December 31, 2000, issued
by The Chase Manhattan Bank in favor of Seller and deposited with Escrow Agent
in accordance with Section 3.3(a). If Purchaser elects to deposit the Earnest
Money in the form of a letter of credit pursuant to this Section 3.3(d),
Purchaser shall cause any such letter(s) of credit to be replaced with cash at
or prior to the Closing.
Section 3.4 PAYMENT OF PURCHASE PRICE. At Closing, Purchaser shall pay to
Seller by wire transfer of immediately available funds an amount equal to the
Purchase Price, PLUS or MINUS the Prorations (as the case may be) pursuant to
Section 10.1, PLUS the Current Accounts Receivables pursuant to Section 10.2,
and LESS the Earnest Money disbursed to Seller. Purchaser shall cause the wire
transfer of funds to be received by Seller no later than 4:00 p.m. (Eastern
Time) on the Closing Date. If Seller receives the wire transfer of funds from
Purchaser after 4:00 p.m. (Eastern Time) and is unable to reinvest such funds on
the Closing Date, then as a condition to the completion of the Closing,
Purchaser shall pay interest on the amount of such funds from the Closing Date
until the next Business Day at the "Prime Rate" charged by Seller's bank.
ARTICLE IV
DUE DILIGENCE; TITLE AND SURVEY
Section 4.1 DUE DILIGENCE.
(a) DUE DILIGENCE CONTINGENCY. Purchaser shall have the period from the
date of the Letter of Intent until 5:00 p.m. (Eastern Time) on January 18, 2000
(the "DUE DILIGENCE PERIOD"), to perform its due diligence review of the
Property and all matters related thereto which Purchaser deems advisable,
including, without limitation, with respect to engineering, environmental,
title, survey, financial, operational and legal compliance matters. If
Purchaser, in its sole discretion, is not satisfied with the results of its due
diligence review of the Property for any reason whatsoever, Purchaser shall have
the right to terminate this Agreement in accordance with Sections 12.2 and 12.3
by providing written notice to Seller prior to the expiration of the Due
Diligence Period (the "DUE DILIGENCE CONTINGENCY"). If Purchaser does not
terminate this Agreement pursuant to the Due Diligence Contingency prior to the
expiration of the Due Diligence Period in accordance with this Section 4.1(a),
Purchaser shall be deemed to have waived its rights to terminate this Agreement
pursuant to the Due Diligence Contingency, in which case the Earnest Money shall
be non-refundable to Purchaser, except as otherwise expressly provided in this
Agreement.
(b) DUE DILIGENCE INSPECTIONS. Purchaser, through its employees, agents
and representatives ("PURCHASER'S INSPECTORS"), shall have the right to perform
such examinations, tests, investigations and
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studies of the Property (the "INSPECTIONS") as Purchaser reasonably deems
advisable, in accordance with this Section 4.1, and Seller shall provide
reasonable access to the Property for Purchaser's Inspectors to perform the
Inspections; provided, however, that (i) Purchaser shall provide Seller with at
least twenty-four (24) hours prior notice of each of the Inspections;
(ii) Purchaser's Inspectors shall be accompanied by an employee, agent or
representative of Seller; provided, however, that Seller shall be deemed to have
waived its right to have an employee, agent or representative present if Seller
fails to make such person available to Purchaser within twenty-four (24) hours
after receipt from Purchaser of the notice required pursuant to clause (i)
immediately preceeding; (iii) the Inspections shall be conducted by Purchaser's
Inspectors during normal business hours; (iv) Purchaser's Inspectors shall not
perform any drilling, coring or other invasive testing, without Seller's prior
written consent, which consent may be withheld in Seller's sole discretion; and
(v) the Inspections shall not unreasonably interfere with the operations of the
Hotel, and Purchaser's Inspectors shall comply with Seller's requests with
respect to the Inspections to minimize such interference.
(c) SELLER'S DUE DILIGENCE MATERIALS. Purchaser acknowledges receipt of
the due diligence materials set forth in SCHEDULE A of the Letter of Intent.
Seller shall provide to Purchaser promptly upon request by Purchaser such
additional due diligence materials in Seller's Possession relating to the
Property which are reasonably requested by Purchaser. (All due diligence
documents and materials provided by Seller to Purchaser pursuant to the Letter
of Intent or this Agreement are referred to collectively herein as the "SELLER
DUE DILIGENCE MATERIALS"). This Section 4.1(c) shall survive the Closing.
(d) PURCHASER'S DUE DILIGENCE REPORTS. If requested by Seller, Purchaser
shall provide a copy to Seller of all non-privileged, final environmental,
engineering and other physical condition studies, reports, and assessments
prepared by any Person for or on behalf of Purchaser in connection with the
Inspections (the "PURCHASER DUE DILIGENCE REPORTS").
(e) RELEASE AND INDEMNIFICATION. Purchaser shall, at its cost and expense,
repair any damage to the Property or any other property owned by a Person other
than Purchaser arising from or in connection with the Inspections, and restore
the Property or such other third-party property to the same condition as existed
prior to such Inspections. Purchaser hereby releases the Seller Indemnitees for
any Losses incurred by any of the Purchaser Indemnitees directly arising from or
in connection with the Inspections, except for Seller's gross negligence or
intentional misconduct. Purchaser shall defend, indemnify and hold harmless the
Seller Indemnitees from and against any Losses incurred by any Seller
Indemnitees arising from or in connection with the Inspections. This
Section 4.1(e) shall survive the termination of this Agreement and the Closing.
Section 4.2 TITLE AND SURVEY.
(a) TITLE COMMITMENT. Seller shall obtain and deliver to Purchaser no
later than ten (10) days prior to the expiration of the Due Diligence Period, a
commitment for a CLTA owner's title insurance policy from the Title Company for
the Real Property, showing Seller as the owner in fee simple of the Real
Property (the "TITLE COMMITMENT"), together with a copy of all documents
referenced therein obtained by the Title Company.
(b) SURVEY. Seller shall obtain and deliver to Purchaser, no later than
five (5) days prior to the expiration of the Due Diligence Period, a survey of
the Real Property, dated no earlier than the date of this Agreement, prepared by
a duly licensed surveyor, in accordance with the ALTA/ACSM Minimum Standard
Detail Requirements for Land Title Surveys, certified to Purchaser and the Title
Company (the "SURVEY").
(c) IDENTIFICATION OF UNPERMITTED EXCEPTIONS. If (i) the Title Commitment
discloses any exceptions to title (the "TITLE EXCEPTIONS") not acceptable to
Purchaser, or (ii) the Survey discloses any encroachments by improvements on
adjoining properties onto or over the Land, any encroachments of the
Improvements onto or over adjoining properties, setback lines or easements (to
the extent in
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violation thereof) or other matters (the "SURVEY DEFECTS") not acceptable to
Purchaser, Purchaser shall provide written notice to Seller of Purchaser's
objections to Title Exceptions and Survey Defects (the "TITLE OBJECTION LETTER")
promptly after determining that such matters are not acceptable, but in no event
later than the expiration of the Due Diligence Period. (The Title Exceptions and
Survey Defects set forth in any Title Objection Letter are referred to
collectively herein as the "UNPERMITTED EXCEPTIONS". All (i) Title Exceptions
disclosed in the Title Commitment and all matters disclosed on the Survey in
each case not objected to by Purchaser in any Title Objection Letter,
(ii) rights of tenants under the Tenant Leases, as tenants only without any
purchase options or rights of first refusal with respect to the Property, and
(iii) all liens and encumbrances created by Purchaser are referred to
collectively herein as the "PERMITTED EXCEPTIONS".) If Purchaser does not
provide a Title Objection Letter to Seller prior to the expiration of the Due
Diligence Period, Purchaser shall be deemed to have waived all objections to any
Title Exceptions and all Survey Defects, in which case all such Title Exceptions
and Survey Defects shall be deemed Permitted Exceptions.
(d) REMOVAL OF UNPERMITTED EXCEPTIONS. Seller shall have no obligation to
cure any Unpermitted Exceptions, except for (i) any mortgages, deeds of trust or
other security interests for any financing incurred by Seller which is not
assumed by Purchaser under this Agreement, (ii) Taxes which would delinquent if
unpaid at Closing, and (iii) any other Unpermitted Exceptions which may be
removed by payment of a liquidated amount which in the aggregate does not exceed
One Million and no/100 Dollars ($1,000,000.00). Seller may cure any Unpermitted
Exceptions by removing such Unpermitted Exceptions from title or causing the
Title Company to waive or commit to insure over such Unpermitted Exception on
the Title Policy in a manner reasonably acceptable to Purchaser and its lenders.
If Seller (i) elects not to cure any Unpermitted Exception(s) (other than the
Unpermitted Exceptions Seller is required to cure under this Section 4.2(d)) or
(ii) determines, in its sole discretion, that it will not be able to cure any
Unpermitted Exception(s) prior to Closing, Seller shall provide written notice
to Purchaser of any such uncured Unpermitted Exception(s) (the "FAILURE TO CURE
NOTICE") within ten (10) Business Days of receipt of a Title Objection Letter,
in which case Purchaser shall have the option, to be exercised by delivery of
written notice to Seller within five (5) Business Days after delivery of the
Failure to Cure Notice, to (i) terminate this Agreement, in accordance with
Sections 12.2 and 12.3, or (ii) proceed to Closing under this Agreement and
accept title to the Real Property, subject to such uncured Unpermitted
Exception(s) (which shall thereafter be deemed to be Permitted Exceptions),
without any credit against the Purchase Price for any such uncured Unpermitted
Exception(s). If Purchaser does not terminate this Agreement under clause (i) of
the preceding sentence within such five (5) Business Day period, Purchaser shall
be deemed to have elected the option in clause (ii) of the preceding sentence.
(e) OTHER TITLE COMPANY. If the Title Company does not agree to remove,
waive or insure over any Unpermitted Exception(s), but another nationally
recognized title insurance company reasonably acceptable to Purchaser and its
lenders is willing to issue the Title Policy without such Unpermitted
Exception(s), then Seller shall have the right to obtain, and Purchaser shall
accept, a Title Policy from such other title insurance company which otherwise
shall satisfy the requirements of Section 8.2(d) (in which case the term "Title
Company" shall be deemed to refer to such other title insurance company, and
term "Escrow Agent" shall be deemed to refer to the escrow agent of such other
title insurance company for all purposes in this Agreement).
(f) EXTENSION OF CLOSING DATE. If Seller is unable to cure any Unpermitted
Exceptions prior to Closing, Seller shall have the right to postpone the Closing
and extend the Closing Date for up to thirty (30) days by providing written
notice to Purchaser no later than five days prior to the originally scheduled
closing date; PROVIDED, HOWEVER, that in no event may the Closing Date be
extended beyond June 26, 2000.
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Section 4.3 STARWOOD BOARD APPROVAL
(a) STARWOOD'S BOARD APPROVAL. Purchaser acknowledges and agrees that
Seller's obligations under this Agreement shall be subject to Seller obtaining
the approval of Starwood's board of directors or a duly authorized executive
committee (the "STARWOOD BOARD APPROVAL"). Seller shall provide written notice
to Purchaser promptly upon obtaining the Starwood Board Approval (the "STARWOOD
BOARD APPROVAL NOTICE"). If Seller does not provide the Starwood Board Approval
Notice to Purchaser on or before January 21, 2000 (the "STARWOOD BOARD APPROVAL
PERIOD"), Seller shall be deemed not to have obtained the Starwood Board
Approval, and Purchaser and Seller shall have the right to terminate this
Agreement after the expiration of the Starwood Board Approval Period and prior
to receipt thereafter of the Starwood Board Approval Notice, by providing
written notice to the other, in which case Escrow Agent shall refund the Earnest
Money to Purchaser, and Seller and Purchaser shall have no further rights or
obligations under this Agreement, except those which expressly survive such
termination.
ARTICLE V
SELLER'S REPRESENTATIONS AND WARRANTIES
Section 5.1 REPRESENTATIONS AND WARRANTIES. To induce Purchaser to enter
into this Agreement and to consummate the transaction contemplated herein,
Seller hereby makes the representations and warranties in this Section 5.1,
subject to the limitations set forth in Sections 5.2, 5.3 and 5.4, upon which
Seller acknowledges and agrees that Purchaser is entitled to rely.
(a) ORGANIZATION AND POWER. Seller is duly formed or organized, validly
existing, in good standing in the jurisdiction of its formation or organization,
and is qualified to do business in the jurisdiction in which the Hotel is
located, and has all requisite power and authority to own and operate the Hotel
as currently owned and operated.
(b) AUTHORITY AND BINDING OBLIGATION. Subject to the Seller Approval and
Starwood Board Approval, (i) Seller has full power and authority to execute and
deliver this Agreement and all documents now or hereafter to be executed and
delivered by Seller under this Agreement, and to perform all obligations arising
under this Agreement and such other documents, (ii) the execution by the
undersigned on behalf of Seller, and the delivery and performance of this
Agreement by Seller has been duly and validly authorized by all necessary action
on the part of Seller, and (iii) this Agreement and such other documents now or
hereafter to be executed and delivered by Seller under this Agreement, when
executed and delivered, will each constitute the legal, valid and binding
obligations of Seller enforceable against Seller in accordance with its terms.
(c) CONSENTS AND APPROVALS; NO CONFLICTS. Subject to receipt of the Seller
Approval and the recordation of the Deed and except as disclosed in
SCHEDULE 5.1(C), (i) no filing with, and no permit, authorization, consent or
approval of, any Governmental Authority or other Person is necessary for the
consummation by Seller of the transaction contemplated by this Agreement, except
to the extent the failure to obtain such permit, authorization, consent or
approval would not have a material adverse effect on the ownership or operation
of the Hotel, and (ii) neither the execution and delivery of this Agreement by
Seller, nor the consummation by Seller of the transaction contemplated under
this Agreement, nor compliance by Seller with any of the terms of this Agreement
will: (A) violate any provision of Seller's organizational or governing
documents; (B) violate any Applicable Law to which Seller is subject; or
(C) result in a violation or breach of, or constitute a default under any of the
Material Contracts, or (D) result in the creation or imposition of any lien or
encumbrance on the Property or any portion thereof.
(d) TITLE TO PERSONAL PROPERTY. Except as set forth in SCHEDULE 5.1(D),
Seller has not pledged, assigned, hypothecated or transferred any of its right,
title or interest in any Personal Property, and Seller has good and valid title
to all tangible Personal Property, which in each case shall be free and clear of
all liens and encumbrances as of the Closing.
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(e) CONDEMNATION. Seller has not received any written notice of any
condemnation or other proceedings in eminent domain, and to Seller's Knowledge,
no such condemnation or eminent domain proceedings are threatened or pending
against Seller or the Property or any portion thereof.
(f) COMPLIANCE WITH APPLICABLE LAW. Except as set forth in Section 5.1(j)
and SCHEDULE 5.1(F), Seller has not received any written notice of a violation
of any Applicable Law with respect to the Hotel which has not been cured or
dismissed.
(g) LITIGATION. Except as set forth in Section 5.1(h) and 5.1(j) and in
SCHEDULE 5.1(G), Seller has not (i) been served with any court filing in any
litigation with respect to the Hotel in which Seller is named a party, or
(ii) received written notice of any charge or complaint from any Governmental
Authority or other Person pursuant to any administrative, arbitration or similar
adjudicatory proceeding with respect to the Hotel which has not been settled or
dismissed and to Seller's Knowledge, there are no actions, suits or proceedings
pending against Seller or the Property or affecting any of Seller's rights with
respect to all or any portion of the Property, before or by any federal, state,
municipal or other governmental agency or instrumentality, nor has Seller
received any written notice of any such action, suit or proceeding.
(h) EMPLOYEES/BENEFIT PLANS.
(i) Except for the Union Contracts, Seller is not a party to any collective
bargaining agreement with any labor union. None of the Employees are
employed by Seller. Seller has made available to Purchaser a correct and
complete copy of the Union Contracts (including all amendments,
modifications and other agreements with respect thereto).
(ii) Except as set forth in Schedule 5.1(h), Seller has not (i) been
served with any court filing in any litigation with respect to the
Employees in which Seller is a named party, or (ii) received
written notice from any Employee, Governmental Authority or other
Person making a formal charge, complaint, or request for a
grievance or arbitration proceeding against Seller alleging a
breach or default under the Union Contracts or a violation of any
Applicable Law relating to the employment or service relationship
of the Employees.
(iii) Schedule 5.1(h)(iii) identifies each Employee Plan.
(iv) No Employee Plan is a Title IV Plan.
(v) The assets of the Seller are not now, nor will they after the
passage of time be, subject to any lien imposed under code
Section 412(m) by reason of a failure of any of the Seller, or its
Affiliates to make timely installments or other payments required
under Code Section 412.
(vi) Each Employee Plan has been maintained in substantial compliance
with its terms and with the requirements prescribed by any and all
applicable statutes, orders and regulations, including but not
limited to ERISA and the Code.
(vii) Neither the Seller nor any of its Affiliate has any current or
projected liability in respect of post-employment or
post-retirement health or medical or life insurance benefits for
retired, Employees, except as required to avoid excise tax under
Section 4980B of the Code.
(viii) There is no contract, plan or arrangement (written or otherwise)
covering any Employee that, individually or collectively, could
give rise to the payment of any amount that would not be deductible
pursuant to the terms of Section 280G of the Code.
(ix) No Employee will become entitled to any bonus, retirement,
severance, job security or similar benefit or enhanced such benefit
(including acceleration of vesting or exercise of an incentive
award) as a result of the transactions contemplated hereby.
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(i) TAXES. Except as disclosed in SCHEDULE 5.1(I), (i) all Taxes imposed
on Seller which would be delinquent if unpaid are paid in full or will be
prorated at Closing as part of the Prorations pursuant to Section 10.1,
(ii) Seller has not received any written notice for an audit of any Taxes which
is pending, and (iii) Seller is not currently contesting any Taxes.
(j) ENVIRONMENTAL MATTERS. SCHEDULE 5.1(J) sets forth a correct and
complete list of all non-privileged environmental assessments, reports and
studies relating to the Hotel in Seller's Possession or Seller's control (the
"ENVIRONMENTAL REPORTS"), and Seller has made available to Purchaser a true and
complete copy of the Environmental Reports. Seller has not received any written
notice from any Governmental Authority or other Person of any Environmental
Claims, Environmental Liabilities or violation of any Environmental Laws with
respect to the Hotel or any other Property. To Seller's Knowledge, there has
been no material violation of any Environmental Laws at or relating to the
Property, except to the extent, if any, described in the Environmental Reports.
(k) PERMITS. SCHEDULE 5.1(K) sets forth all of the Licenses and Permits
held by Seller which are necessary for the ownership, use, maintenance and
operation of the Hotel as currently owned and operated and, as applicable, to
the other Property and, except as specifically set forth in SCHEDULE 5.1(K),
Seller has made available to Purchaser a true and complete copy of each of the
Licenses and Permits. Seller has not received any written notice from any
Governmental Authority or other Person of (i) any violation, non-renewal,
suspension or revocation of any Licenses and Permits with respect to the Hotel
that has not been dismissed or cured, or (ii) any failure by Seller to obtain
any License or Permit required for the ownership, maintenance, use, occupancy or
operation of the Hotel or, as applicable, other Property, that has not been
dismissed or cured. To Seller's Knowledge, each License and Permit set forth in
Schedule 5.1(k) is in good standing and in full force and effect
(l) TENANT LEASES. SCHEDULE 5.1(L) sets forth a correct and complete list
of the Tenant Leases and Seller has delivered to Purchaser a true and complete
copy of the Tenant Leases (including all amendments, modifications and other
agreements with respect thereto). Except as set forth in SCHEDULE 5.1(L):
(i) Seller has neither given nor received any written notice of any breach or
default under any of the Tenant Leases and, to Seller's Knowledge, there are no
material defaults under any of the Tenant Leases by any of the parties
thereunder; (ii) no tenant under any Tenant Lease has paid rent for more than
one month in advance or claims or is entitled to any offset against rent;
(iii) Seller is not required to perform any decorating or alterations or any
other work in any tenant's space or furnish any equipment for any tenant under
any Tenant Lease; (iv) no tenant under any Tenant Lease has an option to
purchase the Property or any portion thereof; (v) there are no security deposits
under any Tenant Leases; (vi) Seller has not assigned any of its rights under
any of the Tenant Leases; (vii) there are no brokerage commissions or finder's
fees payable with respect to the current or renewal term of any of the Tenant
Leases or the negotiation of any new Tenant Lease; and (viii) there are no
pending actions or proceedings instituted against Seller by any tenant under any
Tenant Lease.
(m) CONTRACTS. SCHEDULE 5.1(m) SETS FORTH A CORRECT AND COMPLETE LIST OF
THE MATERIAL CONTRACTS AND SELLER, TO SELLER'S KNOWLEDGE, HAS MADE AVAILABLE TO
PURCHASER A TRUE AND COMPLETE COPY OF EACH OF THE CONTRACTS (INCLUDING ALL
AMENDMENTS, MODIFICATIONS AND OTHER AGREEMENTS WITH RESPECT THERETO). EXCEPT AS
SET FORTH ON SCHEDULE 5.1(M), Seller has neither given nor received any written
notice of any breach or default under any of the Material Contracts which has
not been cured and, to Seller's Knowledge, there are no defaults under any of
the Material Contracts by any of the parties thereunder.
(n) MANAGEMENT AGREEMENTS. Except for the Management Agreement, Seller is
not a party to any management, franchise, license, concession or other agreement
for the management or operation of the Hotel.
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(o) BOOKINGS. SCHEDULE 5.1(O) sets forth a correct list of all Bookings
for the Hotel as of a date which is not earlier than ten (10) Business Days
prior to the date of this Agreement, which shall be updated at Closing to a date
which is not earlier than ten (10) Business Days prior to Closing; provided,
however, that such list of Bookings shall be redacted to exclude all information
identifying the particular Persons holding such Bookings.
(p) INSURANCE. SCHEDULE 5.1(P) sets forth a correct and complete list of
each insurance policy maintained by Seller with respect to the Hotel.
(q) FINDERS AND INVESTMENT BROKERS. Except for the Broker, Seller has not
dealt with any Person who has acted, directly or indirectly, as a broker,
finder, financial adviser or in such other capacity for or on behalf of Seller
in connection with the transaction contemplated by this Agreement in a manner
which would entitle such Person to any fee or commission in connection with this
Agreement or the transaction contemplated in this Agreement.
(r) FOREIGN PERSON. Seller is not a "foreign partnership" for purposes of
the withholding provisions of Section 1445 of the Code.
(s) REAL PROPERTY AND IMPROVEMENTS. The Real Property and the Improvements
constitute all of the real property and improvements owned by Seller. Except as
provided in this Agreement, the Real Property is not subject to any outstanding
contract of sale or purchase option in favor of any Person.
(t) EQUIPMENT LEASES. Other than the equipment leases set forth in
SCHEDULE 5.1(T), there are no other equipment leases to which Seller is a party
affecting the ownership, use, operation or maintenance of the Property or
affecting the existence, use, ownership, occupancy, operation and/or maintenance
of any personal property used in the operation of the Hotel.
(u) BANKRUPTCY. No insolvency proceeding of any character (including
bankruptcy, receivership, reorganization, composition or arrangement with
creditors (including any assignment for the benefit of creditors)), voluntary or
involuntary, relating to Seller or the Property is pending, or, to Seller's
Knowledge, is being threatened against Seller by any Person.
(v) CONSTRUCTION DISPUTES. Except as set forth on Schedule 5.1(v), to
Seller's Knowledge, there are no disputes pending between Seller and any
mechanic or materialman with respect to work or materials furnished to the
Hotel, and to Seller's Knowledge no work which has been performed or materials
which have been supplied is likely to give rise to such a dispute. At the
Closing, there will be no unpaid bills with respect to any work or materials
furnished to the Hotel under any Material Contract which, if unpaid, could
result in a mechanics' or materialmen's lien being filed on the Hotel.
(w) TRANSIENT GUESTS. As of the date hereof, there are no guests at the
Hotel who have maintained occupancy at the Hotel for a period in excess of
thirty (30) consecutive days.
(x) PREPAID FEES AND DEPOSITS. SCHEDULE 5.1(X) sets forth a list of each
prepaid fee, reservation, advanced payment and deposit in excess of $10,000.00
relating to the Hotel.
(y) TRADE ASSOCIATIONS. SCHEDULE 5.1(Y) sets forth all trade associations
to which Seller or Manager belongs and the respective dues and fees therefor.
(z) FINANCIAL AND OPERATING STATEMENTS. Seller has furnished Purchaser
with true, correct and complete copies of the annual financial statements for
the Hotel for the year ended December 31, 1998 (collectively, the "FINANCIAL
STATEMENTS"), and unaudited monthly operating statements of the Hotel for
January through December 31, 1999 (collectively, the "OPERATING STATEMENTS").
The Financial Statements and Operating Statements fairly present the financial
condition and results from operations of the Hotel. To Seller's Knowledge, no
event, act or condition has occurred which has had (or could reasonably be
expected to result in) a material adverse change in the financial condition of
the Hotel,
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since the date of the most recent Financial Statements and Operating Statements
delivered to Purchaser.
(aa) TAXES. Seller has paid, or by the Closing date will pay, all Taxes
due and payable in connection with the ownership and operation of the Property
on or before the Closing Date. Seller (i) is not a party to any action or
proceeding to abate any Taxes, nor is aware of any proceeding by any
governmental authority for enforcement of collection of Taxes, and (ii) has not
granted any waiver of any statute of limitation with respect to, or any
extension of a period for, the assessment of any Taxes.
Section 5.2 LIMITATION ON SELLER'S REPRESENTATIONS AND WARRANTIES.
PURCHASER ACKNOWLEDGES AND AGREES THAT, EXCEPT AS OTHERWISE EXPRESSLY SET FORTH
IN THIS AGREEMENT OR ANY CLOSING DOCUMENT, (I) THE PURCHASE OF THE PROPERTY
SHALL BE ON AN "AS IS", "WHERE IS", "WITH ALL FAULTS BASIS", SUBJECT TO
REASONABLE WEAR AND TEAR FROM THE DATE OF THIS AGREEMENT UNTIL CLOSING, AND
(II) NEITHER SELLER, STARWOOD, MANAGER OR ANY OF THEIR AFFILIATES, NOR ANY OF
THEIR RESPECTIVE DIRECTORS, OFFICERS, MANAGERS, EMPLOYEES, AGENTS OR
REPRESENTATIVES, NOR ANY PERSON PURPORTING TO REPRESENT ANY OF THE FOREGOING,
HAVE MADE ANY REPRESENTATION, WARRANTY, GUARANTY, PROMISE, PROJECTION OR
PREDICTION WHATSOEVER WITH RESPECT TO THE HOTEL OR ANY ASPECT THEREOF OR THE
PROPERTY OR ANY PORTION THEREOF, WRITTEN OR ORAL, EXPRESS OR IMPLIED, ARISING BY
OPERATION OF LAW OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR ANY REPRESENTATION OR
WARRANTY AS TO (A) THE CONDITION, QUANTITY, QUALITY, USE, OCCUPANCY OR OPERATION
OF THE PROPERTY OR ANY PORTION THEREOF, (B) THE PAST, PRESENT OR FUTURE REVENUES
OR EXPENSES WITH RESPECT TO THE HOTEL, (C) THE COMPLIANCE OF THE PROPERTY OR ANY
PORTION THEREOF OR THE OPERATION OF THE HOTEL WITH ANY ZONING REQUIREMENTS,
BUILDING CODES OR OTHER APPLICABLE LAW, OR (D) THE ACCURACY OF ANY ENVIRONMENTAL
REPORTS OR OTHER INFORMATION SET FORTH IN THE SELLER DUE DILIGENCE MATERIALS
PROVIDED TO PURCHASER WHICH WERE PREPARED FOR OR ON BEHALF OF SELLER. PURCHASER
ACKNOWLEDGES AND AGREES THAT PURCHASER IS NOT RELYING ON ANY STATEMENT MADE OR
INFORMATION PROVIDED TO PURCHASER BY SELLER, STARWOOD, MANAGER OR ANY OF THEIR
AFFILIATES, OR ANY OF THEIR RESPECTIVE DIRECTORS, MANAGERS, OFFICERS, EMPLOYEES,
AGENTS OR REPRESENTATIVES, OR ANY PERSON PURPORTING TO REPRESENT ANY OF THE
FOREGOING, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY MADE BY
SELLER IN THIS AGREEMENT.
Purchaser's Initials _______
Section 5.3 AMENDMENT TO SCHEDULES. Notwithstanding anything to the
contrary in this Agreement, Seller shall have the right to amend and supplement
the schedules to this Agreement from time to time prior to Closing to the extent
Seller did not have Knowledge as of the date of this Agreement of the matter
being disclosed in such amendment or supplement by providing a written copy of
such amendment or supplement to Purchaser; provided, however, that any amendment
or supplement to the schedules to this Agreement made after the expiration of
the Due Diligence Period shall have no effect for the purposes of determining
whether the Purchaser Closing Conditions, including, without limitation,
Sections 8.2(b) and 8.2(c), have been satisfied, but shall have effect only for
the purposes of limiting the defense and indemnification obligations of Seller
for the inaccuracy or untruth of the representation or warranty qualified by
such amendment or supplement.
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Section 5.4 EFFECT OF PURCHASER'S KNOWLEDGE. If Purchaser has Knowledge
prior to Closing of a breach of any representation or warranty made by Seller in
this Agreement and Purchaser nevertheless elects to close this transaction, such
representation or warranty by Seller with respect to such matter shall be deemed
to be modified to reflect such Purchaser's Knowledge.
ARTICLE VI
PURCHASER'S REPRESENTATIONS AND WARRANTIES
Section 6.1 REPRESENTATIONS AND WARRANTIES. To induce Seller to enter into
this Agreement and to consummate the transaction contemplated hereby, Purchaser
hereby makes the representations and warranties in this Section 6.1, subject to
the limitation in Section 6.2, upon which Purchaser acknowledges and agrees that
Seller is entitled to rely.
(a) ORGANIZATION AND POWER. Purchaser is duly organized, validly existing
and in good standing under the laws of the State of Delaware, and has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted.
(b) AUTHORITY AND BINDING OBLIGATION. (i) Purchaser has full power and
authority to execute and deliver this Agreement and all documents now or
hereafter to be executed and delivered by Purchaser under this Agreement, and to
perform all obligations arising under this Agreement and such other documents,
(ii) the execution by the undersigned on behalf of Purchaser, and the delivery
and performance of this Agreement by Purchaser has been duly and validly
authorized by all necessary partnership action on the part of Purchaser, and
(iii) this Agreement and such other documents now or hereafter to be executed
and delivered by Purchaser under this Agreement, when executed and delivered,
will each constitute the legal, valid and binding obligations of Purchaser
enforceable against Purchaser in accordance with its terms, except to the extent
Seller itself is in default hereunder.
(c) CONSENTS AND APPROVALS; NO CONFLICTS. (i) no filing with, and no
permit, authorization, consent or approval of, any Governmental Authority or
other Person is necessary for the consummation by Purchaser of its obligations
under this Agreement, and (ii) neither the execution and delivery of this
Agreement by Purchaser, nor the consummation by Purchaser of the transaction
contemplated under this Agreement, nor compliance by Purchaser with any of the
terms of this Agreement will: (A) violate any provision of the organizational or
governing documents of Purchaser; (B) violate any Applicable Law to which
Purchaser is subject; or (C) result in a violation or breach of or constitute a
default under any contract, agreement or other instrument or obligation to which
Purchaser is a party or by which any of Purchaser's properties are subject.
(d) FINDERS AND INVESTMENT BROKERS. Except for Broker, Purchaser has not
dealt with any Person who has acted, directly or indirectly, as a broker,
finder, financial adviser or in such other capacity for or on behalf of
Purchaser in connection with the transaction contemplated by this Agreement in
any manner which would entitle such Person to any fee or commission in
connection with this Agreement or the transaction contemplated in this
Agreement.
Section 6.2 EFFECT OF SELLER'S KNOWLEDGE. If Seller has Knowledge prior to
Closing of a breach of any representation or warranty made by Purchaser in this
Agreement and Seller nevertheless elects to close this transaction, such
representation or warranty by Purchaser with respect to such matter shall be
deemed to be modified to reflect such Seller's Knowledge.
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ARTICLE VII
COVENANTS
Section 7.1 CONFIDENTIALITY.
(a) DISCLOSURE OF CONFIDENTIAL INFORMATION; PUBLIC ANNOUNCEMENTS. Seller
and Purchaser shall keep confidential and not make any public announcement or
disclose to any Person the existence or any terms of this Agreement, any
information disclosed by the Inspections or in the Seller Due Diligence
Materials or Purchaser Due Diligence Reports, and any other documents,
materials, data or other information with respect to the Hotel which is not
generally known to the public (the "CONFIDENTIAL INFORMATION") provided,
however, that Seller and Purchaser shall be permitted to (i) disclose any
Confidential Information to the extent required by court order or under
Applicable Law, (ii) make a public announcement regarding the transaction
contemplated in this Agreement after the expiration of the Due Diligence Period,
provided that Seller and Purchaser shall approve the form and substance of any
such public announcement, which approval shall not be unreasonably withheld,
conditioned or delayed, or (iii) disclose any Confidential Information to any
Person on a "need-to-know" basis, such as their respective directors, officers,
partners, members, employees, attorneys, accountants, engineers, surveyors,
consultants, lenders, investors, managers, franchisors and such other Persons
whose assistance is required to consummate the transactions contemplated in this
Agreement; provided, however, that Seller or Purchaser (as the case may be)
shall (a) advise such Person of the confidential nature of such Confidential
Information, and (b) use commercially reasonable efforts to cause such Person to
maintain the confidentiality of such information; provided, however, that except
for the obligations of Seller and Purchaser to use such commercially reasonable
efforts, neither Seller nor Purchaser shall be liable for any breach of
confidentiality by such Person. If this Agreement is terminated, Purchaser
promptly shall return all Seller Due Diligence Materials to Seller, and if
requested by Seller, Purchaser shall provide a copy of all Purchaser Due
Diligence Reports to Seller. This Section 7.1(a) shall survive the Closing.
(b) COMMUNICATION WITH EMPLOYEES. Purchaser shall not, through its
employees, agents, representatives or any other Person, directly or indirectly,
initiate or pursue any communication with any Employees or any employees of
Starwood, or their respective Affiliates involving any matter with respect to
the Hotel, such employees, the Letter of Intent or this Agreement, other than
Joseph D. Long and Michael Cassidy and such additional employees as may be
approved by either of them, without Seller's prior consent, which consent may be
withheld in Seller's sole discretion, unless such communication is arranged by
Seller. If Purchaser breaches its covenants in this Section 7.1(b), Seller shall
have the right to terminate this Agreement, in which case Escrow Agent shall
refund the Earnest Money to Purchaser, and Seller and Purchaser shall have no
further rights or obligations under this Agreement, except those which expressly
survive such termination.
Section 7.2 OPERATION OF THE HOTEL PRIOR TO CLOSING.
(a) OPERATION IN ORDINARY COURSE OF BUSINESS. From the date of this
Agreement until the Closing or earlier termination of this Agreement, Seller
shall operate the Hotel in the Ordinary Course of Business, including, without
limitation, (i) maintaining all existing insurance coverages as set forth in
SCHEDULE 5.1(P), (ii) maintaining the inventories of Supplies, F&B and Retail
Merchandise and any other consumables in the Ordinary Course of Business, and
(iii) performing maintenance and repairs for the Hotel in the Ordinary Course of
Business. Notwithstanding the foregoing, Seller will not, without the consent of
Purchaser, which consent shall not be unreasonably withheld, (i) undertake
capital improvements or expenditures costing in the aggregate in excess of
Twenty-Five Thousand and no/100 Dollars ($25,000.00) and which are not
contemplated under the 2000 Cap Ex Budget (as defined below), (ii) amend, modify
or extend or renew or terminate any existing Tenant Lease or (iii) enter into
any leases or lease amendments or modifications with respect to the Hotel prior
to the Closing. After the expiration of the Due Diligence Period and until the
Closing or earlier termination
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of this Agreement, Seller and Purchaser shall have meetings at the Hotel at
reasonable times and upon reasonable notice no less frequently than monthly, and
Seller shall provide Purchaser with (i) monthly reports relating to the
ownership and operation of the Hotel and (ii) copies of all notices received by
Seller relating to the ownership and operation of the Hotel, including those
received under the Management Agreement. After the expiration of the Due
Diligence Period and until the Closing or earlier termination of this Agreement,
Purchaser shall have the right to solicit estoppel certificates in form and
substance reasonably satisfactory to Purchaser from tenants under the Tenant
Leases.
(b) CONTRACTS. From the date of this Agreement until the Closing or
earlier termination of this Agreement, Seller shall not, without Purchaser's
consent, which shall not be unreasonably withheld (i) amend, modify or extend or
renew or terminate any existing Material Contracts, nor (ii) enter into any new
Material Contracts, unless such new Contracts are terminable by Purchaser,
without any termination fee, upon not more than thirty (30) days notice.
Section 7.3 LICENSES AND PERMITS. Subject to Section 8.1(c) and this
Section 7.3, Purchaser shall be responsible for obtaining the transfer of all
Licenses and Permits (to the extent transferable) or the issuance of new
licenses and permits, including, without limitation, the licenses and permits
required for the sale and service of alcoholic beverages at the Hotel (the
"LIQUOR LICENSE"). Purchaser, at its cost and expense, shall submit all
necessary applications and other materials to the appropriate Governmental
Authority and take such other actions to effect the transfer of Licenses and
Permits or issuance of new licenses and permits, including, without limitation,
the Liquor License, as of the Closing, and Seller shall use commercially
reasonable efforts (at no cost or expense to Seller other than any DE MINIMIS
cost or expense or any cost or expense which Purchaser agrees in writing to
reimburse) to cooperate with Purchaser to cause the Licenses and Permits to be
transferred or new licenses and permits to be issued to Purchaser.
Notwithstanding anything to the contrary in this Section 7.3, Purchaser shall
not post any notices at the Hotel or publish any notices required for the
transfer of the Licenses or Permits or issuance of new licenses and permits,
including, without limitation, the Liquor License, prior to the expiration of
the Due Diligence Period. Purchaser will use all commercially reasonable efforts
(i) to file with the appropriate Governmental Authority the necessary
application or documentation in order to obtain the transfer of the Liquor
License or issuance of a temporary liquor license on the Closing Date within
ninety (90) days after the expiration of the Due Diligence Period and (ii) to
cause the appropriate Governmental Authority to transfer the Liquor License to
Purchaser or issue a temporary Liquor License to Purchaser on the Closing Date.
A portion of the Purchase Price equal to Twenty-five Thousand Dollars
($25,000.00) shall be allocated to the sale of the Liquor License. To the extent
at the Closing such transfer of the Liquor License or issuance of a temporary
liquor license has not occurred, Seller shall cause the holder of the Liquor
License, an Affiliate of Seller, to enter into an agreement with Purchaser in
the form attached as Exhibit B. This Section 7.3 shall survive the Closing.
Section 7.4 EMPLOYEE MATTERS.
(a) UNION EMPLOYEES; ASSUMPTION OF UNION CONTRACTS. Upon the assignment of
Seller's obligations under the Union Contracts to Purchaser at Closing,
Purchaser shall assume all liabilities and obligations of Seller arising or
accruing under the Union Contracts on or after the Closing Date, and Purchaser
shall (and shall cause its manager to) comply with the terms of the Union
Contracts, including, without limitation, hiring or continuing the employment of
the Union Employees upon Closing to the extent required thereunder, on such
terms and with such compensation, health, welfare and other benefits for the
Union Employees as required thereunder; PROVIDED, HOWEVER, Seller shall retain
all liability in connection with the assignment of the Union Contracts.
(b) EMPLOYMENT CLAIMS. Seller shall retain all liabilities and obligations
in connection with any employment claims, charges or grievances by any Employees
based on events or occurrences through and including the Closing Date. Purchaser
shall assume all liabilities and obligations in connection with
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any employment claims, charges or grievances by any Employees based on events or
occurrences after the Closing Date.
(c) EMPLOYEE PLAN OBLIGATIONS. Notwithstanding any other provision of this
Agreement to the contrary, except for obligations and liabilities expressly
assumed by Purchaser under the Union Contract relating to events occurring after
the Closing Date, Seller and its Affiliates shall retain and assume all
obligations and liabilities arising under, or in respect of, any Employee Plan,
regardless of when incurred.
(d) SURVIVAL. The provisions of this Section 7.4 shall survive the
Closing.
Section 7.5 BOOKINGS. Purchaser shall honor all Bookings for any period on
or after the Closing Date. This Section 7.5 shall survive the Closing.
Section 7.6 TAX CONTESTS.
(a) TAXABLE PERIOD TERMINATING PRIOR TO CLOSING DATE. Seller shall retain
the right to commence, continue and settle any proceeding to contest any Taxes
for any taxable period which terminates prior to the Closing Date, and shall be
entitled to any refunds or abatements of Taxes awarded in such proceedings.
(b) TAXABLE PERIOD INCLUDING THE CLOSING DATE. Seller shall have the right
to commence, continue and settle any proceeding to contest any Taxes for any
taxable period which includes the Closing Date. Notwithstanding the foregoing,
if Purchaser desires to contest any Taxes for such taxable period and Seller has
not commenced any proceeding to contest any such Taxes for such taxable period,
Purchaser shall provide written notice requesting that Seller contest such
Taxes. If Seller desires to contest such Taxes, Seller shall provide written
notice to Purchaser within thirty (30) days after receipt of Purchaser's request
confirming that Seller will contest such Taxes, in which case Seller shall
proceed to contest such Taxes, and Purchaser shall not have the right to contest
such Taxes. If Seller fails to provide such written notice confirming that
Seller will contest such Taxes within such thirty (30) day period, Purchaser
shall have the right to contest such Taxes. Any refunds or abatements awarded in
such proceedings shall be used first to reimburse the Party contesting such
Taxes for the reasonable costs and expenses incurred by such Party in contesting
such Taxes, and the remainder of such refunds or abatements shall be prorated
between Seller and Purchaser as of the Cut-Off Time, and the Party receiving
such refunds or abatements promptly shall pay such prorated amount due to the
other Party.
(c) TAXABLE PERIOD COMMENCING ON OR AFTER CLOSING DATE. Purchaser shall
have the right to commence, continue and settle any proceedings to contest Taxes
for any taxable period which commences on or after the Closing Date, and shall
be entitled to any refunds or abatements of Taxes awarded in such proceedings.
(d) COOPERATION. Seller and Purchaser shall use commercially reasonable
efforts to cooperate with the Party contesting the Taxes (at no cost or expense
to the Party not contesting the Taxes other than any de minimis cost or expense
or any cost or expense which the requesting Party agrees in writing to
reimburse) and to execute and deliver any documents and instruments reasonably
requested by the Party contesting the Taxes in furtherance of the contest of
such Taxes.
(e) SURVIVAL. The provisions of this Section 7.6 shall survive the
Closing.
Section 7.7 NOTICES AND FILINGS. Seller shall send an announcement to all
tenants under any Tenant Lease as of the Closing in form and substance
reasonably acceptable to Purchaser, informing such tenants of the change in
ownership and operation of the Hotel to Purchaser. Seller and Purchaser shall
use commercially reasonable efforts to cooperate with each other (at no cost or
expense to the Party whose cooperation is requested, other than any DE MINIMIS
cost or expense or any cost or expense which the requesting Party agrees in
writing to reimburse) to provide written notice to any Person under any Tenant
Leases, Contracts, Licenses and Permits, and to effect any registrations or
filings with
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any Governmental Authority or other Person, regarding the change in ownership or
operation of the Hotel. This Section 7.7 shall survive the Closing.
Section 7.8 ACCESS TO INFORMATION. After the Closing, Purchaser shall
provide reasonable access to the officers, employees, agents and representatives
of Seller or any of its Affiliates to (i) Purchaser's books and records for the
Hotel to facilitate the preparation of any documents required to be filed by
Seller under Applicable Law or the resolution of any audit, litigation or other
proceeding, claim or charge made by any Person or insurance claim involving
Seller or any of its Affiliates; (ii) the Property to conduct any examination,
tests, investigations or studies of the Property required for the resolution of
any litigation or other proceeding, claim or charge made by any Person involving
Seller or any of its Affiliates; and (iii) the employees of Purchaser (or
Purchaser's manager) whose assistance or testimony is reasonably deemed
necessary or advisable by Seller to assist Seller in evaluating or defending any
audit, litigation or other proceeding, claim or charge made by any Person or
insurance claim involving any Seller Indemnitees; provided, however, that
(A) such Seller or Affiliate thereof shall provide reasonable prior notice to
Purchaser; (B) Purchaser shall not be required to provide such access during
non-business hours; (C) Purchaser shall have the right to have to accompany the
officer, employees, agents or representatives of such Seller or Affiliate
thereof in providing access to its books and records, the Property or the
employees of Purchaser (or Purchaser's manager) as provided in this
Section 7.8. Seller shall, at its cost and expense, repair any damage to the
Property or any other property owned by a Person other than Seller arising from
or in connection with Seller exercising its right to access the Property in
accordance with this Section 7.8 ("SELLER ACCESS"), and restore the Property or
such other third-party property to the same condition as existing prior to
Seller Access. Seller hereby releases the Purchaser Indemnitees for any Losses
incurred by any of the Seller Indemnitees directly arising from or in connection
with Seller Access, except for Purchaser's gross negligence or intentional
misconduct. Seller shall defend, indemnify and hold harmless the Purchaser
Indemnitees from and against any Losses incurred by any Purchaser Indemnitees
arising from or in connection with Seller Access. This Section 7.8 shall survive
the Closing.
Section 7.9 FURTHER ASSURANCES. Seller and Purchaser shall use
commercially reasonable efforts (at no cost or expense to such Party, other than
any DE MINIMIS cost or expense or any cost or expense which the requesting Party
agrees in writing to reimburse) to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable (i) prior
to Closing to consummate the transaction contemplated in this Agreement,
including, without limitation, (A) obtaining all necessary consents, approvals
and authorizations required to be obtained from any Governmental Authority or
other Person under this Agreement or Applicable Law, and (B) effecting all
registrations and filings required under this Agreement or Applicable Law, and
(ii) after the Closing to further effect the transaction contemplated in this
Agreement. Seller and Purchaser shall cooperate and keep each other informed
regarding all filings with the SEC made by either party. If any claim, action,
suit, investigation or other proceeding by any Governmental Authority or other
Person is commenced which questions the validity or legality of the transactions
contemplated by this Agreement or seeks damages in connection therewith, the
Parties shall cooperate and use all reasonable efforts to defend against such
claim, action, suit, investigation or other proceeding and, if an injunction or
other order is issued in any such action, suit or other proceeding, to use
commercially reasonable efforts to have such injunction or other order lifted,
and to cooperate reasonably regarding any other impediment to the consummation
of the transactions contemplated by this Agreement. This Section 7.9 shall
survive the Closing.
Section 7.10 SELLER APPROVAL. Purchaser acknowledges and agrees that
Seller's obligations under this Agreement shall be subject to Seller obtaining
approval by WHLP of the transactions contemplated hereby (the "WHLP APPROVAL"),
which approval requires that WHLP obtain the approval of the sale of the Hotel
to Purchaser pursuant to the terms of this Agreement by not less than fifty-one
percent (51%) by interest of the Limited Partners (the "LIMITED PARTNERS
APPROVAL" and collectively with the
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WHLP Approval, the "SELLER APPROVAL") not later than one hundred and fifty
(150) days following the expiration of the Due Diligence Period (the "SELLER
APPROVAL DATE"). Seller shall provide written notice to Purchaser promptly upon
obtaining the Seller Approval (the "SELLER APPROVAL NOTICE"). If Seller does not
provide the Seller Approval Notice to Purchaser on or prior to 5:00 P.M. Eastern
Time on the Seller Approval Date, Seller shall be deemed to have failed to
obtain the Seller Approval, and Purchaser and Seller shall each thereafter have
the right to terminate this Agreement after the Seller Approval Date and prior
to receipt thereafter by Purchaser of the Seller Approval Notice, by providing
written notice to the other, in which case Escrow Agent shall refund the Earnest
Money to Purchaser.
As promptly as reasonably practicable after execution of this Agreement,
WHLP shall prepare and file with the Securities and Exchange Commission (the
"SEC") under the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), a proxy statement relating to the solicitation by the General Partner of
the consent of the Limited Partners required under the WHLP Partnership
Agreement in connection with obtaining the Seller Approval (the "CONSENT
SOLICITATION"). WHLP shall provide Purchaser with a copy of the Consent
Solicitation as promptly as practicable and, in any event, at least five
(5) Business Days prior to its filing with the SEC. WHLP will cause all filings
made with the SEC in connection with the Consent Solicitation to comply as to
form in all material respects with the applicable provisions of the Exchange Act
and the rules and regulations thereunder. WHLP shall promptly notify Purchaser
of the receipt of any comments from the SEC and of any requests by the SEC for
amendments or supplements to the Consent Solicitation or for additional
information and will supply Purchaser with copies of all material correspondence
between WHLP or any of its representatives and the SEC with respect to the
Consent Solicitation. Following the satisfaction of all SEC requirements with
respect to the Consent Solicitation, WHLP shall cause the Consent Solicitation
to be mailed to the Limited Partners as promptly as practicable and shall in
good faith otherwise use its commercially reasonable efforts to obtain the
Seller Approval. The General Partner shall recommend to the Limited Partners
approval of this Agreement and the transactions contemplated by the Agreement
and include such recommendation in the Consent Solicitation (the "GP
RECOMMENDATION") provided, however, that prior to the Seller Approval Date (as
the same may be extended and subject to the General Partner's compliance with
Section 7.11 below), such recommendation may be withdrawn, modified or amended
if the General Partner determines in good faith, based on advice of its
financial advisors and outside counsel, that in the absence of such action the
General Partner would not be in compliance with its duties to the Limited
Partners imposed by the WHLP Partnership Agreement or applicable law.
Section 7.11 NON-SOLICITATION. Each of the General Partner and Seller
agrees that, except for transfers of limited partnership interests in WHLP made
in accordance with the terms of the WHLP Partnership Agreement (which transfers
will not exceed five (5) percent of the aggregate limited partnership interests
in WHLP in any calendar year), from the date of this Agreement until the
termination of this Agreement (if terminated), neither Seller nor the General
Partner will (or permit any of its agents, representatives, employees, members,
partners, principals or affiliates to) solicit or knowingly encourage any
proposals or offers to sell or otherwise dispose of the Hotel or any interest
(directly or indirectly, debt or equity) in the Hotel, Seller or WHLP (any such
proposal or offer being referred to as an "ACQUISITION PROPOSAL") or negotiate
or otherwise enter into discussions for, or provide confidential information
relating to, any Acquisition Proposal. Each of the General Partner and Seller
shall immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal and shall promptly notify the Purchaser if Seller
receives any Acquisition Proposal after the date of this Agreement, including a
description of the terms and conditions of such Acquisition Proposal, the
identity of the parties involved and a copy of such Acquisition Proposal (if in
writing). The foregoing shall not limit Seller's right to dispose of personal
property in the ordinary course of the operation of the Hotel without the
consent of the Purchaser.
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Notwithstanding anything to the contrary in this Section 7.11, nothing
contained in Section 7.11 shall prohibit Seller from furnishing information to
or entering into discussions or negotiations with any Person that makes a bona
fide, written unsolicited Acquisition Proposal after the date of this Agreement
(a "COMPETING PROPOSAL"), if each of Seller and the General Partner believe that
the Competing Proposal is reasonably likely to be a Superior Acquisition
Proposal (taking into consideration the terms and conditions of the Competing
Proposal, including the presence or absence of any financing contingencies) and
prior to furnishing such information to, or entering into discussions with, such
Person, the Seller provides written notice to the Purchaser to the effect that
it is furnishing information to, or entering into discussions or negotiations
with, such Person with regard to a Competing Proposal and keeps Purchaser
promptly informed of the status of any such discussions or negotiations. If the
General Partner determines in good faith, based upon the advice of its financial
advisers and outside counsel, that in the absence of such action the General
Partner would not be in compliance with its duties to the Limited Partners
imposed by the WHLP Partnership Agreement or applicable law, the Seller and the
General Partner may terminate this Agreement by written notice thereof delivered
to Purchaser so as to approve or recommend (and, in connection therewith,
withdraw or modify the GP Recommendation), a Superior Acquisition Proposal (as
defined below).
Prior to accepting or recommending a Superior Acquisition Proposal, entering
into an agreement with respect to the transaction contemplated by any such
Superior Acquisition Proposal or withdrawing, materially modifying or amending
the GP Recommendation, the Seller shall (i) notify the Purchaser in writing of
its intention to take any such action (the "SAP NOTICE"), (ii) identify the
third party making such Superior Acquisition Proposal and (iii) attach the most
current version of such agreement to such notice, all of which information will
be kept confidential by the Purchaser in accordance with the terms of this
Agreement. The Purchaser shall have the opportunity, which may be exercised, if
at all, not later than the expiration of the five business day period following
receipt by Purchaser of the SAP Notice (the "RESPONSE PERIOD"), to amend this
Agreement to provide for the sale of the Hotel on terms and conditions that the
General Partner determines, in good faith after consultation with its financial
advisors: (1) are at least as favorable, from a financial point of view; and
(2) are at least as likely to result in consummation of a sale of the Hotel
within substantially the same time frame as, the terms and conditions of the
Superior Acquisition Proposal. If: (a) Purchaser fails to so amend this
Agreement in the manner and within the time frame required by the preceding
sentence; or (b) the General Partner determines that the terms and conditions
offered by the Purchaser in any such amendment are not as favorable as the terms
of the Superior Acquisition Proposal, then Purchaser's opportunity to so amend
this Agreement shall terminate, in either event, not later than 5:00 p.m. E.S.T.
on the fifth (5th) Business Day following Purchaser's receipt of the SAP Notice.
The Seller shall not enter into an agreement regarding the transactions
contemplated by a Superior Acquisition Proposal prior to the sixth business day
after it has provided the SAP Notice to the Purchaser. In addition, the Seller
shall keep the Purchaser reasonably informed of the status and details of the
Superior Acquisition Proposal (including amendments or proposed amendments
thereto) during the Response Period and notify the Purchaser promptly if its
intention to enter into a binding, written agreement for the Superior
Acquisition Proposal shall change. For all purposes of this Agreement, "Superior
Acquisition Proposal" means a bona fide written proposal made by a third party
to acquire the Hotel on terms and conditions which, in the aggregate, the
General Partner determines, after consultation with its financial advisors and
outside counsel: (i) are at least as favorable, from a financial point of view,
as the terms of this Agreement; and (ii) are at least as likely to result in
consummation of the sale of the Hotel within substantially the same time frame,
as the terms of this Agreement,
Any disclosure that the General Partner or the Seller may be compelled to
make with respect to the receipt of an Acquisition Proposal in order to comply
with its duties imposed by applicable law or Rule 14d-9 or 14e-2 of the Exchange
Act will not constitute a violation of this Section 7.11.
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ARTICLE VIII
CONDITIONS PRECEDENT
Section 8.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BOTH SELLER AND
PURCHASER. The respective obligations of Seller and Purchaser to close the
transaction contemplated under this Agreement are subject to the satisfaction at
or prior to the Closing Date of the following conditions precedent (the "MUTUAL
CLOSING CONDITIONS"):
(a) ADVERSE PROCEEDINGS. No preliminary or permanent injunction or other
order, decree or ruling shall have been issued by a court of competent
jurisdiction or by any Governmental Authority, and no Applicable Law shall have
been enacted (or passed which upon enactment) would make illegal or invalid or
otherwise prevent the consummation of the transaction contemplated under this
Agreement.
(b) SELLER APPROVAL. Seller shall have obtained the Seller Approval.
Section 8.2 ADDITIONAL CONDITIONS TO PURCHASER'S OBLIGATIONS. Purchaser's
obligations to close the transactions contemplated under this Agreement also are
subject to the satisfaction at or prior to Closing of the following conditions
precedent (the "PURCHASER CLOSING CONDITIONS"):
(a) SELLER'S DELIVERIES. Seller shall have delivered to Purchaser or
deposited with Escrow Agent in the Closing Escrow for the benefit of Purchaser,
all of the closing documents and other items set forth in Section 9.3.
(b) REPRESENTATIONS AND WARRANTIES. Each of Seller's representations and
warranties made in this Agreement shall be true and correct in all material
respects as of the Closing (unless such representation or warranty is made
expressly as of another date).
(c) COVENANTS AND OBLIGATIONS. Seller shall have performed in all material
respects all of its covenants and obligations under this Agreement.
(d) TITLE POLICY. The Title Company shall have committed to issue an owner
s title insurance policy to Purchaser (which may be in the form of a mark-up of
the Title Commitment) in accordance with the Title Commitment, insuring
Purchaser's fee simple interest in the Real Property as of the Closing Date,
with gap coverage from the Closing through the date of recording, subject only
to the Permitted Exceptions, with extended coverage (the "TITLE POLICY").
(e) Purchaser shall have received an estoppel certificate from Manager duly
executed by Manager in the form required pursuant to Section 6.5 of the
Management Agreement and containing such additional information as reasonably
requested by Purchaser.
(f) Purchaser shall have received a subordination, non-disturbance and
attornment agreement in the form attached hereto as Exhibit C, duly executed by
Manager.
(g) The Property shall be in the same condition as of the date hereof,
normal wear and tear excluded, subject to Article XIII hereof.
(h) Seller shall have caused Manager to establish a new bank account with a
banking institution designated by Purchaser for the purpose of maintaining the
Fund (as defined in the Management Agreement).
(i) Manager shall have accepted the insurance procured by Purchaser
fulfilling the requirements of Section 5.1 of the Management Agreement and shall
have waived the six (6) month notice requirement set forth in Section 5.1(b) of
the Management Agreement.
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(j) The Affiliate of Manager which is the registered owner of the trademark
or tradename "St. Francis" shall have executed a trademark license agreement in
favor of Purchaser in the form attached hereto as Exhibit D.
The Purchaser Closing Conditions are for the benefit of Purchaser, and
Purchaser shall have the right, except as expressly provided in Section 8.4, to
waive any of the Purchaser Closing Conditions at or prior to Closing.
Section 8.3 ADDITIONAL CONDITIONS TO SELLER'S OBLIGATIONS. Seller's
obligations to close the transactions contemplated under this Agreement are
subject to the satisfaction at or prior to Closing of the following conditions
precedent (the "SELLER CLOSING CONDITIONS"):
(a) RECEIPT OF THE PURCHASE PRICE. Purchaser shall have paid the Purchase
Price to Seller pursuant to Section 3.4, and Escrow Agent shall have disbursed
the Earnest Money to Seller.
(b) PURCHASER'S DELIVERIES. Purchaser shall have delivered to Seller or
deposited with Escrow Agent in the Closing Escrow for the benefit of Seller, all
of the closing documents and other items set forth in Section 9.4.
(c) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Purchaser made in this Agreement shall be true and correct in all
material respects as of the Closing (unless such representation or warranty is
made expressly as of another date).
(d) COVENANTS AND OBLIGATIONS. Purchaser shall have performed in all
material respects all of its covenants and obligations under this Agreement.
(e) APPROVALS. Seller shall have obtained Seller Approval and Starwood
Board Approval.
The Seller Closing Conditions are for the benefit of Seller, and Seller
shall have the right, except as expressly provided in Section 8.4, to waive any
of the Seller Closing Conditions at or prior to Closing.
Section 8.4 FRUSTRATION OF CLOSING CONDITIONS. Seller and Purchaser may
not rely on the failure of the Seller Closing Conditions or Purchaser Closing
Conditions, respectively, if such failure was caused by such Party's failure to
act in good faith or to use its best efforts to cause the Closing to occur.
ARTICLE IX
CLOSING
Section 9.1 CLOSING DATE. The closing of the transaction contemplated
under this Agreement (the "CLOSING") shall occur on the tenth (10(th)) Business
Day after the date on which Seller shall have delivered the Seller Approval
Notice, or such other date as agreed to in writing between Seller and Purchaser
(the date on which the Closing occurs is referred to herein as the "CLOSING
DATE"), at the offices of Seller's counsel or such other place as agreed to in
writing between Seller and Purchaser; PROVIDED, HOWEVER, that in no event shall
the Closing occur later than June 26, 2000.
Section 9.2 CLOSING ESCROW. The Closing shall take place by means of a
so-called "New York-style" escrow (the "CLOSING ESCROW"). On or prior to the
Closing Date, Seller and Purchaser shall enter into a closing escrow agreement
with the Escrow Agent with respect to the Closing Escrow in form and substance
reasonably acceptable to Seller, Purchaser and the Escrow Agent (the "CLOSING
ESCROW AGREEMENT") pursuant to which (i) all of the documents required to be
delivered by Seller and Purchaser pursuant to this Agreement shall be deposited
with Escrow Agent unless otherwise agreed by the Parties; (ii) the Purchase
Price to be paid by Purchaser pursuant to Section 3.4 shall be deposited with
Escrow Agent, and (iii) at Closing, the closing documents shall be delivered to
Seller and Purchaser (as the case may be) and the Purchase Price shall be
disbursed to Purchaser pursuant to the Closing Escrow Agreement.
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Section 9.3 SELLER'S DELIVERIES. At the Closing, Seller shall deliver or
cause to be delivered to Purchaser or deposited with Escrow Agent in the Closing
Escrow for the benefit of Purchaser all of the (i) documents, each of which
shall have been duly executed by Seller and acknowledged (if required), and
(ii) other items, set forth in this Section 9.3, as follows:
(a) A closing certificate in the form of EXHIBIT E, together with a copy of
all appropriate resolutions, consents and approvals evidencing the Seller
Approval.
(b) A grant deed in the form of EXHIBIT F, conveying the Real Property to
Purchaser, subject only to the Permitted Exceptions (the "DEED");
(c) An Assignment and Assumption of Management Agreement in the form of
EXHIBIT G, assigning the Management Agreement to Purchaser, with the assumption
by Purchaser of the liabilities and obligations thereunder;
(d) A Bill of Sale in the form of EXHIBIT H, transferring the FF&E,
Supplies, F&B, Retail Merchandise, Books and Records and Accounts Receivable to
Purchaser, free and clear of all liens and encumbrances;
(e) An Assignment and Assumption of Leases and Contracts in the form of
EXHIBIT I, assigning the Tenant Leases, Equipment Lease and Operating Agreements
to Purchaser, with the assumption by Purchaser of the liabilities and
obligations thereunder from and after the Closing Date;
(f) An Assignment and Assumption of Union Contracts in the form of
EXHIBIT J, assigning the Union Contracts to Purchaser, with the assumption by
Purchaser of the liabilities and obligations of Seller thereunder from and after
the Closing Date;
(g) A General Assignment and Assumption Agreement in the form of
EXHIBIT K, assigning the Licenses and Permits, Intangible Property and Bookings,
with the assumption by Purchaser of the liabilities and obligations thereunder
from and after the Closing Date;
(h) A certificate or registration of title for any vehicle owned by Seller,
duly executed by Seller, conveying such vehicle to Purchaser;
(i) Such agreements, affidavits or other documents as may be reasonably
required by the Title Company from the Seller to issue the Title Policies;
(j) Any required real estate transfer tax declaration or similar documents
required in connection with any tax imposed by any Governmental Authority in
connection with the transaction contemplated hereunder;
(k) A FIRPTA affidavit in the form set forth in the regulations under
Section 1445 of the Code;
(l) All originals (or copies if originals are not available) of the Leases,
Contracts, Licenses and Permits, Books and Records, keys and lock combinations
in Seller's Possession, which shall be located at the Hotel on the Closing Date
and deemed to be delivered to Purchaser upon delivery of possession of the
Hotel; provided, however, that Seller shall have the right to redact and
reformat any Books and Records which include data or other information
pertaining to any other hotels owned, managed or franchised by Seller, Starwood,
Manager or their Affiliates;
(m) The Settlement Statement prepared pursuant to Section 11.1; and
(n) Such other documents and instruments as may be reasonably requested by
Purchaser in order to consummate or better effectuate the transaction
contemplated in this Agreement.
Section 9.4 PURCHASER'S DELIVERIES. At the Closing, Purchaser shall
deliver or cause to be delivered to Seller or deposited with Escrow Agent in the
Closing Escrow for the benefit of Seller all
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of the (i) documents, each of which shall have been duly executed by Purchaser
and acknowledged (if required), and (ii) other items, set forth in this
Section 9.4, as follows:
(a) A closing certificate in the form of EXHIBIT L, together with a copy of
all appropriate resolutions, consents and approvals evidencing the Purchaser
Board Approval.
(b) The Purchase Price to be paid by Purchaser pursuant to Section 3.4.
(c) A letter of direction to Escrow Agent directing Escrow Agent to
disburse the Earnest Money to Seller; and
(d) A counterpart of each of the documents and instruments to be delivered
by Seller under Section 9.3 which require execution by Purchaser; and
(e) Such other documents and instruments as may be reasonably requested by
Seller or the Title Company in order to consummate or better effectuate the
transaction contemplated in this Agreement.
Section 9.5 POSSESSION. Seller shall deliver the Property and possession
of the Hotel to Purchaser as of the Closing, subject to the Permitted
Exceptions.
ARTICLE X
PRORATIONS; ACCOUNTS RECEIVABLE; TRANSACTION COSTS
Section 10.1 PRORATIONS. The items of revenue and expense with respect to
the Hotel set forth in this Section 10.1 shall be prorated between Seller and
Purchaser (the "PRORATIONS") as of 11:59 p.m. on the day preceding the Closing
Date, or such other time expressly provided in this Section 10.1 (the "CUT-OFF
TIME"), so that the Closing Date is a day of income and expense for Purchaser.
Without duplication, Purchaser shall receive a credit for any items of expense
in this Section 10.1 to the extent the same are accrued or due and payable but
unpaid as of the Cut-Off Time in which case Purchaser shall be obligated to pay
such expense, and Seller shall receive a credit for any of the items of expense
in this Section 10.1 which have been paid prior to or at the Closing or will be
paid by Seller after the Closing to the extent such payment relates to any
period of time after the Cut-Off Time. Any errors and omissions in computing the
Prorations shall be corrected not later than One Hundred and Eighty (180) days
following the Closing Date; PROVIDED, HOWEVER, that any errors or omissions
which are incapable of discovery within such period shall be corrected as soon
as possible after the Closing. This Section 10.1 shall survive the Closing.
(a) TAXES. All Taxes shall be prorated as of the Cut-Off Time between
Purchaser and Seller. If the amount of any such Taxes is not ascertainable on
the Closing Date, the proration for such Taxes shall be based on the most recent
available bill; provided, however, that after the Closing, Seller and Purchaser
shall reprorate the Taxes and pay any deficiency in the original proration to
the other Party promptly upon receipt of the actual bill for the relevant
taxable period.
(b) TENANT LEASES. Any rents and other amounts prepaid, accrued or due and
payable under the Tenant Leases with respect to periods not in excess of thirty
(30) days from the Closing shall be prorated as of the Cut-Off Time between
Purchaser and Seller. Purchaser shall receive a credit for all security deposits
previously paid (and not applied against obligations) under the Tenant Leases
which are transferred to Purchaser, and Purchaser thereafter shall be obligated
to refund or apply such deposits in accordance with the terms of such Tenant
Leases.
(c) CONTRACTS. Any amounts prepaid, accrued or due and payable under the
Contracts (other than for utilities which proration is addressed separately in
this Section 10.1(e)) shall be prorated as of the Cut-Off Time between Seller
and Purchaser. Purchaser shall receive a credit for all deposits held by Seller
under the Contracts which are transferred to Purchaser, and Purchaser thereafter
shall be obligated to refund or apply such deposits in accordance with the terms
of such Contracts. Seller shall
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receive a credit for all deposits made by Seller under the Contracts which are
transferred to Purchaser or remain on deposit for the benefit of Purchaser.
(d) LICENSES AND PERMITS. All amounts prepaid, accrued or due and payable
under any Permits (other than utilities which are separately prorated under
Section 10.1(e)) transferred to Purchaser shall be prorated as of the Cut-Off
Time between Seller and Purchaser. Seller shall receive a credit for all
deposits made by Seller under the Permits which are transferred to Purchaser or
which remain on deposit for the benefit of Purchaser.
(e) UTILITIES. All utility services shall be prorated as of the Cut-Off
Time between Purchaser and Seller. To the extent possible, readings shall be
obtained for all utilities as of the Cut-Off Time. If not possible, the cost of
such utilities shall be prorated between Seller and Purchaser by estimating such
cost on the basis of the most recent bill for such service; provided, however,
that after the Closing, Seller and Purchaser shall reprorate the amount for such
utilities and pay any deficiency in the original proration to the other Party
promptly upon receipt of the actual bill for the relevant billing period. Seller
shall receive a credit for all deposits transferred to Purchaser or which remain
on deposit for the benefit of Purchaser with respect to such utility contracts,
otherwise such deposits shall be refunded to Seller.
(f) COMPENSATION. If the payroll period for the Employees ends on the date
prior to the Closing Date, Seller shall (or shall cause Manager or employer to)
pay all Compensation due to the Employees for such payroll period, and Purchaser
shall not receive a credit for such Compensation. If the payroll period for the
Employees does not end on the date prior to the Closing Date, Purchaser shall
receive a credit for all Compensation which is earned by the Employees as of the
Cut-Off Time for the payroll period which includes the Closing Date, and
Purchaser shall pay all Compensation due to the Employees for such payroll
period.
(g) ACCRUED BENEFITS. Purchaser shall receive a credit in an amount equal
to the Accrued Benefits for all Employees.
(h) DEPOSITS FOR BOOKINGS. Purchaser shall receive a credit for all
prepaid deposits for Bookings scheduled for accommodations or events on or after
the Closing Date which Purchaser is obligated to honor pursuant to this
Agreement, except to the extent such deposits are transferred to Purchaser.
(i) RESTAURANTS AND BARS. Seller shall close out the transactions in the
restaurants and bars in the Hotel as of the regular closing time for such
restaurants and bars during the night in which the Cut-Off Time occurs and
retain all monies collected as of such closing, and Purchaser shall be entitled
to any monies collected from the restaurants and bars thereafter.
(j) TRADE PAYABLES. Except to the extent an adjustment or proration is
made under another subsection of this Section 10.1, (i) Seller shall pay in full
prior to the Closing all amounts payable to vendors or other suppliers of goods
or services to the Hotel (the "TRADE PAYABLES") which are due and payable as of
the Closing Date for which goods or services have been delivered to the Hotel
prior to Closing, and (ii) Purchaser shall receive a credit for the amount of
such Trade Payables which have accrued, but are not yet due and payable as of
the Closing Date, and Purchaser shall pay all such Trade Payables accrued as of
the Closing Date when such Trade Payables become due and payable up to the
amount of such credit; provided, however, Seller and Purchaser shall reprorate
the amount of credit for any Trade Payables and pay any deficiency in the
original proration to the other Party promptly upon receipt of the actual bill
for such goods or services. Seller shall receive a credit for all advance
payments or deposits made by Seller with respect to FF&E, Supplies, F&B and
Retail Merchandise ordered, but not delivered to the Hotel prior to the Closing
Date, and Purchaser shall pay the balance of any amounts which become due and
payable for such FF&E, Supplies, F&B and Retail Merchandise which were ordered
prior to Closing.
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(k) CASH. Seller shall receive a credit for all cash on hand or on deposit
in any house bank at the Hotel which shall be transferred to Purchaser.
(l) MANAGEMENT FEES. Seller shall pay all fees and expenses, including
without limitation, all deferred management fees and expenses due under the
Management Agreement through the Closing Date. Seller shall be responsible for
its pro rata share of the incentive management fee earned or accrued under the
Management Agreement for the 2000 calendar year. At Closing, Purchaser shall
receive a credit equal to the estimate of such prorata share and a re-adjustment
shall be made between Seller and Purchaser post-closing upon determination of
the 2000 calendar year incentive management fee. The reproration obligation
under this Section 10.1(l) shall survive the Closing.
(m) 2000 CAP EX BUDGET. Seller shall be responsible for paying the cost of
all capital expenditures incurred prior to the Closing. Purchaser (or Seller)
will receive a credit at Closing in an amount equal to the shortfall (or excess)
between (x) the pro rata portion (based on the number of days elapsed in the
calendar year 2000 prior to Closing) of the aggregate capital expenditures set
forth in the 2000 Cap Ex Budget attached as SCHEDULE 10.1(M) hereto (the "2000
CAP EX BUDGET") and (y) the actual capital expenditures paid by Seller during
the calendar year of 2000 under the 2000 Cap Ex Budget. Notwithstanding anything
to the contrary above, Seller shall be solely responsible for the line item in
the 2000 Cap Ex Budget relating to the Heavenly Beds, and to the extent such
costs have not been paid at Closing, Purchaser shall receive a credit equal to
the unpaid portion.
(n) FINANCING COMMITMENT FEES. Purchaser shall receive a credit at Closing
for up to Five Hundred Thousand and no/100 Dollars ($500,000.00), for hedging
fees and costs incurred by Purchaser to provide interest rate protection in
connection with Purchaser's contemplated debt financing and financing commitment
fees; provided, however, Purchaser provides documentation reasonably
satisfactory to Seller evidencing the nature and amount of hedging fees and
costs incurred by Purchaser to provide interest rate protection and financing
and commitment fees.
(o) OTHER ADJUSTMENTS AND PRORATIONS. All other items of income and
expense as are customarily adjusted or prorated upon the sale and purchase of a
hotel property similar to the Hotel shall be adjusted and prorated between
Seller and Purchaser accordingly.
Section 10.2 ACCOUNTS RECEIVABLE.
(a) GUEST LEDGER. At Closing, Seller shall receive a credit in an amount
equal to: (i) all amounts charged to the Guest Ledger for all room nights up to
(but not including) the night during which the Cut-Off Time occurs, and
(ii) one-half ( 1/2) of all amounts charged to the Guest Ledger for the room
night which includes the Cut-Off Time (other than any restaurant or bar charges
for such room night which are otherwise prorated under Section 10.1) and
Purchaser shall be entitled to retain all deposits made and amounts collected
for such Guest Ledger.
(b) ACCOUNTS RECEIVABLE (OTHER THAN GUEST LEDGER). At Closing, Seller
shall receive a credit for all Accounts Receivable (other than the Guest Ledger
which is addressed in Section 10.2(a)) in an amount equal to one hundred percent
(100%) of all Accounts Receivable which are unpaid for not more than thirty
(30) days ("CURRENT ACCOUNTS RECEIVABLE") and Purchaser shall be entitled to all
amounts collected for such Current Accounts Receivable. Seller shall retain the
right to collect all Accounts Receivable (other than the Guest Ledger which is
addressed in Section 10.2(a)) which are unpaid for more than thirty (30) days
("DELINQUENT ACCOUNTS RECEIVABLE") and Seller shall not receive a credit for the
Delinquent Accounts Receivable. Purchaser shall cooperate with Seller in
collecting the Delinquent Accounts Receivable, at no cost or expense to
Purchaser other than any de minimis cost and expense or any cost or expense
which Seller agrees in writing to reimburse. If any Delinquent Accounts
Receivable are paid to Purchaser after the Closing, Purchaser shall pay to
Seller the amounts received by Purchaser within ten (10) days after receipt of
such amounts, without any commission or deduction for Purchaser.
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Section 10.3 TRANSACTION COSTS.
(a) SELLER'S TRANSACTION COSTS. In addition to the other costs and
expenses to be paid by Seller set forth elsewhere in this Agreement, Seller
shall pay for the following costs in connection with this transaction:
(i) transfer and sales taxes; (ii) title insurance premiums for the Title
Policy; (iii) the fees and expenses for the Survey; (iv) the commission due to
Broker; (v) one-half of the fees and expenses of the Escrow Agent (but excluding
any fee for the investment of the Earnest Money); and (vi) the fees and expenses
of its own attorneys and accountants.
(b) PURCHASER'S TRANSACTION COSTS. In addition to the other costs and
expenses to be paid by Purchaser set forth elsewhere in this Agreement,
Purchaser shall pay for the following costs in connection with this transaction:
(i) the fees and expenses of its own attorneys and accountants; (ii) the fees
and expenses incurred by Purchaser for Purchaser's Inspectors or otherwise in
connection with the Inspections; (iii) any recording charges payable in
connection with the conveyance of the Real Property; (iv) any mortgage tax,
title insurance fees and expenses for any loan title insurance policies,
recording charges or other amounts payable in connection with any financing
obtained by Purchaser; (v) one-half of the fees and expenses for the Escrow
Agent; and (vi) any fees for the investment of the Earnest Money.
(c) OTHER TRANSACTION COSTS. All other fees, costs and expenses not
expressly addressed in this Section 10.3 or elsewhere in this Agreement shall be
allocated between Seller and Purchaser in accordance with local custom for
similar transactions.
ARTICLE XI
TRANSITION PROCEDURES
Section 11.1 SETTLEMENT STATEMENT. On the day prior to Closing, Seller and
Purchaser, through their respective employees, agents or representatives,
jointly shall make such examinations, audits and inventories of the Hotel as may
be necessary to make the adjustments and prorations to the Purchase Price as set
forth in Section 10.1 and 10.2 or any other provisions of this Agreement. Based
upon such examinations, audits and inventories, Seller and Purchaser jointly
shall prepare prior to Closing a settlement statement (the "SETTLEMENT
STATEMENT"), which shall set forth Seller's and Purchaser's best estimate of the
amounts of the items to be adjusted and prorated under this Agreement. Subject
to the reproration provided in Section 10.1, the Settlement Statement shall be
approved and executed by Seller and Purchaser, and shall be binding and
conclusive on Seller and Purchaser with respect to the items set forth in the
Settlement Statement.
ARTICLE XII
TERMINATION; EFFECT OF TERMINATION
Section 12.1 SELLER'S RIGHT OF TERMINATION. This Agreement may be
terminated by Seller (i) upon the acceptance of a Superior Acquisition Proposal
by Seller in accordance with Section 7.11 of this Agreement following the
payment of any money required by Section 12.3, (ii) if any of the Mutual Closing
Conditions set forth in Section 8.1 has not been satisfied on or before the
Closing Date, (iii) if any of the Seller Closing Conditions set forth in
Section 8.3 has not been satisfied on or before the Closing Date, (iv) upon a
Purchaser Default, (v) as set forth in Section 7.10; or (vi) as set forth in
Section 4.3.
Section 12.2 PURCHASER'S RIGHT OF TERMINATION. This Agreement may be
terminated by Purchaser (i) in accordance with the terms and conditions of
Sections 4.1(a), 4.2(d), 7.10, 13.1(a) or 13.2(a) of this Agreement, (ii) if any
of the Mutual Closing Conditions in Section 8.1 has not been satisfied on or
before the Closing Date, (iii) if any of the Purchaser Closing Conditions in
Section 8.2 has not been
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satisfied on or before the Closing Date, (iv) upon a Seller Default, or (v) if
the General Partner has withdrawn, amended or modified the GP Recommendation or
approved or recommended any Superior Acquisition Proposal.
Section 12.3 EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to Section 12.1 or Section 12.2, this Agreement shall
thereafter become void and have no effect, without any liability on the part of
any Party other than the provisions of this Section 12.3 and such provisions in
this Agreement which expressly survive termination of this Agreement.
(a) BREAK-UP FEE. If this Agreement is terminated, and, if, and only if:
(i) the General Partner has withdrawn the GP Recommendation (except as a result
of a Purchaser Default); (ii) Seller, the General Partner or WHLP shall have
terminated or caused to be terminated this Agreement pursuant to Section 7.11;
or (iii) (x) this Agreement is terminated as a result of Seller's failure or
inability to obtain the Seller Approval prior to the Seller Approval Date,
(y) within six (6) months after such termination Seller, the General Partner or
WHLP shall have executed an agreement relating to a transaction contemplated by
any Acquisition Proposal made by any Person or Affiliate thereof who had
disclosed to Seller, WHLP or the General Partner any Acquisition Proposal made
after the date of the Letter of Intent but prior to the termination of this
Agreement ("a NEW TRANSACTION AGREEMENT"), and (z) Seller, the General Partner
or WHLP shall have entered into a binding definitive agreement (a "DEFINITIVE
AGREEMENT") with the other party to such New Transaction Agreement as to which
Definitive Agreement all contingencies shall have been satisfied or waived
(other than customary closing conditions relating to Seller's performance)
within twelve (12) months after such termination, then Seller shall pay to
Purchaser a fee in the amount of Six Million Two Hundred and Fifty Thousand
Dollars ($6,250,000.00) (the "BREAK-UP FEE"); provided, however, in no event
shall the sum of the Break-up Fee and the Out of Pocket Expenses reimbursed to
Purchaser pursuant to Section 12.3(b) exceed an aggregate amount of Eight
Million Two Hundred and Fifty Thousand Dollars ($8,250,000.00) ("Fee Cap").
(b) REIMBURSABLE EXPENSES. If Seller or Purchaser terminates this
Agreement under any of the circumstances described in clause (i), (ii),
(iii)(x) of Section 12.3(a) above, then, subject to the Fee Cap, Seller shall
reimburse Purchaser for the reasonable out-of-pocket expenses incurred by
Purchaser solely in connection with the transactions contemplated by this
Agreement, including without limitation, reasonable legal fees and
disbursements, the cost of physical, environmental and other inspections and
non-recoverable fees and expenses actually paid to proposed financing sources
and hedging counterparties (the "OUT-OF-POCKET EXPENSES"), up to an amount not
to exceed Four Million Dollars and no/100 ($4,000,000.00); provided that
Purchaser provides documentation reasonably satisfactory to Seller evidencing
the nature and amount of such Out-of-Pocket Expenses.
(c) PURCHASER DEFAULT. Upon termination of this Agreement by Seller upon a
Purchaser Default, Purchaser shall cause Escrow Agent to disburse the Earnest
Money to Seller within two (2) Business Days after such termination, and Seller
and Purchaser shall have no further rights or obligations under this Agreement,
except those which expressly survive such termination. Purchaser's obligation to
cause Escrow Agent to disburse the Earnest Money to Seller shall survive such
termination.
SELLER AND PURCHASER AGREE THAT IF THIS AGREEMENT IS TERMINATED PURSUANT TO THIS
SECTION 12.3 (c), THE DAMAGES THAT SELLER WOULD SUSTAIN AS A RESULT OF SUCH
TERMINATION WOULD BE DIFFICULT IF NOT IMPOSSIBLE TO ASCERTAIN. ACCORDINGLY,
SELLER AND PURCHASER AGREE THAT SELLER SHALL RETAIN THE EARNEST MONEY AS FULL
AND COMPLETE LIQUIDATED DAMAGES AND AS SELLER'S SOLE AND EXCLUSIVE REMEDY FOR
SUCH TERMINATION; PROVIDED, HOWEVER, THAT SELLER SHALL RETAIN ALL RIGHTS AND
REMEDIES UNDER THIS AGREEMENT WITH RESPECT TO THOSE OBLIGATIONS WHICH EXPRESSLY
SURVIVE SUCH TERMINATION.
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<PAGE>
Seller's Initials _______ Purchaser's Initials _______
(d) EARNEST MONEY If this Agreement is terminated by Purchaser pursuant to
Section 12.2(i), Escrow Agent shall refund the Earnest Money to Purchaser, and
Seller and Purchaser shall have no further rights or obligations under this
Agreement, except those which expressly survive such termination.
(e) SELLER DEFAULT. If Purchaser terminates this Agreement upon a Seller
Default, Escrow Agent shall refund the Earnest Money to Purchaser, and Seller
and Purchaser shall have no further rights or obligations under this Agreement,
except those which expressly survive such termination. Purchaser and Seller
agree that Purchaser's sole and exclusive remedies upon a Seller Default shall
be to: (i) terminate this Agreement pursuant to Section 12.2(iv); (ii) proceed
to Closing without any reduction in or setoff against the Purchase Price; or
(iii) obtain an injunction for specific performance or other equitable remedy
available to Purchaser; or (iv) if such Seller Default is an Intentional Seller
Default, sue for damages; PROVIDED, HOWEVER, that in no event shall Purchaser be
entitled to damages in excess of Six Million Two Hundred and Fifty Thousand
Dollars ($6,250,000.00) as a result of such Seller Default.
ARTICLE XIII
CASUALTY; CONDEMNATION
Section 13.1 CASUALTY.
(a) MATERIAL CASUALTY. If the Property or any portion thereof is damaged
or destroyed by fire or any other casualty prior to Closing (a "CASUALTY"),
Seller shall give written notice of such Casualty to Purchaser promptly after
the occurrence of such Casualty. If the amount of the repair, restoration or
replacement required by a Casualty equals or exceeds One Million and no/100
Dollars ($1,000,000.00) (a "MATERIAL CASUALTY") and the Casualty was not caused
by Purchaser or Purchaser's Inspectors, or their respective employees or agents,
then Purchaser shall have the right, in its sole discretion, to (i) terminate
this Agreement, in which case Escrow Agent shall refund the Earnest Money to
Purchaser, and Seller and Purchaser shall have no further rights or obligations
under this Agreement, except those which expressly survive such termination, or
(ii) proceed to Closing, without terminating this Agreement, in which case
Seller shall (A) credit the amount of the applicable insurance deductible
against the Purchase Price, and (B) transfer and assign to Purchaser all of
Seller's right, title and interest in and to all proceeds from all casualty and
lost profits insurance policies maintained by Seller with respect to the Hotel,
except those proceeds allocable to lost profits for the period prior to the
Closing. Purchaser shall make an election under this Section 13.1(a) by giving
written notice to Seller on or before ten (10) days after Seller's delivery to
Purchaser of written notice of such Casualty. If Purchaser fails to make an
election under Section 13.1(a) within such time period, Purchaser shall be
conclusively deemed to have elected to proceed to Closing pursuant to
clause (B) of this Section 13.1(a). If the Closing Date is scheduled to occur
within Purchaser's ten (10) day election period, the Closing Date shall be
extended until the tenth (10th) day after the expiration of such ten (10) day
election period.
(b) NON-MATERIAL CASUALTY. In the event of any (i) Casualty which is not a
Material Casualty, or (ii) Material Casualty which is caused by Purchaser or
Purchaser's Inspectors, or their respective employees or agents, then Purchaser
shall not have the right to terminate this Agreement, but shall proceed to
Closing, in which case Seller shall (A) credit the amount of the applicable
insurance deductible against the Purchase Price, and (B) transfer and assign to
Purchaser all of Seller's right, title and interest in and to all proceeds from
all casualty and lost profits insurance policies maintained by Seller with
respect to the Hotel, except those proceeds allocable to lost profits for the
period prior to the Closing.
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Section 13.2 CONDEMNATION.
(a) MATERIAL CONDEMNATION. If the event of any actual or threatened
condemnation or taking pursuant to the power of eminent domain of all or any
portion of the Real Property, or any proposed sale in lieu thereof (a
"CONDEMNATION"), Seller shall give written notice of such Condemnation to
Purchaser as soon as possible after Seller receives notice of such Condemnation.
If the Condemnation would (i) result in the loss of more than ten percent (10%)
of the Land or Improvements, (ii) result in any material reduction or
restriction in access to the Land or Improvements, (iii) have a materially
adverse effect on the operation of the Hotel as operated prior to such
Condemnation or (iv) reduces the value of the Land or Improvement by more than
One Million and no/100 Dollars ($1,000,000.00) (a "MATERIAL CONDEMNATION"), then
Purchaser shall have the right, in its sole discretion, to (A) terminate this
Agreement, in which case Escrow Agent shall refund the Earnest Money to
Purchaser, and Seller and Purchaser shall have no further rights or obligations
under this Agreement, except those which expressly survive such termination, or
(B) proceed to Closing, without terminating this Agreement, in which case Seller
shall assign to Purchaser all of Seller's right, title and interest in all
proceeds and awards from such Condemnation. Purchaser shall make an election
under this Section 13.2(a) by giving written notice to Seller within ten
(10) days after Seller's delivery to Purchaser of written notice of such
Condemnation. If Purchaser fails to make an election under Section 13.2(a)
within such time period, Purchaser shall be conclusively deemed to have elected
to terminate this Agreement pursuant to clause (B) of Section 13.2(a). If the
Closing Date is scheduled to occur within Purchaser's ten (10) day election
period, the Closing Date shall be extended until the tenth (10th) day after the
expiration of such ten (10) day election period.
(b) NON-MATERIAL CONDEMNATION. In the event of any Condemnation of any
Real Property other than a Material Condemnation, Purchaser shall not have the
right to terminate this Agreement, but shall proceed to Closing, in which case
Seller shall assign to Purchaser all of Seller's right, title and interest in
all proceeds and awards from such Condemnation.
ARTICLE XIV
INDEMNIFICATION
Section 14.1 INDEMNIFICATION BY SELLER. Subject to the limitations set
forth in Sections 5.2, 5.3, 5.4, 14.3, 14.4, 14.5 and 14.7, from and after the
Closing, Seller shall defend, indemnify and hold harmless the Purchaser
Indemnitees from and against any Losses incurred by any Purchaser Indemnitees
(i) as a result of (a) any inaccuracy or untruth of any representations or
warranties made by Seller in this Agreement, (b) the breach by Seller of any of
its covenants or obligations under this Agreement which expressly survive the
Closing, (ii) after the termination of this Agreement based on the breach by
Seller of any of its covenants or obligations under this Agreement which
expressly survive such termination or (iii) except to the extent prorated
pursuant to the provisions of this Agreement or expressly agreed to be paid by
Purchaser, any and all liabilities relating to the ownership, operation or
business of the Hotel with respect to the period prior to the Closing.
Section 14.2 INDEMNIFICATION BY PURCHASER. Subject to the limitations set
forth in Section 6.2 and 14.3, 14.4 and 14.5, Purchaser shall defend, indemnify
and hold harmless the Seller Indemnitees from and against any Losses incurred by
any Seller Indemnitees (i) after the Closing as a result of (a) any inaccuracy
or breach of any representations or warranties made by Purchaser in this
Agreement, or (b) the breach by Purchaser of any of its covenants or obligations
under this Agreement which expressly survive the Closing, (ii) after the
termination of this Agreement based on the breach by Purchaser of any of its
covenants or obligations under this Agreement which expressly survive such
termination or (iii) except to the extent prorated pursuant to the provisions of
this Agreement or expressly agreed to be paid by Seller, any and all liabilities
relating to the ownership, operation or business of the Hotel with respect to
the period from and after the Closing.
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Section 14.3 LIMITATIONS ON INDEMNIFICATION OBLIGATIONS.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller under Sections 5.1(a), 5.1(b), 5.1(c), 5.1(i), 5.1(q),
5.1(r) and 5.1(aa), and the representations and warranties of Purchaser under
this Agreement shall survive the Closing until the expiration of the applicable
statute of limitations, and all other representations and warranties of Seller
under this Agreement shall survive the Closing for a period commencing on the
Closing Date and expiring at 5:00 p.m. (Eastern Time) on the date which is Three
Hundred and Sixty (360) days after the Closing Date (the "SURVIVAL PERIOD"). To
the extent any Indemnitee is seeking the defense of, or indemnification for, a
breach of any representations or warranties, the Indemnitee shall be entitled to
indemnification only for those matters as to which the Indemnitee has given
written notice to the Indemnitor prior to the expiration of the expiration of
the applicable Survival Period.
(b) INDEMNIFICATION DEDUCTIBLE AND CAP. Notwithstanding anything to the
contrary in this Agreement, Seller shall be not be required to provide defense
or indemnification to the Purchaser Indemnitees pursuant to Section 14.1(i)(a)
to the extent that the aggregate amount of all Losses incurred by the Purchaser
Indemnitees for which Purchaser otherwise would be entitled to indemnification:
(i)(a) does not exceed Five Hundred Thousand Dollars ($500,000) (the
"INDEMNIFICATION DEDUCTIBLE"), and (b) if such Losses exceed the Indemnification
Deductible, Purchaser shall not be entitled to defense or indemnification for
any amount up to the Indemnification Deductible, or (ii) exceeds Six Million Two
Hundred Fifty Thousand and no/100 Dollars ($6,250,000.00) ("INDEMNIFICATION
CAP").
(c) EFFECT OF TAXES AND INSURANCE. The amount of any Losses for which
defense or indemnification is provided to any Indemnitee under this Article XIV
shall be net of any tax benefits realized or insurance proceeds received by such
Indemnitee in connection with the Indemnification Claim.
Section 14.4 INDEMNIFICATION PROCEDURE.
(a) NOTICE OF INDEMNIFICATION CLAIM. In the case of any indemnification
sought by any of the Seller Indemnitees or Purchaser Indemnitees (as the case
may be) (each, an "INDEMNITEE"), or any claim asserted by a third party which if
adversely determined would entitle any Indemnitee to indemnification or defense
under this Agreement (each, an "INDEMNIFICATION CLAIM"), the Indemnitee shall
provide written notice to the Party required to provide indemnification or
defense for such Indemnification Claim under this Agreement (the "INDEMNITOR")
promptly after such Indemnitee has actual knowledge of any facts or
circumstances or third-party claim as to which such Indemnification Claim may be
sought, describing in reasonable detail the facts and circumstances or
third-party claim giving rise to such Indemnification Claim.
(b) DEFENSE AND RESOLUTION OF INDEMNIFICATION CLAIM. If the
Indemnification Claim does not involve a third-party claim and is disputed by
the Indemnitor, the dispute shall be resolved by litigation or other means as
the Parties otherwise may agree. If the Indemnification Claim involves a
third-party claim, the Indemnitor shall have the right (but shall not be
obligated) to assume the defense of such claim or any litigation resulting
therefrom, at its cost and expense, and shall use good faith efforts consistent
with prudent business judgment to defend such third-party claim in an effective
and cost-efficient manner, provided that (i) the counsel for the Indemnitor who
shall conduct the defense of the third-party claim or litigation shall be
reasonably satisfactory to the Indemnitee (unless selected by Indemnitor's
insurance company), (ii) the Indemnitee, at its cost and expense, may
participate in, but shall not control, the defense of such third-party claim,
(iii) the failure by any Indemnitee to give notice as provided herein shall not
relieve the Indemnitor of its indemnification obligation under this Agreement,
except to the extent that such failure to provide notice increases the amount of
the indemnification obligation of Indemnitor or otherwise prejudices the
Indemnitor's ability to defend against such third-party claim, and (iv) the
Indemnitor shall not enter into any settlement or other
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<PAGE>
agreement which requires any performance by the Indemnitee, other than the
payment of money which shall be paid by the Indemnitor. The Indemnitee shall not
enter into any settlement agreement with respect to the Indemnification Claim,
without the Indemnitor's prior written consent. If the Indemnitor elects not to
assume the defense of such third-party claim, the Indemnitee shall retain the
defense of such third-party claim and shall use good faith efforts consistent
with prudent business judgment to defend such third-party claim in an effective
and cost-efficient manner.
(c) ACCRUAL OF INDEMNIFICATION OBLIGATION. Notwithstanding anything to the
contrary in this Agreement, the Indemnitee shall have no right to
indemnification against the Indemnitor for any Indemnification Claim which does
not involve a third-party claim, but is disputed by Indemnitor, until such time
as such dispute or litigation is concluded, including any appeals with respect
thereto.
Section 14.5 EXCLUSIVE REMEDY. Except for claims based on fraud, the
indemnification provisions of this Article XIV shall be the sole and exclusive
remedy of any Indemnitee with respect to any claim for Losses arising from or in
connection with this Agreement.
Section 14.6 INDEMNIFICATION OBLIGATIONS. So long as Seller has
indemnification obligations under Section 14.1 of this Agreement, WHLP shall
guaranty Seller's indemnification obligations and WHLP shall maintain sufficient
net worth from and after the Closing to satisfy such obligations.
Section 14.7 RELEASE OF SELLER FOR ENVIRONMENTAL
LIABILITIES. Notwithstanding any indemnification or defense obligation of
Seller under this Agreement, Purchaser does hereby forever release and discharge
the Seller Indemnitees from any and all Environmental Claims and Environmental
Liabilities, whether now known or unknown to Purchaser; provided, however, that
such release and discharge shall not apply to any defense or indemnification
obligation of Seller based on a breach of Seller's representation or warranty
set forth in Section 5.1; and PROVIDED, FURTHER, that the foregoing release
shall not be effective with respect to (i) any action, cause of action, suit,
claim or liability that Purchaser may have or incur relating to or arising out
of third party claims brought against Purchaser or the Hotel based upon and to
the extent of any condition(s), event(s) or occurrence(s) existing on or prior
to the Closing, including without limitation, lawsuits and claims similar in
substance to those set forth in Schedule 5.1(g) or (ii) the litigation matters
referred to on Schedule 5.1(g).
ARTICLE XV
MISCELLANEOUS PROVISIONS
Section 15.1 NOTICES.
(a) METHOD OF DELIVERY. All notices, requests, demands and other
communications (each, a "NOTICE") required to be provided to the other Party
pursuant to this Agreement shall be in writing and shall be delivered (i) in
person, (ii) by certified U.S. mail, with postage prepaid and return receipt
requested, (iii) by overnight courier service, or (iv) by facsimile transmittal,
with a verification copy sent on the same day by any of the methods set forth in
clauses (i), (ii) and (iii), to the other Party to this Agreement at the
following address or facsimile number (or to such other address or facsimile
number as Seller or Purchaser may designate from time to time pursuant to
Section 15.1(c)):
IF TO SELLER:
Starwood Hotels & Resorts Worldwide, Inc.
777 Westchester Avenue
White Plains, New York 10604
Attn: Thomas Janson, Esq., Executive Vice President and General Counsel
Matthew Coe, Esq., Vice President and Associate General Counsel
Facsimile No.: (914) 640-8260
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WITH A COPY TO:
Stephen G. Tomlinson, Esq.
Kirkland & Ellis
200 E. Randolph
Chicago, IL 60601
Facsimile No.: (312) 861-2200
IF TO PURCHASER:
BRE/St. Francis L.L.C.
345 Park Avenue
32nd Floor
New York, NY 10154
Attn: Jonathan D. Gray
Facsimile No.: (212) 583-5573
WITH A COPY TO:
Gregory Ressa, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Facsimile No.: (212) 455-2502
(b) RECEIPT OF NOTICES. All Notices sent by Seller or Purchaser (or their
respective counsel pursuant to Section 15.1(d)) under this Agreement shall be
deemed to have been received by the Party to whom such Notice is sent upon
(i) delivery to the address or facsimile number of the recipient Party, provided
that such delivery is made prior to 5:00 p.m. (local time for the recipient
Party) on a Business Day, otherwise the following Business Day, or (ii) the
attempted delivery of such Notice if (A) such recipient Party refuses delivery
of such Notice, or (B) such recipient Party is no longer at such address or
facsimile number, and such recipient Party failed to provide the sending Party
with its current address or facsimile number pursuant to this Section 15.1(c).
(c) CHANGE OF ADDRESS. Seller and Purchaser and their respective counsel
shall have the right to change their respective address and/or facsimile number
for the purposes of this Section 15.1 by providing a Notice of such change in
address and/or facsimile as required under this Section 15.1(c).
(d) DELIVERY BY PARTY'S COUNSEL. Seller and Purchaser agree that the
attorney for such Party shall have the authority to deliver Notices on such
Party's behalf to the other Party hereto.
Section 15.2 TIME IS OF THE ESSENCE. Time is of the essence of this
Agreement; provided, however, that notwithstanding anything to the contrary in
this Agreement, if the time period for the performance of any covenant or
obligation, satisfaction of any condition or delivery of any notice or item
required under this Agreement shall expire on a day other than a Business Day,
such time period shall be extended automatically to the next Business Day.
Section 15.3 ASSIGNMENT. Purchaser shall not assign this Agreement or any
interest therein to any Person, without the prior written consent of Seller,
which consent may be withheld in Seller's sole discretion. Notwithstanding the
foregoing, Purchaser shall have the right to designate any Affiliate as its
nominee to receive title to the Property, or assign all of its right, title and
interest in this Agreement to any Affiliate or any Person with whom Purchaser
will enter into a joint venture to purchase the Hotel; provided, however, that
(i) Purchaser shall not be released from any of its liabilities and obligations
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under this Agreement by reason of such designation or assignment; and (ii) such
designation or assignment shall not be effective until Purchaser has provided
Seller with a fully executed copy of such designation or assignment and
assumption instrument, which shall (A) provide that such designee or assignee
shall be jointly and severally liable for all liabilities and obligations of
Purchaser under this Agreement, (B) provide that Purchaser and its designee or
assignee agree to pay any additional transfer tax as a result of such
designation or assignment, and (iii) include a representation and warranty in
favor of Seller that all representations and warranties made by Purchaser in
this Agreement are true and correct with respect to such designee or assignee as
of the date of such designation or assignment, and will be true and correct as
of the Closing, and (iv) otherwise be in form and substance reasonably
satisfactory to Seller.
Section 15.4 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES. This
Agreement shall be binding upon and inure to the benefit of Seller and
Purchaser, and their respective successors and permitted assigns pursuant to
Section 15.3. Except for any Indemnitee to the extent such Indemnitee is
expressly granted certain rights of defense and indemnification in this
Agreement and for any successors and permitted assignee pursuant to
Section 15.3, this Agreement shall not confer any rights or remedies upon any
third party.
Section 15.5 PREVAILING PARTY. If any litigation or other court action,
arbitration or similar adjudicatory proceeding is sought, taken, instituted or
brought by Seller or Purchaser to enforce its rights under this Agreement, all
fees, costs and expenses, including, without limitation, reasonable attorneys
fees and court costs, of the prevailing Party in such action, suit or proceeding
shall be borne by the Party against whose interest the judgment or decision is
rendered. This Section shall survive the termination of this Agreement and the
Closing.
Section 15.6 NO RECORDATION. Neither this Agreement, nor any memorandum or
other notice of this Agreement, shall be recorded without Seller's prior written
consent, which consent may be withheld in Seller's discretion.
Section 15.7 RULES OF CONSTRUCTION. The following rules shall apply to the
construction and interpretation of this Agreement:
(a) Singular words shall connote the plural as well as the singular, and
plural words shall connote the singular as well as the plural, and the masculine
shall include the feminine and the neuter.
(b) All references in this Agreement to particular articles, sections,
subsections or clauses (whether in upper or lower case) are references to
articles, sections, subsections or clauses of this Agreement. All references in
this Agreement to particular exhibits or schedules (whether in upper or lower
case) are references to the exhibits and schedules attached to this Agreement,
unless otherwise expressly stated or clearly apparent from the context of such
reference.
(c) The headings contained herein are solely for convenience of reference
and shall not constitute a part of this Agreement nor shall they affect its
meaning, construction or effect.
(d) Each Party hereto and its counsel have reviewed and revised (or
requested revisions of) this Agreement and have participated in the preparation
of this Agreement, and therefore any usual rules of construction requiring that
ambiguities are to be resolved against a particular Party shall not be
applicable in the construction and interpretation of this Agreement or any
exhibits hereto.
(e) The terms "HEREBY," "HEREOF," "HERETO," "HEREIN," "HEREUNDER" and any
similar terms shall refer to this Agreement, and not solely to the provision in
which such term is used.
(f) The terms "INCLUDE," "INCLUDING" and similar terms shall be construed
as if followed by the phrase "WITHOUT LIMITATION."
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<PAGE>
Section 15.8 GOVERNING LAW; SEVERABILITY. This Agreement shall be governed
by the laws of the State of New York. If any term or provision of this Agreement
is held to be or rendered invalid or unenforceable at any time in any
jurisdiction, such term or provision shall not affect the validity or
enforceability of any other terms or provisions of this Agreement, or the
validity or enforceability of such affected terms or provisions at any other
time or in any other jurisdiction.
Section 15.9 RECITALS, EXHIBITS AND SCHEDULES. The recitals to this
Agreement, and all exhibits and schedules (as amended and supplemented from time
to time pursuant to Section 5.3) referred to in this Agreement are incorporated
herein by such reference and made a part of this Agreement.
Section 15.10 ENTIRE AGREEMENT; AMENDMENTS TO AGREEMENT. This Agreement
sets forth the entire understanding and agreement of the Parties hereto, and
shall supersede the Letter of Intent and any other agreements and understandings
(written or oral) between Seller and Purchaser on or prior to the date of this
Agreement with respect to the transaction contemplated in this Agreement. No
amendment or modification to any terms of this Agreement(other than amendments
and supplements to the schedules made by Seller pursuant to Section or
cancellation of this Agreement, shall be valid unless in writing and executed
and delivered by Seller and Purchaser.
Section 15.11 FACSIMILE; COUNTERPARTS. Seller and Purchaser may deliver
executed signature pages to this Agreement by facsimile transmission to the
other Party, which facsimile copy shall be deemed to be an original executed
signature page; provided, however, that such Party shall deliver an original
signature page to the other Party promptly thereafter. This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original and all of which counterparts together shall constitute one agreement
with the same effect as if the Parties had signed the same signature page.
[Remainder of page intentionally left blank;
Signatures on following pages]
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IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be
executed in their names by their respective duly authorized officers or
representatives.
<TABLE>
<S> <C> <C>
SELLER:
THE WESTIN ST. FRANCIS
LIMITED PARTNERSHIP,
a Delaware limited Partnership
By: ST. FRANCIS HOTEL CORP.,
a Delaware corporation, General Partner
By:
-----------------------------------------
Name:
Title:
PURCHASER:
BRE/ST. FRANCIS L.L.C.,
a Delaware limited liability company
By:
-----------------------------------------
Name:
Title:
</TABLE>
Westin Hotel Limited Partnership executes this Agreement solely for the purposes
of acknowledging and agreeing to its obligations under Section 7.10 and
Section 14.6 of this Agreement.
<TABLE>
<S> <C> <C> <C>
WESTIN HOTELS LIMITED PARTNERSHIP:
By: Westin Realty Corporation,
Its General Partner
By:
------------------------------------
Its:
------------------------------------
</TABLE>
St. Francis Hotel Corporation executes this Agreement solely for the
purposes of acknowledging and agreeing to its obligations under Section 7.11 of
this Agreement.
<TABLE>
<S> <C> <C> <C>
ST. FRANCIS HOTEL CORP.
By:
------------------------------------
Its:
------------------------------------
</TABLE>
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<PAGE>
ANNEX B
FAIRNESS OPINION
[LETTERHEAD OF HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL ADVISORS]
January 20, 2000
Westin Hotels Limited Partnership
Westin St. Francis Limited Partnership
Ladies and Gentlemen:
We understand the Westin Hotels Limited Partnership, a Delaware limited
partnership ("WHLP"), owns the Westin St. Francis Hotel in San Francisco,
California ("Westin St. Francis") through The Westin St. Francis Limited
Partnership (the "Hotel Partnership"), a subsidiary Delaware limited
partnership. We further understand that BRE/St. Francis L.L.C., a Delaware
limited liability company and affiliate of The Blackstone Group ("Blackstone"),
has agreed to acquire the Westin St. Francis from the Hotel Partnership for
$243.0 million. The sale of the Westin St. Francis to Blackstone is referred to
herein as the "Transaction." The terms of the Transaction are detailed in the
Purchase Agreement (as defined herein).
Houlihan Lokey Howard & Zukin Financial Advisors, Inc. ("Houlihan Lokey")
has been retained by and reports to WHLP and the Hotel Partnership (collectively
the "Partnerships") and their respective general partners, Westin Realty Corp.
("WRC") and the St. Francis Hotel Corporation ("SFHC"), collectively the
"General Partners." Both WRC and SFHC are wholly-owned, through affiliates, by
Starwood Hotels & Resorts Worldwide, Inc.
In connection with the proposed Transaction, the Partnerships and the
General Partners have requested that Houlihan Lokey render an opinion as to the
fairness of the Transaction, from a financial point of view, to the limited
partners of WHLP.
The Opinion does not address the Partnerships' or the General Partners'
underlying business decision to effect the Transaction. We have not been
requested to, and did not, solicit third party indications of interest in
acquiring all or any part of the Westin St. Francis, make any recommendations as
to the form or amount of consideration to be received by the Partnerships, the
limited partners, the General Partners or any other person in connection with
the Transaction, which consideration was determined through negotiations between
Blackstone and the General Partners. We were not asked to opine on and did not
express any opinion as to (i) tax or legal consequences of the Transaction,
including but not limited to tax or legal consequences to the limited partners,
the General Partners or the Partnerships; (ii) the fairness, advisability or
desirability of alternatives to the Transaction; (iii) the fair market value of
the Westin St. Francis; or (iv) the fairness of any aspect of the Transaction
not expressly addressed in this Opinion, including the fairness of the
Transaction as a whole. Furthermore, at your request, we have not negotiated the
Transaction or advised you with respect to alternatives to it.
<PAGE>
Westin Hotels Limited Partnership
Westin St. Francis Limited Partnership
January 20, 2000 2
In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
1. held discussions with the Partnerships' senior management to discuss the
Transaction, the operations, financial condition, future prospects and
performance of the Westin St. Francis;
2. held discussions with Sonnenblick-Goldman Company to discuss the
Transaction, specifically the process undertaken in selling the Westin St.
Francis;
3. reviewed the Purchase and Sale Agreement dated January 18, 2000 by and
between WHLP and BRE/St. Francis L.L.C., a Delaware limited liability
company, (the "Purchase Agreement") which details the terms of the
Transactions;
4. reviewed WHLP's financial statements as filed on Form 10-K for the two
fiscal years ended December 31, 1998 and December 31, 1997, respectively;
5. reviewed WHLP's financial statements as filed on Form 10-Q for the quarterly
period ended September 30, 1999;
6. reviewed company-prepared Westin St. Francis financial statements for the
fiscal year ended December 31, 1998;
7. reviewed company-prepared Westin St. Francis financial statements for the
fiscal year ended December 31, 1999, which WHLP's management has identified
as being the most current financial statements available;
8. reviewed a company-prepared Distribution of Assumed Sales Proceeds schedule
as of December 31, 1999;
9. reviewed the forecasted business plan for the year ended December 31, 2000
of the Westin St. Francis;
10. reviewed the March 8, 1999 appraisal report of the Westin St. Francis as
prepared by HVS International, Inc.;
11. visited the Westin St. Francis;
12. reviewed the offering memorandum on the Westin St. Francis, as prepared by
Sonnenblick-Goldman Company;
13. reviewed the Best and Final Offer Matrix as prepared by Sonnenblick-Goldman
Company;
14. reviewed copies of the following agreements:
-- the First Amendment to Amended and Restated Agreement of Limited
Partnership of The Westin St. Francis Limited Partnership, as of June 2,
1994,
-- the Amended and Restated Agreement of Limited Partnership of The Westin
St. Francis Limited Partnership, as of December 31, 1986,
-- the Amended and Restated Agreement of Limited Partnership of Westin
Hotels Limited Partnership, as of December 31, 1986,
-- the Second Amendment to Amended and Restated Management Agreement, as of
September 1, 1999,
-- the First Amendment to Amended and Restated Management Agreement of The
Westin St. Francis Limited Partnership, as of June 2, 1994,
<PAGE>
Westin Hotels Limited Partnership
Westin St. Francis Limited Partnership
January 20, 2000 3
-- the Amended and Restated Management Agreement among Westin Hotel Company
and St. Francis Hotel Corporation, The Westin St. Francis Limited
Partnership, and Westin Hotels Limited Partnership, as of August 21,
1986,
-- Promissory Note dated August 21, 1986,
-- Deed of Trust, Financing Statement, Security Agreement and Fixture
Filing (with Assignment of Rents and Leases) dated August 21, 1986 and
amendments, and
-- Assignment of Management Agreement among Teacher Retirement System of
Texas and St. Francis Hotel Corporation, The Westin St. Francis Limited
Partnership, and Westin Hotels Limited Partnership, as of August 21,
1986.
15. conducted such other studies analyses, studies and investigations as we
deemed appropriate under the circumstances for rendering the opinion
expressed herein.
We have relied upon and assumed, without independent verification, the
accuracy and completeness of the financial and other information, including the
financial forecasts and projections, provided to us by the General Partners and
that such information has been reasonably prepared and reflects the best
currently available estimates of the current and future financial results and
condition of the Westin St. Francis and that there has been no material change
in the assets, financial condition or prospects of the Westin St. Francis since
the date of the most recent financial statements made available to us.
Furthermore, we have relied upon, without independent investigation, the General
Partners' interpretation of the Partnerships' partnership agreement,
particularly the distribution and allocation provisions thereof. We have also
relied upon the assurance of the General Partners that any financial projections
or pro forma statements or adjustments provided to us were reasonably prepared
or adjusted on bases consistent with actual historical experience or reflecting
the best currently available estimates and good faith judgements; that no
material changes have occurred in the information reviewed by us between the
date the information was provided and the date of this Opinion or in the assets,
financial condition business or prospectus of the Westin St. Francis; and the
General Partners are not aware of any information or facts regarding the Westin
St. Francis and the Partnerships that would cause the information supplied to us
to be incomplete or misleading in any material respect.
We have not independently verified the accuracy and completeness of the
information supplied to us with respect to the Westin St. Francis, the
Partnerships, or the General Partners and do not assume any responsibility with
respect to it. We have not made an independent appraisal of the Hotel or any of
the properties or assets of the Partnerships, or the General Partners. Our
Opinion is necessarily based on business, economic, market and other conditions
as they exist and can be evaluated by us at the date of this letter.
The Westin St. Francis, the Partnerships, and the General Partners, like
other companies and any business entities analyzed by Houlihan Lokey or which
are otherwise involved in any manner in connection with this Opinion, could be
materially affected by complications that may occur, or may be anticipated to
occur, in computer-related applications as a result of the year change from 1999
to 2000 (the "Y2K Issue"). In accordance with long-standing practice and
procedure, Houlihan Lokey's services are not designed to detect the likelihood
and extent of the effect of the Y2K Issue, directly or indirectly, on the
financial condition and/or operations of a business. Further, Houlihan Lokey has
no responsibility with regard to the Westin St. Francis' or the Partnerships'
efforts to make its systems, or any other systems (including its vendors and
service providers), Year 2000 compliant on a timely basis. Accordingly, Houlihan
Lokey shall not be responsible for any effect of the Y2K Issue on the matters
set forth in this Opinion.
<PAGE>
Westin Hotels Limited Partnership
Westin St. Francis Limited Partnership
January 20, 2000 4
Based upon the foregoing, and in reliance thereon, it is our opinion that
the Transaction in its entirety is fair to the limited partners of WHLP from a
financial point of view.
HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL ADVISORS, INC.
/s/ HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL ADVISORS, INC.
<PAGE>
CONSENT CARD
THIS WRITTEN CONSENT IS SOLICITED BY THE GENERAL PARTNER OF
WESTIN HOTELS LIMITED PARTNERSHIP
CONSENT CARD FOR ACTION BY WRITTEN CONSENT OF LIMITED PARTNERS
TO BE EFFECTIVE AS SET FORTH IN THE CONSENT SOLICITATION STATEMENT
ACCOMPANYING THIS CONSENT CARD
The undersigned, with respect to each Unit in Westin Hotels Limited
Partnership (the "Partnership") held of record by the undersigned on
February 15, 2000, hereby sets forth his, her or its vote in connection with the
written consent solicited by the General Partner of the Partnership as described
in the Consent Solicitation Statement accompanying this consent card.
You are encouraged to indicate your vote by marking the appropriate box on
the reverse side. Failure to check any of the boxes with respect to the proposed
authorization will, if this consent card has been signed and dated, constitute a
vote "FOR" the proposed authorization. Please sign and date this card. A
postage-paid return envelope is enclosed for your convenience in returning this
card.
IMPORTANT: PLEASE VOTE, DATE AND SIGN ON REVERSE SIDE.
<PAGE>
THE GENERAL PARTNER RECOMMENDS A VOTE "FOR" THE PROPOSED AUTHORIZATION:
Authorization of the General Partner's grant of consent on behalf of the
Partnership to the proposed sale by The Westin St. Francis Limited Partnership
of The Westin St. Francis Hotel as described in the accompanying Consent
Solicitation Statement, dated March 15, 2000.
<TABLE>
<S> <C> <C>
FOR AGAINST ABSTAIN
/ / / / / /
</TABLE>
<TABLE>
<S> <C>
Dated: , 2000
(SIGNATURE(S) OF LIMITED PARTNERS(S))
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------------------------------------------------
------------------------------------------------
(NOTE: PLEASE SIGN EXACTLY AS YOUR NAME OR NAMES
APPEAR ON THE LABEL. IF MORE THAN ONE NAME
APPEARS, ALL PERSONS SO DESIGNATED SHOULD SIGN.
WHEN SIGNING IN A REPRESENTATIVE CAPACITY,
PLEASE GIVE YOUR FULL TITLE.)
</TABLE>
