<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:
/ X / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / 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 ___, 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
/s/ ________________
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
/s/ ________________
Alan M. Schnaid
Vice President
White Plains, New York
March ____, 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
<PAGE>
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___, 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<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.....................................................................15
Fairness Opinion..........................................................................................16
Distributions.............................................................................................22
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..........................................................................24
Gain on Sale..............................................................................................24
Cash Distributions........................................................................................24
Passive Activity Losses...................................................................................25
California Income Taxes...................................................................................25
Tax-Exempt Limited Partners...............................................................................25
Estimated Taxable Gain and Income.........................................................................25
Accounting Treatment......................................................................................26
THE PURCHASE AND SALE AGREEMENT..................................................................................27
The Purchase and Sale.....................................................................................27
Representations and Warranties............................................................................27
Covenants.................................................................................................28
Conditions Precedent......................................................................................28
Prorations and Apportionments.............................................................................29
Termination...............................................................................................29
Casualty And Condemnation.................................................................................30
i
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE PROPOSED SALE................................................................31
General Partner...........................................................................................31
D.F. King & Co., Inc......................................................................................31
WHERE YOU CAN FIND ADDITIONAL INFORMATION........................................................................32
ANNEX A: PURCHASE AND SALE AGREEMENT
ANNEX B: FAIRNESS OPINION
</TABLE>
ii
<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 complimentary health and fitness center. Jewelry and gift boutiques,
clothing shops, specialty stores, an art gallery, a florist and a hair salon
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. As of
September 30, 1999, the balance of the mortgage loan relating to the St.
Francis was $91.5 million. 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.
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 September 30, 1999,
the subordinated loan from the General Partner to the Partnership totaled $39.3
million. Of that amount $31.4 million represents the portion of the loan
attributable to the St. Francis, which includes $11.4 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 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 September 30, 1999
the amount of all current and deferred incentive management fees attributable
to the Hotel Partnership was $23.5 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 by
the Partnership and Hotel Partnership 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 will be
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
amount of 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 $[801] per Unit, characterized as ordinary income as a result of
the recapture of prior depreciation deductions. See "THE PROPOSED SALE-Certain
Federal Income Tax Consequences." The balance of such gain is expected to
constitute a "Section 1231" gain, which will be treated as a long-term capital
gain in the hands of a Limited Partner if the Limited Partner's "Section 1231"
gains exceed its "Section 1231" losses.
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
3
<PAGE>
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 THE FIRST NINE MONTHS OF 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 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
September 30, 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;
- impact of the Year 2000 issue; 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
NAME BENEFICIALLY OWNED OUTSTANDING UNITS
<S> <C> <C>
Kalima 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
5
<PAGE>
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.
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 (1) on September 30, 1999 for purposes of
the pro forma condensed consolidated balance sheet items, and (2) 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 September 30, 1999 ...........................8
Pro Forma Condensed Consolidated Statement of Income for the Nine Month Period
Ended September 30, 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
SEPTEMBER 30, PRO FORMA SEPTEMBER 30,
1999 ADJUSTMENTS 1999
-------------------- ----------- ------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 38,180 $ 240,000 (a) $ 38,180
(101,944) (b)
(31,370) (c)
(23,545) (d)
(83,141) (e)
Net receivables 13,395 (9,105) (a) 4,290
Other current assets 1,777 (1,481) (a) 296
------------- -------------- -------------
Total current assets 53,352 (10,586) 42,766
Property & equipment, net 236,463 (173,098) (a) 63,365
Other assets 6,365 (504) (a) 5,693
(168) (f)
------------- -------------- -------------
$ 296,180 $ (184,356) $ 111,824
============= ============== =============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Current maturities of long-term obligations $ 1,843 $ (220) (a) $ 412
(1,211) (b)
Accounts payable and accrued expenses 16,540 (7,749) (a) 8,791
Payable to General Partner and affiliates 3,624 (689) (a) 834
(2,101) (d)
Other current liabilities 2,438 (1,788) (a) 650
------------- -------------- -------------
Total current liabilities 24,445 (13,758) 10,687
Long-term obligations 126,418 (502) (a) 31,902
(94,014) (b)
Long-term obligation to General Partner 39,324 (31,370) (c) 7,954
Deferred incentive management fees
payable to General Partner 28,168 (21,444) (d) 6,724
------------- -------------- -------------
Total liabilities 218,355 (161,088) 57,267
Minority interests 4,163 668 (a) 4,829
(2) (f)
Partners' capital (deficit)
General Partner (2,765) 661 (a) (2,106)
(2) (f)
Limited Partners (135,600 Units issued
and outstanding) 76,427 65,431 (a) 51,834
(6,719) (b)
(83,141) (e)
(164) (f)
------------- -------------- -------------
Total Partners' capital 73,662 (23,934) 49,728
------------- -------------- -------------
$ 296,180 $ (184,356) $ 111,824
============= ============== =============
</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 STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ST. FRANCIS PRO FORMA
NINE MONTHS ENDED PRO FORMA NINE MONTHS ENDED
SEPTEMBER 30, 1999 ADJUSTMENTS SEPTEMBER 30, 1999
------------------ ----------- ------------------
<S> <C> <C> <C>
Operating revenues $ 114,414 $ (81,663) (g) $ 32,751
Operating expenses 91,928 (64,011) (g) 27,917
------------- -------------- -------------
Operating profit 22,486 (17,652) 4,834
Other expenses, net 9,222 (7,758) (h) 1,464
------------- -------------- -------------
Income before minority interests 13,264 (9,894) 3,370
Minority interests 182 (117) (i) 65
------------- -------------- -------------
Net income $ 13,082 $ (9,777) $ 3,305
============= ============== =============
Net income per Unit $ 96.47 $ 24.37
============= =============
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>
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 (173,240)
------------------
Gain on Sale $ 66,760
==================
Allocated as follows:
Minority interests $ 668
General Partner 661
Limited Partners 65,431
------------------
$ 66,760
==================
</TABLE>
(b) To reflect the retirement of a mortgage loan in favor of
TRST, of $101,944, 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 $31,370 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 $23,545 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 $83,141 to the
Limited Partners.
(f) To reflect the write-off of deferred charges associated with
the mortgage loan totaling $168 and related allocation of $2,
$2 and $164 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) Interest expense incurred by St. Francis primarily related to
the mortgage loan and the subordinated note payable to the
General Partner. Interest expense for the St. Francis has been
eliminated for the periods presented as if the debt was 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, 1998
and 1997 and for each of the three years in the period ended December 31,
1998 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,
1998 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, 1996, 1995, and 1994 and
for each of the two years in the period ended December 31, 1995 are derived
from the Partnership's audited financial statements not incorporated by
reference in this Consent Solicitation Statement. The financial statements as
of and for the nine months ended September 30, 1999 and 1998, incorporated by
reference herein, are unaudited but, in the opinion of management, include
all adjustments (consisting only of normal, recurring adjustments) considered
necessary for a fair presentation. The results of operations for the nine
months ended September 30, 1999 are not necessarily indicative of the results
to be expected for the full fiscal year. 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>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- ----------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues:
Rooms...................... $ 72,804 $ 69,821 $ 94,724 $ 83,600 $ 73,375 $ 60,963 $ 60,251
Food and beverage.......... 32,179 26,061 37,354 32,793 27,477 27,124 30,611
Other operating departments 9,431 9,364 12,158 10,660 10,098 9,157 8,526
--------- --------- --------- --------- --------- --------- ---------
Total operating revenues..... 114,414 105,246 144,236 127,053 110,950 97,244 99,388
--------- --------- --------- --------- --------- --------- ---------
Operating expenses:
Rooms...................... 18,771 18,757 25,493 22,162 19,631 17,931 18,511
Food and beverage.......... 25,322 19,357 26,946 24,866 21,963 22,842 25,637
Administrative, general and
marketing................ 14,037 14,604 19,857 18,022 16,265 15,079 15,082
Management fees............ 9,104 7,021 9,949 8,554 5,672 2,188 5,309
Other...................... 24,694 23,687 31,617 30,990 27,520 25,210 22,393
--------- --------- --------- --------- --------- --------- ---------
Total operating expenses: 91,928 83,426 113,862 104,594 91,051 83,250 86,932
--------- --------- --------- --------- --------- --------- ---------
Operating profit............. $ 22,486 $ 21,820 $ 30,374 $ 22,459 $ 19,899 $ 13,994 $ 12,456
========= ========= ========= ========= ========= ========= =========
Net income................... $ 13,082 $ 12,047 $ 17,933 $ 9,691 $ 6,978 $ 1,713 $ 1,444
Net income per Unit.......... $ 96.47 $ 88.84 $ 132.25 $ 71.47 $ 51.46 $ 12.63 $ 10.65
Total assets................. $ 296,180 $ 282,692 $ 285,661 $ 269,785 $ 263,148 $ 246,698 $ 234,293
Long-term obligations........ $ 165,742 $ 164,522 $ 165,050 $ 162,989 $ 157,880 $ 153,760 $ 141,659
Deferred incentive management
fees....................... $ 28,168 $ 24,627 $ 25,618 $ 22,281 $ 19,425 $ 16,249 $ 16,249
Distributions paid per Unit.. $ 71.25 $ 71.25 $ 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.
13
<PAGE>
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 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, among other things, to 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.
14
<PAGE>
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 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:
<TABLE>
<C> <S>
(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.
</TABLE>
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.
15
<PAGE>
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."
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.
16
<PAGE>
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 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;
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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;
- 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,
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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 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., 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.
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<PAGE>
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 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.
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<PAGE>
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 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.
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<PAGE>
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."
ESTIMATED USE OF PROCEEDS FROM THE PROPOSED SALE
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
<TABLE>
<CAPTION>
<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.
(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.
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<PAGE>
(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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<PAGE>
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 taxation.
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 $[801] per Unit, 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 THE FIRST NINE MONTHS OF
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
25
<PAGE>
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. 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 generally accepted accounting principles, 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. The book basis of the
real estate is the historical acquisition cost of the St. Francis, plus capital
additions, less accumulated depreciation through December 31, 1999.
26
<PAGE>
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 Hotel, 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
27
<PAGE>
representations and warranties regarding contracts relating to the St.
Francis, violations of law, legal proceedings, condemnation actions, and
permits and licenses.
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.
28
<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 Purchaser 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 (12)
months after such termination.
29
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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 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 International 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.
30
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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 September 30, 1999 approximately $23.5 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.
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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:
<TABLE>
<C> <S>
(1) The Partnership's Annual Report on Form 10-K for the year
ended December 31, 1998;
(2) The Partnership's Quarterly Report on Form 10-Q for the
quarters ended March 31, 1999, June 30, 1999 and September 30,
1999; and
(3) The Partnership's Current Report on Form 8-K filed February 2,
2000.
</TABLE>
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
Jonathan H. Yellen
Assistant Secretary
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ANNEX A
PURCHASE AND SALE AGREEMENT
33
<PAGE>
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>
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<S> <C>
ARTICLE I DEFINITIONS..............................................................1
Section 1.1. Definitions..............................................................1
ARTICLE II DESCRIPTION OF THE PROPERTY; EXCLUDED PROPERTY..........................10
Section 2.1 Description of the Property.............................................10
Section 2.2 Excluded Property.......................................................13
ARTICLE III PURCHASE PRICE; EARNEST MONEY...........................................13
Section 3.1 Purchase Price..........................................................13
Section 3.2 Allocation of Purchase Price............................................13
Section 3.3 Earnest Money...........................................................14
Section 3.4 Payment of Purchase Price...............................................14
ARTICLE IV DUE DILIGENCE; TITLE AND SURVEY.........................................15
Section 4.1 Due Diligence...........................................................15
Section 4.2 Title and Survey........................................................16
Section 4.3 Starwood Board Approval.................................................17
ARTICLE V SELLER'S REPRESENTATIONS AND WARRANTIES.................................18
Section 5.1 Representations and Warranties..........................................18
Section 5.2 Limitation on Seller's Representations and Warranties...................23
Section 5.3 Amendment to Schedules..................................................23
Section 5.4 Effect of Purchaser's Knowledge.........................................24
ARTICLE VI PURCHASER'S REPRESENTATIONS AND WARRANTIES..............................24
Section 6.1 Representations and Warranties..........................................24
Section 6.2 Effect of Seller's Knowledge............................................25
ARTICLE VII COVENANTS...............................................................25
Section 7.1 Confidentiality.........................................................25
Section 7.2 Operation of the Hotel Prior to Closing.................................26
Section 7.3 Licenses and Permits....................................................26
Section 7.4 Employee Matters........................................................27
Section 7.5 Bookings................................................................27
Section 7.6 Tax Contests............................................................28
Section 7.7 Notices and Filings.....................................................28
Section 7.8 Access to Information...................................................29
Section 7.9 Further Assurances......................................................29
Section 7.10 Seller Approval.........................................................30
Section 7.11 Non-Solicitation........................................................31
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ARTICLE VIII CONDITIONS PRECEDENT....................................................32
Section 8.1 Conditions Precedent to the Obligations of Both Seller and Purchaser....33
Section 8.2 Additional Conditions to Purchaser's Obligations........................32
Section 8.3 Additional Conditions to Seller's Obligations...........................34
Section 8.4 Frustration of Closing Conditions.......................................34
ARTICLE IX CLOSING.................................................................34
Section 9.1 Closing Date............................................................34
Section 9.2 Closing Escrow..........................................................34
Section 9.3 Seller's Deliveries.....................................................35
Section 9.4 Purchaser's Deliveries..................................................36
Section 9.5 Possession..............................................................36
ARTICLE X PRORATIONS; ACCOUNTS RECEIVABLE; TRANSACTION
COSTS...................................................................37
Section 10.1 Prorations..............................................................37
Section 10.2 Accounts Receivable.....................................................39
Section 10.3 Transaction Costs.......................................................40
ARTICLE XI TRANSITION PROCEDURES...................................................40
Section 11.1 Settlement Statement....................................................40
ARTICLE XII TERMINATION; EFFECT OF TERMINATION.....................................41
Section 12.1 Seller's Right of Termination...........................................41
Section 12.2 Purchaser's Right of Termination........................................41
Section 12.3 Effect of Termination...................................................41
ARTICLE XIII CASUALTY; CONDEMNATION..................................................43
Section 13.1 Casualty................................................................43
Section 13.2 Condemnation............................................................44
ARTICLE XIV INDEMNIFICATION.........................................................44
Section 14.1 Indemnification by Seller...............................................44
Section 14.2 Indemnification by Purchaser............................................45
Section 14.3 Limitations on Indemnification Obligations..............................45
Section 14.4 Indemnification Procedure...............................................45
Section 14.5 Exclusive Remedy........................................................46
Section 14.6 Indemnification Obligations.............................................46
Section 14.7 Release of Seller for Environmental Liabilities.........................46
ARTICLE XV MISCELLANEOUS PROVISIONS................................................47
Section 15.1 Notices.................................................................47
Section 15.2 Time is of Essence......................................................48
Section 15.3 Assignment..............................................................48
Section 15.4 Successors and Assigns; Third Party Beneficiaries.......................49
Section 15.5 Prevailing Party........................................................49
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TABLE OF CONTENTS
<CAPTION>
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Section 15.6 No Recordation..........................................................49
Section 15.7 Rules of Construction...................................................49
Section 15.8 Governing Law; Severability.............................................50
Section 15.9 Recitals, Exhibits and Schedules........................................50
Section 15.10 Entire Agreement; Amendments to Agreement...............................50
Section 15.11 Facsimile; Counterparts.................................................50
</TABLE>
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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>
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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>
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<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "AGREEMENT") is made and entered
into as of this 18th 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.
<PAGE>
"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.
"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.
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"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 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
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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. Sections 9601 et seq. ("CERCLA"), (B) the Resource
Conservation and Recovery Act, 42 U.S.C. Sections 6901 et seq. ("RCRA"), (C)
the Federal Water Pollution Control Act, 33 U.S.C. Sections 2601 et seq., (D)
the Toxic Substances Control Act, 15 U.S.C. Sections 2601 et seq., (E) the
Clean Water Act, 33 U.S.C. Sections 1251 et seq., (F) the Clean Air Act, 42
U.S.C. Sections 7401 et seq., (G) the Hazardous Materials Transportation Act,
49 U.S.C. Sections 1801 et seq., (H) the Occupational Safety and Health Act,
29 U.S.C. Sections 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.
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"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.
"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.
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"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.
"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.
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"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 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.
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"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.
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"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.
"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.
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"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.
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");
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(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 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
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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
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certain Assignment of 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.
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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 "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
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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 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
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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 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
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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.
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
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board of directors or a duly authorized executivecommittee (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
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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.
(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.
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(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.
(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
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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.
(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.
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(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, 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.
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Seller (i) is not a party to any action orproceeding 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
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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.
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.
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(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.
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
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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 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
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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 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.
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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 any Governmental Authority or other
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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
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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 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.
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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.
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
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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.
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.
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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.
(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.
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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 (10th) 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
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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.
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;
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(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 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.
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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
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.
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(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/l00 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
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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.
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
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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 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
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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/l00 ($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.
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
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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.
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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.
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
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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 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
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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
WITH A COPY TO:
---------------
Stephen G. Tomlinson, Esq.
Kirkland & Ellis
200 E. Randolph
Chicago, IL 60601
Facsimile No.: (312) 861-2200
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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
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released from any of its liabilities and obligations 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.
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(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."
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.
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:
------------------------------
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.
WESTIN HOTELS LIMITED PARTNERSHIP:
By: Westin Realty Corporation,
Its General Partner
By:
---------------------------
Its:
--------------------------
<PAGE>
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.
ST. FRANCIS HOTEL CORP.
By:
---------------------------
Its:
--------------------------
<PAGE>
ANNEX B
FAIRNESS OPINION
34
<PAGE>
[LOGO]
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 the 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.
[FOOTER]
<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
Transaction;
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;
<PAGE>
Westin Hotels Limited Partnership
Westin St. Francis Limited Partnership
January 20, 2000 -3-
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,
- 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
<PAGE>
Westin Hotels Limited Partnership
Westin St. Francis Limited Partnership
January 20, 2000 -4-
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
prospects of the Westin St. Francis; and that 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.
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.
<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.
35
<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 __, 2000.
FOR AGAINST ABSTAIN
[_] [_] [_]
___________________________________
___________________________________
(SIGNATURE(S) OF LIMITED PARTNERS(S))
Dated: _________________, 2000
(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.)
36
