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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): September 10, 1999
SECURITY CAPITAL GROUP INCORPORATED
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(Exact Name of Registrant as Specified in its Charter)
Maryland
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(State or Other Jurisdiction of Incorporation)
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1-13355 36-3692698
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(Commission File Number) (I.R.S.Employer Identification No.)
125 Lincoln Avenue, Santa Fe, New Mexico 87501
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(Address of Principal Executive Offices) (Zip Code)
(505) 982-9292
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(Registrant's Telephone Number, Including Area Code)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On August 12, 1999, Security Capital Group Incorporated ("Security
Capital") entered into a Purchase and Sale Agreement (the "Agreement") with
Strategic Hotel Capital Incorporated ("Strategic Hotel"), under which Security
Capital agreed to sell 19,166,666 shares of common stock of Strategic Hotel,
$125,000,000 principal amount of 7.5% Convertible Subordinated Debentures
due 2017 of Strategic Hotel, and $50,000,000 principal amount of 6.5%
Convertible Subordinated Debentures due 2008 of Strategic Hotel (collectively
the "Securities") beneficially owned by Security Capital to Strategic Hotel,
and Strategic Hotel agreed to purchase the Securities, for $329,322,222 (the
"Purchase Price"). The Purchase Price was based on an anticipated closing on
September 8, 1999, and was subject to increase if the closing occurred after
September 8, 1999. The Agreement closed on September 10, 1999, and the actual
Purchase Price paid was $329,450,556, which was paid in cash.
Prior to the closing, Security Capital had held a 23.6% interest on a
fully converted basis in Strategic Hotel and had three representatives on
Strategic Hotel's board of eleven directors. Security Capital's representatives
on Strategic Hotel's board resigned as of the closing.
The transaction was approved by a special committee of Strategic Hotel
directors, not including any Security Capital representatives.
Security Capital has sold its entire interest in Strategic Hotel.
Security Capital originally purchased the Securities between May 1997 and
and May 1998 for an aggregate purchase price of $375 million. As a result
of the sale, Security Capital has recorded a $55.2 million loss which was taken
as a special charge in the second quarter of 1999 and will generate
approximately $19.3 million of tax benefits that Security Capital could use to
offset future capital gains taxes. Security Capital no longer recorded equity
in earnings from Strategic Hotel after the second quarter of 1999.
The proceeds of the sale will be used to repurchase $100 million of
Security Capital securities, described below, and the balance will be used to
reduce short-term corporate indebtedness.
The Board of Directors of Security Capital has authorized a repurchase
program of up to $100 million of Class A Common Stock, Class B Common Stock and
6.5% Convertible Subordinated Debentures due 2016 of Security Capital.
Repurchases may be made in open market or privately negotiated transactions,
depending on market prices and other conditions.
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial Statements:
None
(b) Pro Forma Financial Information:
Pro Forma Condensed Consolidated Balance Sheet as of June 30,1999
(unaudited)
Pro Forma Condensed Consolidated Statement of Operations for
the six months ended June 30, 1999 (unaudited)
Pro Forma Condensed Consolidated Statement of Operations for the
year ended December 31, 1998 (unaudited)
Notes to Pro Forma Condensed Consolidated Financial Statements
(unaudited)
(c) Exhibits
Exhibit No. Document Designation
10.22 Purchase and Sale Agreement, dated as of August 12, 1999,
between Security Capital Group Incorporated and
Strategic Hotel Capital Incorporated
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SECURITY CAPITAL GROUP INCORPORATED
By: /s/ Jeffrey A. Klopf
Jeffrey A. Klopf
Senior Vice President and Secretary
Dated: September 20, 1999
<PAGE>
SECURITY CAPITAL GROUP INCORPORATED
INDEX TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Page
Number(s)
---------
Pro Forma Condensed Consolidated Balance Sheet as of June 30, 1999
(unaudited)...................................................... F-3
Pro Forma Condensed Consolidated Statement of Operations for the six
months ended June 30, 1999 (unaudited)........................... F-4
Pro Forma Condensed Consolidated Statement of Operations for the year
ended December 31, 1998 (unaudited).............................. F-5
Notes to Pro Forma Condensed Consolidated Financial Statements
(unaudited)...................................................... F-6
<PAGE>
SECURITY CAPITAL GROUP INCORPORATED
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying pro forma condensed consolidated financial statements
for Security Capital Group Incorporated ("Security Capital") reflect the sale of
Security Capital's entire interest in Strategic Hotel Capital Incorporated
("Strategic Hotel"), which consists of 19,166,666 shares of common stock, $125.0
million principal amount of 7.5% convertible subordinated debentures and $50.0
million principal amount of 6.5% convertible subordinated debentures, for a cash
amount of $329.5 million. The sale closed on September 10, 1999.
On August 12, 1999, Security Capital announced that its Board of
Directors had authorized a share repurchase program of up to $100.0 million, for
which part of the proceeds from the sale of Strategic Hotel were to be used.
The pro forma condensed consolidated financial statements have been
prepared based upon certain pro forma adjustments to the historical financial
statements of Security Capital.
The accompanying pro forma condensed consolidated balance sheet as of
June 30, 1999, has been prepared as if the sale of Strategic Hotel had been
completed as of that date and the sale proceeds are assumed to be used to
repurchase $100.0 million of Security Capital Class B common stock for an
assumed price of $15.00 per share (based on August and September 1999 market
values), and the balance used to reduce Security Capital's short-term
indebtedness.
The accompanying pro forma condensed consolidated statements of
operations for the six months ended June 30, 1999, and for the year ended
December 31, 1998, have been prepared as if (i) the sale of Strategic Hotel had
occurred on January 1, 1998, (ii) $100.0 million of the sale proceeds had been
used to reduce common shares outstanding as of January 1, 1998, and (iii) the
remaining sale proceeds had been used to reduce Security Capital's indebtedness.
The pro forma condensed consolidated financial statements do not
purport to be indicative of the financial position or results of operations
which would actually have been obtained had the transaction described above been
completed on the dates indicated or which may be obtained in the future. The pro
forma condensed consolidated financial statements should be read in conjunction
with the historical financial statements of Security Capital as set forth in
Security Capital's 1998 Form 10-K and June 30, 1999, Form 10-Q. In management's
opinion, all material adjustments necessary to reflect the effects of the sale
of Security Capital's investment in Strategic Hotel have been made to the pro
forma condensed consolidated financial statements.
F-2
<PAGE>
SECURITY CAPITAL GROUP INCORPORATED
and Subsidiaries
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
June 30, 1999
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
ASSETS -------------- -------------- -------------
<S> <C> <C> <C>
Investments, at equity:
Archstone Communities Trust $ 821,926 $ -- $ 821,926
ProLogis Trust 596,246 -- 596,246
Security Capital European Realty 353,543 -- 353,543
Security Capital Preferred Growth Incorporated 80,739 -- 80,739
Security Capital U.S. Realty 812,006 -- 812,006
Strategic Hotel Capital Incorporated 329,000 (329,000)(a) --
-------------- -------------- -------------
2,993,460 (329,000) 2,664,460
-------------- -------------- -------------
Real estate, less accumulated depreciation 1,129,508 -- 1,129,508
Investments in publicly traded real estate securities, at market value 84,292 -- 84,292
-------------- -------------- -------------
Total real estate investments 4,207,260 (329,000) 3,878,260
Cash and cash equivalents 33,941 -- 33,941
Other assets 146,621 -- 146,621
-------------- -------------- -------------
Total assets $ 4,387,822 $ (329,000) $ 4,058,822
============== ============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Lines of credit $ 475,000 $ (229,451)(b) $ 245,549
Mortgage notes payable and capital lease obligations 363,970 -- 363,970
Long-term debt 699,570 -- 699,570
Convertible debentures 320,751 -- 320,751
Accounts payable, accrued expenses and other liabilities 140,387 -- 140,387
-------------- -------------- -------------
Total liabilities 1,999,678 (229,451) 1,770,227
Minority interests 83,236 -- 83,236
Shareholders' Equity:
Class A (NYSE: SCZ.A) Shares, (1,337,152 historically and
1,337,152 pro forma) 13 -- 13
Class B (NYSE: SCZ) Shares, (55,473,295 historically and
48,806,628 pro forma) 555 (67)(c) 488
Series B Preferred Shares 257,642 -- 257,642
Additional paid-in capital 2,421,129 (99,933)(c) 2,321,196
Accumulated deficit (374,431) 451 (a) (373,980)
-------------- -------------- -------------
Total shareholders' equity 2,304,908 (99,549) 2,205,359
-------------- -------------- -------------
Total liabilities and shareholders' equity $ 4,387,822 $ (329,000) $ 4,058,822
============== ============== =============
</TABLE>
See accompanying notes to the pro forma condensed consolidated financial
statements.
F-3
<PAGE>
SECURITY CAPITAL GROUP INCORPORATED
and Subsidiaries
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Six Months Ended June 30, 1999
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
-------------- -------------- --------------
<S> <C> <C> <C>
INCOME:
Equity in earnings of equity method investees $ 48,908 $ (11,247)(d) $ 37,661
Financial Services Division revenues from
related parties 39,429 -- 39,429
Other income, net 13,139 -- 13,139
Property revenue 104,421 -- 104,421
-------------- -------------- --------------
205,897 (11,247) 194,650
-------------- -------------- --------------
EXPENSES:
Interest expense 66,100 (7,806)(e) 58,294
Financial Services Division expenses 39,734 -- 39,734
General, administrative and other 34,395 -- 34,395
Depreciation and amortization 22,410 -- 22,410
Property expenses 51,038 -- 51,038
Homestead special charge 65,296 -- 65,296
-------------- -------------- --------------
278,973(f) (7,806) 271,167
-------------- -------------- --------------
Loss from operations (73,076) (3,441) (76,517)
Provision for income tax expense (benefit):
Current 4,519(f) 443 (g) 4,962
Deferred (13,026) (1,647)(g) (14,673)
-------------- -------------- --------------
Total income tax benefit (8,507) (1,204) (9,711)
-------------- -------------- --------------
Minority interest in net loss
of subsidiaries (20,839) -- (20,839)
-------------- -------------- --------------
Loss from continuing operations excluding provision
for loss on investment (43,730) (2,237) (45,967)
Less Preferred Share dividends 9,017 -- 9,017
-------------- -------------- -------------
Net loss from continuing operations excluding
provision for loss on investment attributable
to common shares $ (52,747) $ (2,237) $ (54,984)
============== ============== ==============
Weighted average Class B common shares
Outstanding:
Basic 120,420 (6,667)(h) 113,753
============== ============= ===============
Diluted 120,420 (6,667)(h) 113,753
============== ============= ===============
Per share net loss from continuing operations
attributable to common shares:
Basic $ (0.44) $ (0.48)
============== ==============
Diluted $ (0.44) $ (0.48)
============== ==============
</TABLE>
See accompanying notes to the pro forma condensed consolidated financial
statements.
F-4
<PAGE>
SECURITY CAPITAL GROUP INCORPORATED
and Subsidiaries
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1998
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Pro forma
Historical Adjustments Pro Forma
-------------- ------------- --------------
<S> <C> <C> <C>
INCOME:
Equity in loss of equity method investees $ (53,159) $ (9,593)(i) $ (62,752)
Financial Services Division revenues from
related parties 93,850 -- 93,850
Other income, net (11,887) -- (11,887)
Property revenue 144,374 -- 144,374
-------------- ------------- --------------
173,178 (9,593) 163,585
-------------- ------------- --------------
EXPENSES:
Interest expense 82,203 (16,360)(j) 65,843
Financial Services Division expenses 76,093 -- 76,093
General, administrative and other 62,774 -- 62,774
Depreciation and amortization 37,419 -- 37,419
Property expenses 63,339 -- 63,339
-------------- ------------- -------------
321,828 (16,360) 305,468
-------------- ------------- -------------
Loss from operations (148,650) 6,767 (141,883)
Provision for income tax expense (benefit):
Current 4,698 1,845(k) 6,543
Deferred (51,793) 524(k) (51,269)
-------------- ------------- -------------
Total income tax benefit (47,095) 2,369 (44,726)
-------------- ------------- -------------
Minority interest in net loss
of subsidiaries (2,202) -- (2,202)
-------------- ------------- -------------
Loss from continuing operations (99,353) 4,398 (94,955)
Less Preferred Share dividends 35,088 -- 35,088
-------------- ------------- -------------
Net loss from continuing operations attributable
to common shares $ (134,441) $ 4,398 $ (130,043)
============== ============= =============
Weighted average Class B common shares
Outstanding:
Basic 121,325 (6,667)(l) 114,658
============== ============= =============
Diluted 121,325 (6,667)(l) 114,658
============== ============= =============
Per share net loss from continuing operations
attributable to common shares:
Basic $ (1.11) $ (1.13)
============== =============
Diluted $ (1.11) $ (1.13)
============== =============
</TABLE>
See accompanying notes to the pro forma condensed consolidated financial
statements.
F-5
<PAGE>
SECURITY CAPITAL GROUP INCORPORATED
and Subsidiaries
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(a) Represents the sale of Strategic Hotel as of June 30, 1999, for $329.5
million. The investment had been written down by $55.2 million to $329.0
million in June 1999, therefore a pro forma adjustment to accumulated
deficit of $0.5 million was made.
(b) Represents the reduction in Security Capital's line of credit, which was
assumed to be paid down with $229.5 million of the proceeds from the sale
of Strategic Hotel.
(c) Represents the reduction of 6,666,667 shares of Security Capital's Class
B common shares at $15 per share which was assumed to have been
repurchased with $100 million of the proceeds from the sale of Strategic
Hotel.
(d) Represents the elimination of equity in earnings of Strategic Hotel due
to the assumed sale of Strategic Hotel on January 1, 1998. The reduction
is comprised of equity in earnings of $4.7 million and interest income of
$6.5 million.
(e) Represents the reduction in interest expense assumed to have been
realized due to the utilization of $229.5 million of proceeds from the
sale of Strategic Hotel to reduce weighted average debt balances. The
reduction in interest expense was calculated using Security Capital's
six months ended June 30, 1999, average line of credit balance of $120.6
million at the related weighted average interest rate of 6.24% and an
assumed $108.9 million reduction in average outstanding long-term debt at
a weighted average interest rate of 7.43%.
(f) Since the intent of the accompanying pro forma condensed consolidated
statement of operations for the six months ended June 30, 1999, is
to reflect the expected continuing impact of the sale of Strategic
Hotel, the $55.2 million provision for loss on investment and the
related $1.2 million tax benefit, which were included in the June 1999
statement of operations, have been excluded.
(g) Represents the adjustment to the tax basis as shown below (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Current income tax adjustments:
Less Strategic Hotel debenture interest income $ (6,541)
Less pro forma interest expense adjustment 7,806
-----------
Total expense adjustments 1,265
Effective tax rate 35%
-----------
Tax expense from above adjustments $ 443
===========
Deferred income tax adjustment:
Reverse deferred tax expense related to investment
in Strategic Hotel $ 1,647
===========
</TABLE>
(h) Reflects the decrease in weighted average Class B common shares
outstanding assumed to have occurred on January 1, 1998, from the
utilization of $100.0 million of the sale proceeds for the share
repurchase program at an assumed purchase price of $15 per share.
(i) Represents the elimination of equity in earnings of Strategic Hotel due
to the assumed sale of Strategic Hotel on January 1, 1998. The reduction
is comprised of equity in loss of $1.5 million and interest income of
$11.1 million.
(j) Represents the reduction in interest expense assumed to have been
realized due to the utilization of $229.5 million of proceeds from the
sale of Strategic Hotel to reduce the weighted average outstanding
balance on Security Capital's line of credit. The reduction in interest
was calculated using the $229.5 million reduction in principal and the
related weighted average interest rate of 7.13%. The average outstanding
line of credit balance for the year ended December 31, 1998, was $247.3
million.
F-6
<PAGE>
SECURITY CAPITAL GROUP INCORPORATED
and Subsidiaries
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(k) Represents the adjustment to the tax basis as shown below (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Current income tax adjustment:
Less Strategic Hotel debenture interest income $ (11,090)
Less pro forma interest expense adjustment 16,360
-----------
Total expense adjustments 5,270
Effective tax rate 35%
-----------
Tax expense from above adjustments $ 1,845
===========
Deferred income tax adjustment:
Reverse deferred tax benefit related to investment
in Strategic Hotel $ 524
===========
</TABLE>
(l) Reflects the decrease in weighted average Class B common shares
outstanding assumed to have occurred on January 1, 1998, from the
utilization of $100.0 million of the sale proceeds for the share
repurchase program at an assumed purchase price of $15 per share.
F-7
Exhibit 10.22
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement"), dated as of August
12, 1999, is between Strategic Hotel Capital Incorporated, a Delaware
corporation ("SHCI"), and Security Capital Group Incorporated, a Maryland
corporation ("Security Capital").
WHEREAS, Security Capital is the beneficial owner of (i) 19,166,667
shares of common stock, $0.01 par value per share (the "SHCI Stock"), of SHCI,
(ii) $125,000,000 original principal amount of 7.5% Convertible Subordinated
Debentures due 2017 of SHCI (the "7.5% Debentures") and (iii) $50,000,000
original principal amount of 6.5% Convertible Subordinated Debentures due 2008
of SHCI (the "6.5% Debentures" and, together with the 7.5% Debentures, the
"Debentures"; and the SHCI Stock and the Debentures are collectively referred to
as the "Securities"); and
WHEREAS, Security Capital desires to sell and SHCI desires to purchase
the Securities subject to the terms described herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, agreements and warranties herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. PURCHASE AND SALE. Subject to the terms and conditions herein set
forth, SHCI agrees to purchase and Security Capital agrees to sell on the
Closing Date (as hereinafter defined) the Securities, free and clear of all
liens, encumbrances, claims and security interests, for the applicable Purchase
Price (as hereinafter defined). The Purchase Price shall be allocated first to
accrued and unpaid interest (including Deferred Interest under the 7.5%
Debentures) and principal on the Debentures and the balance to the SHCI Stock.
4741664.1 90199 1440C 98504582
<PAGE>
2. EARNEST MONEY; DEPOSIT. Concurrently with the execution of this
Agreement, SHCI has deposited $10,000,000 with First American Title Insurance
Company, as escrow agent (the "Escrow Agent"). Such amount, together with
interest thereon (the "Earnest Money") shall be held and disbursed by the Escrow
Agent in accordance with the Escrow Agreement of even date herewith among SHCI,
Security Capital and the Escrow Agent (the "Escrow Agreement"). On September 8,
1999, the Escrow Agent shall, in accordance with the Escrow Agreement, pay
$10,000,000 of the Earnest Money to Security Capital and shall pay the balance
of the Earnest Money to SHCI. In the event that the Closing shall not have
occurred on September 8, 1999, SHCI shall pay to Security Capital by 5:00 p.m.
EST on September 8, 1999 an additional amount equal to $10,000,000. In the event
that the Closing shall not have occurred on or before October 8, 1999, SHCI
shall pay to Security Capital by 5:00 p.m. EST on October 8, 1999 an additional
amount equal to $10,000,000. In the event that the Closing shall not have
occurred on or before November 8, 1999, SHCI shall pay to Security Capital by
5:00 p.m. EST on November 8, 1999 an additional amount equal to $10,000,000.
Each of the amounts to be paid by SHCI to Security Capital hereunder, including
the portion of the Earnest Money paid to Security Capital, is referred to as a
"Deposit" and shall be non-refundable and creditable by SHCI towards the
Purchase Price. Each Deposit shall be paid by SHCI to Security Capital on the
applicable date by wire transfer of immediately available funds to the account
specified by Security Capital. For the purposes of this Section 2, the Closing
shall be deemed not to have occurred on any specified date unless a Federal Wire
Transfer Reference Number shall have been received by SHCI by no later than 2:00
p.m. EST on such date. If the Closing shall fail to occur for any reason other
than the failure of Security Capital to perform its obligations under this
Agreement, Security Capital shall be entitled to retain the Deposit and to
pursue any and all remedies available at law or in equity, it being agreed that
the retention of the Deposit does not represent liquidated damages and that such
amount shall be offset against any recovery by Security Capital. SHCI shall have
no right to terminate this Agreement or to receive any reimbursement of the
Deposit unless Security Capital shall fail to perform any of its obligations
under this Agreement. SHCI will be responsible for and shall pay all taxes
relating to earnings on the Earnest Money for the period during which such
amounts are held in escrow pursuant to the terms of the Escrow Agreement.
3. RELEASE. Subject to the terms and conditions herein set forth, SHCI
hereby consents to the execution and delivery by Security Capital of this
Agreement and waives any right of first offer or right of first refusal it may
have with respect to the Securities to be sold pursuant to this Agreement.
4. LLC CONVERSION. The parties acknowledge that SHCI intends to convert
into a limited liability company (the "LLC Conversion"). SHCI agrees that the
LLC Conversion (whether such conversion is accomplished through a merger of SHCI
into a limited liability company subsidiary or otherwise) shall not be
consummated prior to the Closing hereunder.
5. REPRESENTATIONS AND WARRANTIES OF SHCI. SHCI hereby represents and
warrants to Security Capital as follows:
(a) DUE ORGANIZATION. SHCI is duly organized, validly existing and in
good standing under the laws of the State of Delaware.
4741664.1 90199 1440C 98504582
2
<PAGE>
(b) AUTHORIZATION. SHCI has the requisite power to enter into this
Agreement and the Transaction Documents (as hereafter defined) and to carry
out its obligations hereunder and thereunder. This Agreement and the
Transaction Documents have been duly authorized, and this Agreement has
been duly executed and delivered by SHCI and constitutes a valid and
binding agreement enforceable in accordance with its terms, and at Closing
to the extent the SHCI Note is issued, the Transaction Documents will be
duly executed and delivered by SHCI and will constitute valid and binding
agreements enforceable in accordance with their terms, except, in each
case, to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other laws affecting the
enforcement of creditors' rights generally or by general equitable
principles. Subject to receiving the consent of the required lenders under
the Credit Agreement, dated as of September 26, 1997, among SHCI, SHC
Funding Incorporated and the lending institutions named therein, neither
the execution and delivery of this Agreement or the Transaction Documents,
the consummation of the transactions contemplated hereby or thereby, nor
compliance with the terms, conditions or provisions of this Agreement or
the Transaction Documents will be a violation of any of the terms,
conditions or provisions of SHCI's Certificate of Incorporation or bylaws
or of any material agreement or instrument to which it or one of its
subsidiaries is a party or by which it or one of its subsidiaries or its or
their material properties may be bound, or constitute a default or create a
right of termination or acceleration thereunder.
(c) FINANCIAL STATEMENTS. The consolidated financial statements of
SHCI as at and for the period ending June 30, 1999 previously delivered to
Security Capital are true, complete and correct in all material respects
and fairly present the financial condition and results of operations of
SHCI and its consolidated subsidiaries at such date and for such period.
6. REPRESENTATIONS AND WARRANTIES OF SECURITY CAPITAL. Security Capital
hereby represents and warrants to SHCI as follows:
(a) DUE ORGANIZATION. Security Capital is duly organized, validly
existing and in good standing under the laws of the State of Maryland.
(b) AUTHORIZATION. Security Capital has the requisite power to enter
into this Agreement and to carry out its obligations hereunder. This
Agreement has been duly authorized, executed and delivered by Security
Capital and constitutes a valid and binding agreement of Security Capital
enforceable in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally or by general equitable principles. Neither the execution and
delivery of this Agreement, consummation of the transactions contemplated
hereby, nor compliance with the terms, conditions or provisions of this
Agreement, will be a violation of any of the terms, conditions or
provisions of Security Capital's charter or bylaws; or of any material
agreement or instrument to which Security Capital (or one of its
subsidiaries) is a party or by which Security Capital (or one of its
subsidiaries) or any of its (or their) material properties may be bound, or
constitute a default or create a right of termination or acceleration
thereunder.
(c) TITLE. Security Capital, directly or through a wholly owned
subsidiary, owns the SHCI Stock and the Debentures, in each case free and
clear of all liens, encumbrances, claims and security interests, but
subject to the Shareholders' Agreement among SHCI, Security Capital and the
other parties identified therein and other agreements between the parties
imposing obligations on Security Capital or one of its subsidiaries in
respect of the Securities.
4741664.1 90199 1440C 98504582
3
<PAGE>
(d) ACCESS TO INFORMATION. Security Capital has been supplied with
and has reviewed the most recent financial information of SHCI, and has had
access to such information as it deems relevant to entering into the
Agreement and has had the opportunity to inquire of management of SHCI as
to any of such information.
7. EXCLUSIVITY. Prior to the Closing, Security Capital shall not, and
shall ensure that its subsidiaries and representatives shall not, directly or
indirectly, solicit, initiate or encourage, inquiries or proposals from, or
provide any confidential information to, or participate in any discussions or
negotiations with, any person (other than SHCI and its representatives)
concerning any sale or other disposition of any interest in SHCI (including the
Securities). Security Capital will promptly advise SHCI of, and communicate to
SHCI the terms and conditions of (and the identity of the person making), any
such inquiry or proposal received on or prior to the Closing. Security Capital
has previously delivered to SHCI a list of all persons with whom it has had
contacts of the nature described above.
8. PUBLIC ANNOUNCEMENTS. The parties hereto will consult with each other
before issuing, and provide each other with the reasonable opportunity to review
and comment upon, any press release or otherwise making any public statements
with respect to the transactions contemplated by this Agreement, and shall not
issue any such press release or make any such public statement without the
reasonable consent of the other party, except as may be required by applicable
law, by court process or by obligations pursuant to any listing agreement with
any national securities exchange or transaction reporting system so long as the
other party is notified promptly by the disclosing party of such press release
or public statement. The parties agree that the initial press release to be
issued with respect to the transactions contemplated by this Agreement upon
execution of this Agreement will be in the form agreed to by the parties hereto
prior to the execution of this Agreement.
9. CLOSING. The purchase and sale of the Securities (the "Closing")
shall occur at 9:00 a.m. (Central time) on September 8, 1999 or such other
business day on or prior to December 8, 1999 as SHCI may, in its sole and
absolute discretion, determine with one business day's prior notice to Security
Capital (such date being the "Closing Date"). The Closing shall take place at
the offices of SHCI at 77 West Wacker Drive, Suite 4600, Chicago, Illinois
60601, at which time the parties shall make the deliveries described below. At
the Closing, in addition to any other documents required to be delivered under
this Agreement, the parties hereto shall deliver the documents described below:
(a) DELIVERIES BY SHCI. At the Closing, SHCI shall deliver or
cause to be delivered the following to Security Capital:
(1) In the event that the Closing Date is prior to
December 8, 1999, either:
4741664.1 90199 1440C 98504582
4
<PAGE>
(i) the amount set forth on Schedule I as the
purchase price (the "Purchase Price") for the Closing
Date by wire transfer of immediately available funds to
the account specified by Security Capital, less the
aggregate amount of the Deposit previously paid by SHCI
to Security Capital pursuant to Section 2 hereof; or
(ii) provided that SHCI and its subsidiaries shall
have complied with each and every covenant contained
(directly or by incorporation) in the SHCI Note (as
hereafter defined) and that no Event of Default shall
have occurred thereunder, all determined as if such SHCI
Note had been executed and delivered on, and been in
effect at all times since the date hereof, and not
otherwise, each of the following:
(A) a promissory note in the amount of the
Purchase Price for the Closing Date from SHCI made
to the order of Security Capital, which promissory
note shall be in substantially the form of EXHIBIT
A attached hereto (the "SHCI Note");
(B) a pledge agreement in the form of
EXHIBIT B attached hereto (the "Pledge Agreement"
and, together with the SHCI Note, the "Transaction
Documents"), pursuant to which SHCI shall grant a
security interest in the SHCI Treasury Stock (as
hereafter defined) to Security Capital as security
for amounts owing under the SHCI Note;
(C) a certificate or certificates
representing the 19,166,667 treasury shares of
SHCI Stock sold by Security Capital to SHCI
hereunder, which certificates shall be duly
endorsed in blank or accompanied by duly executed
stock powers to be held by Security Capital
pursuant to the Pledge Agreement (the "SHCI
Treasury Stock");
(D) an opinion of Mayer, Brown & Platt, in
form and substance reasonably satisfactory to
Security Capital, to the effect that the SHCI Note
has been duly authorized and issued and
constitutes the binding and enforceable obligation
(subject to customary exceptions) of SHCI and as
to the due authorization, binding effect and
enforceability (subject to customary exceptions)
of the Pledge Agreement; and
4741664.1 90199 1440C 98504582
5
<PAGE>
(E) financial statements for SHCI and its
consolidated subsidiaries as at, and for the
period ending as of, the most recent month end,
demonstrating and accompanied by a certificate of
the Chief Financial Officer of SHCI in appropriate
form, dated as of the Closing Date, certifying to,
compliance with the covenants contained (directly
or by incorporation) in the SHCI Note and that no
Event of Default shall have occurred thereunder as
aforesaid in this clause (ii), and to the truth,
completeness, correctness and fairness of
presentation of such financial statements;
(2) In the event that the Closing Date is on December 8,
1999, the amount set forth on Schedule I as the Purchase Price
for such Closing Date by wire transfer of immediately available
funds to the account specified by Security Capital, less the
aggregate amount of the Deposit previously paid by SHCI to
Security Capital pursuant to Section 2 hereof:
(3) a certificate, dated the Closing Date, of an
executive officer of SHCI, certifying that, as of such date, the
representations and warranties of SHCI are accurate, true and
correct with the same force and effect as though made on and as
of such date; and
(4) a certificate of SHCI's secretary certifying
resolutions of the board of directors of SHCI approving this
Agreement and the transactions contemplated hereby (together with
an incumbency and signature certificate regarding the officer(s)
signing on behalf of SHCI).
(b) DELIVERIES BY SECURITY CAPITAL. At the Closing, Security
Capital shall deliver or cause to be delivered the following to SHCI:
(1) a certificate or certificates representing the
19,166,667 shares of SHCI Stock, which certificates shall be duly
endorsed in blank or accompanied by duly executed stock powers;
(2) originally executed 7.5% Debentures in the aggregate
principal amounts of $125,000,000, which debentures shall be
accompanied by duly executed instruments of transfer and
assignment;
(3) originally executed 6.5% Debentures in the aggregate
principal amounts of $50,000,000, which debentures shall be
accompanied by duly executed instruments of transfer and
assignment;
(4) the resignations of William D. Sanders, C. Ronald
Blankenship and Thomas B. Allin from SHCI's board of directors
and any other position such persons may hold with SHCI;
(5) a certificate, dated the Closing Date, of an
executive officer of Security Capital, certifying that, as of
such date, the representations and warranties of Security Capital
are accurate, true and correct with the same force and effect as
though made on and as of such date;
4741664.1 90199 1440C 98504582
6
<PAGE>
(6) a certificate of Security Capital's secretary (and of
the secretary of the record owner of the Securities) certifying
resolutions of the board of directors of Security Capital (and of
such record owner) approving this Agreement and the transactions
contemplated hereby (together with an incumbency and signature
certificate regarding the officer(s) signing on behalf of
Security Capital or such record owner); and;
(7) such documents and instruments as SHCI may reasonably
request in connection with the LLC Conversion.
10. CONDITIONS TO THE OBLIGATIONS OF SHCI. The obligations of SHCI under
this Agreement are subject to the fulfillment of each of the following
conditions:
(a) PERFORMANCE. Security Capital shall have performed and
complied in all material respects with all agreements, covenants,
obligations and conditions required by this Agreement to be performed or
complied with by it (it being agreed that any lien, encumbrance, claim
or security interest on the Securities (other than as described in
Section 6(c)) shall be deemed material for these purposes).
(b) INJUNCTIONS. No preliminary or permanent injunction or other
final order by any United States federal or state court shall have been
issued which prevents the consummation of the transactions contemplated
hereby.
11. CONDITIONS TO THE OBLIGATIONS OF SECURITY CAPITAL. The obligations
of Security Capital under this Agreement are subject to the fulfillment of each
of the following conditions:
(a) PERFORMANCE. SHCI shall have performed and complied in all
material respects with all agreements, covenants, obligations and
conditions required by this Agreement to be performed or complied with
by it.
(b) INJUNCTIONS. No preliminary or permanent injunction or other
final order by any United States federal or state court shall have been
issued which prevents the consummation of the transactions contemplated
hereby.
12. SURVIVAL. The representations and warranties of the parties shall
survive the Closing for a period of six months from the Closing Date.
13. INDEMNIFICATION.
4741664.1 90199 1440C 98504582
7
<PAGE>
(a) Each party (the "Indemnifying Party") agrees to indemnify the
other party, and each of their affiliates and their respective officers,
directors, employees, agents and representatives (each, an "Indemnified
Party" and together the "Indemnified Parties") against, and agrees to
hold each of them harmless from, any and all liabilities, losses, costs,
claims, damages, penalties and expenses (including, without limitation,
reasonable attorneys' fees and expenses and costs of investigation and
litigation) ("Losses") incurred or suffered by them relating to or
arising out of or in connection with any breach of or any inaccuracy in
any representation or warranty made by the Indemnifying Party in this
Agreement or any document delivered by it at the Closing pursuant to
Section 9 hereof.
(b) As soon as is reasonably practicable after becoming aware of
a claim for indemnification under this Agreement the Indemnified Party
shall promptly give notice to the Indemnifying Party of such claim and
the amount the Indemnified Party will be entitled to receive hereunder
from the Indemnifying Party; provided that the failure of the
Indemnified Party to give notice shall not relieve the Indemnifying
Party of its obligations hereunder except to the extent (if any) that
the Indemnifying Party shall have been prejudiced thereby. If the
Indemnifying Party does not object in writing to such indemnification
claim within 30 calendar days of receiving notice thereof, the
Indemnified Party shall be entitled to recover promptly from the
Indemnifying Party the amount of such claim (but such recovery shall not
limit the amount of any additional indemnification to which the
Indemnified Party may be entitled pursuant to this Agreement), and no
later objection by the Indemnifying Party shall be permitted. If the
Indemnifying Party agrees that it has an indemnification obligation but
objects that it is obligated to pay only a lesser amount, the
Indemnified Party shall nevertheless be entitled to recover promptly
from the Indemnifying Party the lesser amount, without prejudice to the
Indemnified Party's claim for the difference.
(c) After receiving a claim as set forth above, the Indemnifying
Party may, at its own expense, (i) participate in the defense of any
claim, suit, action or proceeding and (ii) upon notice to the
Indemnified Party and the Indemnifying Party's delivering to the
Indemnified Party a written agreement that the Indemnified Party is
entitled to indemnification for all Losses arising out of such claim,
suit, action or proceeding, assume the defense thereof; provided,
however, that (x) the Indemnifying Party's counsel is reasonably
satisfactory to the Indemnified Party, and (y) the Indemnifying Party
shall thereafter consult with the Indemnified Party upon the Indemnified
Party's reasonable request for such consultation from time to time with
respect to such claim, suit, action or proceeding. If the Indemnifying
Party assumes such defense, the Indemnified Party shall have the right
(but not the duty) to participate in the defense thereof and to employ
counsel, at its own expense, separate from the counsel employed by the
Indemnifying Party. If, however, the Indemnified Party reasonably
determines in its judgment that representation by the Indemnifying
Party's counsel of both the Indemnifying Party and the Indemnified Party
would present such counsel with a conflict of interest, then such
Indemnified Party may employ separate counsel to represent or defend it
in any such claim, action, suit or proceeding and the Indemnifying Party
shall pay the reasonable fees and disbursements of such separate
counsel. Whether or not the Indemnifying Party chooses to defend or
prosecute any such claim, suit, action or proceeding, all of the parties
hereto shall cooperate in the defense or prosecution thereof.
4741664.1 90199 1440C 98504582
8
<PAGE>
(d) Notwithstanding anything in this Section 13 to the contrary,
neither the Indemnifying Party nor the Indemnified Party shall, without
the written consent of the other, settle or compromise any claim or
permit a default or consent to entry of any judgment unless the claimant
and such party provide to such other party an unqualified release from
all liability in respect of such claim. Notwithstanding the foregoing,
if a settlement offer solely for money damages is made by the applicable
third party claimant, and the Indemnifying Party notifies the
Indemnified Party in writing of the Indemnifying Party's willingness to
accept the settlement offer and pay the amount called for by such offer,
and the Indemnified Party declines to accept such offer, the Indemnified
Party may continue to contest such claim, free of any participation by
the Indemnifying Party, and the amount of any ultimate liability with
respect to such claim that the Indemnifying Party has an obligation to
pay hereunder shall be limited to the lesser of (i) the amount of the
settlement offer that the Indemnified Party declined to accept or (ii)
the aggregate Losses of the Indemnified Party with respect to such
claim. If the Indemnifying Party makes any payment on any claim, the
Indemnifying Party shall be subrogated, to the extent of such payment,
to all rights and remedies of the Indemnified Party to any insurance
benefits or other claims of the Indemnified Party with respect to such
claim.
(e) In the event that the Indemnifying Party does not elect to
assume the defense of any claim, suit, action or proceeding, then any
failure of the Indemnified Party to defend or to participate in the
defense of any such claim, suit, action or proceeding or to cause the
same to be done, shall not relieve the Indemnifying Party of its
obligations hereunder.
14. RELEASE AND WAIVER. Effective upon the Closing of the transactions
contemplated hereby, each party irrevocably waives, releases, remises,
quitclaims, discharges and covenants not to sue the other party, its
predecessors, subsidiaries, parents, and affiliates, and their respective past,
present, and future officers, directors, partners, members, agents, employees,
attorneys, and each of them regarding any and all rights, claims, demands,
liabilities, benefits, grievances or causes of action that it and its
successors, assigns and affiliates may have against the other party and such
persons which have resulted from the relationship between the parties on or
prior to the Closing Date.
15. TERMINATION OF SERVICE CONTRACTS. Each of the parties agrees that it
will take such actions as reasonably necessary to cause any agreement between
SHCI and Security Capital and/or their respective subsidiaries to be terminable
by SHCI on thirty (30) days' notice without any cost or penalty to SHCI.
16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, and
inure to the benefit of, the parties hereto and their respective heirs, personal
representatives, successors, assigns and affiliates.
4741664.1 90199 1440C 98504582
9
<PAGE>
17. NOTICES. Any notice or other communication provided for herein or
given hereunder to a party hereto shall be in writing and shall be given by
delivery, by telex, telecopier or by mail (registered or certified mail, postage
prepaid, return receipt requested) to the respective parties as follows:
If to SHCI:
Strategic Hotel Capital Incorporated
77 West Wacker Drive, Suite 4600
Chicago, Illinois 60601
Attention: Patricia A. Needham
Facsimile: (312) 658-5799
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Michael T. Blair
Facsimile: (312) 701-7711
If to Security Capital:
Security Capital Group Incorporated
125 Lincoln Avenue
Santa Fe, New Mexico 87501
Attention: Jeffrey A. Klopf
Facsimile: (505) 988-8920
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Adam O. Emmerich
Robin Panovka
Facsimile: (212) 403-2000
or to such other address with respect to a party as such party shall notify the
other in writing.
18. WAIVER. No party may waive any of the terms or conditions of this
Agreement except by a duly signed writing referring to the specific provision to
be waived.
19. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement,
and supersedes all other prior agreements and understandings, both written and
oral, among the parties hereto and their affiliates.
4741664.1 90199 1440C 98504582
10
<PAGE>
20. EXPENSES. Except as otherwise expressly contemplated herein to the
contrary, regardless of whether the transactions contemplated hereby are
consummated, each party hereto shall pay its own expenses incident to preparing
for, entering into and carrying out this Agreement and the consummation of the
transactions contemplated hereby.
21. CAPTIONS. The Section and Paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
22. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
23. GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware.
24. NO PRESUMPTION AGAINST DRAFTER. Each of the parties hereto has
jointly participated in the negotiation and drafting of this Agreement. In the
event of an ambiguity or a question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by each of the parties hereto
and no presumptions or burdens of proof shall arise favoring any party by virtue
of the authorship of any of the provisions of this Agreement.
* * * * *
4741664.1 90199 1440C 98504582
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the day and year first executed.
STRATEGIC HOTEL CAPITAL
INCORPORATED
___________________________________
By: /S/ LAURENCE S. GELLER
Laurence S. Geller
Chief Executive Officer
SECURITY CAPITAL GROUP INCORPORATED
___________________________________
By: /S/ C. RONALD BLANKENSHIP
C. Ronald Blankenship
Vice Chairman
4741664.1 90199 1440C 98504582
12
<PAGE>
SCHEDULE I
PURCHASE PRICE
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------------------------------- ---------------------
CLOSING DATE PURCHASE PRICE
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
September 8, 1999......................................................... $329,322,222
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
September 9, 1999......................................................... 329,386,389
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
September 10, 1999........................................................ 329,450,556
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
September 13, 1999........................................................ 329,643,056
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
September 14, 1999........................................................ 329,707,222
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
September 15, 1999........................................................ 329,771,389
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
September 16, 1999........................................................ 329,835,556
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
September 17, 1999........................................................ 329,899,722
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
September 20, 1999........................................................ 330,092,222
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
September 21, 1999........................................................ 330,156,389
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
September 22, 1999........................................................ 330,220,556
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
September 23, 1999........................................................ 330,284,722
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
September 24, 1999........................................................ 330,348,889
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
September 27, 1999........................................................ 330,541,389
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
September 28, 1999........................................................ 330,605,556
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
September 29, 1999........................................................ 330,669,722
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
September 30, 1999........................................................ 330,733,889
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
October 1, 1999........................................................... 330,798,056
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
October 4, 1999........................................................... 330,990,556
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
October 5, 1999........................................................... 331,054,722
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
October 6, 1999........................................................... 331,118,889
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
October 7, 1999........................................................... 331,183,056
- ----------------------------------------------------------------------------- ---------------------
</TABLE>
4741664.90199 1409C 98504582
I-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------------------------------- ---------------------
CLOSING DATE PURCHASE PRICE
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
October 8, 1999........................................................... 331,247,222
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
October 12, 1999.......................................................... 331,528,667
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
October 13, 1999.......................................................... 331,599,028
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
October 14, 1999.......................................................... 331,669,389
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
October 15, 1999.......................................................... 331,739,750
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
October 18, 1999.......................................................... 331,950,833
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
October 19, 1999.......................................................... 332,021,194
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
October 20, 1999.......................................................... 332,091,556
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
October 21, 1999.......................................................... 332,161,917
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
October 22, 1999.......................................................... 332,232,278
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
October 25, 1999.......................................................... 332,443,361
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
October 26, 1999.......................................................... 332,513,722
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
October 27, 1999.......................................................... 332,584,083
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
October 28, 1999.......................................................... 332,654,444
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
October 29, 1999.......................................................... 332,724,806
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
November 1, 1999.......................................................... 332,935,889
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
November 2, 1999.......................................................... 333,006,250
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
November 3, 1999.......................................................... 333,076,611
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
November 4, 1999.......................................................... 333,146,972
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
November 5, 1999.......................................................... 333,217,333
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
November 8, 1999.......................................................... 333,428,417
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
November 9, 1999.......................................................... 333,504,417
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
November 10, 1999......................................................... 333,580,417
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
November 11, 1999......................................................... 333,656,417
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
</TABLE>
4741664.90199 1409C 98504582
I-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------------------------------- ---------------------
CLOSING DATE PURCHASE PRICE
- ----------------------------------------------------------------------------- ---------------------
November 12, 1999......................................................... 333,732,417
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
November 15, 1999......................................................... 333,960,417
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
November 16, 1999......................................................... 334,036,417
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
November 17, 1999......................................................... 334,112,417
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
November 18, 1999......................................................... 334,188,417
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
November 19, 1999......................................................... 334,264,417
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
November 22, 1999......................................................... 334,492,417
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
November 23, 1999......................................................... 334,568,417
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
November 24, 1999......................................................... 334,644,417
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
November 26, 1999......................................................... 334,796,417
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
November 29, 1999......................................................... 335,024,417
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
November 30, 1999......................................................... 335,100,417
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
December 1, 1999.......................................................... 335,176,417
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
December 2, 1999.......................................................... 335,252,417
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
December 3, 1999.......................................................... 335,328,417
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
December 6, 1999.......................................................... 335,556,417
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
December 7, 1999.......................................................... 335,632,417
- ----------------------------------------------------------------------------- ---------------------
- ----------------------------------------------------------------------------- ---------------------
December 8, 1999.......................................................... 335,708,417
- ----------------------------------------------------------------------------- ---------------------
</TABLE>
4741664.90199 1409C 98504582
I-3
<PAGE>
ESCROW AGREEMENT
THIS AGREEMENT is entered into as of August 12, 1999, among Strategic Hotel
Capital Incorporated, a Delaware corporation ("SHCI"), Security Capital Group
Incorporated, a Maryland corporation ("Security Capital"), and First American
Title Insurance Company, as escrow agent (the "Escrow Agent").
WHEREAS, pursuant to a Purchase and Sale Agreement of even date herewith
(the "Purchase Agreement"), SHCI has agreed to purchase from Security Capital
certain securities of SHCI owned by Security Capital;
WHEREAS, pursuant to the Purchase Agreement, SHCI and Security Capital have
agreed to appoint the Escrow Agent to hold the $10,000,000, plus applicable
interest thereon (the "Earnest Money") to be deposited by SHCI under the
Purchase Agreement; and
WHEREAS, the Escrow Agent has agreed to act as escrow agent in connection
with the foregoing.
NOW, THEREFORE, it is agreed as follows:
1. For a period commencing on the date hereof and terminating as provided
herein, the Escrow Agent shall act as escrow agent and agrees to receive and
disburse the Earnest Money in accordance herewith.
2. The Earnest Money shall be deposited in an escrow account to be
established hereunder for this purpose by the Escrow Agent. The Escrow Agent
shall invest such funds deposited with it in short term bank time or demand
deposits, short term certificates of deposit (including certificates of deposit
or demand deposits of the Escrow Agent), short term United States government
securities or other short term United States government guaranteed money
instruments or other investments as may be directed by SHCI; provided, however,
that such investments shall be made in a manner permitting necessary funds to be
available for transfer within two business days after notice as provided herein
and in no event later than 9:00 a.m. (Central time) on September 8, 1999.
3. At 9:00 a.m. (Central time) on September 8, 1999, the Escrow Agent shall
pay $10,000,000 of the Earnest Money to Security Capital by wire transfer of
immediately available funds to the account designated by Security Capital and
shall pay the balance of the Earnest Money to SHCI by wire transfer of
immediately available funds to the account designated by SHCI.
4732668.5 90199 1434C 98504582
-1-
<PAGE>
4. SHCI and Security Capital agree that in the event of any controversy
regarding the Earnest Money, unless mutual written instructions are received by
the Escrow Agent directing the Earnest Money's disposition, the Escrow Agent
shall not take any action, but instead shall await the disposition of any
proceeding relating to the Earnest Money or, at the Escrow Agent's option, the
Escrow Agent may interplead all parties and deposit the Earnest Money with a
court of competent jurisdiction in which event the Escrow Agent may recover all
of its court costs and reasonable attorneys' fees. SHCI or Security Capital,
whichever loses in any such interpleader action, shall be solely obligated to
pay such costs and fees of the Escrow Agent, as well as the reasonable
attorneys' fees of the prevailing party in accordance with the other provisions
of this Agreement.
5. The parties acknowledge that the Escrow Agent is acting solely as a
stakeholder at their request and for their convenience, that the Escrow Agent
shall not be deemed to be the agent of either of the parties, and that the
Escrow Agent shall not be liable to either of the parties for any action or
omission on its part taken or made in good faith, and not in disregard of this
Agreement, but shall be liable for its negligent acts and for any loss, cost or
expense incurred by SHCI or Security Capital resulting from the Escrow Agent's
mistake of law respecting the Escrow Agent's scope or nature of its duties. SHCI
and Security Capital shall jointly and severally indemnify and hold the Escrow
Agent harmless from and against all costs, claims and expenses, including
reasonable attorneys' fees, incurred in connection with the performance of the
Escrow Agent's duties hereunder, except with respect to actions or omissions
taken or made by the Escrow Agent in bad faith, in disregard of this Agreement
or involving negligence on the part of the Escrow Agent.
6. Except as expressly provided herein to the contrary, the escrow fee
charged by the Escrow Agent for holding the Earnest Money shall be shared
equally by SHCI and Security Capital. The Escrow Agent, for services rendered
under this Agreement, shall receive a fee, according to the standard fee
schedule of the Escrow Agent for such escrow funds.
7. It is understood and agreed, further, that the Escrow Agent shall be
protected in acting upon any notice, request, certificate, approval, consent or
other paper believed by it to be genuine, signed by the proper party or parties
and in accordance with the terms of this Agreement.
8. Any notice or other communication provided for herein or given hereunder
to a party hereto shall be in writing and shall be given by delivery, by telex,
telecopier or by mail (registered or certified mail, postage prepaid, return
receipt requested) to the respective parties as follows:
4732668.5 90199 1434C 98504582
-2-
<PAGE>
If to SHCI:
Strategic Hotel Capital Incorporated
77 West Wacker Drive, Suite 4600
Chicago, Illinois 60601
Attention: Patricia A. Needham
Facsimile: (312) 658-5799
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Michael T. Blair
Facsimile: (312) 701-7711
If to Security Capital:
Security Capital Group Incorporated
125 Lincoln Avenue
Santa Fe, New Mexico 87501
Attention: Jeffrey A. Klopf
Facsimile: (505) 988-8920
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Adam O. Emmerich
Robin Panovka
Facsimile: (212) 403-2000
Escrow Agent:
First American Title Insurance Company
30 North LaSalle Street, Suite 310
Chicago, Illinois 60602
Attention: Jim McIntosh
Facsimile: (312) 553-0480
or to such other address with respect to a party as such party shall notify
the other in writing.
4732668.5 90199 1434C 98504582
-3-
<PAGE>
9. Nothing in this Agreement is intended to or shall confer upon anyone
other than the parties hereto any legal or equitable right, remedy or claim.
This Agreement shall be construed in accordance with the laws of the State of
Illinois and may be modified only in writing.
10. This Agreement may be executed by the several parties hereto in
separate counterparts, each of which shall be deemed to be an original and all
of which taken together shall constitute one and the same instrument.
11. SHCI will be responsible for and shall pay all taxes relating to
earnings on the Earnest Money for the period during which such amounts are held
in escrow pursuant to the terms of this Agreement.
* * * * *
4732668.5 90199 1434C 98504582
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of
the date first above written by their respective duly authorized officers.
FIRST AMERICAN TITLE INSURANCE COMPANY
___________________________________________
By: /s/ Philip N. Webb
Name: Philip N. Webb
Title: Vice President
STRATEGIC HOTEL CAPITAL INCORPORATED
____________________________________________
By: /s/ Laurence S. Geller
Laurence S. Geller
Chief Executive Officer
SECURITY CAPITAL GROUP INCORPORATED
___________________________________________
By: /s/ C.Ronald Blankenship
C. Ronald Blankenship
Vice Chairman
