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Exhibit 10.68
EXECUTION COPY
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT is made as of the 23rd day of
February, 1998, by and among Starwood Hotels & Resorts (the "REIT"), a Maryland
real estate investment trust, Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation (the "OPCO") (the REIT and the OPCO, each a "Company" and
together the "Companies"), Xxxxxx Brothers Inc. ("LBI") and, solely with respect
to the covenants, representation and warranties in Sections 5 and 6, Xxxxxx
Brothers Finance S.A. ("LBF").
IN CONSIDERATION of the mutual covenants contained in this
Purchase Agreement, the Companies and LBI hereby agrees as follows:
SECTION 1. Authorization of Sale of the Shares. Subject to the
terms and conditions of this Purchase Agreement, the REIT has authorized the
sale to LBI of 1,547,000 shares of beneficial interest, $.01 par value per
share, of the REIT (the "REIT Shares") and the OPCO has authorized the sale to
LBI of 1,547,000 shares of common stock, $.01 par value per share, of the OPCO
(the "OPCO Shares"), which REIT Shares and OPCO Shares are paired as a unit
consisting of one (1) REIT Share and one (1) OPCO Share (hereinafter each such
paired unit is referred to as a "Paired Share") and the Paired Shares referred
to in this sentence are herein called the "Purchase Shares"). In addition, the
REIT and the OPCO may issue to LBF additional Paired Shares in settlement of
certain of their obligations under that certain Agreement (the "Agreement"),
dated as of the date hereof, between the REIT, the OPCO and LBF (the "Additional
Shares"). The Paired Shares and the Additional Shares are hereinafter
collectively called the "Shares."
SECTION 2. Agreement to Sell and Purchase the Purchase Shares.
Subject to the terms and conditions of this Purchase Agreement, on the Closing
Date (as defined in Section 3 hereof), the Companies will sell to LBI the
Purchase Shares for a per Paired Share purchase price equal to 98.00% of the
Closing Price. The "Closing Price" shall equal the closing price reported on the
New York Stock Exchange for a Paired Share on February 23, 1998.
SECTION 3. Delivery of the Purchase Shares at the Closing.
3.1 Closing. The completion of the purchase and sale of the
Purchase Shares (the "Closing") shall occur as soon as practicable on or after
the date hereof on a business day to be agreed upon by the Companies and LBI,
but in no event later than five business days after the execution of this
Purchase Agreement (hereinafter, the "Closing Date").
3.2 Conditions. At Closing, the Companies shall deliver to LBI
one or more stock certificates registered in the name of LBI representing the
number of Purchase Shares set forth in Section 2 above.
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The obligation of the Companies to complete the purchase and
sale of the Purchase Shares and deliver such stock certificate(s) to LBI at the
Closing shall be subject to the following conditions, any one or more of which
may be waived by both of the Companies acting together: (i) receipt by the
Companies of Federal Funds (or other mutually agreed upon form of payment) in
the full amount of the purchase price for the Purchase Shares being purchased
hereunder, (ii) the accuracy in all material respects as of the Closing Date, of
the representations and warranties made by LBI herein and the fulfillment, in
all material respects, of those undertakings of LBI to be fulfilled prior to the
Closing, (iii) execution and delivery of the Agreement by LBF, (iv) receipt by
the Companies of a cross-receipt with respect to the Purchase Shares executed by
LBI and (v) receipt by the Companies of a certificate by an officer or
authorized representative of LBI to the effect that the representations and
warranties of LBI set forth in Section 5 hereof are true and correct as of the
date of this Purchase Agreement and as of the Closing Date.
LBI's obligation to accept delivery of such stock
certificate(s) and to pay for the Purchase Shares evidenced thereby shall be
subject to the following conditions, any one or more of which may be waived by
LBI: (i) the accuracy in all material respects, as of the Closing Date, of the
representations and warranties made by the Companies herein and the fulfillment,
in all material respects, of those undertakings of the Companies to be fulfilled
prior to the Closing, (ii) receipt by LBI of all opinions, letters and
certificates to be delivered by the Companies pursuant to this Purchase
Agreement, (iii) execution and delivery of the Agreement by each of the
Companies, and (iv) receipt by LBI of a cross-receipt with respect to the
purchase price for the Purchase Shares executed by the Companies.
SECTION 4. Representations, Warranties and Covenants of the
Companies. Except as disclosed in the Companies' SEC Filings (as defined below),
each of the REIT and the OPCO, severally and not jointly, hereby represents and
warrants to LBI, and covenants with LBI, with respect to such Company and its
Subsidiaries (as defined below) only, as follows:
4.1 Organization and Qualification of the Companies. Each of
the REIT and the OPCO has been duly organized and is validly existing in good
standing under the laws of Maryland with power and authority to own and lease
its properties and to conduct its business as currently conducted. Each of the
REIT and the OPCO is duly qualified to transact business and is in good standing
in each jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing or managing of property or the conduct of business,
except where the failure to so qualify would not have a material adverse effect
on the condition, financial or otherwise, or the earnings, assets, business
affairs or business prospects of the Companies and the Subsidiaries of the
Companies considered as one enterprise (a "Material Adverse Effect"). Entities
in which either of the Companies directly or indirectly has at least a 50%
ownership interest are herein referred to as the "Subsidiaries," and each
individually, as a "Subsidiary."
4.2 Organization and Qualification of Subsidiaries. Each of
the Subsidiaries has been duly organized and is validly existing as a
corporation, limited partnership, or limited liability company, as the case may
be, in good standing under the laws of its respective jurisdiction of
organization, with full power and authority to own, lease and operate its
properties
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and to conduct the business in which it currently is engaged. Each of the
Subsidiaries is duly qualified as a foreign corporation, limited partnership, or
limited liability company, as the case may be, to transact business and is in
good standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure to so qualify would not have a Material
Adverse Effect. All of the issued and outstanding shares of capital stock of
each of the corporate Subsidiaries have been duly authorized and validly issued
and are fully paid and non-assessable. The ownership by the Companies or the
Subsidiaries of the shares of capital stock or limited partnership or equity
interests, as the case may be, of each of the Subsidiaries is as described in
the Companies' SEC Filings.
4.3 Authorized Capital Stock. The REIT has the following
authorized shares: 1,000,000,000 REIT shares par value $0.01 per share,
200,000,000 excess shares of beneficial interest, par value $.01 per share,
100,000,000 shares of trust preferred, par value $.01 per share, and 50,000,000
shares of excess trust preferred, par value $0.01 per share. The OPCO has the
following authorized shares: 1,000,000,000 OPCO shares, par value $0.01 per
share, 200,000,000 shares of preferred stock, par value $0.01 per share,
50,000,000 shares of excess common stock, par value $0.01 per share and
100,000,000 shares of excess preferred stock, par value $0.01 per share. As of
January 20, 1998, there were 55,392,389 Paired Shares, 6,285,765 Class A
Exchangeable Preferred Shares of the Trust and 5,502,711 Class B Exchangeable
Preferred Shares of the Trust outstanding, and 21,292,005 REIT shares and
21,292,005 OPCO shares were reserved for issuance. The issued and outstanding
Paired Shares of the Companies have been duly authorized and validly issued, are
fully paid and nonassessable, have been issued in compliance with all federal
and state securities laws, were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities, and
conform to the description thereof in the Companies' SEC Filings. Other than as
described in the Companies' SEC Filings, the REIT does not have outstanding any
options to purchase, or other rights to subscribe for or purchase, any
securities or obligations convertible into, or any contracts or commitments to
issue or sell, shares of its capital stock or any such options, rights,
convertible securities or obligations. The description of the Companies' stock,
stock bonus and other stock plans or arrangements and the options or other
rights granted and exercised thereunder in the Companies' SEC Filings accurately
and fairly presents the information required to be shown with respect to such
plans, arrangements, options and rights.
4.4 Issuance, Sale and Delivery of the Shares. The Purchase
Shares to be sold by the Companies have been duly authorized for issuance and,
when issued, delivered and paid for in the manner set forth in this Purchase
Agreement, will be validly issued, fully paid and non-assessable. The Additional
Shares, if and when issued pursuant to the Agreement, have been duly authorized
and will be validly issued, fully paid and non-assessable. Upon payment of the
purchase price and delivery of the Shares in accordance with this Purchase
Agreement, LBI will receive good, valid and marketable title to the Shares, free
and clear of all security interests, mortgages, pledges, liens, encumbrances and
claims. No approval of or authorization by the respective shareholders or boards
of trustees or directors of the Companies will be required for the issuance
and/or sale of the Shares to be sold by the Companies as contemplated herein or
in the Agreement, except such as shall have been obtained on or before the
Closing Date or the
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applicable Settlement Date. The issuance and/or sale of the Shares to LBI or LBF
by the Companies pursuant to this Purchase Agreement or the Agreement (as the
case may be), the compliance by the Companies with the other provisions of this
Purchase Agreement or the Agreement and the consummation of the other
transactions contemplated hereby or thereby do not require the consent,
approval, authorization, registration or qualification of or with any court,
governmental authority or agency, except such as shall have been obtained on or
before the Closing Date or in connection with any Resale Registration Statement
filed with respect to any of the Shares. The Companies meet and will continue to
meet the requirements for use of Form S-3 under the Securities Act of 1933, as
amended (the "Securities Act"), and the rules and regulations of the U.S.
Securities and Exchange Commission (the "Commission") under the Securities Act
(the "1933 Act Regulations"). The Companies have filed and will file all
documents which they are required to file under the Securities Exchange Act of
1934, as amended (the "Exchange Act") and the rules and regulations promulgated
thereunder (the "1934 Act Regulations") within the time periods prescribed by
the Exchange Act and the 1934 Act Regulations since December 31, 1996 and all
such documents (collectively, together with the Companies' registration
statements filed under the Securities Act which have been declared effective
since January 1, 1997 and have not been withdrawn, the "Companies' SEC Filings")
comply and will comply in all material respects with the requirements of the
Exchange Act and the 1934 Act Regulations, as applicable, and none of such
documents, when so filed, contained or will contain any untrue statement of a
material fact or omitted or will omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. No Resale
Registration Statement filed in respect of any of the Shares, when so filed,
contained or will contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein not misleading.
4.5 Due Execution, Delivery and Performance by the Company.
Each of the Companies has full right, power and authority to enter into this
Purchase Agreement and the Agreement and perform the transactions contemplated
hereby and thereby. This Purchase Agreement and the Agreement have been duly
authorized, executed and delivered by each of the Companies. The execution and
delivery of the Purchase Agreement and the Agreement by each of the Companies
and the consummation of the transactions and the performance of the obligations
herein and therein contemplated will not violate any provision of the
declaration of trust, certificate of incorporation, bylaws, or other
organizational documents of either of the Companies, and will not conflict with,
result in the breach or violation of, or constitute, either by itself or upon
notice or the passage of time or both, a default under any material agreement,
mortgage, deed of trust, credit agreement, lease, franchise, license, indenture,
note, permit or other instrument to which either Company is a party or by which
either Company or its respective properties may be bound or affected, any
statute or any authorization, judgment, decree, order, rule or regulation of any
court or any regulatory body, administrative agency or other governmental body
applicable to either Company or any of its respective properties other than
violations, conflicts, breaches or defaults that individually or in the
aggregate would not have a Material Adverse Effect. No consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body is required for the execution and delivery of
this Purchase Agreement, the Agreement or the consummation of the transactions
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contemplated hereby or thereby, except in connection with the filing of any
Resale Registration Statements pursuant to Section 7 below or for compliance
with the blue sky laws applicable to the offering of the Shares.
4.6 Accountants. The Companies' independent certified public
accountants, who have expressed their opinion with respect to the Most Recent
Financial Statements (as defined below) are independent accountants as required
by the Securities Act and the 1933 Act Regulations.
4.7 No Defaults. Except as to defaults, violations and
breaches which individually or in the aggregate would not have a Material
Adverse Effect, neither of the Companies nor any of their respective
Subsidiaries is in violation or default of any provision of its declaration of
trust, certificate of incorporation or bylaws, or other organizational
documents, and is not in breach of or default with respect to any provision of
any agreement, judgment, decree, order, mortgage, deed of trust, credit
agreement, lease, franchise, license, indenture, permit or other instrument to
which it is a party or by which it or any of its properties are bound.
4.8 No Actions. There is no action, suit or proceeding before
or by any court or governmental agency or body, domestic or foreign, now
pending, or, to the knowledge of each Company, threatened against or affecting
such Company or any of its Subsidiaries, any real property or improvements
thereon owned or leased by such Company or its Subsidiaries, including any
property underlying indebtedness held by such Company (each, individually, a
"Property" and collectively, the "Properties"), or any officer of such Company
or any of its Subsidiaries that, if determined adversely to such Company or any
Subsidiary, any Property, including any property underlying indebtedness held by
such Company and any of its Subsidiaries, or any such officer, would reasonably
be expected to (A) result in any Material Adverse Effect or (B) materially and
adversely affect the consummation of the transactions contemplated by this
Purchase Agreement or the Agreement.
4.9 Properties. (A) Each Company and its respective
Subsidiaries, as the case may be, has good and marketable title to all the
properties and assets reflected as owned by such entities in the Most Recent
Financial Statements, subject to no lien, mortgage, pledge, charge or
encumbrance of any kind except (i) those, if any, reflected in the Most Recent
Financial Statements, or (ii) those which would not have a Material Adverse
Effect, (B) the leases of any real property and buildings held under lease by
such Company or any of its Subsidiaries are in full force and effect, and such
entities are not in default in respect of any of the terms or provisions of such
leases and have not received notice of the assertion of any claim by anyone
adverse to such entities' rights as lessee under such leases, or affecting or
questioning such entity's right to the continued possession or use of the real
property and buildings held under such leases or of a default under such leases,
in each case with such exceptions as would not have a Material Adverse Effect;
(C) neither Company nor any of its respective Subsidiaries or any tenant of any
of the Properties is in default under any of the leases pursuant to which such
Company or its Subsidiaries, as lessor, leases its Property (and to the best
knowledge of such Company no
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event has occurred which, but for the passage of time or the giving of notice,
or both, would constitute a default under any of such leases) other than such
defaults that would not have a Material Adverse Effect; (D) no person has an
option or right of first refusal to purchase all or part of any Property or any
interest therein, other than such options or rights of first refusal which would
not have a Material Adverse Effect; (E) each of the Properties complies with all
applicable codes, laws and regulations (including, without limitation, building
and zoning codes, laws and regulations and laws relating to access to the
Properties), except for such failures to comply that would not individually or
in the aggregate have a Material Adverse Effect; and (F) neither Company has
knowledge of any pending or threatened condemnation proceedings, zoning change,
or other proceeding or action that will in any manner affect the size of, use
of, improvements on, construction on or access to the Properties, including any
property underlying indebtedness held by either Company or any of its respective
Subsidiaries, except such proceedings or actions that would not have a Material
Adverse Effect.
4.10 REIT Qualification. The REIT qualified as a real estate
investment trust under the Internal Revenue Code of 1986, as amended (the
"Code"), with respect to its taxable years ended December 31, 1995, December 31,
1996 and December 31, 1997, and is organized in conformity with the requirements
for qualification as a real estate investment trust, and its manner of operation
has enabled it to meet the requirements for qualification as a real estate
investment trust as of the date hereof, and its proposed manner of operation
will enable it to meet the requirements for qualification as a real estate
investment trust in the future.
4.11 No Material Change. Since the date of the Most Recent
Financial Statements, and except as otherwise disclosed in the Companies' SEC
Filings as of the Closing Date, (i) no material casualty loss or material
condemnation or other material adverse event with respect to any Property or any
of the Subsidiaries, has occurred that would singly or in the aggregate have a
Material Adverse Effect; (ii) neither of the Companies, nor any of their
respective Subsidiaries is in default in the payment of principal or interest on
any outstanding debt obligations; (iii) except as a result of (a) the Companies'
acquisition of Westin Hotels & Resorts Worldwide, Inc. and certain affiliates
and the related financing transactions and (b) the OPCO's acquisition of ITT
Corporation and the related financing transactions, there has not been any
change in the capital stock of either Company or the Subsidiaries (other than
the sale of the Purchase Shares hereunder or those reserved for issuance
pursuant to the Agreement, issuances pursuant to the incentive compensation
plans of the Companies), or any increase in the indebtedness of either Company
or their respective Subsidiaries that is material to such entities, considered
as one enterprise; (iv) and except for regular quarterly distributions on the
REIT Shares, there has been no dividend or distribution of any kind declared,
paid or made by the REIT or the OPCO; and (v) there has not been any material
adverse change in the condition, financial or otherwise, or in the earnings,
assets, business affairs or business prospects of the Companies and the
Subsidiaries, considered as one enterprise, whether or not arising in the
ordinary course of business.
4.12 Intellectual Property. Neither of the Companies nor the
Subsidiaries is required to own or possess trademarks, trade names, patent
rights, copyrights, licenses, approvals and governmental authorizations, which
it does not already own or possess to conduct its
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businesses as now conducted; and neither Company has knowledge of any material
infringement by it of trademark, trade name rights, patent rights, copyrights,
licenses, trade secrets or other similar rights of others, and has not received
any notice that any claim has been made against such Company regarding
trademark, trade name, patent, copyright, license, trade secrets or other
infringement that would not singly or in the aggregate have a Material Adverse
Effect.
4.13 Compliance. Neither Company has been advised, or has
reason to believe, that it is not conducting business in compliance with all
applicable laws, rules and regulations of the jurisdictions in which it is
conducting business, except where failure to be so in compliance will not have a
Material Adverse Effect.
4.14 Taxes. Each of the Companies and its Subsidiaries have
filed all material federal, state and foreign income and franchise tax returns
which have been required to be filed and has paid or accrued all taxes shown as
due thereon (except for those taxes which are being contested in good faith
through appropriate proceeding, for which adequate reserves have been
established and which are either reflected in the Most Recent Financial
Statements or disclosed by the Companies to LBI), and neither Company has any
knowledge of any tax deficiency which has been or might be asserted or
threatened against such Company and its Subsidiaries which would singly or in
the aggregate have a Material Adverse Effect.
4.15 Transfer Taxes. On the Closing Date, all stock transfer
or other taxes, if any (other than income taxes) which are required to be paid
in connection with the sale and transfer of the Purchase Shares to be sold to
LBI hereunder will be, or will have been, fully paid or provided for by the
Companies and all laws imposing such taxes will be or will have been fully
complied with.
4.16 Investment Company. Neither of the Companies nor any of
their Subsidiaries is required to register as an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended.
4.17 Offering Materials. Neither the REIT nor the OPCO has
distributed nor will distribute prior to the Closing Date any offering material
in connection with the offering and sale of the Purchase Shares other than the
documents and information provided to LBI pursuant to this Section 4.
4.18 Additional Information. Each of the Companies represents
and warrants that the information contained in the following documents, which
the Companies have furnished to LBI, or will be furnished or made available upon
request prior to the Closing, is true and correct in all material respects as of
their respective filing dates:
(a) Joint Annual Report on Form 10-K for the year ended
December 31, 1996, which Joint Annual Report includes the Companies' most
recently available audited financial statements together with the report thereon
of the independent certified public accountants (the "Most Recent Financial
Statements"),
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(b) Joint Quarterly Reports on Form 10-Q, as amended if
applicable, for the quarters ended March 31, 1997, June 30, 1997 and September
30, 1997;
(c) the Companies' proxy statements on Form 14A relating
to (i) the most recent Annual Meetings of the REIT's Shareholders and the OPCO's
Shareholders and (ii) the Special Meetings of the REIT's Shareholders and the
OPCO's Shareholders which occurred during the 12 month period prior to the date
hereof or for which a meeting date has been fixed and a proxy statement
distributed;
(d) all other documents, if any, filed by or with respect
to the REIT and the OPCO with the Commission since January 1, 1997 pursuant to
Section 13, 15(d) or 16(a) of the Exchange Act; and
(e) covenant compliance certificates stating that none of
the REIT, the OPCO or their respective Subsidiaries are in default under any of
their respective credit agreements or other financing arrangements.
4.19 Legal Opinion. At or prior to the Closing, counsel to the
Companies will deliver their legal opinions dated the Closing Date to LBI in
substantially the form of Exhibit A hereto.
4.20 ERISA. Each of the Companies and their respective
Subsidiaries are in compliance with all applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended and the rules and regulations
promulgated thereunder ("ERISA"), except for such failures to comply as will not
have a Material Adverse Effect. Neither a Reportable Event (as defined under
ERISA) nor a Prohibited Transaction (as defined under ERISA) has occurred with
respect to any Plan (as defined below) of the Companies and/or their respective
affiliates; no notice of intent to terminate a Plan has been filed nor has any
Plan been terminated within the past five years; to the Companies' knowledge, no
circumstance exists which constitutes grounds under Section 402 of ERISA
entitling the Pension Benefit Guaranty Corporation ("PBGC") to institute
proceedings to terminate, or appoint a trustee to administer, a Plan, nor has
the PBGC instituted any such proceedings; neither Company nor their respective
affiliates has completely or partially withdrawn under Section 4201 or 4202 of
ERISA from any Multiemployer Plan (as defined therein); each of the Companies
and their respective affiliates have met the minimum funding requirements of
Section 412 of the Code and Section 302 of ERISA with respect to each Plan and
there is no unfunded current liability (as defined below) with respect to any
Plan; each of the Companies and their respective affiliates have not incurred
any liability to the PBGC under ERISA (other than for the payment of premiums
under Section 4007 of ERISA); no part of the funds to be used by the Companies
in satisfaction of their respective obligations under this Purchase Agreement or
the Agreement constitute "plan assets" of any "employee benefit plan" within the
meaning of ERISA or of any "plan" within the meaning of Section 4957(e)(I) of
the Code, as interpreted by the Internal Revenue Service and the U.S. Department
of Labor in rules, regulations, releases and bulletins or as interpreted under
applicable case law. As used below,"Plan" means an "employee benefit plan" or
"plan" as described in Section 3(3) of ERISA; and "unfunded current liability"
has the meaning provided in Section 302(d)(8)(A) of ERISA.
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4.21 Environmental Protection. Except as otherwise disclosed
in the Companies' SEC Filings and except for such exceptions as would not singly
or in the aggregate have a Material Adverse Effect, none of the REIT's or the
OPCO's or their respective affiliates' properties contain any Hazardous
Materials that, under any Environmental Law, (i) would impose liability on such
Company or any affiliate that is likely to have a Material Adverse Effect or
(ii) is likely to result in the imposition of a lien on any material asset
owned, directly or indirectly, by such Company. Neither Company nor any
affiliate is subject to any existing, pending or, to the best knowledge of each
Company, threatened investigation or proceeding by any governmental agency or
authority with respect to pursuant to any Environmental law, except any which,
if adversely determined, would not have a Material Adverse Effect. As used
herein, "Environmental Laws" mean all federal, state, local and foreign
environmental, health and safety laws, codes and ordinances and all rules and
regulations promulgated thereunder, including, without limitation laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment (including, without limitation, air, surface water, ground
water, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage disposal,
transport or handling of pollutants, contaminants, chemicals, or industrial,
solid, toxic or hazardous substances or wastes; and "Hazardous Material"
includes, without limitation, (i) all substances which are designated pursuant
to Section 311(b)(2)(A) of the Federal Water Pollution Control Act ("FWPCA"), 33
U.S.C. Section 1251 et seq.; (ii) any element, compound, mixture, solution, or
substance which is designated pursuant to Section 102 of the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
Section 9601 et seq.; (iii) any hazardous waste having the characteristics which
are identified under or listed pursuant to Section 3001 of the Resource
Conservation and Recovery Act ("RCRA"), 42 U.S.C. Section 6901 et seq.; (iv) any
toxic pollutant listed under Section 307(a) of the FWPCA; (v) any hazardous air
pollutant which is listed under Section 112 of the Clean Air Act, 42 U.S.C.
Section 7401 et seq.; (vi) any imminently hazardous chemical substance or
mixture with respect to which action has been taken pursuant to Section 7 of the
Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; and (vii)
petroleum, petroleum products, petroleum by-products, petroleum decomposition
by-products, and waste oil.
4.22 Solvency. Immediately following (i) the execution of this
Purchase Agreement and the Agreement, (ii) the purchase of the Purchase Shares
pursuant hereto and (iii) the completion of any other transaction contemplated
by this Purchase Agreement and the Agreement, each of the Companies will be
solvent and able to pay its debts as they mature, will have capital sufficient
to carry on its business and all businesses in which it is to engage, and will
have assets which will have a present fair market valuation greater than the
amount of all of its liabilities. This Purchase Agreement and the Agreement have
been executed and delivered by the Companies in good faith and in exchange for
reasonably equivalent value. Neither of the Companies intends to incur debts
beyond its ability to pay them as they become due. Each of the Companies' assets
and capital are now, and are expected in the future to be, sufficient to pay the
Companies' ongoing expenses as they are incurred and to discharge all of the
Companies' liabilities in the event that the business of the Companies is
required to be liquidated. The Companies have not entered into this Purchase
Agreement or the Agreement or any transaction contemplated hereby or thereby
with an intent to hinder, delay or defraud creditors of any persons
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or entity.
4.23 Certificate. At or prior to the Closing, each Company
shall deliver an officer's certificate to be dated the Closing Date in form and
substance satisfactory to LBI to the effect that (i) the representations and
warranties of such Company set forth in this Section 4 are true and correct in
all material respects as of the date of this Purchase Agreement and as of the
Closing Date and (ii) such Company has complied in all material respects with
all the covenants and satisfied in all material respects all the conditions on
its respective part to be performed or satisfied pursuant to this Purchase
Agreement or the Agreement on or prior to such Closing Date.
4.24 Financial Statements. The Most Recent Financial
Statements (including the notes thereto) present fairly in all material respects
the financial position of the respective entity or entities presented therein at
the respective dates indicated and the results of their operations for the
respective periods specified, and except as otherwise stated in the Most Recent
Financial Statements, said financial statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis. The
supporting schedules included in the Companies' SEC Filings fairly present in
all material respects the information required to be stated therein. The
financial information and data included in the Companies' SEC Filings present
fairly in all material respects the information included therein and have been
prepared on a basis consistent with that of the financial statements included in
the Companies' SEC Filings and the books and records of the respective entities
presented therein. The pro forma financial information included in the
Companies' SEC Filings has been prepared in accordance with the applicable
requirements of Rules 11-01 and 11-02 of Regulation S-X under the Securities Act
and other 1933 Act Regulations and American Institute of Certified Public
Accountants ("AICPA") guidelines with respect to pro forma financial information
and includes all adjustments necessary to present fairly in all material
respects the pro forma financial position of the respective entity or entities
presented therein at the respective dates indicated and the results of their
operations for the respective periods specified. Other than the historical and
pro forma financial statements (and schedule) included therein, no other
historical or pro forma financial statements (or schedules) are required to be
included in the Companies' SEC Filings. Except as reflected or disclosed in the
financial statements included in the Companies' SEC Filings, none of the
Companies or any of the Subsidiaries is subject to any material indebtedness,
obligation, or liability, contingent or otherwise.
4.25 Labor Disputes. No labor dispute with the employees of
either of the Companies or their respective Subsidiaries exists or, to the
knowledge of the such Company is imminent.
4.26 Regulation M. Each Company, its Subsidiaries and, to such
Company's knowledge, any of their respective trustees, directors, executive
officers or controlling persons, has not taken or will not take, directly or
indirectly, any action resulting in a material violation of Regulation M under
the Exchange Act, or designed to cause or result under the Exchange Act or
otherwise in, or which has constituted or which reasonably might be expected to
constitute, the
11
unlawful stabilization or manipulation of the price of Paired Shares in
connection with the public sale or distribution of the Shares.
SECTION 5. Representations, Warranties and Covenants of LBI or
LBF.
5.1 Investment. LBI represents and warrants to, and covenants
with each of the Companies that: (i) LBI is knowledgeable, sophisticated and
experienced in making, and is qualified to make, decisions with respect to
investments in shares presenting an investment decision like that involved in
the purchase of the Purchase Shares, including investments in securities issued
by the Companies; (ii) LBI is acquiring the number of Purchase Shares set forth
in Section 2 above in the ordinary course of its business and for its own
account for investment (as defined for purposes of the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976 and the regulations thereunder) only and with
no present intention of distributing any of such Purchase Shares or any
arrangement or understanding with any other persons regarding the distribution
of such Purchase Shares, except pursuant to a registration statement declared
effective under, or an exemption from the registration requirements of, the
Securities Act, (iii) LBI will not, directly or indirectly, sell or otherwise
dispose of (or solicit any offers to purchase or otherwise acquire) any of the
Purchase Shares except in compliance with the Securities Act, the Rules and
Regulations and any applicable state securities or blue sky laws; (iv) LBI has
completed or caused to be completed the Registration Statement Questionnaire and
the Stock Certificate Questionnaire, both attached hereto as Appendix I, for use
in preparation of the Resale Registration Statement and the answers thereto are
true and correct as of the date hereof and will be true and correct as of the
effective date of the Resale Registration Statement; (v) LBI has, in connection
with their decision to purchase the number of Purchase Shares set forth in
Section 2 above, relied solely upon the documents identified in Section 4.17,
the information referred to in Section 7.7 and the representations and
warranties of each of the Companies contained herein; (vi) LBI has had access to
such additional information, if any, concerning the Companies as it has
considered necessary in connection with its investment decision to acquire the
Purchase Shares; (vii) LBI is an "accredited investor" within the meaning of
Rule 501(a)(1), (2), (3) or (7) of Regulation D promulgated under the Securities
Act; and (viii) LBI understands that until the Shares are sold under an
appropriate Resale Registration Statement that has been declared effective by
the Commission, the Shares will contain a legend to the following effect:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THESE SHARES UNDER THE SECURITIES ACT OF 1933 OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANIES
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
5.2 Resale. LBI acknowledges and agrees that in connection
with any transfer
12
of any Shares it will provide to the transfer agent prompt notice of any Shares
sold pursuant to a Resale Registration Statement or otherwise transferred in
compliance with applicable federal and state securities laws. LBI acknowledges
that there may occasionally be times when, subject to the provisions of Section
7.2(a)(v), the Companies must suspend the right of LBI to effect sales of the
Shares through the use of the Resale Prospectus (as defined below) forming a
part of a Resale Registration Statement until such time as an amendment to such
Resale Registration Statement has been filed by the Companies and declared
effective by the Commission, or until such time as the Companies have filed an
appropriate report with the Commission pursuant to the Exchange Act (each, a
"Black-out Period"); provided that no Black-out Period shall exceed 90
consecutive days. LBI hereby covenants that it will not effect sales of any
Shares pursuant to said Resale Prospectus during the period commencing at the
time at which the Companies give LBI written notice (which such notice shall
have been given by the Companies as promptly as practicable) of the suspension
of the use of said Resale Prospectus and ending at the time the Companies give
LBI written notice that LBI may thereafter effect sales pursuant to said Resale
Prospectus. LBI further covenants to notify the Companies promptly of the sale
of all of the Shares.
5.3 Due Execution, Delivery and Performance of this Purchase
Agreement. Each of LBI and LBF further represents and warrants to, and covenant
with, the Companies that (i) LBI has full right, power, authority and capacity
to enter into this Purchase Agreement and that each of LBI and LBF has full
right, power, authority and capacity to enter into the Agreement, and each has
the full right, power, authority and capacity to perform its respective
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby and has taken all necessary action to authorize
the execution, delivery and performance of this Purchase Agreement and the
Agreement, and (ii) upon the execution and delivery of this Purchase Agreement
and the Agreement, this Purchase Agreement and the Agreement shall constitute
valid and binding obligations of LBI and LBF, respectively, enforceable against
each in accordance with their terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and except that the enforcement of the indemnification agreements in Section 7.5
hereof may be limited by public policy.
5.4 Residence of LBI. LBI is organized in the State of
Delaware and has its principal place of business in the State of New York; LBF
is organized under the laws of Switzerland and has its principal place of
business in Zurich, Switzerland.
5.5 Certain Tax Considerations. LBI represents and warrants
that it is a "corporation" for U.S. federal income tax purposes and for purposes
of any exemptions from information reporting and backup withholding requirements
that may apply to payments by the Companies to LBI under this Purchase
Agreement.
SECTION 6. Survival of Representations, Warranties and
Agreements. Notwithstanding any investigation made by any party to this Purchase
Agreement, all covenants,
13
agreements, representations and warranties made by each of the Companies and LBI
and LBF herein shall survive the execution of this Purchase Agreement, the
Agreement, the delivery to LBI of the Purchased Shares being purchased and the
payment therefor and the consummation of any other transactions contemplated
hereby or thereby.
SECTION 7. Registration of the Shares; Compliance with the
Securities Act.
7.1 Registration Procedures and Expenses. The Companies shall:
(a) within 45 days after the Closing, prepare and file
with the Commission a Resale Registration Statement (as defined below) covering
the resale by LBI, from time to time, of a number of Shares equal to the number
of Purchase Shares in any of the manners specified in the Agreement (the
"Initial Resale Registration Statement") and use its best efforts to obtain
effectiveness of the Initial Resale Registration Statement within 90 days after
the Closing Date. If the total number of Shares exceeds the number of Shares
covered by the Initial Resale Registration Statement, then the Companies shall
promptly prepare and file with the Commission such additional Resale
Registration Statement or Statements as shall be necessary to cover the resale
by LBI of such excess Shares in the same manner as contemplated by the Initial
Registration Statement for the Shares covered thereby (each, an "Additional
Resale Registration Statement"); provided that, except as provided for in
Section 5 of the Agreement, prior to issuing any such excess Shares to LBI, the
Companies shall cause such Resale Registration Statement to have become
effective. For purposes of this Purchase Agreement, "Resale Registration
Statement" means the Initial Resale Registration Statement, any Additional
Resale Registration Statement or any other registration statement under the
Securities Act on Form S-3 covering the resale by LBI of up to a specified
number of Shares, filed and maintained continuously effective by the Companies
pursuant to the provisions of this Section 7, including the prospectus contained
therein (the "Resale Prospectus"), any amendments and supplements to such
registration statement, including all post-effective amendments thereto, and all
exhibits and all material incorporated by reference into such registration
statement;
(b) use commercially reasonable best efforts to prevent
the issuance of any order suspending the effectiveness of such Resale
Registration Statement or Resale Prospectus or suspending the qualification (or
exemption from qualification) of any of the Shares in any jurisdiction;
(c) prepare and file with the Commission such amendments
and supplements to each Resale Registration Statement and the Resale Prospectus
as may be reasonably requested by LBI in order to accomplish the public resale
or other disposition of any Shares in accordance with the terms of the
Agreement, or as may be necessary to keep such Resale Registration Statement
effective until the date on which either (i) the Shares covered thereby have
been sold by or on behalf of LBI or (ii) LBI has advised the Companies that they
no longer require that such Resale Registration Statement remain effective;
(d) furnish to LBI with respect to the Shares registered
under any
14
Resale Registration Statement such reasonable number of copies of Resale
Prospectuses, including any supplements and amendments thereto, in order to
facilitate the public sale or other disposition of all or any of the Shares by
LBI;
(e) in order to facilitate the public sale or other
disposition of all or any of the Shares by LBI, furnish to LBI with respect to
the Shares registered under any Resale Registration Statement, in connection
with any such public sale or other disposition, an opinion of counsel to the
Companies covering such matters as are customarily covered by legal opinions
delivered in connection with secondary public offerings of equity securities and
such other documents as LBI may reasonably request (including a comfort letter
from the Companies' independent certified public accountants and a certificate
of bring down of representations and warranties in connection with sale of
Shares under the Resale Registration Statement) (collectively, the "Resale
Closing Documents") (i) upon the effectiveness of the Initial Resale
Registration Statement, (ii) upon the commencement of any continuous offering of
Shares under any Resale Registration Statement and on the last day of every
30-day period thereafter for the duration of such continuous offering, and (iii)
in the event the public sale or other disposition of the Shares is effected
through an underwritten offering or a block trade, as of the date of the closing
of any sale of such Shares or date of pricing with respect to the sale of such
Shares, as applicable upon prior notice from LBI to the Companies as to which
date applies; provided, however, that the Companies shall not be required to
deliver any Resale Closing Documents in the event that the aggregate offering
price of any Shares offered in a public sale or other distribution is less than
$20,000,000, unless as of the date of any such public sale or other
distribution, the Companies have not made any previous delivery of Resale
Closing Documents to LBI in connection with any other public sale or other
disposition of the Shares;
(f) use its reasonable best efforts to prevent the
happening of any event that would cause any such Resale Registration Statement
to contain a material misstatement or omission or to be not effective and
continuously useable for resale of the Shares during the period that such Resale
Registration Statement is required to be effective and useable;
(g) file documents required of the Companies for normal
blue sky clearance in states specified in writing by LBI, provided, however,
that the Companies shall not be required to qualify to do business or consent to
service of process in any jurisdiction in which it is not now so qualified or
has not so consented;
(h) bear all reasonable expenses in connection with the
procedures in paragraphs (a) through (g) of this Section 7.1 and Section 7.2(a)
and the registration of the Shares pursuant to each Resale Registration
Statement, which expenses shall not include brokerage or underwriting
commissions and taxes of any kind (including without limitation, transfer
bonuses) with respect to any disposition, sale or transfer of Shares sold by LBI
and for any legal, accounting and other expenses incurred by LBI which expenses
shall be borne by LBI; and
(i) promptly file any necessary listing applications or
amendments to existing listing applications to cause any Shares registered under
any Resale Registration Statement to be listed or admitted to trading, on or
prior to the effectiveness of any Resale
15
Registration Statement, on the New York Stock Exchange or any national stock
exchange or automated quotation system on which the Paired Shares are then
listed or traded.
7.2 Covenants in Connection With Registration.
(a) Each of the Companies hereby covenants with LBI that
(i) such Company shall not file any Resale Registration Statement or Resale
Prospectus relating to the resale of the Shares or any amendment or supplement
thereto, unless a copy thereof shall have been first submitted to LBI and LBI
did not object thereto in good faith (provided that if LBI does not object
within two business days of receiving any such material, there shall be deemed
to have been no objection thereto); (ii) such Company shall immediately notify
LBI of the issuance by the Commission of any stop order suspending the
effectiveness of such Resale Registration Statement or the initiation of any
proceedings for such purpose; (iii) such Company shall make every reasonable
effort to promptly obtain the withdrawal of any order suspending the
effectiveness of such Resale Registration Statement at the earliest possible
moment; (iv) such Company shall immediately notify LBI of the receipt of any
notification with respect to the suspension of the qualification of the Shares
for sale under the securities or blue sky laws of any jurisdiction or the
initiation of any proceeding for such purpose; and (v) such Companies shall as
soon as practicable notify LBI in writing of the happening of any event or the
failure of any event to occur or the existence of any fact or otherwise which
results in any Resale Registration Statement, any amendment or post-effective
amendment thereto, the Resale Prospectus, any prospectus supplement, or any
document incorporated therein by reference containing an untrue statement of a
material fact or omitting to state a material fact required to be stated therein
or necessary to make the statements therein not misleading and promptly shall
prepare, file with the Commission and promptly furnish to LBI a reasonable
number of copies of a supplement or post-effective amendment to such Resale
Registration Statement or the Resale Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Shares, the Resale Prospectus will not
contain an untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein not misleading provided that this
clause (v) shall in no way limit the Companies' right to suspend the right of
LBI to affect sales under the Resale Registration Statement during any Black-out
Period as specified in Section 5.2 above.
(b) LBI shall cooperate with the Companies in connection
with the preparation of the Resale Registration Statement and shall furnish to
the Companies, in a timely manner, all information in their possession or
reasonably obtainable by them and necessary for inclusion in the Resale
Registration Statement (including, without limitation, information relating to
the ownership by each of them of Paired Shares and the plan of distribution).
(c) LBI shall notify the Companies at least two business
days prior to the earlier of the date on which they intend to commence effecting
any resales of Shares under a Resale Registration Statement or the date of
pricing with respect to the public sale or other disposition of any Shares under
a Resale Registration Statement effected through an underwritten offering or
block trade and if the Companies do not, within such two day period, advise LBI
of the existence of any facts of the type referred to in Section 7.2(a) above,
then the Companies
16
shall be deemed to have certified and represented to LBI that no such facts then
exist and LBI may rely on such certificate and representations in making such
sales. The preceding sentence shall in no way limit the Companies' obligations
under Section 7.2(a) above.
(d) the Companies shall cooperate with LBI to facilitate
the timely preparation and delivery of certificates representing the Shares to
be sold under the Resale Registration Statements and not bearing any restrictive
legends and in such denominations and registered in such names as LBI may
reasonably request at least two business days prior to the closing of any sale
of the Shares.
(e) If the Companies notify LBI that they wish LBI to
effect an underwritten offering or block trade of Shares, (i) LBI shall have the
right to select the managing underwriters or the executing dealer, as the case
may be, who shall be subject to the approval of the Companies, which approval
shall not be unreasonably withheld (it being understood that LBI is, in any
event, reasonably acceptable to the Companies for this purpose) and (ii) the
Companies shall (A) enter into written agreements (including underwriting
agreements) as are customary in underwritten offerings or block trades, as the
case may be; (B) obtain an opinion of counsel to the Companies and other
entities reasonably requested by the underwriters or the executing dealer, as
the case may be, and updates thereof (which may be in the form of a reliance
letter) in form and substance reasonably satisfactory to the managing
underwriters or the executing dealer, as the case may be, and LBI addressed to
the underwriters or the executing dealer, as the case may be, and LBI covering
the matters customarily covered in opinions requested in underwritten offerings
or block trades, as the case may be, and such other matters as may be reasonably
requested by such underwriters or the executing dealer, as the case may be, and
LBI (it being agreed that the matters to be covered by such opinion may be
subject to customary qualifications and exceptions); (C) obtain "cold comfort"
letters and updates thereof in form and substance reasonably satisfactory to the
managing underwriters or the executing dealer, as the case may be, and LBI from
the independent certified public accountants of the Companies (and, if
necessary, other independent certified public accountants of any affiliate or
Subsidiary of either of the Companies or of any business acquired by the
Companies for which financial statements and financial data are, or are required
to be, included in the Resale Registration Statement), addressed to each of the
underwriters or the executing dealer, as the case may be, ad, if permitted by
applicable accounting rules and statements, LBI, such letters to be in customary
form and covering matters of the type customarily covered in "cold comfort"
letters in connection with underwritten offerings or block trades, as the case
may be, and such other matters as may be reasonably requested by such
underwriters or the executing dealer, as the case may be, in accordance with
Statement on Auditing Standards No. 72; (D) ensure that any underwriting
agreement contains indemnification provisions and procedures not less favorable
than that included herein (or such other provisions and procedures acceptable to
LBI and the underwriters) with respect to all parties to be indemnified pursuant
to said section (including, without limitation, the underwriters and LBI); and
(E) deliver such other documents as are customarily delivered in connection with
closing of underwritten offerings or block trades, as the case may be.
(f) The Companies will make reasonably available for
inspection by LBI, any underwriter, agent or broker-dealer participating in any
disposition of Shares such
17
information and corporate documents as shall be reasonably necessary to enable
them to exercise any applicable due diligence responsibilities for the purposes
of applicable law, and cause the officers of the Companies and their
"significant subsidiaries" (as that term is defined in Regulation S-X) to be
available, upon request at least two business days in advance, to respond to
questions relevant to such due diligence inquiries.
(g) The parties hereby acknowledge and agree that the
Companies may suspend the right of LBI to effect sales of the Paired Shares
through use of the Resale Prospectus forming a part of a Resale Registration
Statement for a period of 90 days (or fewer if LBI are notified to that effect
by the Companies) in connection with a public offering or a sale pursuant to
Rule 144A under the Securities Act (an "Offering") of Paired Shares (or shares
of capital stock convertible into Paired Shares) by the Companies (a "Suspension
Period"); provided that (i) there shall be no more than three Suspension Periods
during any 12-month period, and (ii) the total number of days of all Suspension
Periods during any 12-month period shall not exceed 120. LBI hereby covenants
that it will not sell any Paired Shares pursuant to said Resale Prospectus
during a Suspension Period which shall commence at the time the Companies give
LBI written notice of such Suspension Period; provided further, that no
Suspension Period shall be applicable or in any way restrict LBI after the
occurrence of the Maturity Date or a Price Decline Termination Event. The
ability of the Companies to suspend the right of LBI to effect sales of the
Paired Shares pursuant to this Section 7.2(g) shall not be construed to limit
the Companies' rights under Section 5.2.
7.3 Extension of Required Effectiveness. In the event that the
Companies shall give any notice required by Section 7.2(a)(v) hereof, the period
during which the Companies are required to keep such Resale Registration
Statement effective and useable shall be extended by the number of days during
the period from and included in such Black-out Period.
7.4 Transfer of Shares After Registration. LBI agrees that it
will not effect any disposition of the Shares or its right to purchase the
Shares that would constitute a sale within the meaning of the Securities Act or
pursuant to any applicable state securities or blue sky laws expect as
contemplated in each Resale Registration Statement referred to in Section 7.1 or
except pursuant to any exemption from the registration requirements of the
Securities Act (including, without limitation, Rule 144 promulgated thereunder
and any successor thereto) and that it will promptly notify the Companies of any
changes in the information set forth in any such Resale Registration Statement
regarding LBI or its plan of distribution.
7.5 Indemnification. For the purpose of this Section 7.5 only,
the term "Resale Registration Statement" shall include any final prospectus,
exhibit, supplement or amendment included in or relating to any Resale
Registration Statement referred to in Section 7.1.
(a) Indemnification by the Companies. Each of the
Companies agrees, severally and not jointly, to indemnify and hold harmless LBI
and each person, if any, who controls LBI within the meaning of Section 15 of
the Securities Act, and any director, officer,
18
employee or affiliate thereof, as follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in any Resale Registration
Statement (or any amendment thereto), including the information deemed to be
part of any Resale Registration Statement pursuant to Rule 430A(b) of the 1933
Act Regulations, if applicable, or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any related Resale
Prospectus or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the Companies shall not be required under this subsection (i) to indemnify
LBI with respect to any loss, liability, claim, damage or expense to the extent
such loss, liability, claim, damage or expense arises out of (A) any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Companies by
LBI specifically for inclusion in any Resale Registration Statement or any
related Resale Prospectus or (B) any statement or omission in any Resale
Prospectus that is corrected in any subsequent Resale Prospectus that was
delivered to LBI prior to the pertinent sale or sales by LBI and not delivered
in connection with such sale, when such delivery was required by the Securities
Act or any state securities law;
(ii) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation or of any investigation or
proceeding by any governmental agency or body, commenced or threatened, or of
any claim whatsoever for which indemnification is provided under subsection (i)
above, only if such settlement is effected with the written consent of the
Companies; and
(iii) against any and all expense whatsoever
(including, without limitation, the fees and other charges of counsel chosen by
you) reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceedings by any governmental agency or
body, commenced or threatened, or any claim whatsoever for which indemnification
is provided under subsection (i) above, to the extent that any such expense is
not paid under subsection (i) (other than expenses not paid pursuant to the
proviso to subsection (i)) or (ii) above (other than any settlement effected
without the written consent of the Companies).
(b) Indemnification by LBI. LBI agrees to indemnify and
hold harmless the Companies, and each person, if any, who controls the Companies
within the meaning of Section 15 of the Securities Act, and any trustee,
director, officer, employee or affiliate thereof, against any and all loss,
liability, claim, damage and expense described in the indemnity contained in
subsection (a) of this Section 7.5, as incurred, but only with respect to (A)
untrue statements or omissions, or alleged untrue statements or omissions, made
in any Resale
19
Registration Statement (or any amendment thereto) or any related Resale
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Companies by LBI
specifically for inclusion in any Resale Registration Statement or any related
Resale Prospectus or (B) any statement or omission in any Resale Prospectus that
is corrected in any subsequent Resale Prospectus that was delivered to LBI prior
to the pertinent sale or sales by LBI and not delivered in connection with such
sale, when such delivery was required by the Securities Act or any state
securities law.
(c) Proceedings. Each indemnified party shall give notice
as promptly as reasonably practicable to each indemnifying party of any action
commenced against it in respect of which indemnity may be sought hereunder, but
failure to so notify an indemnifying party shall not relieve such indemnifying
party from any liability hereunder to the extent it is not materially prejudiced
as a result thereof and in any event shall not relive it from any liability
which it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of such
action. If it so elects within a reasonable time after receipt of such notice,
an indemnifying party, jointly with any other indemnifying parties receiving
such notice, may assume the defense of such action with counsel chosen by it and
reasonably acceptable to the indemnified parties defendant in such action,
unless such indemnified parties reasonably object to such assumption on the
ground that the named parties to any such action (including any impleaded
parties) include both such indemnified parties and an indemnifying party, and
such indemnified parties reasonably believe that there may be legal defenses
available to them which are different from or in addition to those available to
such indemnifying party. If an indemnifying party assumes the defense of such
action, the indemnifying parties shall not be liable for any fees and expenses
of counsel for the indemnified parties incurred thereafter in connection with
such action. In no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to any local counsel) separate
from their own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances. No indemnifying
party shall, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 7.5 (whether
or not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent (i) includes an unconditional release of
each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 7.5(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance
20
with such request prior to the date of such settlement.
(d) Contribution. If the indemnification provided for in
this Section 7.5 is required by its terms but is for any reason held to be
unavailable to or otherwise insufficient to hold harmless an indemnified party
under paragraph (a), (b) or (c) of this Section 7.5 in respect of any losses,
claims, damages, liabilities or expenses referred to herein, then each
applicable indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of any losses, claims, damages, liabilities
or expenses referred to herein, (i) in such proportion as is appropriate to
reflect the relative benefits received by the Companies and LBI from the
purchase and sale of the Shares or (ii) if the allocation provided in clause (i)
is not permitted by applicable law, in such proportion or as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Companies and LBI in connection with the statements or
omissions or inaccuracies in the representations and warranties in this Purchase
Agreement which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The respective
relative benefits received by the Companies on the one hand and LBI on the other
shall be deemed to be in the same proportion as the amount paid by LBI to the
Companies pursuant to this Purchase Agreement and the Agreement and the net
proceeds retained or discounts received by LBI from the transactions
contemplated by this Purchase Agreement and the Agreement. The relative fault of
the Companies and LBI shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or the alleged omission to state a material fact or the inaccurate or
the alleged inaccurate representation and/or warranty relates to information
supplied by the Companies or by LBI and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in paragraph (c) of this Section
7.5 any reasonable legal or other fees or expenses incurred by such party in
connection with investigating or defending any action or claim. The provisions
set forth in paragraph (c) of this Section 7.5 with respect to notice of
commencement of any action shall apply if a claim for contribution is to be made
under this paragraph (d); provided, however, that no additional notice shall be
required with respect to any action for which notice has been given under
paragraph (c) for purposes of indemnification. The Companies and LBI agree that
it would not be just and equitable if contribution pursuant to this Section 7.5
were determined solely by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in this paragraph (d). Notwithstanding the provisions of this Section 7.5,
LBI shall not be required to contribute any amount in excess of the amount by
which the aggregate net proceeds retained or discounts received by LBI from the
transactions contemplated hereby and by the Agreement exceeds the amount of any
damages that LBI has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(e) Relationship Between the REIT and OPCO. The
obligations set forth in this Section 7.5 shall in no way limit the ability of
the Companies to allocate liability
21
between themselves.
7.6 Information Available. So long as any Resale Registration
Statement covering the resale of any shares owned by LBI or LBF is effective,
the Companies will furnish to LBI:
(a) as soon as practicable after available, one copy of
(i) their Joint Annual Report to Shareholders, (ii) their Joint Annual Report on
Form 10-K, (iii) their Joint Quarterly Reports to Shareholders, (iv) their Joint
Quarterly Reports on Form 10-Q, (v) a full copy of the particular Resale
Registration Statement covering the Shares (the foregoing, in each case,
excluding exhibits) and (iv) upon request, any or all other filings made with
the Commission by the Companies; and
(b) upon the reasonable request of LBI, a reasonable
number of copies of the Resale Prospectuses to supply to any other party
requiring such Resale Prospectuses;
and the Companies, upon the reasonable request of LBI, will meet with LBI or a
representative thereof at the Companies' headquarters to discuss all information
relevant for disclosure in such Resale Registration Statement covering the
Shares, subject to appropriate confidentiality limitations.
7.7 Remedies. The Companies and LBI acknowledge that there
would be no adequate remedy at law if the Companies fail to perform any of their
obligations under this Section 7, and accordingly agree that LBI, in addition to
any other remedy to which it may be entitled at law or in equity, shall be
entitled to compel specific performance of the obligations of the Companies
under this Section 7, and the Companies hereby waive the defense that a remedy
at law would be adequate.
7.8 Notice Requirement. The REIT and the OPCO each covenants
and agrees that it will notify LBI at any time it becomes aware that as a result
of a change in the REIT's and the OPCO's capital stock, LBI beneficially holds
more than 4.9% of the REIT's and the OPCO's Paired Shares.
SECTION 8. Broker's Fee. Other than any fees payable under or
in connection with the Agreement, each of the parties hereto represents that, on
the basis of any actions and agreements by it, there are no brokers or finders
entitled to compensation in connection with the sale or issuance of the Shares
to LBI.
SECTION 9. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified airmail, by telegram or telecopy or sent by nationally
recognized overnight express courier postage prepaid, and shall be deemed given
when so mailed or for telecopies, when transmitted and receipt confirmed, and
shall be delivered as addressed as follows:
(a) if to the Companies, to:
22
Starwood Hotels & Resorts
Starwood Hotels & Resorts Worldwide, Inc.
0000 Xxxx Xxxxxxxxx Xxxx
Xxxxx 000 and 410
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxx/Xxxx X. Xxxxxxx
Telecopier: 000-000-0000
with copies so mailed to:
Sidley & Austin
000 Xxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Telecopier: 000-000-0000
or to such other person at such other place as the Companies shall designate to
LBI in writing; and
(b) if to LBI or LBF, to:
Xxxxxx Brothers Inc.
3 World Financial Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Mr. Xxxx Xxxxxxx
Telecopier: 000-000-0000
SECTION 10. Changes. This Purchase Agreement may not be
modified or amended except pursuant to an instrument in writing signed by each
of the Companies and By each of LBI and LBF.
SECTION 11. Headings. The headings of the various sections of
this Purchase Agreement have been inserted for convenience of reference only and
shall not be deemed to be part of this Purchase Agreement.
SECTION 12. Severability. In case any provision contained in
this Purchase Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
SECTION 13. Successors and Assigns. The Companies or LBI may
assign any
23
of their respective rights, or delegate any of their respective duties under
this Purchase Agreement, if the other party first consents to such assignment in
writing. This Purchase Agreement shall inure to the benefit of and be binding
upon (i) the successors of LBI and (ii) any assignee or transferee of rights and
obligations of LBF pursuant to the Agreement and any assignee or transferee of
rights and obligations of LBI pursuant to this Purchase Agreement. A transferee
of LBF pursuant to the Agreement and a transferee of LBI pursuant to this
Purchase Agreement, and, in each case, any successor, assignee, or transferee,
shall be held subject to all of the terms of this Purchase Agreement.
SECTION 14. Governing Law; Jurisdiction. This Purchase
Agreement shall be governed by and construed in accordance with the laws of the
State of New York without regard to the conflicts of law principles thereof.
SECTION 15. Transfer to Affiliate. Notwithstanding anything
herein to the contrary, LBI may transfer the Purchase Shares to any affiliate of
LBI, together with all of LBI's rights hereunder, provided that (i) such
affiliate shall be an "accredited investor" within the meaning of Rule 501
(a)(1), (2), (3) or (7) of Regulation D promulgated under the Securities Act,
and (ii) such transfer shall be consistent with the investment representations
set forth at Section 5.1 hereto. In the event of such an assignment, such
affiliate shall in all respects be substituted for LBI as a party hereto.
SECTION 16. Counterparts. This Purchase Agreement may be
executed in two or more counterparts, each of which shall constitute an
original, but all of which, when taken together, shall constitute but one
instrument, and shall become effective when one or more counterparts have been
signed by each party hereto and delivered to the other parties.
SECTION 17. Recourse. LBI acknowledges and agrees that the
name "Starwood Hotels & Resorts" is a designation of the REIT and its Trustees
(as Trustees but not personally) under a Declaration of Trust dated August 25,
1969, as amended and restated as of June 6, 1988, as further amended on February
1, 1995, June 19, 1995, January 2, 1998 and February 23, 1998 and as the same
may be further amended from time to time, and all persons dealing with the REIT
shall look solely to the REIT's assets for the enforcement of any claims against
the REIT, as the Trustees, officers, agents and security holders of the REIT
assume no personal liability for obligations entered into on behalf of the REIT,
and their respective individual assets shall not be subject to the claims of any
person relating to such obligations.
24
IN WITNESS WHEREOF, the parties hereto have caused this Purchase
Agreement to be executed by their duly authorized representatives as of the day
and year first above written.
STARWOOD HOTELS & RESORTS
By:
Name:
Title:
STARWOOD HOTELS & RESORTS
WORLDWIDE, INC.
By:
Name:
Title:
XXXXXX BROTHERS INC.
By:
Name:
Title:
XXXXXX BROTHERS FINANCE S.A., solely
with respect to the covenants, representation and
warranties set forth in Sections 5 and 6, which are
hereby made mutatis mutandis by LBF to the
Companies
By:
Name:
Title:
25
Appendix I
(one of two)
STOCK CERTIFICATE QUESTIONNAIRE
Pursuant to Section 5 of the Purchase Agreement, please
provide us with the following information:
1. The exact name that your Shares are to be registered
in (this is the name that will appear on your stock
certificate(s)). You may use a nominee name if
appropriate:
2. All relationships between Xxxxxx Brothers and the
Registered Holder listed in response to Item 1 above:
3. The mailing address of the Registered Holder listed
in response to Item 1 above:
4. The Social Security Number or Tax Identification
Number of the Registered Holder listed in response to
Item 1 above:
26
Appendix I
(two of two)
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration
Statement, please provide us with the following information:
1. Pursuant to the "Selling Shareholders" section of the
Registration Statement, please state your or your organization's name exactly as
it should appear in the Registration Statement:
2. Please provide the number of shares that you or your
organization (including all affiliates) will own immediately after Closing,
including those Shares purchased by you or your organization (including all
affiliates) pursuant to this Purchase Agreement and those shares purchased by
you or your organization (including all affiliates) through other transactions:
3. Have you or your organization had any position, office or
other material relationship within the past three years with the Company or its
affiliates:
_____ Yes _____ No
If yes, please indicate the nature of any such relationships
below:
27
Appendix II
Attention:
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
The undersigned, [an officer of, or other person duly
authorized by] ________________________________ hereby certifies that he/she
[fill in official name of individual or institution] [said institution] is the
Purchaser of the shares evidenced by the attached certificate, and as such, sold
such shares on [date] in accordance with Registration Statement number [fill in
the number of or otherwise identify Registration Statement], the Securities Act
of 1933, as amended, and any applicable state securities or blue sky laws and
the requirement of delivering a current prospectus by the Company has been
complied with in connection with such sale.
Print or Type:
NAME OF PURCHASER
(Individual or Institution):
NAME OF INDIVIDUAL
representing Purchaser
(if an Institution)
TITLE OF INDIVIDUAL
representing Purchaser
(if an Institution)
Signature by:
Individual Purchaser
or Individual representing
Purchaser:
28
EXHIBIT A
FORM OF CLOSING OPINION OF COUNSEL TO THE COMPANY
29
AGREEMENT
THIS AGREEMENT is made as of the 23rd day of February, 1998, by and
between Starwood Hotels & Resorts (the "REIT"), Starwood Hotels & Resorts
Worldwide, Inc. ("OPCO," and together with the REIT, the "Companies") and Xxxxxx
Brothers Finance S.A. ("LBF"), through its agent Xxxxxx Brothers Inc. ("LBI").
The purpose of this Agreement is to confirm the terms and conditions of
the transaction (the "Transaction") entered into between LBF and the Companies.
IN CONSIDERATION of the mutual representations, warranties and covenants
herein contained, and on the terms and subject to the conditions herein set
forth, the Companies and LBF hereby agree as follows:
Section 1. Definitions. As used in this Agreement, the following terms
shall have the meanings set forth below:
(a) Ability to Settle in Paired Shares. As of the date hereof, the
Companies have not, and after the date hereof, the Companies will not, enter
into any obligation that would contractually prohibit the Companies from
delivering Paired Shares pursuant to Sections 3.2, 4.2 or 5 of this Agreement.
(b) Certain Adjustments to Reference Price or Number of Notional
Shares. In the event of:
(i) a subdivision, consolidation or reclassification of the
Paired Shares, or a free distribution or dividend of any Paired Shares to all
existing holders of Paired Shares by way of bonus, capitalization or similar
issue; or
(ii) a distribution or dividend to all existing holders of
Paired Shares of (A) additional Paired Shares or (B) other share capital or
securities granting right to payment of dividends and/or the proceeds of
liquidation of the Companies equally or proportionally with such payments to
holders of Paired Shares,
an adjustment shall thereupon be effected to the Reference Price and/or the
Notional Shares at the time of such event with the intent that following such
adjustment, the value of this Transaction is economically equivalent to the
value immediately prior to the occurrence of the event causing the adjustment.
(c) Block Sale. Any privately negotiated sales of the Paired Shares
involving at least a block of such security (as defined in Rule 10b-18 under the
Exchange Act).
(d) Business Day. Any day other than a Saturday, Sunday, or any
other day on which banking institutions in the States of Delaware or New York
are not open for business.
30
(e) Calculation Agent. LBF, whose calculations and determinations
shall be made in a reasonable manner.
(f) Closing Price. The last sale price of the Paired Shares on the
Relevant Exchange on the relevant date.
(g) Commission. The Securities and Exchange Commission.
(h) Compounding Period. Means each period commencing on and
including:
(i) in the case of the first Compounding Period, the Initial
Settlement Date and ending on but excluding the first Reset Date, and
(ii) for each period thereafter, a Reset Date and ending on
(but excluding) the next following Reset Date.
(i) Distribution Amount. Means, on each Reset Date, an amount in
U.S. Dollars equal to:
(i) the sum of all cash distributions paid on a single Paired
Share during the relevant Compounding Period; plus
(ii) an amount representing interest that could have been
earned on such distributions at the USD LIBOR rate having a designated maturity
of three months, plus Spread, for the period from the date that such
distributions would have been received by a holder of a single Paired Share
until such Reset Date.
(j) DRIP Distribution. Sales to any Distribution Reinvestment Plan
now or hereafter established by the Companies, or to any agent acting on behalf
of such Plan, for sale to participants in such Plan.
(k) Effective Date. February 24, 1998.
(l) Exchange Act. The Securities Exchange Act of 1934, as amended.
(m) Exchange Trading Day. Each day on which the Relevant Exchange is
open for trading.
(n) Execution Price. The Closing Price on the Effective Date`.
(o) Gradual Market Distribution. An offering of the Paired Shares
into the existing trading market for outstanding shares of the same class at
other than (i) a fixed price on or through the facilities of a national
securities exchange or (ii) to or through a market maker otherwise than on an
exchange.
31
(p) Initial Price. Means,
(i) for the Compounding Period ending on the first Reset Date,
an amount in U.S. Dollars equal to $53.875, and
(ii) for each subsequent Reset Date, the Reference Price as
calculated on or adjusted as of the prior Reset Date.
(q) Initial Settlement Date. February 24, 1998.
(r) Interim Settlement Amount. With respect to a given Reset Date,
means the amount by which the Reference Amount minus $5,000,000 exceeds the
product of (x) the Closing Price on such Reset Date and (y) the number of
Notional Shares.
(s) Interim Settlement Shares. The Interim Settlement Amount divided
by the Closing Price on such Reset Date.
(t) Maturity Date. March 1, 1999.
(u) Notional Shares. 1,547,000 Paired Shares, as may be adjusted
from time to time pursuant to Section 1(b), reduced by the number of Settlement
Shares that have been settled prior to the date of calculation pursuant to
Section 3.1 or Section 4.1.
(v) Paired Shares. Units consisting of one share of beneficial
interest, $.01 par value per share, in the REIT and one share of common stock,
par value $.01 per share, of OPCO, which shares are paired and traded as a unit.
(w) Pooled Underwritten Secondary Offering. An underwritten fixed
price offering of Paired Shares, in which the Settlement Shares and other Paired
Shares, which may include the Paired Shares of other selling shareholders and
previously unissued Paired Shares.
(x) Pooling Exit Fee. 50 basis points on the Settlement Amount in
connection with the related Pooled Underwritten Secondary Offering.
(y) Purchase Shares. Paired Shares sold to LBF pursuant to the
Purchase Agreement.
(z) Purchase Agreement. The Purchase Agreement, dated as of February
23, 1998 (the "Purchase Agreement"), among the Companies, LBF and LBI
(aa) Reference Amount. On each Reset Date, the Reference Price
multiplied by the Notional Shares or Settlement Shares, as applicable.
(bb) Reference Price. On each Reset Date, the Reference Price shall
be determined by:
32
(i) compounding the Initial Price for the previous Compounding
Period at USD LIBOR rate plus Spread for a designated maturity of three months
(Actual/360 day count fraction) to such Reset Date and
(ii) subtracting the Distribution Amount at that date.
(cc) Relevant Exchange. Means, with respect to any Exchange Trading
Day, the principal Stock Exchange on which the Paired Shares are traded on that
day.
(dd) Reset Date. Means, through the final Trade Date, (i) the last
day of each three-month period, beginning on May 31, 1998 (provided, that if
such day is not a Business Day then the Reset Date shall be the next Business
Day), (ii) as to any Settlement Shares, but only as to such Settlement Shares,
the related Trade Date and (iii) as to any Gross Settlement Shares, but only as
to such Gross Settlement Shares, the Exchange Trading Day immediately prior to
the date on which the related Gross Settlement Notice is delivered.
(ee) Securities Act. The Securities Act of 1933, as amended.
(ff) Settlement. Has the meaning set forth in Section 3.1 or Section
4.1, as applicable.
(gg) Settlement Amount. Except as set forth in subsection (iv)
below, the net sales proceeds realized by or on behalf of LBF for all sales of
Paired Shares in connection with any Settlement, calculated as follows:
(i) if the manner of Settlement Sale pursuant to Section 3.1
or 4.1 is an Underwritten Secondary Offering, the Settlement Amount will equal
the gross proceeds realized, net of a negotiated underwriting discount;
(ii) if the manner of Settlement Sale pursuant to Section 3.1
or 4.1 is a Block Sale, the Settlement Amount will equal the gross sales
proceeds realized, net of a negotiated underwriting discount;
(iii) if the manner of Settlement Sale pursuant to Section 3.1
or 4.1 is a Gradual Market Distribution, the Settlement Amount will equal the
gross sales proceeds realized from sales to the market over the period of the
distribution, net of a resale spread of 50 basis points;
(iv) with respect to a given Trade Date, if the manner of
Settlement Sale pursuant to Section 3.1 or 4.1 is a VWAP Sale, the Settlement
Amount will equal the product of (a) the volume weighted average price of the
Paired Shares for such Trade Date and (b) the number of Paired Shares determined
by the Company to be sold by LBF on such Trade Date, net of a resale spread of
50 basis points;
33
(v) if the manner of Settlement Sale pursuant to Section 3.1
or 4.1 is a DRIP Distribution, the Settlement Amount will equal the gross sales
proceeds realized from sales to any Purchase Agent for a Company Distribution
Reinvestment Plan, net of a resale spread of 50 basis points; and
(vi) if the manner of Settlement Sale pursuant to Section 3.1
or 4.1 is a Pooled Underwritten Secondary Offering, the Settlement Amount will
equal a pro rata share of the gross proceeds realized, net of a negotiated
underwriting discount.
(hh) Settlement Date. The date after each Trade Date on which, in
accordance with standard market practice, any Paired Shares are delivered and
the funds received, in respect of any Settlement in accordance with Section 3.2
or Price Decline Termination Event in accordance with Section 4.2.
(ii) Settlement Shares. The number of Notional Shares which will be
settled on a given Settlement Date pursuant to Section 3.2 or Section 4.2, as
applicable.
(jj) Spread. 175 basis points, subject to adjustment pursuant to
Section 6.3.
(kk) Stock Exchange. Means the New York Stock Exchange, the American
Stock Exchange or NASDAQ.
(ll) Trade Date. Any date on which LBF executes a settlement trade
or trades as part of a Settlement in any of the manners of Settlement Sale set
forth in Section 3.1, pursuant to either Section 3.1 or 4.1.
(mm) Underwritten Secondary Offering. An underwritten fixed price
offering of the Paired Shares.
(nn) USD LIBOR. The London Inter Bank Offered Rate in respect of
U.S. Dollars for the designated maturity as quoted on Page 3750 on the Telerate
Service (or such other page as may replace Page 3750 on that service) as of
11:00 a.m., London time, on the date on which it is to be determined.
(oo) VWAP Sale. A sale of the Paired Shares into the existing
trading market for outstanding shares of the same class effected in order to
approximate the volume weighted average price of the Paired Shares on the
Relevant Exchange on the relevant date.
Section 2. Representations and Warranties. The representations and
warranties of the Companies in Section 4 of the Purchase Agreement are hereby
incorporated by reference herein, and each Company hereby so represents and
warrants to LBF, and the representations and warranties of LBI and LBF in
Section 5 of the Purchase Agreement are hereby incorporated by reference, and
the LBF hereby so represents and warrants to each Company. The provisions of
Section 6 of the Purchase Agreement shall also be applicable to any Paired
Shares delivered to
34
LBF under this Agreement.
Section 3. Settlement.
3.1 Settlement Sale. On any Reset Date of the type referred to in
clause (i) of the definition of Reset Date, on any Exchange Trading Day that is
one month or two months following such a Reset Date or on any other Exchange
Trading Day (in each case, if other than such a Reset Date, the related
Settlement (as defined below) will include standard market interest breakage
fees), up to and including the Maturity Date, the Companies may give telephonic
notice to LBF to settle, and LBF shall settle, in a commercially reasonable
manner (which may require sales over a period of more than 1 day), all or a
portion of the Notional Shares to be settled on the related Settlement Date or
Dates, as specified by the Companies ("Settlement"), through sale of not less
than the number of Paired Shares, the sale of which would result in a Settlement
Amount equal to 100% of the Reference Amount on the Settlement Date, and not
more than the number of Paired Shares, the sale of which would result in a
Settlement Amount equal, to 105% of the Reference Amount on the Settlement Date,
in any of the manners set forth below, as selected by the Companies:
(i) an Underwritten Secondary Offering (for which the
Companies shall provide at least 21 Business Days prior notice to LBF);
(ii) a Block Sale (for which the Companies shall provide at
least 3 Business Days prior notice to LBF);
(iii) a Gradual Market Distribution (for which the Companies
shall provide at least 1 Business Day prior notice to LBF);
(iv) a VWAP Sale (for which the Companies shall provide at
least 1 Business Day prior notice to LBF);
(v) a DRIP Distribution (for which the Companies shall provide
at least 1 Business Day prior notice to LBF); or
(vi) a Pooled Underwritten Secondary Offering (for which the
Companies shall provide at least 21 Business Day prior notice to LBF).
If the Companies do not specify a manner of sale, a Gradual Market Distribution
shall be used. If the Paired Shares delivered by the Companies to LBF pursuant
to the Purchase Agreement and this Agreement are not, on the applicable trade
date, the subject of an Effective Resale Registration Statement (as defined in
Section 6.3), the Companies may not select a VWAP Sale as the manner of
Settlement. The number of shares sold as part of a VWAP Sale on any Trade Date
shall not be less than 20% of the six-month daily average trading volume of the
Paired Shares as calculated by the Calculation Agent and shall not exceed 40% of
the six-month daily average trading volume of the Paired Shares as calculated by
the Calculation Agent, unless both parties agree otherwise prior to the
execution of any trades in connection with such VWAP Sale. In connection with
any Underwritten Secondary Offering or Block Sale, LBI shall be the sole
35
manager and underwriter. In connection with a Pooled Underwritten Secondary
Offering, LBF and LBI may, in their discretion, elect to (a) participate in such
offering as a first-tier co-manager on the same terms as all other first-tier
co-managers or (b) receive the Pooling Exit Fee; provided, however, that
regardless of the election of LBF and LBI, all of the Notional Shares shall be
included in the Pooled Underwritten Secondary Offering. Settlement procedures
shall begin as soon as commercially practicable, as determined by LBF, after LBF
receives notice from the Companies and no later than the first Exchange Trading
Day after expiration of the notice period unless otherwise agreed by the
Companies and LBF. At such time as the Companies deliver notice pursuant to this
Section 3.1, the Companies may direct LBF to sell not less than the number of
Paired Shares equal to the number of Settlement Shares, and LBF shall comply
with such direction in a commercially reasonable manner. In connection with a
Gradual Market Distribution, there shall be a separate Settlement Date for each
Trade Date. Final Settlement shall occur no later than the Maturity Date.
However, if the Companies have not given LBF notice to settle by the Maturity
Date, then LBF shall settle the Notional Shares using a Gradual Market
Distribution to begin as soon as commercially practicable, as determined by LBF,
on or after the Maturity Date.
3.2 Settlement.
(a) If, on a Settlement Date, the Settlement Amount is greater
than the Reference Amount, LBF, on such Settlement Date, will pay the Companies
an amount in cash or Paired Shares (valued at the Closing Price on the Trade
Date), at the election of the Companies, equal to the difference.
(b) If the number of Paired Shares sold by LBF pursuant to
Section 3.1 is greater than the number of Settlement Shares, the Companies shall
deliver to LBF, on the Settlement Date, a number of Paired Shares equal to the
difference. If the number of Paired Shares sold by LBF pursuant to Section 3.1
is less than the number of Settlement Shares, LBF shall deliver to the
Companies, on the Settlement Date, a number of Paired Shares equal to the
difference.
(c) In all events, LBF will pay to the Companies an amount
equal to all cash distributions payable to LBF but not paid prior to the
Settlement Date, on a number of Paired Shares equal to the Settlement Shares on
the Business Day after the relevant distribution payment date declared by the
Board of Directors of the REIT and OPCO.
(d) If LBF, in connection with any Settlement, receives net
sales proceeds, as calculated pursuant to the definition of Settlement Amount,
from the sale of Paired Shares prior to the applicable Settlement Date, LBF, on
the Settlement Date, shall pay the Companies an amount in cash representing
interest that could have been earned on such net sales proceeds at the USD LIBOR
rate having a designated maturity of three months, plus Spread, for the period
from the date that such net sales proceeds are received by LBF until such
Settlement Date.
3.3 Gross Share Settlement.
36
(a) The Companies may elect, in their sole discretion, to
settle all or any portion of the then outstanding Notional Shares by delivering
Paired Shares in exchange for such number of Notional Shares (a "Gross Share
Settlement"). The Companies may effect a Gross Share Settlement by delivering a
written notice (the "Gross Settlement Notice") to LBF indicating the date of
such Gross Share Settlement and the number of then outstanding Notional Shares
subject to such Gross Share Settlement; provided that such notice must be
accompanied by a notice pursuant to Section 3.1 to effect settlement of all
Paired Shares delivered pursuant to this Section 3.3(a). To effect a Gross Share
Settlement, LBF Shall deliver to the Companies the number of Notional Shares
subject to such Gross Share Settlement ("Gross Settlement Shares") against
delivery by the Companies to LBF of a number of Paired Shares equal to the
product of (i) the number of Gross Settlement Shares and (ii) the quotient
obtained by dividing (A) the Reference Price by (B) the Closing Price, in each
case, on the Reset Date for such Gross Settlement Shares. The deliveries set
forth in the immediately preceding sentence shall be made on the Exchange
Trading Day immediately following the date on which the Gross Settlement Notice
is delivered. All Paired Shares delivered to the Companies by LBF as part of a
Gross Share Settlement shall be immediately retired and shall cease to be issued
and outstanding Paired Shares.
(b) For purposes of the Settlement of the Paired Shares
delivered to LBF pursuant to Section 3.3(a), the Settlement Shares shall be
deemed to be equal to the Gross Settlement Shares, provided that for purposes of
Section 3.2(b), the Settlement Shares shall be deemed to be equal to the Paired
Shares delivered to LBF pursuant to Section 3.3(a), and provided further that,
for purposes of Section 3.2(c), with respect to any distribution payable to LBF
on the Gross Settlement Shares but not paid prior to the Settlement Date for
which the record date occurs after the date on which the Gross Settlement Notice
is delivered, the Settlement Shares shall be deemed to be equal to the Paired
Shares delivered to LBF pursuant to Section 3.3(a).
(c) The amount of any distribution referred to in clause (i)
of the definition of Distribution Amount for which the record date occurs after
a Gross Share Settlement with respect to the Paired Shares delivered to LBF
pursuant to Section 3.3 shall be multiplied by the quotient obtained in clause
(ii) of Section 3.3(a).
Section 4. Price Decline Termination Event.
4.1 Price Decline Termination Event Sale. If the Closing Price on
any Exchange Trading Day falls below any Termination Price listed in the
following schedule ("Price Decline Termination Event"), LBF will, at its
discretion, in a commercially reasonable manner (which may require sales over a
period of more than 1 day) following notice to the Companies, settle the
percentage of the Notional Shares indicated in the table below ("Settlement")
through sale of not less than the number of Paired Shares, the sale of which
would result in a Settlement Amount equal to 100% of the Reference Amount on the
Settlement Date, and not more than the number of Paired Shares, the sale of
which would result in a Settlement Amount equal to 105% of the Reference Amount
on the Settlement Date, in any of the manners specified in Section 3.1,
37
as specified by the Companies:
Percentage of Initial Notional Termination Price
Shares to be Settled
--------------------------- -----------------
25% $37.7125
50% $35.0188
75% $33.6719
100% $32.3250
Settlement procedures shall commence on the date specified by LBF.
4.2 Price Decline Termination Event Settlement.
(a) If, on the Settlement Date, the Settlement Amount is
greater than the Reference Amount, LBF, on the Settlement Date, will pay the
Companies an amount in cash or Paired Shares (valued at the Closing Price on the
Trade Date), at the election of the Companies, equal to the difference.
(b) If the number of Paired Shares sold by LBF pursuant to
Section 4.1 is greater than the number of Settlement Shares, the Companies shall
deliver to LBF, on the Settlement Date, a number of Paired Shares equal to the
difference. If the number of Paired Shares sold by LBF pursuant to Section 4.1
is less than the number of Settlement Shares, LBF shall deliver to the
Companies, on the Settlement Date, a number of Paired Shares equal to the
difference.
(c) In all events, LBF will pay to the Companies an amount
equal to all cash distributions payable to LBF but not paid prior to the
Settlement Date, on a number of Paired Shares equal to the Settlement Shares on
the Business Day after the relevant distribution payment date declared by the
Boards of Directors of the REIT and OPCO.
(d) If LBF, in connection with any Settlement, receives net
sales proceeds, as calculated pursuant to the definition of Settlement Amount,
from the sale of Paired Shares prior to the applicable Settlement Date, LBF, on
the Settlement Date, shall pay the Companies an amount in cash representing
interest that could have been earned on such net sales proceeds at the USD LIBOR
rate having a designated maturity of three months, plus Spread, for the period
from the date that such net sales proceeds are received by LBF until such
Settlement Date.
Section 5. Interim Settlements. Within 5 Business Days following each
Reset Date of the type referred to in clause (i) of the definition of Reset
Date, the Companies shall (i) deliver the Interim Settlement Amount, if any, in
Interim Settlement Shares to LBF. Interim Settlement Shares shall be the subject
of a registration statement covering any sale of such Interim
38
Settlement Shares by LBI that has been declared effective under the Securities
Act by the Commission (an "Effective Registration Statement"). Interim
Settlement Shares shall be registered in the stock register of the Companies as
instructed by LBF and shall be held by LBI or a custodian or depository
designated by LBI. If the Companies are unable to deliver Interim Settlement
Shares in accordance with the preceding sentence, the Companies shall deliver
"restricted" Interim Settlement Shares that are not the subject of an Effective
Registration Statement in an amount equal to the Interim Settlement Amount. If
the Interim Settlement Shares are not the subject of an Effective Registration
Statement, the Companies shall deliver additional Interim Settlement Shares
equal to 20% of the Interim Settlement Shares. At such time as the Interim
Settlement Shares are the subject of an Effective Registration Statement, the
Companies may elect to have returned all additional Interim Settlement Shares
delivered pursuant to the preceding sentence. On any Reset Date, if Interim
Settlement Shares are held by LBF, LBF shall deliver to the Companies within
five (5) Business Days after such Reset Date, the amount in Interim Settlement
Shares by which the amount in Interim Settlement Shares held by LBF (valued at
the Closing Price on such Reset Date) plus any cash amounts in the collateral
account exceeds the Interim Settlement Amount (or 120% of the Interim Settlement
Amount, in the event that LBF holds restricted Interim Settlement Shares that
are not the subject of an Effective Registration Statement). Distributions on
the Interim Settlement Shares will be deposited in a collateral account at LI or
a custodian or depositary designated by LBI. All Interim Settlement Shares will
be, when delivered, duly authorized, validly issued, fully paid and
non-assessable. Interim Settlement Shares shall not be voted by LBF or LBI. All
distributions received in respect of the Interim Settlement Shares shall be held
in the collateral account at LBI or a depositary designated by LBI. The cash
amounts in the collateral account will be immediately returned to the Companies
by LBF, but should LBF fail to return any cash amounts in the collateral
account, such cash amounts will earn interest at the USD LIBOR rate having a
designated maturity of three months. Upon final Settlement, LBF shall
immediately release all claims to cash held in the collateral account, if any
(including interest earned thereon), and Interim Settlement Shares and deliver
such amounts and all Interim Settlement Shares to the Companies.
Section 6. Certain Covenants and Other Provisions.
6.1 Par Value. LBF shall pay to the Companies $.01 par value per
share for each share comprising a Paired Share delivered to LBF pursuant to this
Agreement, including any Interim Settlement Shares.
6.2 Allocation of Payment and Deliveries. As between the REIT and
OPCO, any delivery of, or payments attributable to, the REIT portion of Paired
Shares pursuant to this Agreement shall be made to or by the REIT, and any
delivery of, or payments attributable to, the OPCO portion of Paired Shares
pursuant to this Agreement shall be made to or by OPCO. When making any payment
to the Companies pursuant to this Agreement, LBF shall allocate such payment
between the REIT and OPCO in the manner specified by the Companies.
6.3 Resale Registration Statement. The Companies shall file a resale
registration statement covering any resales of Paired Shares delivered by the
Companies to LBF
39
pursuant to this Agreement and the Purchase Agreement (a "Resale Registration
Statement") within 45 Business Days of the Closing Date and the Companies shall
use their best efforts to obtain effectiveness of such Resale Registration
Statement within 90 Business Days of the Closing Date. If the Paired Shares
delivered by the Companies to LBF pursuant to the Purchase Agreement are not the
subject of a Resale Registration Statement that has been declared effective
under the Securities Act by the Commission (an "Effective Resale Registration
Statement") within 90 Business Days of the Closing Date, the Spread shall
increase, retroactively effective commencing on the Initial Settlement Date, to
the Spread plus 125 basis points. At such time as the Purchase Shares are the
subject of an Effective Resale Registration Statement, the Spread shall be
reduced, from and after such time, to the Spread. The Companies further agree
that they will cause any Resale Registration Statement to remain in effect until
the earliest of the date on which (i) the Notional Shares plus all of the
Interim Settlement Shares and any other Paired Shares delivered by the Companies
to LBF pursuant this Agreement have been sold by or on behalf of LBF, or (ii)
LBF has advised the Companies that it no longer requires that such registration
be effective. The provisions of Section 5.2 and Section 7.2 of the Purchase
Agreement shall be deemed to apply to any Resale Registration Statement filed by
the Companies pursuant to this Agreement.
6.4 Delivery of Paired Shares. Each Company covenants and agrees
with LBF that Paired Shares delivered by the Companies pursuant to settlement
events in accordance herewith will be duly authorized, validly issued, fully
paid and nonassessable. The issuance of such Paired Shares will not require the
consent, approval, authorization, registration, or qualification of any
government authority, except such as shall have been obtained on or before the
delivery date to LBF in connection with any registration statement filed with
respect to any Paired Shares. Each party agrees that the Companies shall not
deliver Paired Shares to LBF or any other person in connection with an Interim
Settlement or the final Settlement until such time as such delivery would not
cause LBF or any other person to violate the "Ownership Limit" set forth in the
Amended and Restated Declaration of Trust of the REIT or the Articles of
Amendment and Restatement of OPCO, in each case, as in effect on the date
hereof.
6.5 Securities Law Compliance. Each party agrees that it will
comply, in connection with this Transaction and all related or contemporaneous
sales and purchases of the Companies' Paired Shares, with the applicable
provisions of the Securities Act, the Exchange Act and the rules and regulations
thereunder.
6.6 Regulatory Compliance. Each party agrees that if the delivery of
Paired Shares upon settlement is subject to any restriction imposed by a
regulatory authority, it shall not be an event of default, and the parties will
negotiate in good faith a procedure to effect settlement of such Paired Shares
in a manner which complies with any relevant rules of such regulatory authority
and which is satisfactory in form and substance to their respective counsel,
subject to Section 6.2 of this Agreement and Section 7 of the Purchase
Agreement. Each party further agrees that any sale pursuant to Section 3.1 may
be delayed or postponed if, in LBF's reasonable judgement, such delay or
postponement is necessary to comply with the requirements of applicable law or
regulation; provided, however, that LBF will act in good faith to end such delay
or postponement or otherwise effect such sale on a reasonably timely basis in a
manner which
40
complies with any such applicable law or regulation and which is satisfactory in
form and substance to its respective counsel.
6.7 Settlement Transfer. All settlements shall occur through DTC or
any other mutually acceptable depository.
6.8 Trading Authorization. The following individuals and/or any
individual authorized in writing by the respective officers of the Companies are
authorized by the Companies to provide trading instructions to LBF with regard
to this transaction:
Xxxxxx X. Xxxxx
0000 X. Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
and
Xxxxxxx Xxxxx
0000 X. Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
6.9 Specific Performance. The parties acknowledge and agree that the
failure of the Companies or LBF to deliver Paired Shares in accordance with the
provisions hereof would result in damage to the other party that could not be
adequately compensated by a monetary award. The parties therefore agree that, if
either party fails to deliver Paired Shares in accordance with the provisions
hereof, the other party may, in addition to all other remedies, seek an order of
specific performance from a court of appropriate jurisdiction.
6.10 Recourse. LBF acknowledges and agrees that the name "Starwood
Hotels & Resorts" is a designation of the REIT and its Trustees (as Trustees but
not personally) under a Declaration of Trust dated August 25, 1969, as amended
and restated as of June 6, 1988, as further amended on February 1, 1995, June
19, 1995, January 2, 1998 and February 23, 1998 and as the same may be further
amended from time to time, and all persons dealing with the REIT shall look
solely to REIT's assets for the enforcement of any claims against the REIT, as
the Trustees, officers, agents and security holders of the REIT assume no
personal liability for obligations entered into on behalf of the REIT, and their
respective individual assets shall not be subject to the claims of any person
relating to such obligations.
6.11 Successors and Assigns. The Companies or LBF may assign any of
their respective rights, or delegate any of their respective duties under this
Agreement, if the other party first consents to such assignment in writing. This
Agreement shall inure to the benefit of and be binding upon (i) the successors
of LBF and (ii) any assignee or transferee of rights and obligations of LBI
pursuant to the Purchase Agreement and any assignee or transferee of rights
41
and obligations of LBF pursuant to this Agreement. A transferee of LBI pursuant
to the Purchase Agreement and a transferee of LBF pursuant to this Agreement,
and, in each case, any successor, assignee, or transferee, shall be held subject
to all of the terms of this Agreement.
6.12 Transfer to Affiliate. Notwithstanding anything herein to the
contrary, if LBF transfers the Purchase Shares to any affiliate of LBF, together
with all of LBF's rights under the Purchase Agreement pursuant to Section 15 of
the Purchase Agreement, then LBF's rights and obligations under this Agreement
shall be transferred to such affiliate of LBF. In the event of such an
assignment, such affiliate shall in all respects be substituted for LBF as a
party hereto.
6.13 Governing Law. The Agreement will be governed by and construed
in accordance with the laws of the State of New York without reference to choice
of law doctrine.
6.14 Confidentiality. Subject to the other applicable subsections of
this Section 6, to any contrary requirement of law, including any disclosure
obligations of the Companies under the Securities Act, the Exchange Act and the
rules and regulations thereunder, and to the right of each party to enforce its
rights hereunder in any legal action, each party shall keep strictly
confidential and shall cause its employees and agents to keep strictly
confidential the terms of this Agreement and any information relating to or
concerning the other party which it or any of its agents or employees may
acquire pursuant to, or in the course of performing its obligation under, any
provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized representatives as of the day and year
first above written.
STARWOOD HOTELS & RESORTS
WORLDWIDE, INC.
By:
Name:
Title:
STARWOOD HOTELS & RESORTS
By:
Name:
Title:
XXXXXX BROTHERS FINANCE S.A.
42
By:
Name:
Title:
XXXXXX BROTHERS INC., as agent
By:
Name:
Title:
