1
Exhibit 10.69
EXECUTION COPY
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT is made as of the 23rd day of
February, 1998, by and among Starwood Hotels & Resorts (the "REIT"), a Maryland
real estate investment trust, Starwood Hotels & Resorts Worldwide, Inc., a
Maryland corporation (the "OPCO") (the REIT and the OPCO, each a "Company" and
together the "Companies"), NMS Services, Inc. ("NMSSI"), and NationsBanc
Xxxxxxxxxx Securities LLC, on behalf of itself and as agent acting for the
account of NMSSI ("NMS" and, collectively with NMSSI, the "NMS Parties").
IN CONSIDERATION of the mutual covenants contained in this
Purchase Agreement, the Companies and the NMS Parties hereby agree as follows:
SECTION 1. Authorization of Sale of the Shares. Subject to the
terms and conditions of this Purchase Agreement, the REIT has authorized the
sale to the NMS Parties of 1,547,000 shares of beneficial interest, $.01 par
value per share, of the REIT (the "REIT Shares") and the OPCO has authorized the
sale to the NMS Parties of 1,547,000 shares of common stock, $.01 par value per
share, of the OPCO (the "OPCO Shares"), which REIT Shares and OPCO Shares are
paired as a unit consisting of one (1) REIT Share and one (1) OPCO Share
(hereinafter each such paired unit is referred to as a "Paired Share") and the
Paired Shares referred to in this sentence are herein called the "Purchase
Shares"). In addition, the REIT and the OPCO may issue to NMSSI additional
Paired Shares in settlement of certain of their obligations under that certain
Agreement (the "Agreement"), dated as of the date hereof, between the REIT, the
OPCO and NMSSI (the "Additional Shares"). The Paired Shares and the Additional
Shares are hereinafter collectively called the "Shares."
SECTION 2. Agreement to Sell and Purchase the Purchase Shares.
Subject to the terms and conditions of this Purchase Agreement, on the Closing
Date (as defined in Section 3 hereof), the Companies will sell to the NMS
Parties the Purchase Shares for a per Paired Share purchase price equal to
98.00% of the Closing Price. The "Closing Price" shall equal the closing price
reported on the New York Stock Exchange for a Paired Share on February 23, 1998.
SECTION 3. Delivery of the Purchase Shares at the Closing.
3.1. Closing. The completion of the purchase and sale of the
Purchase Shares (the "Closing") shall occur as soon as practicable on or after
the date hereof on a business day to be agreed upon by the Companies and the NMS
Parties, but in no event later than five business days after the execution of
this Purchase Agreement (hereinafter, the "Closing Date").
2
3.2. Conditions. At Closing, the Companies shall deliver to
the NMS Parties one or more stock certificates registered in the name of NMSSI
representing the number of Purchase Shares set forth in Section 2 above.
The obligation of the Companies to complete the purchase and
sale of the Purchase Shares and deliver such stock certificate(s) to the NMS
Parties at the Closing shall be subject to the following conditions, any one or
more of which may be waived by both of the Companies acting together: (i)
receipt by the Companies of Federal Funds (or other mutually agreed upon form of
payment) in the full amount of the purchase price for the Purchase Shares being
purchased hereunder, (ii) the accuracy in all material respects as of the
Closing Date, of the representations and warranties made by the NMS Parties
herein and the fulfillment, in all material respects, of those undertakings of
the NMS Parties to be fulfilled prior to the Closing, (iii) execution and
delivery of the Agreement by NMSSI, (iv) receipt by the Companies of a
cross-receipt with respect to the Purchase Shares executed by NMSSI and (v)
receipt by the Companies of a certificate by an officer or authorized
representative of each of the NMS Parties to the effect that the representations
and warranties of the NMS Parties set forth in Section 5 hereof are true and
correct as of the date of this Purchase Agreement and as of the Closing Date.
The NMS Parties' obligation to accept delivery of such stock
certificate(s) and to pay for the Purchase Shares evidenced thereby shall be
subject to the following conditions, any one or more of which may be waived by
the NMS Parties: (i) the accuracy in all material respects, as of the Closing
Date, of the representations and warranties made by the Companies herein and the
fulfillment, in all material respects, of those undertakings of the Companies to
be fulfilled prior to the Closing, (ii) receipt by the NMS Parties of all
opinions, letters and certificates to be delivered by the Companies pursuant to
this Purchase Agreement, (iii) execution and delivery of the Agreement by each
of the Companies, and (iv) receipt by the NMS Parties of a cross-receipt with
respect to the purchase price for the Purchase Shares executed by the Companies.
SECTION 4. Representations, Warranties and Covenants of the
Companies. Except as disclosed in the Companies' SEC Filings (as defined below),
each of the REIT and the OPCO, severally and not jointly, hereby represents and
warrants to the NMS Parties, and covenants with the NMS Parties, with respect to
such Company and its Subsidiaries (as defined below) only, as follows:
4.1. Organization and Qualification of the Companies. Each of
the REIT and the OPCO has been duly organized and is validly existing in good
standing under the laws of Maryland with power and authority to own and lease
its properties and to conduct its business as currently conducted. Each of the
REIT and the OPCO is duly qualified to transact business and is in good standing
in each jurisdiction in which such qualification is required, whether by reason
of the ownership or leasing or
3
managing of property or the conduct of business, except where the failure to so
qualify would not have a material adverse effect on the condition, financial or
otherwise, or the earnings, assets, business affairs or business prospects of
the Companies and the Subsidiaries of the Companies considered as one enterprise
(a "Material Adverse Effect"). Entities in which either of the Companies
directly or indirectly has at least a 50% ownership interest are herein referred
to as the "Subsidiaries," and each individually, as a "Subsidiary."
4.2. Organization and Qualification of Subsidiaries. Each of
the Subsidiaries has been duly organized and is validly existing as a
corporation, limited partnership, or limited liability company, as the case may
be, in good standing under the laws of its respective jurisdiction of
organization, with full power and authority to own, lease and operate its
properties and to conduct the business in which it currently is engaged. Each of
the Subsidiaries is duly qualified as a foreign corporation, limited
partnership, or limited liability company, as the case may be, to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to so qualify
would not have a Material Adverse Effect. All of the issued and outstanding
shares of capital stock of each of the corporate Subsidiaries have been duly
authorized and validly issued and are fully paid and non-assessable. The
ownership by the Companies or the Subsidiaries of the shares of capital stock or
limited partnership or equity interests, as the case may be, of each of the
Subsidiaries is as described in the Companies' SEC Filings.
4.3. Authorized Capital Stock. The REIT has the following
authorized shares:1,000,000,000 REIT shares par value $0.01 per share,
200,000,000 excess shares of beneficial interest, par value $.01 per share,
100,000,000 shares of trust preferred shares, par value $.01 per share, and
50,000,000 shares of excess preferred stock, par value $0.01 per share. The OPCO
has the following authorized shares: 1,000,000,000 OPCO shares, par value $0.01
per share, 200,000,000 shares of preferred stock, par value $0.01 per share,
50,000,000 shares of excess common stock, par value $0.01 per share and
100,000,000 shares of excess preferred shares, par value $0.01 per share. As of
January 20, 1998, there were 55,392,389 Paired Shares, 6,285,765 Class A
Exchangeable Preferred Shares of the Trust and 5,502,711 Class B Exchangeable
Preferred Shares of the Trust outstanding, and 21,292,005 REIT shares and
21,292,005 OPCO shares were reserved for issuance. The issued and outstanding
Paired Shares of the Companies have been duly authorized and validly issued, are
fully paid and nonassessable, have been issued in compliance with all federal
and state securities laws, were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities, and
conform to the description thereof in the Companies' SEC Filings. Other than as
described in the Companies' SEC Filings, the REIT does not have outstanding any
options to purchase, or other rights to subscribe for or purchase, any
securities or obligations convertible into, or any contracts or commitments to
issue or sell, shares of its capital stock or any such options, rights,
convertible securities or obligations. The description of the
4
Companies' stock, stock bonus and other stock plans or arrangements and the
options or other rights granted and exercised thereunder in the Companies' SEC
Filings accurately and fairly presents the information required to be shown with
respect to such plans, arrangements, options and rights.
4.4. Issuance, Sale and Delivery of the Shares. The Purchase
Shares to be sold by the Companies have been duly authorized for issuance and,
when issued, delivered and paid for in the manner set forth in this Purchase
Agreement, will be validly issued, fully paid and non-assessable. The Additional
Shares, if and when issued pursuant to the Agreement, have been duly authorized
and will be validly issued, fully paid and non-assessable. Upon payment of the
purchase price and delivery of the Shares in accordance with this Purchase
Agreement, NMSSI will receive good, valid and marketable title to the Shares,
free and clear of all security interests, mortgages, pledges, liens,
encumbrances and claims. No approval of or authorization by the respective
shareholders or boards of trustees or directors of the Companies will be
required for the issuance and/or sale of the Shares to be sold by the Companies
as contemplated herein or in the Agreement, except such as shall have been
obtained on or before the Closing Date or the applicable Settlement Date. The
issuance and/or sale of the Shares to the NMS Parties by the Companies pursuant
to this Purchase Agreement or the Agreement (as the case may be), the compliance
by the Companies with the other provisions of this Purchase Agreement or the
Agreement and the consummation of the other transactions contemplated hereby or
thereby do not require the consent, approval, authorization, registration or
qualification of or with any court, governmental authority or agency, except
such as shall have been obtained on or before the Closing Date or in connection
with any Resale Registration Statement filed with respect to any of the Shares.
The Companies meet and will continue to meet the requirements for use of Form
S-3 under the Securities Act of 1933, as amended (the "Securities Act"), and the
rules and regulations of the U.S. Securities and Exchange Commission (the
"Commission") under the Securities Act (the "1933 Act Regulations"). The
Companies have filed and will file all documents which they are required to file
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
the rules and regulations promulgated thereunder (the "1934 Act Regulations")
within the time periods prescribed by the Exchange Act and the 1934 Act
Regulations since December 31, 1996 and all such documents (collectively,
together with the Companies' registration statements filed under the Securities
Act which have been declared effective since January 1, 1997 and have not been
withdrawn, the "Companies' SEC Filings") comply and will comply in all material
respects with the requirements of the Exchange Act and the 1934 Act Regulations,
as applicable, and none of such documents, when so filed, contained or will
contain any untrue statement of a material fact or omitted or will omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. No Resale Registration Statement filed in respect of any of the
Shares, when so filed, contained or will contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading.
5
4.5. Due Execution, Delivery and Performance by the Company.
Each of the Companies has full right, power and authority to enter into this
Purchase Agreement and the Agreement and perform the transactions contemplated
hereby and thereby. This Purchase Agreement and the Agreement have been duly
authorized, executed and delivered by each of the Companies. The execution and
delivery of the Purchase Agreement and the Agreement by each of the Companies
and the consummation of the transactions and the performance of the obligations
herein and therein contemplated will not violate any provision of the
declaration of trust, certificate of incorporation, bylaws, or other
organizational documents of either of the Companies, and will not conflict with,
result in the breach or violation of, or constitute, either by itself or upon
notice or the passage of time or both, a default under any material agreement,
mortgage, deed of trust, credit agreement, lease, franchise, license, indenture,
note, permit or other instrument to which either Company is a party or by which
either Company or its respective properties may be bound or affected, any
statute or any authorization, judgment, decree, order, rule or regulation of any
court or any regulatory body, administrative agency or other governmental body
applicable to either Company or any of its respective properties other than
violations, conflicts, breaches or defaults that individually or in the
aggregate would not have a Material Adverse Effect. No consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body is required for the execution and delivery of
this Purchase Agreement, the Agreement or the consummation of the transactions
contemplated hereby or thereby, except in connection with the filing of any
Resale Registration Statements pursuant to Section 7 below or for compliance
with the blue sky laws applicable to the offering of the Shares.
4.6. Accountants. The Companies' independent certified public
accountants, who have expressed their opinion with respect to the Most Recent
Financial Statements (as defined below) are independent accountants as required
by the Securities Act and the 1933 Act Regulations.
4.7. No Defaults. Except as to defaults, violations and
breaches which individually or in the aggregate would not have a Material
Adverse Effect, neither of the Companies nor any of their respective
Subsidiaries is in violation or default of any provision of its declaration of
trust, certificate of incorporation or bylaws, or other organizational
documents, and is not in breach of or default with respect to any provision of
any agreement, judgment, decree, order, mortgage, deed of trust, credit
agreement, lease, franchise, license, indenture, permit or other instrument to
which it is a party or by which it or any of its properties are bound.
4.8. No Actions. There is no action, suit or proceeding before
or by any court or governmental agency or body, domestic or foreign, now
pending, or, to the knowledge of each Company, threatened against or affecting
such Company or any of its Subsidiaries, any real property or improvements
thereon owned or leased by such Company or its Subsidiaries, including any
property underlying indebtedness held by
6
such Company (each, individually, a "Property" and collectively, the
"Properties"), or any officer of such Company or any of its Subsidiaries that,
if determined adversely to such Company or any Subsidiary, any Property,
including any property underlying indebtedness held by such Company and any of
its Subsidiaries, or any such officer, would reasonably be expected to (A)
result in any Material Adverse Effect or (B) materially and adversely affect the
consummation of the transactions contemplated by this Purchase Agreement or the
Agreement.
4.9. Properties. (A) Each Company and its respective
Subsidiaries, as the case may be, has good and marketable title to all the
properties and assets reflected as owned by such entities in the Most Recent
Financial Statements, subject to no lien, mortgage, pledge, charge or
encumbrance of any kind except (i) those, if any, reflected in the Most Recent
Financial Statements, or (ii) those which would not have a Material Adverse
Effect, (B) the leases of any real property and buildings held under lease by
such Company or any of its Subsidiaries are in full force and effect, and such
entities are not in default in respect of any of the terms or provisions of such
leases and have not received notice of the assertion of any claim by anyone
adverse to such entities' rights as lessee under such leases, or affecting or
questioning such entity's right to the continued possession or use of the real
property and buildings held under such leases or of a default under such leases,
in each case with such exceptions as would not have a Material Adverse Effect;
(C) neither Company nor any of its respective Subsidiaries or any tenant of any
of the Properties is in default under any of the leases pursuant to which such
Company or its Subsidiaries, as lessor, leases its Property (and to the best
knowledge of such Company no event has occurred which, but for the passage of
time or the giving of notice, or both, would constitute a default under any of
such leases) other than such defaults that would not have a Material Adverse
Effect; (D) no person has an option or right of first refusal to purchase all or
part of any Property or any interest therein, other than such options or rights
of first refusal which would not have a Material Adverse Effect; (E) each of the
Properties complies with all applicable codes, laws and regulations (including,
without limitation, building and zoning codes, laws and regulations and laws
relating to access to the Properties), except for such failures to comply that
would not individually or in the aggregate have a Material Adverse Effect; and
(F) neither Company has knowledge of any pending or threatened condemnation
proceedings, zoning change, or other proceeding or action that will in any
manner affect the size of, use of, improvements on, construction on or access to
the Properties, including any property underlying indebtedness held by either
Company or any of its respective Subsidiaries, except such proceedings or
actions that would not have a Material Adverse Effect.
4.10. REIT Qualification. The REIT qualified as a real estate
investment trust under the Internal Revenue Code of 1986, as amended (the
"Code"), with respect to its taxable years ended December 31, 1995, December 31,
1996 and December 31, 1997, and is organized in conformity with the requirements
for qualification as a real estate investment trust, and its manner of operation
has enabled it to meet the requirements for qualification as a real estate
investment trust as of the date hereof,
7
and its proposed manner of operation will enable it to meet the requirements for
qualification as a real estate investment trust in the future.
4.11. No Material Change. Since the date of the Most Recent
Financial Statements, and except as otherwise disclosed in the Companies' SEC
Filings as of the Closing Date, (i) no material casualty loss or material
condemnation or other material adverse event with respect to any Property or any
of the Subsidiaries, has occurred that would singly or in the aggregate have a
Material Adverse Effect; (ii) neither of the Companies, nor any of their
respective Subsidiaries is in default in the payment of principal or interest on
any outstanding debt obligations; (iii) except as a result of (a) the Companies'
acquisition of Westin Hotels & Resorts Worldwide, Inc. and certain affiliates
and the related financing transactions and (b) the OPCO's acquisition of ITT
Corporation and the related financing transactions, there has not been any
change in the capital stock of either Company or the Subsidiaries (other than
the sale of the Purchase Shares hereunder or those reserved for issuance
pursuant to the Agreement, issuances pursuant to the incentive compensation
plans of the Companies), or any increase in the indebtedness of either Company
or their respective Subsidiaries that is material to such entities, considered
as one enterprise; (iv) and except for regular quarterly distributions on the
REIT Shares, there has been no dividend or distribution of any kind declared,
paid or made by the REIT or the OPCO; and (v) there has not been any material
adverse change in the condition, financial or otherwise, or in the earnings,
assets, business affairs or business prospects of the Companies and the
Subsidiaries, considered as one enterprise, whether or not arising in the
ordinary course of business.
4.12. Intellectual Property. Neither of the Companies nor the
Subsidiaries is required to own or possess trademarks, trade names, patent
rights, copyrights, licenses, approvals and governmental authorizations, which
it does not already own or possess to conduct its businesses as now conducted;
and neither Company has knowledge of any material infringement by it of
trademark, trade name rights, patent rights, copyrights, licenses, trade secrets
or other similar rights of others, and has not received any notice that any
claim has been made against such Company regarding trademark, trade name,
patent, copyright, license, trade secrets or other infringement that would not
singly or in the aggregate have a Material Adverse Effect.
4.13. Compliance. Neither Company has been advised, or has
reason to believe, that it is not conducting business in compliance with all
applicable laws, rules and regulations of the jurisdictions in which it is
conducting business, except where failure to be so in compliance will not have a
Material Adverse Effect.
4.14. Taxes. Each of the Companies and its Subsidiaries have
filed all material federal, state and foreign income and franchise tax returns
which have been required to be filed and has paid or accrued all taxes shown as
due thereon (except for those taxes which are being contested in good faith
through appropriate proceeding, for which adequate reserves have been
established and which are either reflected in the Most Recent Financial
Statements or disclosed by the Companies to the NMS Parties),
8
and neither Company has any knowledge of any tax deficiency which has been or
might be asserted or threatened against such Company and its Subsidiaries which
would singly or in the aggregate have a Material Adverse Effect.
4.15. Transfer Taxes. On the Closing Date, all stock transfer
or other taxes, if any (other than income taxes) which are required to be paid
in connection with the sale and transfer of the Purchase Shares to be sold to
the NMS Parties hereunder will be, or will have been, fully paid or provided for
by the Companies and all laws imposing such taxes will be or will have been
fully complied with.
4.16. Investment Company. Neither of the Companies nor any of
their Subsidiaries is required to register as an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended.
4.17. Offering Materials. Neither the REIT nor the OPCO has
distributed nor will distribute prior to the Closing Date any offering material
in connection with the offering and sale of the Purchase Shares other than the
documents and information provided to the NMS Parties pursuant to this Section
4.
4.18. Additional Information. Each of the Companies represents
and warrants that the information contained in the following documents, which
the Companies have furnished to the NMS Parties, or will be furnished or made
available upon request prior to the Closing, is true and correct in all material
respects as of their respective filing dates:
(a) Joint Annual Report on Form 10-K for the year ended
December 31, 1996, which Joint Annual Report includes
the Companies' most recently available audited
financial statements together with the report thereon
of the independent certified public accountants (the
"Most Recent Financial Statements"),
(b) Joint Quarterly Reports on Form 10-Q, as amended if
applicable, for the quarters ended March 31, 1997,
June 30, 1997 and September 30, 1997;
(c) the Companies' proxy statements on Form 14A relating
to (i) the most recent Annual Meetings of the REIT's
Shareholders and the OPCO's Shareholders and (ii) the
Special Meetings of the REIT's Shareholders and the
OPCO's Shareholders which occurred during the 12
month period prior to the date hereof or for which a
meeting date has been fixed and a proxy statement
distributed;
(d) all other documents, if any, filed by or with respect
to the REIT and the OPCO with the Commission since
January 1, 1997 pursuant to Section 13, 15(d) or
16(a) of the Exchange Act; and
9
(e) covenant compliance certificates stating that none of
the REIT, the OPCO or their respective Subsidiaries
are in default under any of their respective credit
agreements or other financing arrangements.
4.19. Legal Opinion. At or prior to the Closing, counsel to
the Companies will deliver their legal opinions dated the Closing Date to the
NMS Parties in substantially the form of Exhibit A hereto.
4.20. ERISA. Each of the Companies and their respective
Subsidiaries are in compliance with all applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended and the rules and regulations
promulgated thereunder ("ERISA"), except for such failures to comply as will not
have a Material Adverse Effect. Neither a Reportable Event (as defined under
ERISA) nor a Prohibited Transaction (as defined under ERISA) has occurred with
respect to any Plan (as defined below) of the Companies and/or their respective
affiliates; no notice of intent to terminate a Plan has been filed nor has any
Plan been terminated within the past five years; to the Companies' knowledge, no
circumstance exists which constitutes grounds under Section 402 of ERISA
entitling the Pension Benefit Guaranty Corporation ("PBGC") to institute
proceedings to terminate, or appoint a trustee to administer, a Plan, nor has
the PBGC instituted any such proceedings; neither Company nor their respective
affiliates has completely or partially withdrawn under Section 4201 or 4202 of
ERISA from any Multiemployer Plan (as defined therein); each of the Companies
and their respective affiliates have met the minimum funding requirements of
Section 412 of the Code and Section 302 of ERISA with respect to each Plan and
there is no unfunded current liability (as defined below) with respect to any
Plan; each of the Companies and their respective affiliates have not incurred
any liability to the PBGC under ERISA (other than for the payment of premiums
under Section 4007 of ERISA); no part of the funds to be used by the Companies
in satisfaction of their respective obligations under this Purchase Agreement or
the Agreement constitute "plan assets" of any "employee benefit plan" within the
meaning of ERISA or of any "plan" within the meaning of Section 4957(e)(I) of
the Code, as interpreted by the Internal Revenue Service and the U.S. Department
of Labor in rules, regulations, releases and bulletins or as interpreted under
applicable case law. As used below, "Plan" means an "employee benefit plan" or
"plan" as described in Section 3(3) of ERISA; and "unfunded current liability"
has the meaning provided in Section 302(d)(8)(A) of ERISA.
4.21. Environmental Protection. Except as otherwise disclosed
in the Companies' SEC Filings and except for such exceptions as would not singly
or in the aggregate have a Material Adverse Effect, none of the REIT's or the
OPCO's or their respective affiliates' properties contain any Hazardous
Materials that, under any Environmental Law, (i) would impose liability on such
Company or any affiliate that is likely to have a Material Adverse Effect or
(ii) is likely to result in the imposition of a lien on any material asset
owned, directly or indirectly, by such Company. Neither Company nor any
affiliate is subject to any existing, pending or, to the best knowledge
10
of each Company, threatened investigation or proceeding by any governmental
agency or authority with respect to pursuant to any Environmental law, except
any which, if adversely determined, would not have a Material Adverse Effect. As
used herein, "Environmental Laws" mean all federal, state, local and foreign
environmental, health and safety laws, codes and ordinances and all rules and
regulations promulgated thereunder, including, without limitation laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or wastes
into the environment (including, without limitation, air, surface water, ground
water, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage disposal,
transport or handling of pollutants, contaminants, chemicals, or industrial,
solid, toxic or hazardous substances or wastes; and "Hazardous Material"
includes, without limitation, (i) all substances which are designated pursuant
to Section 311(b)(2)(A) of the Federal Water Pollution Control Act ("FWPCA"), 33
U.S.C. ss.1251 et seq.; (ii) any element, compound, mixture, solution, or
substance which is designated pursuant to Section 102 of the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
ss.9601 et seq.; (iii) any hazardous waste having the characteristics which are
identified under or listed pursuant to Section 3001 of the Resource Conservation
and Recovery Act ("RCRA"), 42 U.S.C. ss.6901 et seq.; (iv) any toxic pollutant
listed under Section 307(a) of the FWPCA; (v) any hazardous air pollutant which
is listed under Section 112 of the Clean Air Act, 42 U.S.C. ss.7401 et seq.;
(vi) any imminently hazardous chemical substance or mixture with respect to
which action has been taken pursuant to Section 7 of the Toxic Substances
Control Act, 15 U.S.C. ss.2601 et seq.; and (vii) petroleum, petroleum products,
petroleum by-products, petroleum decomposition by-products, and waste oil.
4.22. Solvency. Immediately following (i) the execution of
this Purchase Agreement and the Agreement, (ii) the purchase of the Purchase
Shares pursuant hereto and (iii) the completion of any other transaction
contemplated by this Purchase Agreement and the Agreement, each of the Companies
will be solvent and able to pay its debts as they mature, will have capital
sufficient to carry on its business and all businesses in which it is to engage,
and will have assets which will have a present fair market valuation greater
than the amount of all of its liabilities. This Purchase Agreement and the
Agreement have been executed and delivered by the Companies in good faith and in
exchange for reasonably equivalent value. Neither of the Companies intends to
incur debts beyond its ability to pay them as they become due. Each of the
Companies' assets and capital are now, and are expected in the future to be,
sufficient to pay the Companies' ongoing expenses as they are incurred and to
discharge all of the Companies' liabilities in the event that the business of
the Companies is required to be liquidated. The Companies have not entered into
this Purchase Agreement or the Agreement or any transaction contemplated hereby
or thereby with an intent to hinder, delay or defraud creditors of any persons
or entity.
4.23. Certificate. At or prior to the Closing, each Company
shall deliver an officer's certificate to be dated the Closing Date in form and
substance satisfactory to the NMS Parties to the effect that (i) the
representations and warranties of such
11
Company set forth in this Section 4 are true and correct in all material
respects as of the date of this Purchase Agreement and as of the Closing Date
and (ii) such Company has complied in all material respects with all the
covenants and satisfied in all material respects all the conditions on its
respective part to be performed or satisfied pursuant to this Purchase Agreement
or the Agreement on or prior to such Closing Date.
4.24. Financial Statements. The Most Recent Financial
Statements (including the notes thereto) present fairly in all material respects
the financial position of the respective entity or entities presented therein at
the respective dates indicated and the results of their operations for the
respective periods specified, and except as otherwise stated in the Most Recent
Financial Statements, said financial statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis. The
supporting schedules included in the Companies' SEC Filings fairly present in
all material respects the information required to be stated therein. The
financial information and data included in the Companies' SEC Filings present
fairly in all material respects the information included therein and have been
prepared on a basis consistent with that of the financial statements included in
the Companies' SEC Filings and the books and records of the respective entities
presented therein. The pro forma financial information included in the
Companies' SEC Filings has been prepared in accordance with the applicable
requirements of Rules 11-01 and 11-02 of Regulation S-X under the Securities Act
and other 1933 Act Regulations and American Institute of Certified Public
Accountants ("AICPA") guidelines with respect to pro forma financial information
and includes all adjustments necessary to present fairly in all material
respects the pro forma financial position of the respective entity or entities
presented therein at the respective dates indicated and the results of their
operations for the respective periods specified. Other than the historical and
pro forma financial statements (and schedule) included therein, no other
historical or pro forma financial statements (or schedules) are required to be
included in the Companies' SEC Filings. Except as reflected or disclosed in the
financial statements included in the Companies' SEC Filings, none of the
Companies or any of the Subsidiaries is subject to any material indebtedness,
obligation, or liability, contingent or otherwise.
4.25. Labor Disputes. No labor dispute with the employees of
either of the Companies or their respective Subsidiaries exists or, to the
knowledge of the such Company is imminent.
4.26. Regulation M. Each Company, its Subsidiaries and, to
such Company's knowledge, any of their respective trustees, directors, executive
officers or controlling persons, has not taken or will not take, directly or
indirectly, any action resulting in a material violation of Regulation M under
the Exchange Act, or designed to cause or result under the Exchange Act or
otherwise in, or which has constituted or which reasonably might be expected to
constitute, the unlawful stabilization or manipulation of the price of Paired
Shares in connection with the public sale or distribution of the Shares.
12
SECTION 5. Representations, Warranties and Covenants of NMS or
NMSSI.
5.1. Investment. The NMS Parties represent and warrant to, and
covenants with each of the Companies that: (i) the NMS Parties are
knowledgeable, sophisticated and experienced in making, and is qualified to
make, decisions with respect to investments in shares presenting an investment
decision like that involved in the purchase of the Purchase Shares, including
investments in securities issued by the Companies; (ii) NMSSI is acquiring the
number of Purchase Shares set forth in Section 2 above in the ordinary course of
its business and for its own account for investment (as defined for purposes of
the 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) neither NMS Party will
directly or indirectly, sell or otherwise dispose of (or solicit any offers to
purchase or otherwise acquire) any of the Purchase Shares except in compliance
with the Securities Act, the Rules and Regulations and any applicable state
securities or blue sky laws; (iv) each NMS Party has completed or caused to be
completed the Registration Statement Questionnaire and the Stock Certificate
Questionnaire, both attached hereto as Appendix I, for use in preparation of the
Resale Registration Statement and the answers thereto are true and correct as of
the date hereof and will be true and correct as of the effective date of the
Resale Registration Statement; (v) the NMS Parties have, in connection with
their decision to purchase the number of Purchase Shares set forth in Section 2
above, relied solely upon the documents identified in Section 4.17, the
information referred to in Section 7.7 and the representations and warranties of
each of the Companies contained herein; (vi) the NMS Parties have had access to
such additional information, if any, concerning the Companies as they have
considered necessary in connection with their investment decision to acquire the
Purchase Shares; (vii) each of the NMS Parties is an "accredited investor"
within the meaning of Rule 501(a)(1), (2), (3) or (7) of Regulation D
promulgated under the Securities Act; and (viii) the NMS Parties understand that
until the Shares are sold under an appropriate Resale Registration Statement
that has been declared effective by the Commission, the Shares will contain a
legend to the following effect:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE
SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES
UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANIES THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
13
5.2. Resale. The NMS Parties acknowledge and agree that in
connection with any transfer of any Shares they will provide to the transfer
agent prompt notice of any Shares sold pursuant to a Resale Registration
Statement or otherwise transferred in compliance with applicable federal and
state securities laws. The NMS Parties acknowledge that there may occasionally
be times when, subject to the provisions of Section 7.2(a)(v), the Companies
must suspend the right of the NMS Parties to effect sales of the Shares through
the use of the Resale Prospectus (as defined below) forming a part of a Resale
Registration Statement until such time as an amendment to such Resale
Registration Statement has been filed by the Companies and declared effective by
the Commission, or until such time as the Companies have filed an appropriate
report with the Commission pursuant to the Exchange Act (each, a "Black-out
Period"); provided that no Black-out Period shall exceed 90 consecutive days.
The NMS Parties hereby covenant that they will not effect sales of any Shares
pursuant to said Resale Prospectus during the period commencing at the time at
which the Companies give the NMS Parties written notice (which such notice shall
have been given by the Companies as promptly as practicable) of the suspension
of the use of said Resale Prospectus and ending at the time the Companies give
the NMS Parties written notice that the NMS Parties may thereafter effect sales
pursuant to said Resale Prospectus. The NMS Parties further covenant to notify
the Companies promptly of the sale of all of the Shares.
5.3. Due Execution, Delivery and Performance of this Purchase
Agreement. The NMS Parties further represent and warrant to, and covenant with,
the Companies that (i) each NMS Party has full right, power, authority and
capacity to enter into this Purchase Agreement and the Agreement and to perform
its obligations hereunder and thereunder and consummate the transactions
contemplated hereby and thereby and has taken all necessary action to authorize
the execution, delivery and performance of this Purchase Agreement and the
Agreement, and (ii) upon the execution and delivery of this Purchase Agreement
and the Agreement, this Purchase Agreement and the Agreement shall constitute
valid and binding obligations of the NMS Parties enforceable against the NMS
Parties in accordance with their terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and except that the enforcement of the indemnification agreements in Section 7.5
hereof may be limited by public policy.
5.4. Residence of NMSSI. NMSSI is organized in the State of
Delaware and has its principal place of business outside the United States.
5.5. Certain Tax Considerations. NMSSI represents and warrants
that it is a "corporation" for U.S. federal income tax purposes and for purposes
of any exemptions from information reporting and backup withholding requirements
that may apply to payments by the Companies to NMSSI under this Purchase
Agreement.
14
SECTION 6. Survival of Representations, Warranties and
Agreements. Notwithstanding any investigation made by any party to this Purchase
Agreement, all covenants, agreements, representations and warranties made by
each of the Companies and the NMS Parties herein shall survive the execution of
this Purchase Agreement, the Agreement, the delivery to NMSSI of the Purchased
Shares being purchased and the payment therefor and the consummation of any
other transactions contemplated hereby or thereby.
SECTION 7. Registration of the Shares; Compliance with the
Securities Act.
7.1. Registration Procedures and Expenses. The Companies
shall:
(a) within 45 days after the Closing, prepare and
file with the Commission a Resale Registration Statement (as defined below)
covering the resale by the NMS Parties, from time to time, of a number of Shares
equal to the number of Purchase Shares in any of the manners specified in the
Agreement (the "Initial Resale Registration Statement") and use its best efforts
to obtain effectiveness of the Initial Resale Registration Statement within 90
days after the Closing Date. If the total number of Shares exceeds the number of
Shares covered by the Initial Resale Registration Statement, then the Companies
shall promptly prepare and file with the Commission such additional Resale
Registration Statement or Statements as shall be necessary to cover the resale
by the NMS Parties of such excess Shares in the same manner as contemplated by
the Initial Registration Statement for the Shares covered thereby (each, an
"Additional Resale Registration Statement"); provided that, except as provided
for in Section 5 of the Agreement, prior to issuing any such excess Shares to
the NMS Parties, the Companies shall cause such Resale Registration Statement to
have become effective. For purposes of this Purchase Agreement, "Resale
Registration Statement" means the Initial Resale Registration Statement, any
Additional Resale Registration Statement or any other registration statement
under the Securities Act on Form S-3 covering the resale by the NMS Parties of
up to a specified number of Shares, filed and maintained continuously effective
by the Companies pursuant to the provisions of this Section 7, including the
prospectus contained therein (the "Resale Prospectus"), any amendments and
supplements to such registration statement, including all post-effective
amendments thereto,
15
and all exhibits and all material incorporated by reference into such
registration statement;
(b) use commercially reasonable best efforts to
prevent the issuance of any order suspending the effectiveness of such Resale
Registration Statement or Resale Prospectus or suspending the qualification (or
exemption from qualification) of any of the Shares in any jurisdiction;
(c) prepare and file with the Commission such
amendments and supplements to each Resale Registration Statement and the Resale
Prospectus as may be reasonably requested by the NMS Parties in order to
accomplish the public resale or other disposition of any Shares in accordance
with the terms of the Agreement, or as may be necessary to keep such Resale
Registration Statement effective until the date on which either (i) the Shares
covered thereby have been sold by or on behalf of the NMS Parties or (ii) the
NMS Parties have advised the Companies that they no longer require that such
Resale Registration Statement remain effective;
(d) furnish to the NMS Parties with respect to the
Shares registered under any Resale Registration Statement such reasonable number
of copies of Resale Prospectuses, including any supplements and amendments
thereto, in order to facilitate the public sale or other disposition of all or
any of the Shares by the NMS Parties;
(e) in order to facilitate the public sale or other
disposition of all or any of the Shares by the NMS Parties, furnish to the NMS
Parties with respect to the Shares registered under any Resale Registration
Statement, in connection with any such public sale or other disposition, an
opinion of counsel to the Companies covering such matters as are customarily
covered by legal opinions delivered in connection with secondary public
offerings of equity securities and such other documents as the NMS Parties may
reasonably request (including a comfort letter from the Companies' independent
certified public accountants and a certificate of bring down of representations
and warranties in connection with sale of Shares under the Resale Registration
Statement) (collectively, the "Resale Closing Documents") (i) upon the
effectiveness of the Initial Resale Registration Statement, (ii) upon the
commencement of any continuous offering of Shares under any Resale Registration
Statement
16
and on the last day of every 30-day period thereafter for the duration of such
continuous offering, and (iii) in the event the public sale or other disposition
of the Shares is effected through an underwritten offering or a block trade, as
of the date of the closing of any sale of such Shares or date of pricing with
respect to the sale of such Shares, as applicable upon prior notice from the NMS
Parties to the Companies as to which date applies; provided, however, that the
Companies shall not be required to deliver any Resale Closing Documents in the
event that the aggregate offering price of any Shares offered in a public sale
or other distribution is less than $20,000,000, unless as of the date of any
such public sale or other distribution, the Companies have not made any previous
delivery of Resale Closing Documents to the NMS Parties in connection with any
other public sale or other disposition of the Shares;
(f) use its reasonable best efforts to prevent the
happening of any event that would cause any such Resale Registration Statement
to contain a material misstatement or omission or to be not effective and
continuously useable for resale of the Shares during the period that such Resale
Registration Statement is required to be effective and useable;
(g) file documents required of the Companies for
normal blue sky clearance in states specified in writing by the NMS Parties,
provided, however, that the Companies shall not be required to qualify to do
business or consent to service of process in any jurisdiction in which it is not
now so qualified or has not so consented;
(h) bear all reasonable expenses in connection with
the procedures in paragraphs (a) through (g) of this Section 7.1 and Section
7.2(a) and the registration of the Shares pursuant to each Resale Registration
Statement, which expenses shall not include brokerage or underwriting
commissions and taxes of any kind (including without limitation, transfer
bonuses) with respect to any disposition, sale or transfer of Shares sold by the
NMS Parties and for any legal, accounting and other expenses incurred by the NMS
Parties which expenses shall be borne by the NMS Parties; and
(i) promptly file any necessary listing
applications or amendments to existing listing applications to cause any
17
Shares registered under any Resale Registration Statement to be listed
or admitted to trading, on or prior to the effectiveness of any Resale
Registration Statement, on the New York Stock Exchange or any national
stock exchange or automated quotation system on which the Paired Shares
are then listed or traded.
7.2. Covenants in Connection With Registration.
(a) Each of the Companies hereby covenants with the NMS
Parties that (i) such Company shall not file any Resale Registration Statement
or Resale Prospectus relating to the resale of the Shares or any amendment or
supplement thereto, unless a copy thereof shall have been first submitted to the
NMS Parties and the NMS Parties did not object thereto in good faith (provided
that if the NMS Parties do not object within two business days of receiving any
such material, there shall be deemed to have been no objection thereto); (ii)
such Company shall immediately notify the NMS Parties of the issuance by the
Commission of any stop order suspending the effectiveness of such Resale
Registration Statement or the initiation of any proceedings for such purpose;
(iii) such Company shall make every reasonable effort to promptly obtain the
withdrawal of any order suspending the effectiveness of such Resale Registration
Statement at the earliest possible moment; (iv) such Company shall immediately
notify the NMS Parties of the receipt of any notification with respect to the
suspension of the qualification of the Shares for sale under the securities or
blue sky laws of any jurisdiction or the initiation of any proceeding for such
purpose; and (v) such Companies shall as soon as practicable notify the NMS
Parties in writing of the happening of any event or the failure of any event to
occur or the existence of any fact or otherwise which results in any Resale
Registration Statement, any amendment or post-effective amendment thereto, the
Resale Prospectus, any prospectus supplement, or any document incorporated
therein by reference containing an untrue statement of a material fact or
omitting to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and promptly shall prepare, file with
the Commission and promptly furnish to the NMS Parties a reasonable number of
copies of a supplement or post-effective amendment to such Resale Registration
Statement or the Resale Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchasers of the Shares, the Resale Prospectus will not contain an
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein not misleading provided that this clause (v)
shall in no way limit the Companies' right to suspend the right of the NMS
Parties to affect sales under the Resale Registration Statement during any
Black-out Period as specified in Section 5.2 above.
(b) The NMS Parties shall cooperate with the Companies in
connection with the preparation of the Resale Registration Statement and shall
furnish to the Companies, in a timely manner, all information in their
possession or reasonably obtainable by them and necessary for inclusion in the
Resale Registration Statement
18
(including, without limitation, information relating to the ownership by each of
them of Paired Shares and the plan of distribution).
(c) The NMS Parties shall notify the Companies at least two
business days prior to the earlier of the date on which they intend to commence
effecting any resales of Shares under a Resale Registration Statement or the
date of pricing with respect to the public sale or other disposition of any
Shares under a Resale Registration Statement effected through an underwritten
offering or block trade and if the Companies do not, within such two day period,
advise the NMS Parties of the existence of any facts of the type referred to in
Section 7.2(a) above, then the Companies shall be deemed to have certified and
represented to the NMS Parties that no such facts then exist and the NMS Parties
may rely on such certificate and representations in making such sales. The
preceding sentence shall in no way limit the Companies' obligations under
Section 7.2(a) above.
(d) the Companies shall cooperate with the NMS Parties to
facilitate the timely preparation and delivery of certificates representing the
Shares to be sold under the Resale Registration Statements and not bearing any
restrictive legends and in such denominations and registered in such names as
the NMS Parties may reasonably request at least two business days prior to the
closing of any sale of the Shares.
(e) If the Companies notify the NMS Parties that they wish the
NMS Parties to effect an underwritten offering or block trade of Shares, (i) the
NMS Parties shall have the right to select the managing underwriters or the
executing dealer, as the case may be, who shall be subject to the approval of
the Companies, which approval shall not be unreasonably withheld (it being
understood that NMS is, in any event, reasonably acceptable to the Companies for
this purpose) and (ii) the Companies shall (A) enter into written agreements
(including underwriting agreements) as are customary in underwritten offerings
or block trades, as the case may be; (B) obtain an opinion of counsel to the
Companies and other entities reasonably requested by the underwriters or the
executing dealer, as the case may be, and updates thereof (which may be in the
form of a reliance letter) in form and substance reasonably satisfactory to the
managing underwriters or the executing dealer, as the case may be, and the NMS
Parties addressed to the underwriters or the executing dealer, as the case may
be, and the NMS Parties covering the matters customarily covered in opinions
requested in underwritten offerings or block trades, as the case may be, and
such other matters as may be reasonably requested by such underwriters or the
executing dealer, as the case may be, and the NMS Parties (it being agreed that
the matters to be covered by such opinion may be subject to customary
qualifications and exceptions); (C) obtain "cold comfort" letters and updates
thereof in form and substance reasonably satisfactory to the managing
underwriters or the executing dealer, as the case may be, and the NMS Parties
from the independent certified public accountants of the Companies (and, if
necessary, other independent certified public accountants of any affiliate or
Subsidiary of either of the Companies or of any business acquired by the
Companies for which financial statements and financial data are, or are required
to be, included in the Resale
19
Registration Statement), addressed to each of the underwriters or the executing
dealer, as the case may be, and, if permitted by applicable accounting rules and
statements, the NMS Parties, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in connection
with underwritten offerings or block trades, as the case may be, and such other
matters as may be reasonably requested by such underwriters or the executing
dealer, as the case may be, in accordance with Statement on Auditing Standards
No. 72; (D) ensure that any underwriting agreement contains indemnification
provisions and procedures not less favorable than that included herein (or such
other provisions and procedures acceptable to the NMS Parties and the
underwriters) with respect to all parties to be indemnified pursuant to said
section (including, without limitation, the underwriters and the NMS Parties);
and (E) deliver such other documents as are customarily delivered in connection
with closing of underwritten offerings or block trades, as the case may be.
(f) The Companies will make reasonably available for
inspection by the NMS Parties, any underwriter, agent or broker-dealer
participating in any disposition of Shares such information and corporate
documents as shall be reasonably necessary to enable them to exercise any
applicable due diligence responsibilities for the purposes of applicable law,
and cause the officers of the Companies and their "significant subsidiaries" (as
that term is defined in Regulation S-X) to be available, upon request at least
two business days in advance, to respond to questions relevant to such due
diligence inquiries.
(g) The parties hereby acknowledge and agree that the
Companies may suspend the right of the NMS Parties to effect sales of the Paired
Shares through use of the Resale Prospectus forming a part of a Resale
Registration Statement for a period of 90 days (or fewer if the NMS Parties are
notified to that effect by the Companies) in connection with a public offering
or a sale pursuant to Rule 144A under the Securities Act (an "Offering") of
Paired Shares (or shares of capital stock convertible into Paired Shares) by the
Companies (a "Suspension Period"); provided that (i) there shall be no more than
three Suspension Periods during any 12-month period, and (ii) the total number
of days of all Suspension Periods during any 12-month period shall not exceed
120. The NMS Parties hereby covenant that they will not sell any Paired Shares
pursuant to said Resale Prospectus during a Suspension Period which shall
commence at the time the Companies give the NMS Parties written notice of such
Suspension Period; provided further, that no Suspension Period shall be
applicable or in any way restrict the NMS Parties after the occurrence of the
Maturity Date or a Price Decline Termination Event. The ability of the Companies
to suspend the right of the NMS Parties to effect sales of the Paired Shares
pursuant to this Section 7.2(g) shall not be construed to limit the Companies'
rights under Section 5.2.
7.3. Extension of Required Effectiveness. In the event that
the Companies shall give any notice required by Section 7.2(a)(v) hereof, the
period during which the Companies are required to keep such Resale Registration
Statement effective and useable shall be extended by the number of days during
the period from and included in such Black-out Period.
20
7.4. Transfer of Shares After Registration. The NMS Parties
agree that they will not effect any disposition of the Shares or their right to
purchase the Shares that would constitute a sale within the meaning of the
Securities Act or pursuant to any applicable state securities or blue sky laws
expect as contemplated in each Resale Registration Statement referred to in
Section 7.1 or except pursuant to any exemption from the registration
requirements of the Securities Act (including, without limitation, Rule 144
promulgated thereunder and any successor thereto) and that it will promptly
notify the Companies of any changes in the information set forth in any such
Resale Registration Statement regarding the NMS Parties or their plan of
distribution.
7.5. Indemnification. For the purpose of this Section 7.5
only, the term "Resale Registration Statement" shall include any final
prospectus, exhibit, supplement or amendment included in or relating to any
Resale Registration Statement referred to in Section 7.1.
(a) Indemnification by the Companies. Each of the Companies
agrees, severally and not jointly, to indemnify and hold harmless the NMS
Parties and each person, if any, who controls the NMS Parties within the meaning
of Section 15 of the Securities Act, and any director, officer, employee or
affiliate thereof, as follows:
(i) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, arising out of any untrue statement
or alleged untrue statement of a material fact contained in any Resale
Registration Statement (or any amendment thereto), including the information
deemed to be part of any Resale Registration Statement pursuant to Rule 430A(b)
of the 1933 Act Regulations, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any related Resale
Prospectus or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the Companies shall not be required under this subsection (i) to indemnify
the NMS Parties with respect to any loss, liability, claim, damage or expense to
the extent such loss, liability, claim, damage or expense arises out of (A) any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Companies by the NMS Parties specifically for inclusion in any Resale
Registration Statement or any related Resale Prospectus or (B) any statement or
omission in any Resale Prospectus that is corrected in any subsequent Resale
Prospectus that was delivered to an NMS Party prior to the pertinent sale or
sales by an NMS Party and not delivered in connection with such sale, when such
delivery was required by the Securities Act or any state securities law;
(ii) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation or of any investigation or
proceeding by any governmental
21
agency or body, commenced or threatened, or of any claim whatsoever for which
indemnification is provided under subsection (i) above, only if such settlement
is effected with the written consent of the Companies; and
(iii) against any and all expense whatsoever
(including, without limitation, the fees and other charges of counsel chosen by
you) reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceedings by any governmental agency or
body, commenced or threatened, or any claim whatsoever for which indemnification
is provided under subsection (i) above, to the extent that any such expense is
not paid under subsection (i) (other than expenses not paid pursuant to the
proviso to subsection (i)) or (ii) above.
(b) Indemnification by the NMS Parties. The NMS Parties agree
to indemnify and hold harmless the Companies, and each person, if any, who
controls the Companies within the meaning of Section 15 of the Securities Act,
and any trustee, director, officer, employee or affiliate thereof, against any
and all loss, liability, claim, damage and expense described in the indemnity
contained in subsection (a) of this Section 7.5, as incurred, but only with
respect to (A) untrue statements or omissions, or alleged untrue statements or
omissions, made in any Resale Registration Statement (or any amendment thereto)
or any related Resale Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Companies by the NMS Parties specifically for inclusion in any Resale
Registration Statement or any related Resale Prospectus or (B) any statement or
omission in any Resale Prospectus that is corrected in any subsequent Resale
Prospectus that was delivered to an NMS Party prior to the pertinent sale or
sales by an NMS Party and not delivered in connection with such sale, when such
delivery was required by the Securities Act or any state securities law.
(c) Proceedings. Each indemnified party shall give notice as
promptly as reasonably practicable to each indemnifying party of any action
commenced against it in respect of which indemnity may be sought hereunder, but
failure to so notify an indemnifying party shall not relieve such indemnifying
party from any liability hereunder to the extent it is not materially prejudiced
as a result thereof and in any event shall not relive it from any liability
which it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of such
action. If it so elects within a reasonable time after receipt of such notice,
an indemnifying party, jointly with any other indemnifying parties receiving
such notice, may assume the defense of such action with counsel chosen by it and
reasonably acceptable to the indemnified parties defendant in such action,
unless such indemnified parties reasonably object to such assumption on the
ground that the named parties to any such action (including any impleaded
parties) include both such indemnified parties and an indemnifying party, and
such indemnified parties reasonably believe that there may be legal defenses
available to them which are different from or in addition to those available to
such indemnifying party. If an indemnifying party assumes the defense of such
action, the indemnifying parties shall not be liable for any fees and expenses
of
22
counsel for the indemnified parties incurred thereafter in connection with such
action. In no event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to any local counsel) separate
from their own counsel for all indemnified parties in connection with any one
action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances. No indemnifying
party shall, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 7.5 (whether
or not the indemnified parties are actual or potential parties thereto), unless
such settlement, compromise or consent (i) includes an unconditional release of
each indemnified party from all liability arising out of such litigation,
investigation, proceeding or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 7.5(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
(d) Contribution. If the indemnification provided for in this
Section 7.5 is required by its terms but is for any reason held to be
unavailable to or otherwise insufficient to hold harmless an indemnified party
under paragraph (a), (b) or (c) of this Section 7.5 in respect of any losses,
claims, damages, liabilities or expenses referred to herein, then each
applicable indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of any losses, claims, damages, liabilities
or expenses referred to herein, (i) in such proportion as is appropriate to
reflect the relative benefits received by the Companies and the NMS Parties from
the purchase and sale of the Shares or (ii) if the allocation provided in clause
(i) is not permitted by applicable law, in such proportion or as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Companies and the NMS Parties in connection with
the statements or omissions or inaccuracies in the representations and
warranties in this Purchase Agreement which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant equitable
considerations. The respective relative benefits received by the Companies on
the one hand and the NMS Parties on the other shall be deemed to be in the same
proportion as the amount paid by the NMS Parties to the Companies pursuant to
this Purchase Agreement and the Agreement and the net proceeds retained or
discounts received by the NMS Parties from the transactions contemplated by this
Purchase Agreement and
23
the Agreement. The relative fault of the Companies and the NMS Parties shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or the alleged omission to
state a material fact or the inaccurate or the alleged inaccurate representation
and/or warranty relates to information supplied by the Companies or by the NMS
Parties and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include, subject to the
limitations set forth in paragraph (c) of this Section 7.5 any reasonable legal
or other fees or expenses incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
paragraph (c) of this Section 7.5 with respect to notice of commencement of any
action shall apply if a claim for contribution is to be made under this
paragraph (d); provided, however, that no additional notice shall be required
with respect to any action for which notice has been given under paragraph (c)
for purposes of indemnification. The Companies and the NMS Parties agree that it
would not be just and equitable if contribution pursuant to this Section 7.5
were determined solely by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in this paragraph (d). Notwithstanding the provisions of this Section 7.5,
the NMS Parties shall not be required to contribute any amount in excess of the
amount by which the aggregate net proceeds retained or discounts received by the
NMS Parties from the transactions contemplated hereby and by the Agreement
exceeds the amount of any damages that the NMS Parties has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) Relationship Between the REIT and OPCO. The obligations
set forth in this Section 7.5 shall in no way limit the ability of the Companies
to allocate liability between themselves.
7.6. Information Available. So long as any Resale Registration
Statement covering the resale of any shares owned by the NMS Parties is
effective, the Companies will furnish to the NMS Parties:
(a) as soon as practicable after available, one copy of
(i) their Joint Annual Report to Shareholders, (ii) their Joint Annual Report on
Form 10-K, (iii) their Joint Quarterly Reports to Shareholders, (iv) their Joint
Quarterly Reports on Form 10-Q, (v) a full copy of the particular Resale
Registration Statement covering the Shares (the foregoing, in each case,
excluding exhibits) and (iv) upon request, any or all other filings made with
the Commission by the Companies; and
24
(b) upon the reasonable request of the NMS Parties, a
reasonable number of copies of the Resale
Prospectuses to supply to any other party requiring
such Resale Prospectuses;
and the Companies, upon the reasonable request of the NMS Parties, will meet
with the NMS Parties or a representative thereof at the Companies' headquarters
to discuss all information relevant for disclosure in such Resale Registration
Statement covering the Shares, subject to appropriate confidentiality
limitations.
7.7. Remedies. The Companies and the NMS Parties acknowledge
that there would be no adequate remedy at law if the Companies fail to perform
any of their obligations under this Section 7, and accordingly agree that the
NMS Parties, in addition to any other remedy to which it may be entitled at law
or in equity, shall be entitled to compel specific performance of the
obligations of the Companies under this Section 7, and the Companies hereby
waive the defense that a remedy at law would be adequate.
7.8. Notice Requirement. The REIT and the OPCO each covenants
and agrees that it will notify the NMS Parties at any time it becomes aware that
as a result of a change in the REIT's and the OPCO's capital stock, the NMS
Parties beneficially hold more than 4.9% of the REIT's and the OPCO's Paired
Shares.
SECTION 8. Broker's Fee. Other than any fees payable under or
in connection with the Agreement, each of the parties hereto represents that, on
the basis of any actions and agreements by it, there are no brokers or finders
entitled to compensation in connection with the sale or issuance of the Shares
to NMSSI.
SECTION 9. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first-class
registered or certified airmail, by telegram or telecopy or sent by nationally
recognized overnight express courier postage prepaid, and shall be deemed given
when so mailed or for telecopies, when transmitted and receipt confirmed, and
shall be delivered as addressed as follows:
(a) if to the Companies, to:
Starwood Hotels & Resorts
Starwood Hotels & Resorts Worldwide, Inc.
0000 Xxxx Xxxxxxxxx Xxxx
Xxxxx 000 and 410
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxx/Xxxx X. Xxxxxxx
Telecopier: 000-000-0000
25
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 NMS in writing; and
(b) if to NMS or NMSSI, to:
NationsBanc Xxxxxxxxxx Securities LLC
0 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxxxxx X. Xxxxx
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 the NMS Parties.
SECTION 11. Headings. The headings of the various sections of
this Purchase Agreement have been inserted for convenience of reference only and
shall not be deemed to be part of this Purchase Agreement.
SECTION 12. Severability. In case any provision contained in
this Purchase Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
SECTION 13. Successors and Assigns. The Companies or the NMS
Parties may assign any of their respective rights, or delegate any of their
respective duties under this Purchase Agreement, if the other party first
consents to such assignment in writing. This Purchase Agreement shall inure to
the benefit of and be binding upon (i) the successors of the NMS Parties and
(ii) any assignee or transferee of rights and obligations of NMSSI pursuant to
the Agreement and any assignee or transferee of rights and obligations of the
NMS Parties pursuant to this Purchase Agreement. A transferee of NMSSI pursuant
to the Agreement and a transferee of the NMS Parties pursuant to this Purchase
Agreement, and, in each case, any successor, assignee, or transferee, shall be
held subject to all of the terms of this Purchase Agreement.
26
SECTION 14. Governing Law; Jurisdiction. This Purchase
Agreement shall be governed by and construed in accordance with the laws of the
State of New York without regard to the conflicts of law principles thereof.
SECTION 15. Transfer to Affiliate. Notwithstanding anything
herein to the contrary, NMSSI may transfer the Purchase Shares to any affiliate
of NMSSI, together with all of NMSSI's rights hereunder, provided that (i) such
affiliate shall be an "accredited investor" within the meaning of Rule 501
(a)(1), (2), (3) or (7) of Regulation D promulgated under the Securities Act,
and (ii) such transfer shall be consistent with the investment representations
set forth at Section 5.1 hereto. In the event of such an assignment, such
affiliate shall in all respects be substituted for NMSSI as a party hereto.
SECTION 16. Counterparts. This Purchase Agreement may be
executed in two or more counterparts, each of which shall constitute an
original, but all of which, when taken together, shall constitute but one
instrument, and shall become effective when one or more counterparts have been
signed by each party hereto and delivered to the other parties.
SECTION 17. Recourse. Each NMS Party acknowledges and agrees
that the name "Starwood Hotels & Resorts" is a designation of the REIT and its
Trustees (as Trustees but not personally) under a Declaration of Trust dated
August 25, 1969, as amended and restated as of June 6, 1988, as further amended
on February 1, 1995, June 19, 1995, January 2, 1998 and February 23, 1998 and as
the same may be further amended from time to time, and all persons dealing with
the REIT shall look solely to the REIT's assets for the enforcement of any
claims against the REIT, as the Trustees, officers, agents and security holders
of the REIT assume no personal liability for obligations entered into on behalf
of the REIT, and their respective individual assets shall not be subject to the
claims of any person relating to such obligations.
27
IN WITNESS WHEREOF, the parties hereto have caused this
Purchase Agreement to be executed by their duly authorized representatives as of
the day and year first above written.
STARWOOD HOTELS & RESORTS
By:
Name:
Title:
STARWOOD HOTELS & RESORTS
WORLDWIDE, INC.
By:
Name:
Title:
NATIONSBANC XXXXXXXXXX SECURITIES LLC
By:
Name:
Title:
NMS SERVICES, INC.
By:
Name:
Title:
28
Appendix I
(one of two)
STOCK CERTIFICATE QUESTIONNAIRE
Pursuant to Section 5 of the Purchase Agreement, please provide us with
the following information:
1. The exact name that your Shares are to be registered in (this is the
name that will appear on your stock certificate(s)). You may use a
nominee name if appropriate:
_______________________________
2. All relationships between the NMS Parties and the Registered
Holder listed in response to Item 1 above:
_______________________________
_______________________________
3. The mailing address of the Registered Holder listed in response to
Item 1 above:
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
_______________________________
4. The Social Security Number or Tax Identification Number of the
Registered Holder listed in response to Item 1 above:
_______________________________
29
Appendix I
(two of two)
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement, please
provide us with the following information:
1. Pursuant to the "Selling Shareholders" section of the Registration Statement,
please state your or your organization's name exactly as it should appear in the
Registration Statement:
2. Please provide the number of shares that you or your organization
(including all affiliates) will own immediately after Closing, including those
Shares purchased by you or your organization (including all affiliates) pursuant
to this Purchase Agreement and those shares purchased by you or your
organization (including all affiliates) through other transactions:
3. Have you or your organization had any position, office or other
material relationship within the past three years with the Company or its
affiliates:
_____ Yes _____ No
If yes, please indicate the nature of any such relationships
below:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
30
Appendix II
Attention:
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
The undersigned, [an officer of, or other person duly authorized by]
hereby certifies that he/she [fill in official name of individual or
institution] [said institution] is the Purchaser of the shares evidenced by the
attached certificate, and as such, sold such shares on [date] in accordance with
Registration Statement number [fill in the number of or otherwise identify
Registration Statement], the Securities Act of 1933, as amended, and any
applicable state securities or blue sky laws and the requirement of delivering a
current prospectus by the Company has been complied with in connection with such
sale.
Print or Type:
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:
31
EXHIBIT A
FORM OF CLOSING OPINION OF COUNSEL TO THE COMPANY
32
AGREEMENT
THIS AGREEMENT is made as of the 23rd day of February, 1998, by and
between Starwood Hotels & Resorts (the "REIT"), Starwood Hotels & Resorts
Worldwide, Inc. ("OPCO," and together with the REIT, the "Companies") and NMS
Services, Inc. ("NMSSI"), through its agent NationsBanc Xxxxxxxxxx Securities
LLC ("NMS" and together with NMSSI, the "NMS Parties").
The purpose of this Agreement is to confirm the terms and conditions of
the transaction (the "Transaction") entered into between NMSSI and the
Companies.
IN CONSIDERATION of the mutual representations, warranties and
covenants herein contained, and on the terms and subject to the conditions
herein set forth, the Companies and NMSSI hereby agree as follows:
Section 1 Definitions.
As used in this Agreement, the following terms shall have the meanings
set forth below:
(a) Ability to Settle in Paired Shares. As of the date hereof,
the Companies have not, and after the date hereof, the Companies will
not, enter into any obligation that would contractually prohibit the
Companies from delivering Paired Shares pursuant to Sections 3.2, 4.2
or 5 of this Agreement.
(b) Certain Adjustments to Reference Price or Number of
Notional Shares. In the event of:
(i) a subdivision, consolidation or reclassification of
the Paired Shares, or a free distribution or dividend of
any Paired Shares to all existing holders of Paired Shares
by way of bonus, capitalization or similar issue; or
(ii) a distribution or dividend to all existing holders of
Paired Shares of (A) additional Paired Shares or (B) other
share capital or securities granting right to payment of
dividends and/or the proceeds of liquidation of the
Companies equally or proportionally with such payments to
holders of Paired Shares,
an adjustment shall thereupon be effected to the Reference
Price and/or the Notional Shares at the time of such event
with the intent that following such adjustment, the value
of this Transaction is economically equivalent to the
value immediately prior to the occurrence of the event
causing the adjustment.
33
(c) Block Sale. any privately negotiated sales of the Paired
Shares involving at least a block of such security (as defined in Rule
10b-18 under the Exchange Act).
(d) Business Day. Any day other than a Saturday, Sunday, or
any other day on which banking institutions in the States of Delaware
or New York are not open for business.
(e) Calculation Agent. NMSSI, whose calculations and
determinations shall be made in a reasonable manner.
(f) Closing Price. The last sale price of the Paired Shares on
the Relevant Exchange on the relevant date.
(g) Commission. The Securities and Exchange Commission.
(h) Compounding Period. Means each period commencing on and
including:
(i) in the case of the first Compounding Period, the
Initial Settlement Date and ending on but excluding the
first Reset Date, and
(ii) for each period thereafter, a Reset Date and ending
on (but excluding) the next following Reset Date.
(i) Distribution Amount. Means, on each Reset Date, an amount
in U.S. Dollars equal to:
(i) the sum of all cash distributions paid on a single
Paired Share during the relevant Compounding Period; plus
(ii) an amount representing interest that could have been
earned on such distributions at the USD LIBOR rate having
a designated maturity of three months, plus Spread, for
the period from the date that such distributions would
have been received by a holder of a single Paired Share
until such Reset Date.
(j) DRIP Distribution. Sales to any Distribution Reinvestment
Plan now or hereafter established by the Companies, or to any agent
acting on behalf of such Plan, for sale to participants in such Plan.
(k) Effective Date. February 24, 1998.
(l) Exchange Act. The Securities Exchange Act of 1934, as
amended.
34
(m) Exchange Trading Day. Each day on which the Relevant
Exchange is open for trading.
(n) Execution Price. The Closing Price on the Effective Date`.
(o) Gradual Market Distribution. An offering of the Paired
Shares into the existing trading market for outstanding shares of the
same class at other than (i) a fixed price on or through the facilities
of a national securities exchange or (ii) to or through a market maker
otherwise than on an exchange.
(p) Initial Price. Means,
(i) for the Compounding Period ending on the first Reset
Date, an amount in U.S. Dollars equal to $53.875, and
(ii) for each subsequent Reset Date, the Reference Price
as calculated on or adjusted as of the prior Reset Date.
(q) Initial Settlement Date. February 24, 1998.
(r) Interim Settlement Amount. With respect to a given Reset
Date, means the amount by which the Reference Amount minus $5,000,000
exceeds the product of (x) the Closing Price on such Reset Date and (y)
the number of Notional Shares.
(s) Interim Settlement Shares. The Interim Settlement Amount
divided by the Closing Price on such Reset Date.
(t) Maturity Date. March 1, 1999.
(u) Notional Shares. 1,547,000 Paired Shares, as may be
adjusted from time to time pursuant to Section 1(b), reduced by the
number of Settlement Shares that have been settled prior to the date of
calculation pursuant to Section 3.1 or Section 4.1.
(v) Paired Shares. Units consisting of one share of beneficial
interest, $.01 par value per share, in the REIT and one share of common
stock, par value $.01 per share, of OPCO, which shares are paired and
traded as a unit.
(w) Pooled Underwritten Secondary Offering. An underwritten
fixed price offering of Paired Shares, in which the Settlement Shares
and other Paired Shares, which may include the Paired Shares of other
selling shareholders and previously unissued Paired Shares.
35
(x) Pooling Exit Fee. 50 basis points on the Settlement Amount
in connection with the related Pooled Underwritten Secondary Offering.
(y) Purchase Shares. Paired Shares sold to NMSSI pursuant to
the Purchase Agreement.
(z) Purchase Agreement. The Purchase Agreement, dated as of
February 23, 1998 (the "Purchase Agreement"), among the Companies,
NMSSI and NMS.
(aa) Reference Amount. On each Reset Date, the Reference Price
multiplied by the Notional Shares or Settlement Shares, as applicable.
(bb) Reference Price. On each Reset Date, the Reference Price
shall be determined by:
(i) compounding the Initial Price for the previous
Compounding Period at USD LIBOR rate plus Spread for a
designated maturity of three months (Actual/360 day count
fraction) to such Reset Date and
(ii) subtracting the Distribution Amount at that date.
(cc) Relevant Exchange. Means, with respect to any Exchange
Trading Day, the principal Stock Exchange on which the Paired Shares
are traded on that day.
(dd) Reset Date. Means, through the final Trade Date, (i) the
last day of each three-month period, beginning on May 31, 1998
(provided, that if such day is not a Business Day then the Reset Date
shall be the next Business Day), (ii) as to any Settlement Shares, but
only as to such Settlement Shares, the related Trade Date and (iii) as
to any Gross Settlement Shares, but only as to such Gross Settlement
Shares, the Exchange Trading Day immediately prior to the date on which
the related Gross Settlement Notice is delivered.
(ee) Securities Act. The Securities Act of 1933, as amended.
(ff) Settlement. Has the meaning set forth in Section 3.1 or
Section 4.1, as applicable.
(gg) Settlement Amount. Except as set forth in subsection (iv)
below, the net sales proceeds realized by or on behalf of NMSSI for all
sales of Paired Shares in connection with any Settlement, calculated as
follows:
36
(i) if the manner of Settlement Sale pursuant to
Section 3.1 or 4.1 is an Underwritten Secondary Offering,
the Settlement Amount will equal the gross proceeds
realized, net of a negotiated underwriting discount;
(ii) if the manner of Settlement Sale pursuant to
Section 3.1 or 4.1 is a Block Sale, the Settlement Amount
will equal the gross sales proceeds realized, net of a
negotiated underwriting discount;
(iii) if the manner of Settlement Sale pursuant to
Section 3.1 or 4.1 is a Gradual Market Distribution, the
Settlement Amount will equal the gross sales proceeds
realized from sales to the market over the period of the
distribution, net of a resale spread of 50 basis points;
(iv) with respect to a given Trade Date, if the manner
of Settlement Sale pursuant to Section 3.1 or 4.1 is a
VWAP Sale, the Settlement Amount will equal the product
of (a) the volume weighted average price of the Paired
Shares for such Trade Date and (b) the number of Paired
Shares determined by the Company to be sold by NMSSI on
such Trade Date, net of a resale spread of 50 basis
points;
(v) if the manner of Settlement Sale pursuant to
Section 3.1 or 4.1 is a DRIP Distribution, the Settlement
Amount will equal the gross sales proceeds realized from
sales to any Purchase Agent for a Company Distribution
Reinvestment Plan, net of a resale spread of 50 basis
points; and
(vi) if the manner of Settlement Sale pursuant to
Section 3.1 or 4.1 is a Pooled Underwritten Secondary
Offering, the Settlement Amount will equal a pro rata
share of the gross proceeds realized, net of a negotiated
underwriting discount.
(hh) Settlement Date. The date after each Trade Date on which,
in accordance with standard market practice, any Paired Shares are
delivered and the funds received, in respect of any Settlement in
accordance with Section 3.2 or Price Decline Termination Event in
accordance with Section 4.2.
(ii) Settlement Shares. The number of Notional Shares which
will be settled on a given Settlement Date pursuant to Section 3.2 or
Section 4.2, as applicable.
(jj) Spread. 175 basis points, subject to adjustment pursuant
to Section 6.3.
(kk) Stock Exchange. Means the New York Stock Exchange, the
American
37
Stock Exchange or NASDAQ.
(ll) Trade Date. Any date on which NMSSI executes a settlement
trade or trades as part of a Settlement in any of the manners of
Settlement Sale set forth in Section 3.1, pursuant to either Section
3.1 or 4.1.
(mm) Underwritten Secondary Offering. An underwritten fixed
price offering of the Paired Shares.
(nn) USD LIBOR. The London Inter Bank Offered Rate in respect
of U.S. Dollars for the designated maturity as quoted on Page 3750 on
the Telerate Service (or such other page as may replace Page 3750 on
that service) as of 11:00 a.m., London time, on the date on which it is
to be determined.
(oo) VWAP Sale. A sale of the Paired Shares into the existing
trading market for outstanding shares of the same class effected in
order to approximate the volume weighted average price of the Paired
Shares on the Relevant Exchange on the relevant date.
38
Section 2 Representations and Warranties.
The representations and warranties of the Companies in Section 4 of the
Purchase Agreement are hereby incorporated by reference herein, and
each Company hereby so represents and warrants to NMSSI, and the
representations and warranties of the NMS Parties in Section 5 of the
Purchase Agreement are hereby incorporated by reference, and NMSSI
hereby so represents and warrants to each Company. The provisions of
Section 6 of the Purchase Agreement shall also be applicable to any
Paired Shares delivered to NMSSI under this Agreement.
Section 3 Settlement.
3.1 Settlement Sale.
On any Reset Date of the type referred to in clause (i) of the
definition of Reset Date, on any Exchange Trading Day that is one month
or two months following such a Reset Date or on any other Exchange
Trading Day (in each case, if other than such a Reset Date, the related
Settlement (as defined below) will include standard market interest
breakage fees), up to and including the Maturity Date, the Companies
may give telephonic notice to NMSSI to settle, and NMSSI shall settle,
in a commercially reasonable manner (which may require sales over a
period of more than 1 day), all or a portion of the Notional Shares to
be settled on the related Settlement Date or Dates, as specified by the
Companies ("Settlement"), through sale of not less than the number of
Paired Shares, the sale of which would result in a Settlement Amount
equal to 100% of the Reference Amount on the Settlement Date, and not
more than the number of Paired Shares, the sale of which would result
in a Settlement Amount equal, to 105% of the Reference Amount on the
Settlement Date, in any of the manners set forth below, as selected by
the Companies:
(i) an Underwritten Secondary Offering (for which the
Companies shall provide at least 21 Business Days prior
notice to NMSSI);
(ii) a Block Sale (for which the Companies shall provide
at least 3 Business Days prior notice to NMSSI);
(iii) a Gradual Market Distribution (for which the
Companies shall provide at least 1 Business Day prior
notice to NMSSI);
(iv) a VWAP Sale (for which the Companies shall provide
at least 1 Business Day prior notice to NMSSI);
(v) a DRIP Distribution (for which the Companies shall
provide at least
39
1 Business Day prior notice to NMSSI); or
(vi) a Pooled Underwritten Secondary Offering (for which
the Companies shall provide at least 21 Business Day
prior notice to NMSSI).
If the Companies do not specify a manner of sale, a Gradual Market
Distribution shall be used. If the Paired Shares delivered by the
Companies to NMSSI pursuant to the Purchase Agreement and this
Agreement are not, on the applicable trade date, the subject of an
Effective Resale Registration Statement (as defined in Section 6.3),
the Companies may not select a VWAP Sale as the manner of Settlement.
The number of shares sold as part of a VWAP Sale on any Trade Date
shall not be less than 20% of the six-month daily average trading
volume of the Paired Shares as calculated by the Calculation Agent and
shall not exceed 40% of the six-month daily average trading volume of
the Paired Shares as calculated by the Calculation Agent, unless both
parties agree otherwise prior to the execution of any trades in
connection with such VWAP Sale. In connection with any Underwritten
Secondary Offering or Block Sale, NMS shall be the sole manager and
underwriter. In connection with a Pooled Underwritten Secondary
Offering, NMSSI and NMS may, in their discretion, elect to (a)
participate in such offering as a first-tier co-manager on the same
terms as all other first-tier co-managers or (b) receive the Pooling
Exit Fee; provided, however, that regardless of the election of NMSSI
and NMS, all of the Notional Shares shall be included in the Pooled
Underwritten Secondary Offering. Settlement procedures shall begin as
soon as commercially practicable, as determined by NMSSI, after NMSSI
receives notice from the Companies and no later than the first Exchange
Trading Day after expiration of the notice period unless otherwise
agreed by the Companies and NMSSI. At such time as the Companies
deliver notice pursuant to this Section 3.1, the Companies may direct
NMSSI to sell not less than the number of Paired Shares equal to the
number of Settlement Shares, and NMSSI shall comply with such direction
in a commercially reasonable manner. In connection with a Gradual
Market Distribution, there shall be a separate Settlement Date for each
Trade Date. Final Settlement shall occur no later than the Maturity
Date. However, if the Companies have not given NMSSI notice to settle
by the Maturity Date, then NMSSI shall settle the Notional Shares using
a Gradual Market Distribution to begin as soon as commercially
practicable, as determined by NMSSI, on or after the Maturity Date.
3.2 Settlement.
(a) If, on a Settlement Date, the Settlement Amount is greater
than the Reference Amount, NMSSI, on such Settlement Date, will pay the
Companies an amount in cash or Paired Shares (valued at the Closing
Price on the Trade Date), at the election of the Companies, equal to
the difference.
(b) If the number of Paired Shares sold by NMSSI pursuant to
Section 3.1 is
40
greater than the number of Settlement Shares, the Companies shall
deliver to NMSSI, on the Settlement Date, a number of Paired Shares
equal to the difference. If the number of Paired Shares sold by NMSSI
pursuant to Section 3.1 is less than the number of Settlement Shares,
NMSSI shall deliver to the Companies, on the Settlement Date, a number
of Paired Shares equal to the difference.
(c) In all events, NMSSI will pay to the Companies an amount
equal to all cash distributions payable to NMSSI but not paid prior to
the Settlement Date, on a number of Paired Shares equal to the
Settlement Shares on the Business Day after the relevant distribution
payment date declared by the Board of Directors of the REIT and OPCO.
(d) If NMSSI, in connection with any Settlement, receives net
sales proceeds, as calculated pursuant to the definition of Settlement
Amount, from the sale of Paired Shares prior to the applicable
Settlement Date, NMSSI, on the Settlement Date, shall pay the Companies
an amount in cash representing interest that could have been earned on
such net sales proceeds at the USD LIBOR rate having a designated
maturity of three months, plus Spread, for the period from the date
that such net sales proceeds are received by NMSSI until such
Settlement Date.
3.3 Gross Share Settlement.
(a) The Companies may elect, in their sole discretion, to
settle all or any portion of the then outstanding Notional Shares by
delivering Paired Shares in exchange for such number of Notional Shares
(a "Gross Share Settlement"). The Companies may effect a Gross Share
Settlement by delivering a written notice (the "Gross Settlement
Notice") to NMSSI indicating the date of such Gross Share Settlement
and the number of then outstanding Notional Shares subject to such
Gross Share Settlement; provided that such notice must be accompanied
by a notice pursuant to Section 3.1 to effect settlement of all Paired
Shares delivered pursuant to this Section 3.3(a). To effect a Gross
Share Settlement, NMSSI Shall deliver to the Companies the number of
Notional Shares subject to such Gross Share Settlement ("Gross
Settlement Shares") against delivery by the Companies to NMSSI of a
number of Paired Shares equal to the product of (i) the number of Gross
Settlement Shares and (ii) the quotient obtained by dividing (A) the
Reference Price by (B) the Closing Price, in each case, on the Reset
Date for such Gross Settlement Shares. The deliveries set forth in the
immediately preceding sentence shall be made on the Exchange Trading
Day immediately following the date on which the Gross Settlement Notice
is delivered. All Paired Shares delivered to the Companies by NMSSI as
part of a Gross Share Settlement shall be immediately retired and shall
cease to be issued and outstanding Paired Shares.
(b) For purposes of the Settlement of the Paired Shares
delivered to NMSSI
41
pursuant to Section 3.3(a), the Settlement Shares shall be deemed to be
equal to the Gross Settlement Shares, provided that for purposes of
Section 3.2(b), the Settlement Shares shall be deemed to be equal to
the Paired Shares so delivered to NMSSI pursuant to Section 3.3(a), and
provided further that, for purposes of Section 3.2(c), with respect to
any distribution payable to NMSSI but not paid prior to the Settlement
Date for which the record date occurs after the date on which the Gross
Settlement Notice is delivered, the Settlement Shares shall be deemed
to be equal to the Paired Shares delivered to NMSSI pursuant to Section
3.3(a).
(c) The amount of any distribution referred to in clause (i)
of the definition of Distribution Amount for which the record date
occurs after a Gross Share Settlement with respect to the Paired Shares
delivered to NMSSI pursuant to Section 3.3 shall be multiplied by the
quotient obtained in clause (ii) of Section 3.3(a).
Section 4 Price Decline Termination Event.
4.1 Price Decline Termination Event Sale.
If the Closing Price on any Exchange Trading Day falls below any
Termination Price listed in the following schedule ("Price Decline
Termination Event"), NMSSI will, at its discretion, in a commercially
reasonable manner (which may require sales over a period of more than 1
day) following notice to the Companies, settle the percentage of the
Notional Shares indicated in the table below ("Settlement") through
sale of not less than the number of Paired Shares, the sale of which
would result in a Settlement Amount equal to 100% of the Reference
Amount on the Settlement Date, and not more than the number of Paired
Shares, the sale of which would result in a Settlement Amount equal to
105% of the Reference Amount on the Settlement Date, in any of the
manners specified in Section 3.1, as specified by the Companies:
Percentage of Initial
Notional Shares to be
Settled Termination Price
--------------------- -----------------
25% $37.7125
50% $35.0188
75% $33.6719
100% $32.3250
42
Settlement procedures shall commence on the date specified by NMSSI.
4.2 Price Decline Termination Event Settlement.
(a) If, on the Settlement Date, the Settlement Amount is
greater than the Reference Amount, NMSSI, on the Settlement Date, will
pay the Companies an amount in cash or Paired Shares (valued at the
Closing Price on the Trade Date), at the election of the Companies,
equal to the difference.
(b) If the number of Paired Shares sold by NMSSI pursuant to
Section 4.1 is greater than the number of Settlement Shares, the
Companies shall deliver to NMSSI, on the Settlement Date, a number of
Paired Shares equal to the difference. If the number of Paired Shares
sold by NMSSI pursuant to Section 4.1 is less than the number of
Settlement Shares, NMSSI shall deliver to the Companies, on the
Settlement Date, a number of Paired Shares equal to the difference.
(c) In all events, NMSSI will pay to the Companies an amount
equal to all cash distributions payable to NMSSI but not paid prior to
the Settlement Date, on a number of Paired Shares equal to the
Settlement Shares on the Business Day after the relevant distribution
payment date declared by the Boards of Directors of the REIT and OPCO.
(d) If NMSSI, in connection with any Settlement, receives net
sales proceeds, as calculated pursuant to the definition of Settlement
Amount, from the sale of Paired Shares prior to the applicable
Settlement Date, NMSSI, on the Settlement Date, shall pay the Companies
an amount in cash representing interest that could have been earned on
such net sales proceeds at the USD LIBOR rate having a designated
maturity of three months, plus Spread, for the period from the date
that such net sales proceeds are received by NMSSI until such
Settlement Date.
Section 5 Interim Settlements.
Within 5 Business Days following each Reset Date of the type referred
to in clause (i) of the definition of Reset Date, the Companies shall
(i) deliver the Interim Settlement Amount, if any, in Interim
Settlement Shares to NMSSI. Interim Settlement Shares shall be the
subject of a registration statement covering any sale of such Interim
Settlement Shares by NMSSI that has been declared effective under the
Securities Act by the Commission (an "Effective Registration
Statement"). Interim Settlement Shares shall be registered in the stock
register of the Companies as instructed by NMSSI and shall be held by
NMS or a custodian or depository designated by NMS. If the Companies
are unable to deliver Interim Settlement Shares in accordance with the
preceding sentence, the Companies shall deliver "restricted" Interim
Settlement Shares that are not the subject
43
of an Effective Registration Statement in an amount equal to the
Interim Settlement Amount. If the Interim Settlement Shares are not the
subject of an Effective Registration Statement, the Companies shall
deliver additional Interim Settlement Shares equal to 20% of the
Interim Settlement Shares. At such time as the Interim Settlement
Shares are the subject of an Effective Registration Statement, the
Companies may elect to have returned all additional Interim Settlement
Shares delivered pursuant to the preceding sentence. On any Reset Date,
if Interim Settlement Shares are held by NMSSI, NMSSI shall deliver to
the Companies within five (5) Business Days after such Reset Date, the
amount in Interim Settlement Shares by which the amount in Interim
Settlement Shares held by NMSSI (valued at the Closing Price on such
Reset Date) plus any cash amounts in the collateral account exceeds the
Interim Settlement Amount (or 120% of the Interim Settlement Amount, in
the event that NMSSI holds restricted Interim Settlement Shares that
are not the subject of an Effective Registration Statement).
Distributions on the Interim Settlement Shares will be deposited in a
collateral account at NMS or a custodian or depositary designated by
NMS. All Interim Settlement Shares will be, when delivered, duly
authorized, validly issued, fully paid and non-assessable. Interim
Settlement Shares shall not be voted by NMSSI or NMS. All distributions
received in respect of the Interim Settlement Shares shall be held in
the collateral account at NMS or a depositary designated by NMS. The
cash amounts in the collateral account will be immediately returned to
the Companies by NMSSI, but should NMSSI fail to return any cash
amounts in the collateral account, such cash amounts will earn interest
at the USD LIBOR rate having a designated maturity of three months.
Upon final Settlement, NMSSI shall immediately release all claims to
cash held in the collateral account, if any (including interest earned
thereon), and Interim Settlement Shares and deliver such amounts and
all Interim Settlement Shares to the Companies.
Section 6 Certain Covenants and Other Provisions.
6.1 Par Value.
NMSSI shall pay to the Companies $.01 par value per share for each
share comprising a Paired Share delivered to NMSSI pursuant to this
Agreement, including any Interim Settlement Shares.
44
6.2 Allocation of Payment and Deliveries
As between the REIT and OPCO, any delivery of, or payments
attributable to, the REIT portion of Paired Shares pursuant to this
Agreement shall be made to or by the REIT, and any delivery of, or
payments attributable to, the OPCO portion of Paired Shares pursuant to
this Agreement shall be made to or by OPCO. When making any payment to
the Companies pursuant to this Agreement, NMSSI shall allocate such
payment between the REIT and OPCO in the manner specified by the
Companies.
6.3 Resale Registration Statement.
The Companies shall file a resale registration statement covering any
resales of Paired Shares delivered by the Companies to NMSSI pursuant
to this Agreement and the Purchase Agreement (a "Resale Registration
Statement") within 45 Business Days of the Closing Date and the
Companies shall use their best efforts to obtain effectiveness of such
Resale Registration Statement within 90 Business Days of the Closing
Date. If the Paired Shares delivered by the Companies to NMSSI pursuant
to the Purchase Agreement are not the subject of a Resale Registration
Statement that has been declared effective under the Securities Act by
the Commission (an "Effective Resale Registration Statement") within 90
Business Days of the Closing Date, the Spread shall increase,
retroactively effective commencing on the Initial Settlement Date, to
the Spread plus 125 basis points. At such time as the Purchase Shares
are the subject of an Effective Resale Registration Statement, the
Spread shall be reduced, from and after such time, to the Spread. The
Companies further agree that they will cause any Resale Registration
Statement to remain in effect until the earliest of the date on which
(i) the Notional Shares plus all of the Interim Settlement Shares and
any other Paired Shares delivered by the Companies to NMSSI pursuant
this Agreement have been sold by or on behalf of NMSSI, or (ii) NMSSI
has advised the Companies that it no longer requires that such
registration be effective. The provisions of Section 5.2 and Section
7.2 of the Purchase Agreement shall be deemed to apply to any Resale
Registration Statement filed by the Companies pursuant to this
Agreement.
6.4 Delivery of Paired Shares.
Each Company covenants and agrees with NMSSI that Paired Shares
delivered by the Companies pursuant to settlement events in accordance
herewith will be duly authorized, validly issued, fully paid and
nonassessable. The issuance of such Paired Shares will not require the
consent, approval, authorization, registration, or qualification of any
government authority, except such as shall have been obtained on or
before the delivery date to NMSSI in connection with any registration
statement filed with respect to any Paired Shares. Each party agrees
that the Companies shall not deliver Paired Shares to NMSSI or any
other person in connection with an Interim Settlement or the final
45
Settlement until such time as such delivery would not cause NMSSI or
any other person to violate the "Ownership Limit" set forth in the
Amended and Restated Declaration of Trust of the REIT or the Articles
of Amendment and Restatement of OPCO, in each case, as in effect on the
date hereof.
6.5 Securities Law Compliance.
Each party agrees that it will comply, in connection with this
Transaction and all related or contemporaneous sales and purchases of
the Companies' Paired Shares, with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations
thereunder.
6.6 Regulatory Compliance.
Each party agrees that if the delivery of Paired Shares upon settlement
is subject to any restriction imposed by a regulatory authority, it
shall not be an event of default, and the parties will negotiate in
good faith a procedure to effect settlement of such Paired Shares in a
manner which complies with any relevant rules of such regulatory
authority and which is satisfactory in form and substance to their
respective counsel, subject to Section 6.2 of this Agreement and
Section 7 of the Purchase Agreement. Each party further agrees that any
sale pursuant to Section 3.1 may be delayed or postponed if, in NMSSI's
reasonable judgement, such delay or postponement is necessary to comply
with the requirements of applicable law or regulation; provided,
however, that NMSSI will act in good faith to end such delay or
postponement or otherwise effect such sale on a reasonably timely basis
in a manner which complies with any such applicable law or regulation
and which is satisfactory in form and substance to its respective
counsel.
6.7 Settlement Transfer.
All settlements shall occur through DTC or any other mutually
acceptable depository.
6.8 Trading Authorization.
The following individuals and/or any individual authorized in writing
by the respective officers of the Companies are authorized by the
Companies to provide trading instructions to NMSSI with regard to this
transaction:
46
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
NMSSI to deliver Paired Shares in accordance with the provisions hereof
would result in damage to the other party that could not be adequately
compensated by a monetary award. The parties therefore agree that, if
either party fails to deliver Paired Shares in accordance with the
provisions hereof, the other party may, in addition to all other
remedies, seek an order of specific performance from a court of
appropriate jurisdiction.
6.10 Recourse. NMSSI acknowledges and agrees that the name
"Starwood Hotels & Resorts" is a designation of the REIT and its
Trustees (as Trustees but not personally) under a Declaration of Trust
dated August 25, 1969, as amended and restated as of June 6, 1988, as
further amended on February 1, 1995, on June 19, 1995, January 2, 1998
and February 23, 1998 and as the same may be further amended from time
to time, and all persons dealing with the REIT shall look solely to
REIT's assets for the enforcement of any claims against the REIT, as
the Trustees, officers, agents and security holders of the REIT assume
no personal liability for obligations entered into on behalf of the
REIT, and their respective individual assets shall not be subject to
the claims of any person relating to such obligations.
6.11 Successors and Assigns. The Companies or NMSSI may assign
any of their respective rights, or delegate any of their respective
duties under this Agreement, if the other party first consents to such
assignment in writing. This Agreement shall inure to the benefit of and
be binding upon (i) the successors of NMSSI and (ii) any assignee or
transferee of rights and obligations of the NMS Parties pursuant to the
Purchase Agreement and any assignee or transferee of rights and
obligations of NMSSI pursuant to this Agreement. A transferee of the
NMS Parties pursuant to the Purchase Agreement and a transferee of
NMSSI pursuant to this Agreement, and, in each case, any successor,
assignee, or transferee, shall be held subject to all of the terms of
this Agreement.
47
6.12 Transfer to Affiliate. Notwithstanding anything herein to
the contrary, if NMSSI transfers the Purchase Shares to any affiliate
of NMSSI, together with all of NMSSI's rights under the Purchase
Agreement pursuant to Section 15 of the Purchase Agreement, then
NMSSI's rights and obligations under this Agreement shall be
transferred to such affiliate of NMSSI. In the event of such an
assignment, such affiliate shall in all respects be substituted for
NMSSI as a party hereto.
6.13 Governing Law.
The Agreement will be governed by and construed in accordance with the
laws of the State of New York without reference to choice of law
doctrine.
6.14 Confidentiality.
Subject to the other applicable subsections of this Section 6, to any
contrary requirement of law, including any disclosure obligations of
the Companies under the Securities Act, the Exchange Act and the rules
and regulations thereunder, and to the right of each party to enforce
its rights hereunder in any legal action, each party shall keep
strictly confidential and shall cause its employees and agents to keep
strictly confidential the terms of this Agreement and any information
relating to or concerning the other party which it or any of its agents
or employees may acquire pursuant to, or in the course of performing
its obligation under, any provision of this Agreement.
48
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
STARWOOD HOTELS & RESORTS
WORLDWIDE, INC.
By:__________________________________
Name:
Title:
STARWOOD HOTELS & RESORTS
By:__________________________________
Name:
Title:
NMS SERVICES, INC.
By:__________________________________
Name:
Title:
NATIONSBANC XXXXXXXXXX SECURITIES LLC
By:__________________________________
Name:
Title:
